October 2011 Philippine Supreme Court Decisions on Civil Law

Civil Code
Contracts; consequences of breach. Having breached the contract it entered with petitioner, respondent ABB is
liable for damages pursuant to Articles 1167, 1170, and 2201 of the Civil Code. Accordingly, a repairman who fails
to perform his obligation is liable to pay for the cost of the execution of the obligation plus damages. Though
entitled, petitioner in this case is not claiming reimbursement for the repair allegedly done by Newton Contractor,
but is instead asking for damages for the delay caused by respondent ABB.
As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the amount of P987.25 per day from
the time of delay, August 30, 1990, up to the time the Kiln Drive Motor was finally returned to petitioner. Records
show that although the testing of Kiln Drive Motor was done on March 13, 1991, the said motor was actually
delivered to petitioner as early as January 7, 1991. The installation and testing was done only on March 13, 1991
upon the request of petitioner because the Kiln was under repair at the time the motor was delivered; hence, the
load testing had to be postponed.
Under Article 1226 of the Civil Code, the penalty clause takes the place of indemnity for damages and the
payment of interests in case of non-compliance with the obligation, unless there is a stipulation to the contrary.
In this case, since there is no stipulation to the contrary, the penalty in the amount of P987.25 per day of delay
covers all other damages (i.e. production loss, labor cost, and rental of the crane) claimed by petitioner.
Article 1226 of the Civil Code further provides that if the obligor refuses to pay the penalty, such as in the instant
case,damages and interests may still be recovered on top of the penalty. Damages claimed must be the natural
and probable consequences of the breach, which the parties have foreseen or could have reasonably foreseen at
the time the obligation was constituted. Thus, in addition to the penalties, petitioner seeks to recover as damages
production loss, labor cost and the rental of the crane. The petitioner, however, was not able to prove with
reasonable certainty that it indeed incurred production losses during the relevant period. It may not be amiss to
say that competent proof and a reasonable degree of certainty are needed to justify a grant of actual or
compensatory damages; speculations, conjectures, assertions or guesswork are not sufficient. Besides,
consequential damages, such as loss of profits on account of delay or failure of delivery, may be recovered only if
such damages were reasonably foreseen or have been brought within the contemplation of the parties as the
probable result of a breach at the time of or prior to contracting. Considering the nature of the obligation in the
instant case, respondent ABB, at the time it agreed to repair petitioners Kiln Drive Motor, could not have
reasonably foreseen that it would be made liable for production loss, labor cost and rental of the crane in case it
fails to repair the motor or incurs delay in delivering the same, especially since the motor under repair was a
spare motor. For the foregoing reasons, petitioner is not entitled to recover production loss, labor cost and the
rental of the crane. Continental Cement Corporation vs. Asea Brown Boveri, et al.;G.R. No. 171660. October 17,
2011.
Contracts; public documents; forms. The necessity of a public document for contracts which transmit or
extinguish real rights over immovable property, as mandated by Article 1358 of the Civil Code, is only for
convenience; it is not essential for validity or enforceability. As notarized documents, Deeds of Absolute Sale carry
evidentiary weight conferred upon them with respect to their due execution and enjoy the presumption of
regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy
as to falsity. The presumptions that attach to notarized documents can be affirmed only so long as it is beyond
dispute that the notarization was regular. A defective notarization will strip the document of its public character
and reduce it to a private instrument. Consequently, when there is a defect in the notarization of a document, the
clear and convincing evidentiary standard normally attached to a duly-notarized document is dispensed with, and
the measure to test the validity of such document is preponderance of evidence. Adelaida Meneses (deceased),
substituted by her heir Marilyn M. Carbonel-Garcia vs. Rosario G. Venturozo; G.R. No. 172196. October 19, 2011.
Damages; actual, temperate; moral; exemplary and attorneys fees. In determining actual damages, onecannot
rely on mere assertions, speculations, conjectures or guesswork, but must depend on competent proof and on
the best evidence obtainable regarding specific facts that could afford some basis for measuring compensatory or
actual damages.
Nevertheless, De Guzman is indeed entitled to temperate damages as provided under Article 2224 of the Civil
Code for the loss she suffered. When pecuniary loss has been suffered but the amount cannot, from the nature of
the case, be proven with certainty, temperate damages may be recovered. Temperate damages may be allowed
in cases where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the
court is convinced that the aggrieved party suffered some pecuniary loss.
As to the CIACs award of 100,000.00 as moral damages, this Court is one with the CA that De Guzman is not
entitled to such an award. The record is bereft of any proof that she actually suffered moral damages. The award
of moral damages must be anchored on a clear showing that she actually experienced mental anguish,
besmirched reputation, sleepless nights, wounded feelings, or similar injury.
De Guzman cannot be awarded exemplary damages either, in the absence of any evidence showing that the
Contractor acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner as provided in Article 2232
of the Civil Code. The ruling in the case of Nakpil and Sons v. Court of Appeals, relied upon by De Guzman, where
it was emphasized that the wanton negligence in effecting the plans, designs, specifications, and construction of
a building is equivalent to bad faith in the performance of the assigned task, finds no application in the case at
bench. As already pointed out, there is negligence on the part of Contractor, but it is neither wanton, fraudulent,
reckless, oppressive, nor malevolent.
As regards the award of attorneys fees, the Court upholds De Guzmans entitlement to reasonable attorneys
fees, although it recognizes that it is a sound policy not to set a premium on the right to litigate. Emerita M. De
Guzman vs. Antonio M. Tumolva; G.R. No. 188072. October 19, 2011.
Damages; attorneys fees. One of the issues in this case is whether the CA erred in ruling that Alcatel is not
entitled to an award of attorneys fees.
Although attorneys fees are not allowed in the absence of stipulation, the court can award the same when the
defendants act or omission has compelled the plaintiff to incur expenses to protect his interest or where the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just, and
demandable claim.
Still, the award of attorneys fees to the winning party lies within the discretion of the court, taking into account
the circumstances of each case. This means that such an award should have factual, legal, and equitable basis,
not founded on pure speculation and conjecture. Further, the court should state the reason for the award of
attorneys fees in the body of the decision. Its unheralded appearance in the dispositive portion is, as a rule, not
allowed.
Here, however, although the RTC did not specifically discuss in the body of its decision its basis for awarding
attorneys fees, its findings of fact clearly support such an award. For instance, the RTC found, based on the
record, that Bongar persistently and clearly violated the terms of its contract with Alcatel. It failed to finish the
works by October 29, 1991, the stipulated date. It sought on December 1, 1991, more than a month after it was
in violation, to finish its job by May 31, 1992, an extra seven months for just a three-month project. Worse, when
Alcatel had to take over the job to save its own undertaking to PLDT, Bongar refused to return to Alcatel the
uninstalled materials that it provided for the works. Alcatel was forced to litigate to protect its interest. Alcatel
Philippines, Inc. vs. I.M. Bongar & Co., Inc., et al.; G.R. No. 182946. October 5, 2011.
Damages; attorneys fees. The petitioner is not entitled to the award of attorneys fees. Jurisprudence requires
that the factual basis for the award of attorneys fees must be set forth in the body of the decision and not in the
dispositive portion only. In this case, no explanation was given by the RTC in awarding attorneys fees in favor of
petitioner. In fact, the award of attorneys fees was mentioned only in the dispositive portion of the
decision.Continental Cement Corporation vs. Asea Brown Boveri, et al.; G.R. No. 171660. October 17, 2011.
Lease; rights of a lessee as to improvements. At this juncture, it would not be amiss to reiterate that the rights of
a lessee, like petitioners in the present case, are governed by Article 1678 of the Civil Code.
Under Article 1678, the lessor has the option of paying one-half of the value of the improvements that the lessee
made in good faith, which are suitable to the use for which the lease is intended, and which have not altered the
form and substance of the land. On the other hand, the lessee may remove the improvements should the lessor
refuse to reimburse.
It appears, nonetheless, that in her Complaint, private respondent prayed for the demolition of petitioners
residential house constructed on the subject lot. It is, thus, clear that private respondent does not want to
appropriate the improvements. As such, petitioners cannot compel her to reimburse to them one-half of the value
of their house. The sole right of petitioners under Article 1678 then is to remove the improvements without
causing any more damage upon the property leased than is necessary. Heirs of Antonio Feraren, rep. by Antonio
Feraren, Jr. vs. Court of Appeals and Cecilia Tadiar; G.R. No. 159328. October 5, 2011.
Nuisance; what constitutes it. The MMDA claims that the portion of the building in question is a nuisance per se.
We disagree.
The fact that in 1966 the City Council gave Justice Gancayco an exemption from constructing an arcade is an
indication that the wing walls of the building are not nuisances per se. The wing walls do not per se immediately
and adversely affect the safety of persons and property. The fact that an ordinance may declare a structure
illegal does not necessarily make that structure a nuisance.
Article 694 of the Civil Code defines nuisance as any act, omission, establishment, business, condition or
property, or anything else that (1) injures or endangers the health or safety of others; (2) annoys or offends the
senses; (3) shocks, defies or disregards decency or morality; (4) obstructs or interferes with the free passage of
any public highway or street, or any body of water; or, (5) hinders or impairs the use of property. A nuisance
may be per se or per accidens. A nuisance per se is that which affects the immediate safety of persons and
property and may summarily be abated under the undefined law of necessity.
Clearly, when Justice Gancayco was given a permit to construct the building, the city council or the city engineer
did not consider the building, or its demolished portion, to be a threat to the safety of persons and property. This
fact alone should have warned the MMDA against summarily demolishing the structure. Neither does the MMDA
have the power to declare a thing a nuisance. Only courts of law have the power to determine whether a thing is
a nuisance. Emilio Gancayco vs. Cito Government of Quezon City and Metro Manila Development Authority/Metro
Manila Development Authority vs. Justice Emilio A. Gancayco (Retired); G.R. No. 177807/G.R. No. 177933.
October 11, 2011.
Subrogation. Subrogation is either legal or conventional. Legal subrogation is an equitable doctrine and arises
by operation of the law, without any agreement to that effect executed between the parties; conventional
subrogation rests on a contract, arising where an agreement is made that the person paying the debt shall be
subrogated to the rights and remedies of the original creditor. The case at bar is an example of legal
subrogation, the petitioner and respondent having no express agreement on the right of subrogation. Thus, it is
of no moment that the Contracts of Sale did not expressly state that demurrage shall be paid to respondent. By
operation of law, respondent has become the real party-in-interest to pursue the payment of
demurrage. Republic Flour Mills Corporation vs. Forbes Factors, Inc. etc.; G.R. No. 152313. October 19, 2011.
Trust; action for reconveyance based on trust; prescription. An action for reconveyance can indeed be barred by
prescription. In a long line of cases decided by this Court, we ruled that an action for reconveyance based on
implied or constructive trust must perforce prescribe in ten years from the issuance of the Torrens title over the
property.
However, there is an exception to this rule. In the case of Heirs of Pomposa Saludares v. Court of Appeals, the
Court reiterating the ruling in Millena v. Court of Appeals,heldthat there is but one instance when prescription
cannot be invoked in an action for reconveyance, that is, when the plaintiff is in possession of the land to be
reconveyed. In Heirs of Pomposa Saludares, this Court explained that the Court in a series of cases, has
permitted the filing of an action for reconveyance despite the lapse of more than ten years from the issuance of
title to the land and declared that said action, when based on fraud, is imprescriptible as long as the land has not
passed to an innocent buyer for value. But in all those cases, the common factual backdrop was that the
registered owners were never in possession of the disputed property. The exception was based on the theory
that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of
another.
In this case, petitioners possession was disturbed in 1983 when respondent Jose filed a case for recovery of
possession. The RTC of Iloilo City ruled in respondent Joses favor but the CA on November 28, 1991, during the
pendency of the present controversy with the court a quo, ruled in favor of petitioner. Petitioner never lost
possession of the said properties, and as such, she is in a position to file the complaint with the court a quo to
protect her rights and clear whatever doubts has been cast on her title by the issuance of TCTs in respondent
Joses name.
In the case of Sandoval v. Court of Appeals, the Court defined an innocent purchaser for value as one who buys
property of another, without notice that some other person has a right to, or interest in, such property and pays
a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of
some other persons in the property. He is one who buys the property with the belief that the person from whom
he receives the thing was the owner and could convey title to the property. A purchaser cannot close his eyes to
facts which should put a reasonable man on his guard and still claim that he acted in good faith.
And while it is settled that every person dealing with a property registered under the Torrens title need not
inquire further but only has to rely on the title, this rule has an exception. The exception is when the party has
actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or
when the purchaser has some knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the property in litigation. The presence
of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and
investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can
neither be denominated an innocent purchaser for value nor a purchaser in good faith and hence does not merit
the protection of the law.
In this case, when the subject properties were sold to Catalino Torre and subsequently to Doronila, respondent
Jose was not in possession of the said properties. Such fact should have put the vendees on guard and should
have inquired on the interest of the respondent Jose regarding the subject properties. But regardless of such
defect on transfer to third persons, the properties again reverted back to respondent Jose. Respondent Jose
cannot claim lack of knowledge of the defects surrounding the cancellation of the OCTs over the properties and
benefit from his fraudulent actions. The subsequent sale of the properties to Catalino Torre and Doronila will not
cure the nullity of the certificates of title obtained by respondent Jose on the basis of the false and fraudulent
Affidavit of Adjudication. Estrella Tiongco Yared, etc. vs. Jose B. Tiongco, et al.; G.R. No. 161360. October 19,
2011.

November 2011 Philippine Supreme Court Decisions on Civil Law

Civil Code
Contracts; interpretation. Article 1332. When one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show
that the terms thereof have been fully explained to the former.
We cannot accede to the petitioners plea. It is quite notable that the petitioner did not specify which of the
stipulations of the deed of conditional sale she had difficulty or deficiency in understanding. Her generalized
averment of having been misled should, therefore, be brushed aside as nothing but a last attempt to salvage a
hopeless position. Our impression is that the stipulations of the deed of conditional sale were simply worded and
plain enough for even one with a slight knowledge of English to easily understand.
The petitioner was not illiterate. She had appeared to the trial court to be educated, its cogent observation of her
as lettered (supra, at p. 7 hereof) being based on how she had composed her correspondences to DBP. Her
testimony also revealed that she had no difficulty understanding English.
Nor was the petitioners ignorance of the true nature of the deed of conditional sale probably true. By her own
admission, she had asked the bank officer why she had been made to sign a deed of conditional sale instead of
an absolute sale, which in itself reflected her full discernment of the matters subject of her dealings with DBP.
Clearly, Article 1332 of the Civil Code does not apply to the petitioner. According to Lim v. Court of Appeals, the
provision came into being because a sizeable percentage of the countrys populace had comprised of illiterates,
and the documents at the time had been written either in English or Spanish, viz:
In calibrating the credibility of the witnesses on this issue, we take our mandate from Article 1332 of the Civil
Code which provides: When one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms
thereof have been fully explained to the former. This substantive law came into being due to the finding
of the Code Commission that there is still a fairly large number of illiterates in this country, and
documents are usually drawn up in English or Spanish. It is also in accord with our state policy of
promoting social justice. It also supplements Article 24 of the Civil Code which calls on court to be
vigilant in the protection of the rights of those who are disadvantaged in life. (Emphasis supplied)
Lina Calilap-Asmeron vs. Development Bank of the Philippines, et al.; G.R. No. 157330. November 23, 2011.
Contracts; rescission. Article 1191 of the Civil Code did not prohibit the parties from entering into an agreement
whereby a violation of the terms of the contract would result to its cancellation. InPangilinan v. Court of
Appeals, the Court upheld the vendors right in a contract to sell to extrajudicially cancel the contract upon failure
of the vendee to pay the installments and even to retain the sums already paid, holding:
[Article 1191 of the Civil Code] makes it available to the injured party alternative remedies such as the power to
rescind or enforce fulfillment of the contract, with damages in either case if the obligor does not comply with
what is incumbent upon him. There is nothing in this law which prohibits the parties from entering into an
agreement that a violation of the terms of the contract would cause its cancellation even without court
intervention. The rationale for the foregoing is that in contracts providing for automatic revocation, judicial
intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed
rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to
determine whether or not the rescission was proper. Where such propriety is sustained, the decision of the court
will be merely declaratory of the revocation, but it is not itself the revocatory act. Moreover, the vendors right in
contracts to sell with reserved title to extrajudicially cancel the sale upon failure of the vendee to pay the
stipulated installments and retain the sums and installments already received has long been recognized by the
well-established doctrine of 39 years standing. The validity of the stipulation in the contract providing for
automatic rescission upon non-payment cannot be doubted. It is in the nature of an agreement granting a party
the right to rescind a contract unilaterally in case of breach without need of going to court. Thus, rescission under
Article 1191 was inevitable due to petitioners failure to pay the stipulated price within the original period fixed in
the agreement.
Lina Calilap-Asmeron vs. Development Bank of the Philippines, et al.; G.R. No. 157330. November 23, 2011.
Special Laws
National Building Code; nuisances. It is unquestionable that the Building Official has the authority to order the
condemnation and demolition of buildings which are found to be in a dangerous or ruinous condition. This
authority emanates from Sections 214 and 215 of the National Building Code (Presidential Decree [P.D.] No.
1096) which provides:
Section 214. Dangerous and Ruinous Buildings or Structures
Dangerous buildings are those which are herein declared as such or are structurally unsafe or not provided with
safe egress, or which constitute a fire hazard, or are otherwise dangerous to human life, or which in relation to
existing use, constitute a hazard to safety or health or public welfare because of inadequate maintenance,
dilapidation, obsolescence, or abandonment; or which otherwise contribute to the pollution of the site or the
community to an intolerable degree.
Section 215. Abatement of Dangerous Buildings
When any building or structure is found or declared to be dangerous or ruinous, the Building Official shall order
its repair, vacation or demolition depending upon the degree of danger to life, health, or safety. This is without
prejudice to further action that may be taken under the provisions of Articles 482 and 694 to 707 of the Civil
Code of the Philippines.
As found by the CA, the records show that the OBO issued the resolution and Demolition Order only after ocular
inspections and hearings were conducted. Notably, the Inspectorate Team of the DPWH came up with the same
conclusion as the OBO when it conducted its own ocular inspection of the premises, that is both Buildings 1 and 2
had structural, sanitary, plumbing and electrical defects of up to 80%.
What is more, contrary to the position of the petitioners that the provisions of the Civil Code on abatement of
nuisances should have been applied in their case, the fact that the buildings in question could also constitute
nuisances under the Civil Code does not preclude the Building Official from issuing the assailed Demolition Order.
As provided by P.D. No. 1096, the authority of the Building Official to order the repair, vacation or demolition, as
the case may be, is without prejudice to further action that may be undertaken under the relevant provisions of
the Civil Code.Spouses Ricardo Hipolito, Jr. and Liza Hipolito vs. Atty. Carlos Cinco, et al.; G.R. No. 174143.
November 28, 2011.
P.D. No. 1529; amendment of title. The proceeding for the amendment and alteration of a certificate of title
under Section 108 of P.D. No. 1529 is applicable in seven instances or situations, namely: (a) when registered
interests of any description, whether vested, contingent, expectant, or inchoate, have terminated and ceased; (b)
when new interests have arisen or been created which do not appear upon the certificate; (c) when any error,
omission or mistake was made in entering a certificate or any memorandum thereon or on any duplicate
certificate; (d) when the name of any person on the certificate has been changed; (e) when the registered owner
has been married, or, registered as married, the marriage has been terminated and no right or interest of heirs or
creditors will thereby be affected; (f) when a corporation, which owned registered land and has been dissolved,
has not conveyed the same within three years after its dissolution; and (g) when there is reasonable ground for
the amendment or alteration of title.
In this case, the petitioner was in reality seeking the reconveyance of the property covered by OCT No. 684, not
the cancellation of a certificate of title as contemplated by Section 108 of P.D. No. 1529. Thus, his petition did not
fall under any of the situations covered by Section 108, and was for that reason rightly dismissed.
Moreover, the filing of the petition would have the effect of reopening the decree of registration, and could
thereby impair the rights of innocent purchasers in good faith and for value. To reopen the decree of registration
was no longer permissible, considering that the one-year period to do so had long ago lapsed, and the properties
covered by OCT No. 684 had already been subdivided into smaller lots whose ownership had passed to third
persons.
Nor is it subject to dispute that the petition was not a mere continuation of a previous registration proceeding.
Shorn of the thin disguise the petitioner gave to it, the petition was exposed as a distinct and independent action
to seek the reconveyance of realty and to recover damages. Accordingly, he should perform jurisdictional acts,
like paying the correct amount of docket fees for the filing of an initiatory pleading, causing the service of
summons on the adverse parties in order to vest personal jurisdiction over them in the trial court, and attaching a
certification against forum shopping (as required for all initiatory pleadings). He ought to know that his taking
such required acts for granted was immediately fatal to his petition, warranting the granting of the respondents
motion to dismiss. Luciano P. Paz vs. Republic of the Philippines, et al.; G.R. No. 157367. November 23, 2011.
P.D. No. 1529; cancellation of title. The RD claimed that it cannot execute the order to cancel the GSISs titles
over Lot 10, Block 2 and Lot 8, Block 8 because it has no record of GSISs title over these two lots. The RD
theorized that these lots are included in a mother title in GSISs possession and would still have to be segregated
therefrom. To effectuate such segregation, the RD needed the technical descriptions of the two lots and the
mother title. Thus, petitioners ask that the GSIS be compelled to surrender its title over, as well as the technical
descriptions of, Lot 10, Block 2 and Lot 8, Block 8.
GSIS refused to turn over the needed documents and information, claiming that these acts go beyond what were
ordered in the Decision in G.R. No. 140398. GSISs protestations ring hollow.
The order contained in the Decision in G.R. No. 140398 is for the RD to cancel GSISs titles over Lot 10, Block 2
and Lot 8, Block 8, inter alia. Whether these titles are individual or contained in a mother title is of no
consequence. The RD has to cause their cancellation. If the cancellation can only be carried out by requiring GSIS
or the Bureau of Lands to provide the necessary information, then they can be compelled to do so. Otherwise,
the Courts decision would be rendered inefficacious, and GSIS would retain ostensible ownership over the lots by
the simple expedience that they are included in a mother title, instead of individual titles. That result is manifestly
contrary to the Courts ruling and would subvert the very purpose of bringing this case for a complete
resolution.Col. Francisco Dela Merced, substituted by his heirs, namely Blanquita E. Dela Merced, et al. vs.
Government Service Insurance System, et al.; G.R. No. 167140. November 23, 2011.
P.D. No. 1529; notice of lis pendens. A notice of lis pendens is an announcement to the whole world that a
particular real property is in litigation, serving as a warning that one who acquires an interest over said property
does so at his own risk, or that he gambles on the result of the litigation over the said property. Once a notice
of lis pendens has been duly registered, any cancellation or issuance of the title of the land involved as well as
any subsequent transaction affecting the same, would have to be subject to the outcome of the litigation. In
other words, upon the termination of the litigation there can be no risk of losing the property or any part thereof
as a result of any conveyance of the land or any encumbrance that may be made thereon posterior to the filing of
the notice of lis pendens. Col. Francisco Dela Merced, substituted by his heirs, namely Blanquita E. Dela Merced,
et al. vs. Government Service Insurance System, et al.; G.R. No. 167140. November 23, 2011.
P.D. No. 1529; registration of title over land of the public domain. Under the Regalian doctrine, which is
embodied in our Constitution, all lands of the public domain belong to the State, which is the source of any
asserted right to any ownership of land. All lands not appearing to be clearly within private ownership are
presumed to belong to the State. Accordingly, public lands not shown to have been reclassified or released as
alienable agricultural land or alienated to a private person by the State remain part of the inalienable public
domain. Unless public land is shown to have been reclassified as alienable or disposable to a private person by
the State, it remains part of the inalienable public domain. Property of the public domain is beyond the commerce
of man and not susceptible of private appropriation and acquisitive prescription. Occupation thereof in the
concept of owner no matter how long cannot ripen into ownership and be registered as a title. The burden of
proof in overcoming the presumption of State ownership of the lands of the public domain is on the person
applying for registration (or claiming ownership), who must prove that the land subject of the application is
alienable or disposable. To overcome this presumption, incontrovertible evidence must be established that the
land subject of the application (or claim) is alienable or disposable.
There must be a positive act declaring land of the public domain as alienable and disposable. To prove that the
land subject of an application for registration is alienable, the applicant must establish the existence of a positive
act of the government, such as a presidential proclamation or an executive order; an administrative action;
investigation reports of Bureau of Lands investigators; and a legislative act or a statute. The applicant may also
secure a certification from the government that the land claimed to have been possessed for the required number
of years is alienable and disposable.
No such evidence was offered by the petitioners to show that the land in question has been classified as alienable
and disposable land of the public domain. In the absence of incontrovertible evidence to prove that the subject
property is already classified as alienable and disposable, we must consider the same as still inalienable public
domain. Verily, the rules on the confirmation of imperfect title do not apply unless and until the land subject
thereof is released in an official proclamation to that effect so that it may form part of the disposable agricultural
lands of the public domain. Pacifico M. Valiao, et al. vs. Republic of the Philippines, et al.; G.R. No. 170757.
November 28, 2011.

January 2012 Philippine Supreme Court Decisions on Civil Law
CIVIL CODE
Agency; principal-agent relationship. The relationship of agency is one where one party called the principal
(mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with
third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself, and (4) the agent acts within the scope of his authority.
Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates
from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the
authority. Qui facit per alium facit se. He who acts through another acts himself.
As provided under Article 1869 of the Civil Code, agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is
acting on his behalf without authority.
The guidelines that would aid in differentiating sale and an agency has been formulated by the Court since 1970.
The primordial differentiating consideration between the two (2) contracts is the transfer of ownership or title
over the property subject of the contract. In an agency, the principal retains ownership and control over the
property and the agent merely acts on the principals behalf and under his instructions in furtherance of the
objectives for which the agency was established. On the other hand, the contract is clearly a sale if the parties
intended that the delivery of the property will effect a relinquishment of title, control and ownership in such a
way that the recipient may do with the property as he pleases. Sps. Fernando and Lourdes Viloria vs. Continental
Airlines, Inc.,G.R. No. 188288. January 16, 2012.
Compromise agreement; contracts; novation.In order for novation to extinguish an obligation, it must be shown
that there is incompatibility between the compromise agreement and the terms of the counter-bond, as required
by Article 1292 of the Civil Code. Nothing in the compromise agreement indicates, or even hints at, releasing
Acropolis from its obligation as a surety to pay United Pulp and Paper Co. Inc. after the latter has obtained a
favorable judgment. Clearly, there is no incompatibility between the compromise agreement and the counter-
bond. Neither can novation be presumed. Novation by presumption has never been favored. To be sustained, it
need be established that the old and new contracts are incompatible in all points, or that the will to novate
appears by express agreement of the parties or in acts of similar import. United Pulp and Paper Co., Inc. vs.
Acropolis Central Guaranty Corporation; G.R. No. 171750. January 25, 2012.
Compromise agreement; rescission. An amicable settlement reached at the barangay conciliation proceedings is
binding between the contracting parties and, upon its perfection, is immediately executory insofar as it is not
contrary to law, good morals, good customs, public order and public policy. Being a by-product of mutual
concessions and good faith of the parties, an amicable settlement has the force and effect of res judicata even if
not judicially approved. It is akin to a judgment subject to execution in accordance with the Rules. However, the
enforcement by execution of the amicable settlement by the Barangay Lupon within six months from the date of
settlement, or by filing an action to enforce such settlement in the appropriate city or municipal court, if beyond
the six-month period, is only applicable if the contracting parties have not repudiated such settlement within ten
days from the date thereof in accordance with Section 416 of the Local Government Code. If the amicable
settlement is repudiated by one party, either expressly or impliedly, the other party has two options: (1) to
enforce the compromise in accordance with the Local Government Code or Rules of Court as the case may be, or
(2) to consider it rescinded and insist upon his original demand. This is in accord with Article 2041 of the Civil
Code, which qualifies the broad application of Article 2037.
Article 2041 does not require an action for rescission, and the aggrieved party, by the breach of the compromise
agreement, may just consider it already rescinded. A partys noncompliance with the amicable settlement pave
the way for the application of Article 2041 under which the other party may either enforce the compromise,
following the procedure laid out in the Revised Katarungang Pambarangay Law, or consider it as rescinded and
insist upon his original demand. The respondents non-compliance with the terms and conditions of
the Kasunduang Pag-aayos, may be construed as repudiation because it denotes that the respondent did not
intend to be bound by the terms thereof, thereby negating the very purpose for which it was executed. Thus, the
petitioner has the option either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist upon
his original demand, in accordance with Article 2041 of the Civil Code. Having instituted an action for collection
of sum of money, the petitioner obviously chose to rescind theKasunduang Pag-aayos. It was error on the part of
the Court of Appeals to rule that the enforcement by execution of said agreement is the appropriate remedy
under the circumstances. Crisanta Alcaraz Miguel vs. Jerry D. Montanez, G.R. No. 191336. January 25, 2012.
Contracts; annulment. There is fraud when one party is induced by the other to enter into a contract, through
and solely because of the latters insidious words or machinations. But not all forms of fraud can vitiate consent.
Under Article 1330 of the Civil Code, this fraud refers to dolo causante or causal fraud, in which, prior to or
simultaneous with the execution of a contract, one party secures the consent of the other by using deception,
without which such consent would not have been given. The fraud must be the determining cause of the
contract, or must have caused the consent to be given.
One who alleges fraud or mistake in a transaction must substantiate his allegation since the presumption is that a
person takes ordinary care for his concerns and private dealings have been entered into fairly and regularly.
Thus, one who alleges defect or lack of valid consent to a contract by reason of fraud or undue influence must
establish by full, clear and convincing evidence such specific acts that vitiated a partys consent; otherwise the
presumed consent to the contract prevails. In this case, the Tan spouses failed to prove how fraud was employed
to induce them to buy the FRCCI shares. There was no showing that insidious words or machinations were used
by the petitioners, without which, the spouses would not have bought the shares.
The right to rescind a contract arises once the other party defaults in the performance of his obligation. However,
rescission will not be permitted for a slight or casual breach, but only for substantial and fundamental breach as
would defeat the very object of the parties in making the agreement. Like fraud, the burden of establishing the
default lies upon the party who alleges that default was committed. There was no evidence presented that
petitioners defaulted on any of their obligations. Therefore, although the Complaint in this case sufficiently
alleged a cause of action for the annulment or rescission of the contract of sale of FRCCI shares, however, there
was failure on the part of the Tan spouses to establish by preponderance of evidence that they are entitled to the
said annulment or rescission. Fontana Resort and Country Club, Inc. and RN Development Corporation vs.
Spouses Roy S. Tan and Susan C. Tan; G.R. No. 154670. January 30, 2012.
Contracts; fraud. Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the
contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within
four (4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are obliged
under Article 1398 of the same Code to restore to each other the things subject matter of the contract, including
their fruits and interest.
Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed
to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
incidente), inducement to the making of the contract. Causal fraud has been defined as a deception employed
by one party prior to or simultaneous to the contract in order to secure the consent of the other. Fraud must be
serious and its existence must be established by clear and convincing evidence, mere preponderance of evidence
is not adequate. Quoting Tolentino, the Court ruled that the misrepresentation constituting the fraud must be
established by full, clear, and convincing evidence, and not merely by a preponderance thereof. The deceit must
be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error;
that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case
should be considered, taking into account the personal conditions of the victim. Sps. Fernando and Lourdes
Viloria vs. Continental Airlines, Inc.,G.R. No. 188288. January 16, 2012.
Contracts; novation. Novation is the extinguishment of an obligation by the substitution or change of the
obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal
conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the
creditor. In order for novation to take place, the concurrence of the following requisites is indispensable:
1. There must be a previous valid obligation,
2. There must be an agreement of the parties concerned to a new contract,
3. There must be the extinguishment of the old contract, and
4. There must be the validity of the new contract.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to
give something or to render some service. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy. Parties are bound not only to the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and
law.
Distinction must be made between the perfection of the employment contract and the commencement of the
employer-employee relationship. The perfection of the contract, which in this case coincided with the date of
execution thereof, occurred when petitioner and respondent agreed on the object and the cause, as well as the
rest of the terms and conditions therein. The commencement of the employer-employee relationship, would have
taken place had petitioner been actually deployed from the point of hire. Thus, even before the start of any
employer-employee relationship, contemporaneous with the perfection of the employment contract was the birth
of certain rights and obligations, the breach of which may give rise to a cause of action against the erring party.
Thus, if the reverse had happened, that is the seafarer failed or refused to be deployed as agreed upon, he would
be liable for damages. Stolt-Nielsen Transportation Group, Inc., et al. vs. Sulpecio ModequilloG.R. No. 177498.
January 18, 2012.
Contracts; novation; extinguishment of criminal liability. The principle of novation cannot apply as to extinguish
criminal liability in this case. The mere payment of an obligation before the institution of a criminal complaint
does not, on its own, constitute novation that may prevent criminal liability. The Court citing the case of People v.
Nery ruled that novation is not one of the means recognized by the Penal Code whereby criminal liability can be
extinguished and that the role of novation may only be either to prevent the rise of criminal liability or to cast
doubt on the true nature of the original petition, whether or not it was such that its breach would not give rise to
penal responsibility as when money loaned is made to appear as a deposit, or other similar disguise is resorted
to. It further ratiocinated, citing the case of Quinto v. People, that the gravamen of the offense of estafa is the
appropriation or conversion of money or property received to the prejudice of the owner and neither the theory
of delay in the fulfilment of commission nor that of novation can avoid the incipient criminal liability. The criminal
liability for estafa already committed is then not affected by the subsequent novation of contract, for it is a public
offense which must be prosecuted and punished by the State in its own conation.
In this case, the acceptance by MPI of the Equitable PCI checks tendered by Milla could not have novated the
original transaction, as the checks were only intended to secure the return of the P2 Million the former had
already given to him these checks even bounced and were thus unable to satisfy his liability. The estafa involved
here was not for simple misappropriation or conversion, but committed through Falsification of public documents,
the liability for which cannot be extinguished by mere novation. Cresencio C. Milla vs. People of the Philippines et
al.; G.R. No. 188726. January 25, 2012.
Contracts; perfection For a contract to be perfected, three elements are needed to create a perfected contract: 1)
the consent of the contracting parties; (2) an object certain which is the subject matter of the contract; and (3)
the cause of the obligation which is established. Under the law on sales, a contract of sale is perfected when the
seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to the buyer,
over which the latter agrees
.
From that moment, the parties may demand reciprocal performance. Starbright
Sales Eterprises, Inc. vs. Philippine Realty Corporation, Msgr. Domingo A. Cirilos, et al., G.R. No. 177936. January
18, 2012.
Contracts; ratification. Article 1392 of the Civil Code states that ratification extinguishes the action to annul a
voidable contract. Ratification of a voidable contract, under Article 1393, may be effected expressly or tacitly. It
is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable
and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily
implies an intention to waive his right.
Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or
adoption of the contract; or by acceptance and retention of benefits flowing therefrom.Sps. Fernando and
Lourdes Viloria vs. Continental Airlines, Inc.,G.R. No. 188288. January 16, 2012.
Contracts; rescission. Annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two
inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment, one
of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in
the consummation stage of the contract when the parties are in the process of performing their respective
obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of the
contract. Accordingly, by pursuing the remedy of rescission under Article 1191, there was implied admission of
the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot rely on the
contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed,
litigants are enjoined from taking inconsistent positions.
The right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that
rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and
fundamental violations as would defeat the very object of the parties in making the agreement. Whether a breach
is substantial is largely determined by the attendant circumstances.
Under Article 1192, in case both parties have committed a breach of the obligation, the liability of the first
infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated
the contract, the same shall be deemed extinguished, and each shall bear his own damages. Sps. Fernando and
Lourdes Viloria vs. Continental Airlines, Inc.,G.R. No. 188288. January 16, 2012.
Dealership contract; liability. The petitioner as importer and the dealer executed an exclusive dealership
agreement for mutual benefit and gain. On one hand, petitioner benefits from the sale of its products, as well as
the advertisement it gains when it broadens its geographical coverage in contracting with independent dealers in
different areas. The products sold and the services rendered by the dealer also contribute to its goodwill. Thus,
despite the transfer of ownership upon the sale and delivery of its products, petitioner still imposes the obligation
on the dealer to exclusively carry its products. The dealer, on the other hand, also benefits from the dealership
agreement, not only from the resale of the products of petitioner, but also from the latters goodwill.
However, with the use of its trade name and trademark, petitioner and the dealer inform and guarantee to the
public that the products and services are of a particular standard or quality. The public, which is not privy to the
dealership contract, assumes that the gasoline station is owned or operated by petitioner. Thus, respondents,
who suffered damages from the act or omission that occurred in the gasoline station and that caused the fire,
may file an action against petitioner based on the representations it made to the public. As far as the public is
concerned, it is enough that the establishment carries exclusively the name and products of petitioner to assume
that the latter is liable for acts done within the premises.
The expiration or nonexistence of a dealership contract did not ipso facto transform the relationship of the dealer
and petitioner into one of agency. As far as the parties to the dealership contract were concerned, the rights and
obligations as to them still subsisted, since they continued to mutually benefit from the agreement. Thus, neither
party can claim that it is no longer bound by the terms of the contract and the expiration thereof. Petron
Corporation vs. Sps. Cesar Jovero and Erma F. Cudilla, et al., G.R. No. 151038. January 18, 2012.
Interest; judgments. The Eastern Shipping case provides that in the absence of a written stipulation, the
applicable interest rate to be imposed in judgments involving a forbearance of credit shall be 12% per annum in
accordance with Central Bank (CB) Circular No. 416. On the other hand, if the judgment refers to payment of
indemnities in the concept of damages arising from a breach or a delay in the performance of obligations in
general, the applicable interest rate shall be 6% per annum, in accordance with Article 2206 of the Civil Code.
Both interest rates apply from the time of judicial or extrajudicial demand until the finality of the judgment.
However, from the time the judgment of the court awarding a sum of money becomes final until it is satisfied,
the award it granted shall be considered a forbearance of credit, whether or not the judgment award actually
pertained to one. Accordingly, during this interim period, the interest rate of 12% per annum for forbearance of
money shall apply.
An award of a sum of money shall be considered as a forbearance of credit once it becomes final, whether or not
the award actually pertained to one. Hence, from its finality until its satisfaction, the judgment award of moral
and exemplary damages, as well as attorneys fees, shall be subject to the interest rate of 12% per
annum. Bibiano Reynoso IV vs. Penta Capital Finance CorporationG.R. No. 162100 & G.R. No. 162395. January
18, 2012.
Interest; lawful interest. Citing Eastern Shipping Lines v. Court of Appeals, enunciated in PCI Leasing & Finance
Inc. v. Trojan Metal Industries, Inc., the Court laid down the rules for the imposition of legal interest as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on Damages of the
Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit. Petron Corporation vs. Sps. Cesar Jovero and Erma F. Cudilla, et al., G.R. No. 151038. January 18, 2012.
Obligations; Solidary obligation. According to Article 1217 of the Civil Code, payment made by one of the solidary
debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which
offer to accept. The debtor who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the payment is made before the debt is
due however, no interest for the intervening period may be demanded.
Article 1208 provides for the share of solidary debtors which states thatif from the law, or the nature of the
wording of the obligations to which the preceding article refers the contrary does not appear, the credit of debt
shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts
being considered distinct from one another, subject to the Rules of Court governing the multiplicity of
suits. Petron Corporation vs. Sps. Cesar Jovero and Erma F. Cudilla, et al., G.R. No. 151038. January 18, 2012.
Quasi-Delict; Damages. With regard to actual damages, one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. In addition, as indemnity for the death of the
deceased as a result of a quasi-delict, actual damages shall likewise include the loss of the earning capacity of the
deceased.
Moral damages, are not intended to enrich plaintiff at the expense of the defendant. They are awarded to enable
the injured party to obtain means, diversions, or amusements that will serve to alleviate the moral suffering
he/she had undergone due to the other partys culpable action and must, perforce, be proportional to the
suffering inflicted.
In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. It is given by
way of example or correction for the public good.Before the court may consider such award, the plaintiff must
show his entitlement first to moral, temperate, or compensatory damages, which the respondents have.
Because exemplary damages are awarded and the found it equitable that expenses of litigation should be
recovered, attorneys fees were also awarded by the Court.Crix Metro Leasing and Finance Corporation (Formerly
Consolidated Orix Leasing and Finance) vs. Minors Dennis, Mylene, Melanie and Marikris, Mangalinao y Dizon, et
al..G.R. Nos. 174089. January 25, 2012.
Quasi-Delict; liability of principal for acts of agent. In actions based on quasi-delict, a principal can only be held
liable for the tort committed by its agents employees if it has been established by preponderance of evidence
that the principal was also at fault or negligent or that the principal exercise control and supervision over them.
A prior determination of the nature of the passengers cause of action is necessary. If the passengers cause of
action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by the
employee of the airline companys agent, there must be an independent showing that the airline company was at
fault or negligent or has contributed to the negligence or tortuous conduct committed by the employee of its
agent. The mere fact that the employee of the airline companys agent has committed a tort is not sufficient to
hold the airline company liable. There is no vinculum juris between the airline company and its agents employees
and the contractual relationship between the airline company and its agent does not operate to create a juridical
tie between the airline company and its agents employees.
Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its agents
employees and the principal-agency relationship per se does not make the principal a party to such tort; hence,
the need to prove the principals own fault or negligence.
On the other hand, if the passengers cause of action for damages against the airline company is based on
contractual breach or culpa contractual, it is not necessary that there be evidence of the airline companys fault or
negligence. In an action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier.
A persons vicarious liability is anchored on his possession of control, whether absolute or limited, on the
tortfeasor. Without such control, there is nothing which could justify extending the liability to a person other than
the one who committed the tort.
The Court cited the case of Cangco v. Manila Railroad Co. stated that with respect to extra-contractual obligation
arising from negligence, whether of act or omission the legislature has limited such liability to cases in which the
person upon whom such an obligation is imposed is morally culpable or, on the contrary, for reasons of public
policy, to extend that liability without regard to the lack of moral culpability, so as to include responsibility for the
negligence of those persons whose acts or omissions are imputable, by a legal fiction, to others who are in a
position to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has
elected to limit extra-contractual liability with certain well-defined exceptions to cases in which moral
culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having
failed to exercise due care in ones own acts, or in having failed to exercise due care in the selection and control
of ones agent or servants, or in the control of persons who, by reasons of their status, occupy a position of
dependency with respect to the person made liable for their conduct. Sps. Fernando and Lourdes Viloria vs.
Continental Airlines, Inc.,G.R. No. 188288. January 16, 2012.
Quasi-Delict; Vicarious Liability. The registered owner cannot point fingers at the alleged real owner to exculpate
itself from vicarious liability under Article 2180of the Civil Code. Regardless of whoever is claimed to be the actual
owner of a vehicle by reason of a contract of sale, the registered owner is nevertheless primarily liable for the
damages or injury the truck registered under it have caused. It has been explained that if a registered owner is
allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by
collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or
to one who possesses no property with which to respond financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to discover or identify the person actually causing
the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office
to determine who is the owner. The protection that the law aims to extend to him would become illusory were
the registered owner given the opportunity to escape liability by disproving his ownership.
The registered owners, in turn, have a right to be indemnified by the real or actual owner of the amount that
they may be required to pay as damage for the injury caused to the plaintiff. They can file a third-party complaint
against the actual or real owner of the vehicle. Crix Metro Leasing and Finance Corporation (Formerly
Consolidated Orix Leasing and Finance) vs. Minors Dennis, Mylene, Melanie and Marikris, Mangalinao y Dizon, et
al..G.R. Nos. 174089. January 25, 2012.
Surety; Liability to Insurance Company. Section 175 of the Insurance Code defines a suretyship as a contract or
agreement whereby a party, called the surety, guarantees the performance by another party, called the principal
or obligor, of an obligation or undertaking in favor of a third party, called the obligee. It includes official
recognizances, stipulations, bonds or undertakings issued under Act 536, as amended. Suretyship arises upon the
solidary binding of a person (surety) with the principal debtor, for the purpose of fulfilling an obligation.
Such undertaking makes a surety agreement an ancillary contract as it presupposes the existence of a principal
contract. Although the contract of a surety is in essence secondary only to a valid principal obligation, the surety
becomes liable for the debt or duty of another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom. And notwithstanding the fact that the surety contract is
secondary to the principal obligation, the surety assumes liability as a regular party to the undertaking.
The extent of a suretys liability is determined by the language of the suretyship contract or bond itself. It cannot
be extended by implication, beyond the terms of the contract. Thus, to determine whether petitioner is liable to
respondent under the surety bond, it becomes necessary to examine the terms of the contract itself.
A surety contract should be read and interpreted together with the contract entered into between the creditor
and the principal. Since a surety contract is merely a collateral one, its basis is the principal contract or
undertaking which it secures.Necessarily, the stipulations in such principal agreement must at least be
communicated or made known to the surety.
Moreover, being an onerous undertaking, a surety agreement is strictly construed against the creditor, and every
doubt is resolved in favor of the solidary debtor. The contract of suretyship imports entire good faith and
confidence between the parties in regard to the whole transaction, although it has been said that the creditor
does not stand as a fiduciary in his relation to the surety. The creditor is generally held bound to a faithful
observance of the rights of the surety and to the performance of every duty necessary for the protection of those
rights. Moreover, obligations arising from contracts have the force of law between the parties and should be
complied with in good faith. First Lepanto-Taisho Insurance Corporation (now known as FLT Prime Insurance
Corporation) vs. Chevron Philippines, inc. (formerly known as Caltex Philippines, Inc.), G.R. No. 177839. January
18, 2012.
Special Laws
P.D. No. 1529; Registration; When entry is deemed registered. The entry of instruments in the Primary Entry
Book is equivalent to registration despite the failure to annotate said instruments in the corresponding certificates
of title. However, for the entry of instruments in the Primary Entry Book to be considered to be equivalent to
registration and to have the effect of registration, certain requirements have to be met. There is still a need to
comply with all that is required for entry and registration, including the payment of prescribed fees. In this case,
since there was still no compliance of all that is required for purposes of entry and annotation of the Deed of Sale
as of June 25, 2004, the registration of the Notice of Levy on Attachment on June 17, 2004 should take
precedence over the former. Considering that the Notice of Levy of Attachment was deemed registered earlier
than the Deed of Sale, the TCT issued pursuant to the latter should contain the annotation of the
Attachment.Durawood Construction and Lumber Supply, Inc. vs. Candice S. Bona.G.R. No. 179884. January 25,
2011

February 2012 Philippine Supreme Court Decisions on Civil Law

Agency; Accounting. Article 1891 of the Civil Code contains a few of the obligations owed by an agent to his
principal Every agent is bound to render an account of his transactions and to deliver to the principal whatever
he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation
exempting the agent from the obligation to render an account shall be void.
It is evident that the reason behind the failure of petitioner to render an accounting to respondent is immaterial.
What is important is that the former fulfill her duty to render an account of the relevant transactions she entered
into as respondents agent. Caridad Segarra Sazon vs. Letecia Vasquez-Menancio, G.R. No. 192085. February 22,
2012.
Agency; Fruits. Every agent is bound to deliver to the principal whatever the former may have received by virtue
of the agency, even though that amount may not be owed to the principal.Caridad Segarra Sazon vs. Letecia
Vasquez-Menancio, G.R. No. 192085. February 22, 2012.
Attorneys fees; When payable. With respect to attorneys fees, it is proper on the ground that petitioners act of
denying respondent and its employees access to the leased premises has compelled respondent to litigate and
incur expenses to protect its interest. Also, under the circumstances prevailing in the present case, attorneys fees
may be granted on grounds of justice and equity. Manila International Airport vs. Avia Filipinas International,
Inc., G.R. No. 180168. February 27, 2012
Civil Code; Moral damages; Exemplary damages; Attorneys fees. Article 2219 of the Civil Code of the Philippines
provides for recovery of moral damages in certain cases:
Art. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also
recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this
article, in the order named.
Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary damages:
Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages.
In this case, we agree with the CA in not awarding moral and exemplary damages for lack of factual basis.
Lastly, Article 2208 of the Civil Code provides for recovery of attorneys fees and expenses of litigation:
Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just
and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation
should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.
Article 111 of the Labor Code provides for a maximum award of attorneys fees in cases of recovery of wages:
Art. 111. Attorneys fees.
a. In cases of unlawful withholding of wages, the culpable party may be assessed attorneys fees equivalent
to ten percent of the amount of wages recovered.
b. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for
the recovery of wages, attorneys fees which exceed ten percent of the amount of wages recovered.
Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid salaries and protect their
interest, we agree with the CAs imposition of attorneys fees in the amount of ten percent (10%) of the total
claims. Skippers United Pacific, Inc. and Skippers Maritime Services, Inc. Ltd. vs Nathaniel Doza, et al., G.R. No.
175558. February 8, 2012.
Contract; Simulation. Article 1345 of the Civil Code provides that the simulation of a contract may either be
absolute or relative. In absolute simulation, there is a colorable contract but it has no substance as the parties
have no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the
parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each
other what they may have given under the contract. However, if the parties state a false cause in the contract to
conceal their real agreement, the contract is only relatively simulated and the parties are still bound by their real
agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and
their successors in interest. The primary consideration in determining the true nature of a contract is the intention
of the parties. If the words of a contract appear to contravene the evident intention of the parties, the latter
shall prevail. Such intention is determined not only from the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties. Spouses Jose and Milagros Villaceran vs. Josephine De
Guzman, G.R. No. 169055. February 22, 2012.
Contract; Subrogation. Subrogation is the substitution of one person by another with reference to a lawful claim
or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including
its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under an insurance
policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any
loss covered by the policy. It contemplates full substitution such that it places the party subrogated in the shoes
of the creditor, and he may use all means that the creditor could employ to enforce payment. Malayan Insurance
Co., Inc. vs. Rodelio Alberto and Enrico Alberto Reyes, G.R. No. 194320. February 1, 2012.
Damages; Torrens system; Laches and prescription. Article 434 of the Civil Code provides that [i]n an action to
recover, the property must be identified, and the plaintiff must rely on the strength of his title and not on the
weakness of the defendants claim. In other words, in order to recover possession, a person must prove (1) the
identity of the land claimed, and (2) his title.
Jurisprudence consistently holds that prescription and laches can not apply to registered land covered by the
Torrens system because under the Property Registration Decree, no title to registered land in derogation to that
of the registered owner shall be acquired by prescription or adverse possession. Rogelio J. Jakolsalem, et al. vs.
Roberto S. Barangan, G.R. No. 175025. February 15, 2012.
Free patent; Fradulently secured. A Free Patent may be issued where the applicant is a natural-born citizen of the
Philippines; is not the owner of more than twelve (12) hectares of land; has continuously occupied and cultivated,
either by himself or through his predecessors-in-interest, a tract or tracts of agricultural public land subject to
disposition, for at least 30 years prior to the effectivity of Republic Act No. 6940; and has paid the real taxes
thereon while the same has not been occupied by any person. Once a patent is registered and the corresponding
certificate of title is issued, the land covered thereby ceases to be part of public domain and becomes private
property, and the Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of one
year from the date of such issuance.
However, a title emanating from a free patent which was secured through fraud does not become indefeasible,
precisely because the patent from whence the title sprung is itself void and of no effect whatsoever. Well-settled
is the doctrine that the registration of a patent under the Torrens System does not by itself vest title; it merely
confirms the registrants already existing one. Verily, registration under the Torrens System is not a mode of
acquiring ownership.
Nonetheless, a free patent that was fraudulently acquired, and the certificate of title issued pursuant to the same,
may only be assailed by the government in an action for reversion pursuant to Section 101 of the Public Land Act.
Since it was the Director of Lands who processed and approved the applications of the appellants and who
ordered the issuance of the corresponding free patents in their favor in his capacity as administrator of the
disposable lands of the public domain, the action for annulment should have been initiated by him, or at least
with his prior authority and consent. Nancy T. Lorzano vs. Juan Tabayag, Jr., G.R. No. 189647. February 6, 2012.
Lease; Failure to maintain lessee in peaceful possession. It is clear that petitioner failed to maintain respondent in
the peaceful and adequate enjoyment of the leased premises by unjustifiably preventing the latter access thereto.
Consequently, in accordance with Article 1658 of the Civil Code, respondent had no duty to make rent
payments. Manila International Airport vs. Avia Filipinas International, Inc., G.R. No. 180168. February 27, 2012.
Lease; Increase in rental. Article 1374 of the Civil Code clearly provides that [t]he various stipulations of a
contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of
them taken jointly. It is true that Article II, Paragraph 2.04 of the Contract of Lease states that [a]ny subsequent
amendment to Administrative Order No. 4, Series of 1982, which will effect a decrease or escalation of the
monthly rental or impose new and additional fees and charges, including but not limited to government/MIAA
circulars, rules and regulation to this effect, shall be deemed incorporated herein and shall automatically amend
this Contract insofar as the monthly rental is concerned. However, the above quoted provision of the lease
contract should not be read in isolation. Rather, it should be read together with the provisions of Article VIII,
Paragraph 8.13, which provide that [a]ny amendment, alteration or modification of th[e] Contract shall not be
valid and binding, unless and until made in writing and signed by the parties thereto. It is clear from the
foregoing that the intention of the parties is to subject such amendment to the conformity of both petitioner and
respondent. Manila International Airport vs. Avia Filipinas International, Inc., G.R. No. 180168. February 27, 2012
Legal pre-emption; Notice requirement. Article 1623 of the Civil Code provides that the right of legal pre-emption
or redemption shall not be exercised except within thirty days from the notice in writing by the prospective
vendor, or by the vendor, as the case may be. The written notice of sale is mandatory. This Court has long
established the rule that notwithstanding actual knowledge of a co-owner, the latter is still entitled to a written
notice from the selling co-owner in order to remove all uncertainties about the sale, its terms and conditions, as
well as its efficacy and status. Sps.Roman Pascual and Mercedita R. Pascual,et al. vs. Sps. Antonio Ballesteros
and Lorenza Melchor-Balles, G.R. No. 186269. February 15, 2012.
Marriage; Divorce not allowed in the Philippines; Exception based on principles of comity; Divorce must be proven
as a fact. The Supreme Court had already ruled that under the principles of comity, our jurisdiction recognizes a
valid divorce obtained by a spouse of foreign nationality. This doctrine was established as early as 1985 in Van
Dorn v. Romillo, Jr. wherein the SC said: It is true that owing to the nationality principle embodied in Article 15
of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces, the same being
considered contrary to our concept of public policy and morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they are valid according to their national law. In this case,
the divorce in Nevada released private respondent from the marriage from the standards of American law, under
which divorce dissolves the marriage.
Nonetheless, the fact of divorce must still first be proven as the Supreme Court has enunciated in Garcia v. Recio,
to wit: Before a foreign judgment is given presumptive evidentiary value, the document must first be presented
and admitted in evidence. A divorce obtained abroad is proven by the divorce decree itself. Indeed the best
evidence of a judgment is the judgment itself. The decree purports to be a written act or record of an act of an
official body or tribunal of a foreign country. Merope Enriquez Vda De Catalan vs Louella A. Catalan-Lee, G.R.
No. 183622. February 8, 2012.
Marriage; Presumption of conjugality of property; Married to is merely descriptive of the status of the
owner. Pursuant to Article 160 of the Civil Code of the Philippines, all property of the marriage is presumed to
belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the
wife. Although it is not necessary to prove that the property was acquired with funds of the partnership, proof of
acquisition during the marriage is an essential condition for the operation of the presumption in favor of the
conjugal partnership. Not having established the time of acquisition of the property, the Dela Peas insist that the
registration thereof in the name of Antonia R. Dela Pea, of legal age, Filipino, married to Antegono A. Dela
Pea should have already sufficiently established its conjugal nature. Confronted with the same issue in the
case Ruiz vs. Court of Appeals, the Supreme Court ruled, however, that the phrase married to is merely
descriptive of the civil status of the wife and cannot be interpreted to mean that the husband is also a registered
owner. Because it is likewise possible that the property was acquired by the wife while she was still single and
registered only after her marriage, neither would registration thereof in said manner constitute proof that the
same was acquired during the marriage and, for said reason, to be presumed conjugal in nature. Since there is
no showing as to when the property in question was acquired, the fact that the title is in the name of the wife
alone is determinative of its nature as paraphernal, i.e., belonging exclusively to said spouse. Antonia R. Dela
Pea, et al. vs Gemma Remilyn C. Avila and Far East Bank & Trust Co., G.R. No. 187490., February 8, 2012.
Mortgage; Foreclosure of Mortgage; Necessary consequence of non-payment. Since foreclosure of the mortgage
is but the necessary consequence of non-payment of the mortgage debt, FEBTC-BPI was, likewise, acting well
within its rights as mortgagee when it foreclosed the real estate mortgage on the property upon Gemmas failure
to pay the loans secured thereby. Executed on 26 November 1997, the mortgage predated Antonias filing of an
Affidavit of Adverse Claim with the Register of Deeds of Marikina on 3 March 1998 and the annotation of a Notice
of Lis Pendens on TCT No. 337834 on 10 December 1999. The mortgage directly and immediately subjects the
property upon which it is imposed, whoever the possessor may be, to the fulfilment of the obligation for whose
security it was constituted. When the principal obligation is not paid when due, the mortgagee consequently has
the right to foreclose the mortgage, sell the property, and apply the proceeds of the sale to the satisfaction of the
unpaid loan. Antonia R. Dela Pea, et al. vs Gemma Remilyn C. Avila and Far East Bank & Trust Co., G.R. No.
187490., February 8, 2012.
Mortgage; Third party mortgagor. Third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property. The fact that the loans were solely for the benefit of TFRC
would not invalidate the mortgage with respect to respondents property as long as valid consent was
given. Thus, when respondent executed the real estate mortgage over its properties, such properties thereby
secured the performance of the principal obligation notwithstanding the fact that respondent itself had not
assumed any liability for the debt of TFRC. China Banking Corporation vs. QBRO Fishing Enterprises, Inc., G.R.
No. 184556, February 22, 2012.
Negligence; Contributory negligence. Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls below the standard which he is required to
conform for his own protection. It is an act or omission amounting to want of ordinary care on the part of the
person injured which, concurring with the defendants negligence, is the proximate cause of the injury.
Here, we cannot see how the respondents could have contributed to their injury when they were not even aware
of the forthcoming danger. It was established during the trial that the jeepney carrying the respondents was
following a ten-wheeler truck which was only about three to five meters ahead. When the truck proceeded to
traverse the railroad track, Reynaldo, the driver of the jeepney, simply followed through. He did so under the
impression that it was safe to proceed. It bears noting that the prevailing circumstances immediately before the
collision did not manifest even the slightest indication of an imminent harm. To begin with, the truck they were
trailing was able to safely cross the track. Likewise, there was no crossing bar to prevent them from proceeding
or, at least, a stoplight or signage to forewarn them of the approaching peril. Thus, relying on his faculties of
sight and hearing, Reynaldo had no reason to anticipate the impending danger. He proceeded to cross the track
and, all of a sudden, his jeepney was rammed by the train being operated by the petitioners. Even then, the
circumstances before the collision negate the imputation of contributory negligence on the part of the
respondents. What clearly appears is that the accident would not have happened had the petitioners installed
reliable and adequate safety devices along the crossing to ensure the safety of all those who may utilize the
same. Philippine National Railways Corporation, et al. vs. Purificacion Vizcara, et al., G.R. No. 190022. February
15, 2012
Negligence; Proximate cause. The petitioners negligence in maintaining adequate and necessary public safety
devices in the area of the accident was the proximate cause of the mishap. Thus, there is no other party to blame
but the petitioners for their failure to ensure that adequate warning devices are installed along the railroad
crossing. Philippine National Railways Corporation, et al. vs. Purificacion Vizcara, et al., G.R. No.
190022. February 15, 2012
Obligations; Delay. The civil law concept of delay or default commences from the time the obligor demands,
judicially or extrajudicially, the fulfillment of the obligation from the obligee. In legal parlance, demand is the
assertion of a legal or procedural right. Philippine Charter Insurance Corporation vs. Central Colleges of the
Philippines and Dynamic Planners and Construction Corporation,G.R. No. 180631-33. February 22, 2012.
Obligation, Extinguishment thereof; Dation in payment. Indeed, pursuant to Article 1232 of the Civil Code, an
obligation is extinguished by payment or performance. There is payment when there is delivery of money or
performance of an obligation. Article 1245 of the Civil Code provides for a special mode of payment called dation
in payment (dacin en pago). There is dation in payment when property is alienated to the creditor in satisfaction
of a debt in money. Here, the debtor delivers and transmits to the creditor the formers ownership over a thing as
an accepted equivalent of the payment or performance of an outstanding debt. In such cases, Article 1245
provides that the law on sales shall apply, since the undertaking really partakes in one sense of the nature of
sale; that is, the creditor is really buying the thing or property of the debtor, the payment for which is to be
charged against the debtors obligation. Dation in payment extinguishes the obligation to the extent of the value
of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement
express or implied, or by their silence consider the thing as equivalent to the obligation, in which case the
obligation is totally extinguished. Tan Shuy vs Spouses Guillermo Maulawin, et al., G.R. No. 190375. February 8,
2012.
Obligations; Surety. A surety under Article 2047 of the New Civil Code solidarily binds itself with the principal
debtor to assure the fulfillment of the obligation. As provided in Article 2047, the surety undertakes to be bound
solidarily with the principal obligor. That undertaking makes a surety agreement an ancillary contract as it
presupposes the existence of a principal contract. Although the contract of a surety is in essence secondary only
to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no
direct or personal interest over the obligations nor does it receive any benefit therefrom. The suretys obligation is
not an original and direct one for the performance of his own act, but merely accessory or collateral to the
obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary
only to a valid principal obligation, his liability to the creditor or promisee of the principal is said to be direct,
primary and absolute; in other words, he is directly and equally bound with the principal.
Suretyship, in essence, contains two types of relationship the principal relationship between the obligee and the
obligor, and the accessory surety relationship between the principal and the surety. In this arrangement, the
obligee accepts the suretys solidary undertaking to pay if the obligor does not pay. Such acceptance, however,
does not change in any material way the obligees relationship with the principal obligor. Neither does it make the
surety an active party to the principal obligee-obligor relationship. Thus, the acceptance does not give the surety
the right to intervene in the principal contract. The suretys role arises only upon the obligors default, at which
time, it can be directly held liable by the obligee for payment as a solidary obligor. Philippine Charter Insurance
Corporation vs. Central Colleges of the Philippines and Dynamic Planners and Construction Corporation, G.R. No.
180631-33. February 22, 2012.
Possession; Recovery of possession; Implied vs. constructive trust; Prescription; Acquisitive vs. extinctive
prescription; Ordinary vs. extraordinary prescription. In a constructive trust, there is neither a promise nor any
fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property
for the beneficiary. The relation of trustee and cestui que trust does not in fact exist, and the holding of a
constructive trust is for the trustee himself, and therefore, at all times adverse. Prescription may supervene even
if the trustee does not repudiate the relationship.
Prescription, as a mode of acquiring ownership and other real rights over immovable property, is concerned with
lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the
concept of an owner, public, peaceful, uninterrupted, and adverse. Acquisitive prescription of real rights may be
ordinary or extraordinary.
The CA correctly dismissed petitioners complaint as an action for reconveyance based on an implied or
constructive trust prescribes in 10 years from the time the right of action accrues. This is the other kind of
prescription under the Civil Code, called extinctive prescription, where rights and actions are lost by the lapse of
time. Petitioners action for recovery of possession having been filed 55 years after Macario occupied Dionisias
share, it is also barred by extinctive prescription.
Ordinary acquisitive prescription requires possession in good faith and with just title for 10 years. In
extraordinary prescription, ownership and other real rights over immovable property are acquired through
uninterrupted adverse possession for 30 years without need of title or of good faith. Celerino E. Mercado vs Belen
Espinocilla and Ferdinand Espinocilla., G.R. No. 184109, February 1, 2012.
Public Document; Effect of notarization; Presumption of regularity. With the material contradictions in the Dela
Peas evidence, the CA cannot be faulted for upholding the validity of the impugned 4 November 1997 Deed of
Absolute Sale. Having been duly notarized, said deed is a public document which carries the evidentiary weight
conferred upon it with respect to its due execution. Regarded as evidence of the facts therein expressed in a
clear, unequivocal manner, public documents enjoy a presumption of regularity which may only be rebutted by
evidence so clear, strong and convincing as to exclude all controversy as to falsity. The burden of proof to
overcome said presumptions lies with the party contesting the notarial document like the Dela Peas who,
unfortunately, failed to discharge said onus. Absent clear and convincing evidence to contradict the same, we
find that the CA correctly pronounced the Deed of Absolute Sale was valid and binding between Antonia and
Gemma. Antonia R. Dela Pea, et al. vs Gemma Remilyn C. Avila and Far East Bank & Trust Co., G.R. No.
187490. February 8, 2012 .
Quasi delict; Negligence. Negligence is the want of care required by the circumstances. It is a conduct that
involves an unreasonably great risk of causing damage; or, more fully, a conduct that falls below the standard
established by law for the protection of others against unreasonably great risk of harm. Not all omissions can be
considered as negligent.
The test of negligence is as follows Could a prudent man, in the case under consideration, foresee harm as a
result of the course actually pursued? If so, it was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by ignoring of the suggestion born of this prevision, is always
necessary before negligence can be held to exist.Philam Insurance Company, Inc., et al. vs. Court of Appeals and
D.M. Consunji, Inc., G.R. No. 165413. February 22, 2012.
Real Estate Mortgage; Extrajudicial foreclosure sale; Recovery of unpaid balance or deficiency; Inadequacy of sale
price. Citing BPI Family Savings Bank, Inc. v. Avenido, the Supreme Court reiterated the well-entrenched rule
that a creditor is not precluded from recovering any unpaid balance on the principal obligation if the extrajudicial
foreclosure sale of the property subject of the real estate mortgage results in a deficiency, to wit: It is settled
that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the
mortgagee is entitled to claim the deficiency from the debtor. While Act No. 3135, as amended, does not discuss
the mortgagees right to recover the deficiency, neither does it contain any provision expressly or impliedly
prohibiting recovery. If the legislature had intended to deny the creditor the right to sue for any deficiency
resulting from the foreclosure of a security given to guarantee an obligation, the law would expressly so provide.
Absent such a provision in Act No. 3135, as amended, the creditor is not precluded from taking action to recover
any unpaid balance on the principal obligation simply because he chose to extrajudicially foreclose the real estate
mortgage.
The Supreme Court ruled in Suico Rattan & Buri Interiors, Inc. v. Court of Appeals that, in deference to the rule
that a mortgage is simply a security and cannot be considered payment of an outstanding obligation, the creditor
is not barred from recovering the deficiency even if it bought the mortgaged property at the extrajudicial
foreclosure sale at a lower price than its market value notwithstanding the fact that said value is more than or
equal to the total amount of the debtors obligation. Thus, it is wrong for petitioners to conclude that when
respondent bank supposedly bought the foreclosed properties at a very low price, the latter effectively prevented
the former from satisfying their whole obligation. Petitioners still had the option of either redeeming the
properties and, thereafter, selling the same for a price which corresponds to what they claim as the properties
actual market value or by simply selling their right to redeem for a price which is equivalent to the difference
between the supposed market value of the said properties and the price obtained during the foreclosure sale. In
either case, petitioners will be able to recoup the loss they claim to have suffered by reason of the inadequate
price obtained at the auction sale and, thus, enable them to settle their obligation with respondent bank.
Moreover, petitioners are not justified in concluding that they should be considered as having paid their
obligations in full since respondent bank was the one who acquired the mortgaged properties and that the price it
paid was very inadequate. The fact that it is respondent bank, as the mortgagee, which eventually acquired the
mortgaged properties and that the bid price was low is not a valid reason for petitioners to refuse to pay the
remaining balance of their obligation. Settled is the rule that a mortgage is simply a security and not a
satisfaction of indebtedness. Bank of the Philippine Islands, as successor-in-Interest of Far Far East Bank & Trust
Company vs Cythia L. Reyes, G.R. No. 182769. February 1, 2012.
Res ipsa loquitur; Simple negligence; Elements of negligence; Damages. The doctrine of res ipsa loquitur as a
rule of evidence is unusual to the law of negligence which recognizes that prima facienegligence may be
established without direct proof and furnishes a substitute for specific proof of negligence. The doctrine,
however, is not a rule of substantive law, but merely a mode of proof or a mere procedural convenience. The
rule, when applicable to the facts and circumstances of a given case, is not meant to and does not dispense with
the requirement of proof of culpable negligence on the party charged. It merely determines and regulates what
shall be prima facie evidence thereof and helps the plaintiff in proving a breach of the duty. The doctrine can be
invoked when and only when, under the circumstances involved, direct evidence is absent and not readily
available. The requisites for the application of the doctrine of res ipsa loquitur are: (1) the accident was of a kind
which does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency which caused the
injury was under the exclusive control of the person in charge; and (3)the injury suffered must not have been
due to any voluntary action or contribution of the person injured.
Negligence is defined as the failure to observe for the protection of the interests of another person that degree of
care, precaution, and vigilance, which the circumstances justly demand, whereby such other person suffers
injury. The elements of simple negligence are: (1) that there is lack of precaution on the part of the offender, and
(2) that the damage impending to be caused is not immediate or the danger is not clearly manifest
Moral damages are not punitive in nature, but are designed to compensate and alleviate in some way the physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury unjustly inflicted on a person. Intended for the restoration of the psychological or
emotional status quo ante, the award of moral damages is designed to compensate emotional injury suffered, not
to impose a penalty on the wrongdoer. Dr. Emmanuel Jarcia, Jr. and Dr. Marilou Bastan vs. People of
the Philippines, G.R. No. 187926. February 15, 2012.
Succession; Hereditary estate transmitted to heirs immediately after death of decedent. Under the rules of
succession, the heirs instantaneously became co-owners of the Marcos properties upon the death of the
President. The property rights and obligations to the extent of the value of the inheritance of a person are
transmitted to another through the decedents death. In this concept, nothing prevents the heirs from exercising
their right to transfer or dispose of the properties that constitute their legitimes, even absent their declaration or
absent the partition or the distribution of the estate. In Jakosalem v. Rafols, the Supreme Court said: Article 440
of the Civil Code provides that the possession of hereditary property is deemed to be transmitted to the heir
without interruption from the instant of the death of the decedent, in case the inheritance be accepted. And
Manresa with reason states that upon the death of a person, each of his heirs becomes the undivided owner of
the whole estate left with respect to the part or portion which might be adjudicated to him, a community of
ownership being thus formed among the coowners of the estate while it remains undivided. (3 Manresa, 357;
Alcala vs. Alcala, 35 Phil. 679.) And according to article 399 of the Civil Code, every part owner may assign or
mortgage his part in the common property, and the effect of such assignment or mortgage shall be limited to the
portion which may be allotted him in the partition upon the dissolution of the community. Republic of the
Philippines vs Ma. Imelda Imee R. Marcos-Manotoc, et al., G.R. No. 171701. February 8, 2012.
Temperate damages. Under Article 2224 of the Civil Code, temperate or moderate damages are more than
nominal but less than compensatory, and may be recovered when the court finds that some pecuniary loss has
been suffered, but the amount cannot, from the nature of the case, be proved with certainty. The CA found that
respondent paid for the doctors professional fees and incurred other hospital expenses; however, the records
failed to show that he presented proof of the actual amount of expenses therein, which served as the basis for
the CA to award temperate damages in the amount of P100,000.00. Wuerth Philippines, Inc. vs. Rodante
Ynson, G.R. No. 175932, February 15, 2012.
Torrens Title; Doctrine of indefeasibility; Conclusiveness of title; Burden of proof; Direct attack vs. collateral
attack. Prohibition against collateral attack does not apply to spurious or non-existent titles, since such titles do
not enjoy indefeasibility. Well-settled is the rule that the indefeasibility of a title does not attach to titles secured
by fraud and misrepresentation. In view of these circumstances, it was as if no title was ever issued in this case
to the petitioner and therefore this is hardly the occasion to talk of collateral attack against a title.
An action or proceeding is deemed an attack on a title when the object of the action is to nullify the title, and
thus challenge the judgment pursuant to which the title was decreed. The attack is direct when the object of the
action is to annul or set aside such judgment, or to enjoin its enforcement. On the other hand, it is indirect or
collateral when, in an action or proceeding to obtain a different relief, an attack on the judgment is nevertheless
made as an incident thereof.Heirs of Leoncio C. Oliveros, represented by Aurora B. Oliveros, et al. vs San Miguel
Corporation, et al., G.R. No. 173531. February 1, 2012.
Void government contract; Payment for services; Quantum meruit. It has been settled in several cases that
payment for services done on account of the government, but based on a void contract, cannot be avoided. The
government is unjustified in denying what it owes to contractors and in leaving them uncompensated after it has
benefitted from the already completed work. Jurisprudence recognizes the principle of quantum meruit. Our
courts are courts of both law and equity. Given these, this Court will remain true to the rule of substantial justice
and direct the payment of compensation to the contractors, who have completed their services for the
governments Mt. Pinatubo Rehabilitation Project. Otherwise, urgent actions for emergency work in the future
would be discouraged. Department of Public Works and Highways vs. Ronaldo E. Quiwa, doing business under
the name R.E.Q. Construction, et al., G.R. No. 183444. February 8, 2012.

March 2012 Philippine Supreme Court Decisions on Civil Law

Civil Code
Contracts; bad faith, fraud. Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive
or interest or ill will that partakes of the nature of fraud. Fraud has been defined to include an inducement
through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state material facts and, by
reason of such omission or concealment, the other party was induced to give consent that would not otherwise
have been given. These are allegations of fact that demand clear and convincing proof. They are serious
accusations that can be so conveniently and casually invoked, and that is why they are never presumed. In this
case, the evidence presented is insufficient to prove that respondent acted in bad faith or fraudulently in dealing
with petitioner. R.S. Tomas, Inc. v. Rizal Cement Company, Inc.; G.R. No. 173155. March 21, 2012
Contracts; rescission of contract. The rescission referred to in Article 1191 of the Civil Code, more appropriately
referred to as resolution, is on the breach of faith by the defendant, which is violative of the reciprocity between
the parties. The right to rescind, however, may be waived, expressly or impliedly. While the right to rescind
reciprocal obligations is implied, that is, that such right need not be expressly provided in the contract,
nevertheless the contracting parties may waive the same.
Hence, in spite of the existence of dispute or controversy between the parties during the course of the
Subcontract Agreement, HRCC had agreed to continue the performance of its obligations pursuant to the
Subcontract Agreement. In view of the provision of the Subcontract Agreement, HRCC is deemed to have
effectively waived its right to effect extrajudicial rescission of its contract with FFCCI. Accordingly, HRCC, in the
guise of rescinding the Subcontract Agreement, was not justified in implementing a work stoppage. F.F. Cruz &
Co., Inc. vs. HR Construction Corp.; G.R. No. 187521. March 14, 2012
Contracts; void and inexistent sale not subject to ratification. As to the applicability of Article 1317 of the Civil
Code, contracts of sale lacking the approval of the Secretary of the Interior/Agriculture and Natural Resources fall
under the class of void and inexistent contracts enumerated in Article 1409, which cannot be ratified. Section 18
of Act No. 1120 mandates the approval by the Secretary for a sale of friar land to be valid.
The official document denominated as Sale Certificate clearly required both the signatures of the Director of
Lands who issued such sale certificate to an applicant settler/occupant and the Secretary of the
Interior/Agriculture and Natural Resources indicating his approval of the sale. These forms had been prepared
and issued by the Chief of the Bureau of Public Lands under the supervision of the Secretary of the Interior,
consistent with Act No. 1120 as may be necessary x x x to carry into effect all the provisions [thereof] that are
to be administered by or under [his] direction, and for the conduct of all proceedings arising under such
provisions. Serverino M. Manotok IV, et al. vs. Heirs of Homer L. Barque, represented by Teresita Barque
Hernandez; G.R. Nos. 162335 & 162605. March 6, 2012
Contracts; waiver of rights under contract. Waiver is defined as a voluntary and intentional relinquishment or
abandonment of a known existing legal right, advantage, benefit, claim or privilege, which except for such waiver
the party would have enjoyed; the voluntary abandonment or surrender, by a capable person, of a right known
by him to exist, with the intent that such right shall be surrendered and such person forever deprived of its
benefit; or such conduct as warrants an inference of the relinquishment of such right; or the intentional doing of
an act inconsistent with claiming it.
FFCCIs voluntary payment in favor of HRCC, albeit in amounts substantially different from those claimed by the
latter, is a glaring indication that it had effectively waived its right to demand for the joint measurement of the
completed works. FFCCIs failure to demand a joint measurement of HRCCs completed works reasonably justified
the inference that it had already relinquished its right to do so. F.F. Cruz & Co., Inc. vs. HR Construction
Corp.; G.R. No. 187521. March 14, 2012
Damages; loss of earning capacity. Damages for loss of earning capacity is in the nature of actual damages,
which as a rule must be duly proven by documentary evidence, not merely by the self-serving testimony of the
widow. By way of exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under
current labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work no
documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the
minimum wage under current labor laws.
It was error for the Court of Appeals to have awarded damages for loss of earning capacity based on Nelfas
testimony alone. First, while it is conceded that the deceased was self-employed, the Court cannot accept that in
his line of work there was no documentary proof available to prove his income from such occupation. There
would have been receipts, job orders, or some form of written contract or agreement between the deceased and
his clients when he is contracted for a job. Second, and more importantly, decedent was not earning less than
the minimum wage at the time of his death. Paulita Edith Serra vs. Nelfa T. Mumar; G.R. No. 193861. March
14, 2012
Employer; liability for damages. Under Article 2180 of the Civil Code, employers are liable for the damages caused
by their employees acting within the scope of their assigned tasks. Whenever an employees negligence causes
damage or injury to another, there instantly arises a presumption that the employer failed to exercise the due
diligence of a good father of the family in the selection or supervision of its employees. The liability of the
employer is direct or immediate. It is not conditioned upon prior recourse against the negligent employee and a
prior showing of insolvency of such employee. Moreover, under Article 2184 of the Civil Code, if the causative
factor was the drivers negligence, the owner of the vehicle who was present is likewise held liable if he could
have prevented the mishap by the exercise of due diligence.
Petitioner failed to show that she exercised the level of diligence required in supervising her driver in order to
prevent the accident. She admitted that de Castro had only been her driver for one year and she had no
knowledge of his driving experience or record of previous accidents. She also admitted that it was de Castro who
maintained the vehicle and would even remind her to pay the installment of the car. Petitioner also admitted
that, at the time of the accident, she did not know what was happening and only knew they bumped into another
vehicle when the driver shouted. She then closed her eyes and a moment later felt something heavy fall on the
roof of the car. When the vehicle stopped, petitioner left the scene purportedly to ask help from her brother,
leaving the other passengers to come to the aid of her injured driver. Paulita Edith Serra vs. Nelfa T.
Mumar;G.R. No. 193861. March 14, 2012
Interest on the judgment; 12% per annum to be computed from default, which is from judicial or extrajudicial
demand. Applying Lunaria v. People, the Court of Appeals modified the appealed judgment holding petitioner
liable for the amount of the dishonored check, with 12% interest per annum from the date of judicial demand
until the finality of this Decision. We find the need to modify the ruling of the CA with regard to the imposition of
interest on the judgment. It has been established that in the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, that is, from judicial or extrajudicial demand under and subject to
the provisions of Article 1169of the Civil Code. In Ongson v. People, we held that interest began to run from the
time of the extrajudicial demand, as duly proved by the creditor. Thus, petitioner should also be held liable for
the amount of the dishonored check, which is 1,500,000, plus 12% legal interest covering the period from the
date of the receipt of the demand letter on 14 May 1999 to the finality of this Decision. The total amount due in
the dispositive portion of the CAs Decision, inclusive of interest, shall further earn 12% interest per annum from
the finality of this Decision until fully paid. Eleanor De Leon Llenado vs. People of the Philippines and Editha
Villaflores. G.R. No. 193279. March 14, 2012
Nuisance per se vs. nuisance per accidens; only nuisance per se may be summarily abated without judicial
intervention. If petitioner indeed found respondents fence to have encroached on the sidewalk, his remedy is not
to demolish the same summarily after respondents failed to heed his request to remove it. Instead, he should go
to court and prove respondents supposed violations in the construction of the concrete fence. Indeed, unless a
thing is a nuisance per se, it may not be abated summarily without judicial intervention.
Respondents fence is not a nuisance per se. By its nature, it is not injurious to the health or comfort of the
community. It was built primarily to secure the property of respondents and prevent intruders from entering it.
And as correctly pointed out by respondents, the sidewalk still exists. If petitioner believes that respondents
fence indeed encroaches on the sidewalk, it may be so proven in a hearing conducted for that purpose. Not
being a nuisance per se, but at most a nuisance per accidens, its summary abatement without judicial
intervention is unwarranted. Jaime S. Perez, both in his personal and official capacity as Chief, Marikina
Demolition Office vs. Spouses Fortunito L. Madrona and Yolanda B. Pante; G.R. No. 184478. March 21, 2012
Special Laws
Act No. 1120 See digest of Serverino M. Manotok IV, et al. vs. Heirs of Homer L. Barque, represented by Teresita
Barque Hernandez; G.R. Nos. 162335 & 162605. March 6, 2012, under heading of Contracts.

April 2012 Philippine Supreme Court Decisions on Civil Law
Civil Code
Compensation/set-off; requisites. The applicable provisions of law are Articles 1278, 1279 and 1290 of the Civil
Code of the Philippines:
Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each
other.
Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
Art. 1290. When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation
of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not
aware of the compensation.
Based on the foregoing, in order for compensation to be valid, the five requisites mentioned in the above-quoted
Article 1279 should be present, as in the case at bench. Insular Investment and Trust Corporation vs. Capital One
Equities Corp. and Planters Development Bank; G.R. No. 183308, April 25, 2012
Contracts; double sales; possession; actual and physical delivery. A double sale calls for the application of the
rules in Article 1544 of the Civil Code, to wit:
If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
Jurisprudence has interpreted possession in Article 1544 of the Civil Code to mean both actual physical delivery
and constructive delivery. Actual delivery of a thing sold occurs when it is placed under the control and
possession of the vendee. Delivery of a thing sold may also be made constructively. Article 1498 of the Civil Code
states that: When the sale is made through a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred. The Roman Catholic Church vs. Pante; G.R. No. 174118, April 11, 2012.
Contracts; mistake; voidable contract. For mistake as to the qualification of one of the parties to vitiate consent,
two requisites must concur:
1. the mistake must be either with regard to the identity or with regard to the qualification of one of the
contracting parties; and
2. the identity or qualification must have been the principal consideration for the celebration of the contract.
The Roman Catholic Church vs. Pante; G.R. No. 174118, April 11, 2012.
Damages; interest in case of breach of contract; interest rate. Interest may be imposed even in the absence of
stipulation in the contract because Article 2210 of the Civil Code expressly provides that [i]nterest may, in the
discretion of the court, be allowed upon damages awarded for breach of contract.
Anent the interest rate, the general rule is that the applicable rate of interest shall be computed in accordance
with the stipulation of the parties. Absent any stipulation, the applicable rate of interest shall be 12% per annum
when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be
six percent (6%). In this case, the parties did not stipulate as to the applicable rate of interest.
The contract involved in this case is admittedly not a loan but a Conditional Deed of Sale. However, the contract
provides that the seller must return the payment made by the buyer if the conditions are not fulfilled. There is no
question that they have in fact, not been fulfilled as the seller has admitted this. Notwithstanding demand by the
buyer, the seller has failed to return the money and should be considered in default from the time that demand
was made.
Even if the transaction involved a Conditional Deed of Sale, can the stipulation governing the return of the money
be considered as a forbearance of money which required payment of interest at the rate of 12%. Forbearance is
a contractual obligation of lender or creditor to refrain during a given period of time, from requiring the borrower
or debtor to repay a loan or debt then due and payable. Forbearance of money, goods or credits refers to
arrangements other than loan agreements, where a person acquiesces to the temporary use of his money, goods
or credits pending happening of certain events or fulfillment of certain conditions. Hermojina Estores vs. Spouses
Arturo and Laura Supangan: G.R. No. 175139, April 18, 2012.
Damages; liquidated damages. Article 2226 of the Civil Code allows the parties to a contract to stipulate on
liquidated damages to be paid in case of breach. It is attached to an obligation in order to insure performance
and has a double function: (1) to provide for liquidated damages, and (2) to strengthen the coercive force of the
obligation by the threat of greater responsibility in the event of breach. As a general rule, contracts constitute the
law between the parties, and they are bound by its stipulations. For as long as they are not contrary to law,
morals, good customs, public order, or public policy, the contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient. Philippine Charter Insurance Corporation vs.
Petroleum Distributors & Service Corporation; G.R. No. 180898. April 18, 2012.
Damages; negligence; proximate cause. PNBs act of releasing the proceeds of the check prior to the lapse of the
15-day clearing period was the proximate cause of the loss. Here, while PNB highlights Ofelias fault in
accommodating a strangers check and depositing it to the bank, it remains mum in its release of the proceeds
thereof without exhausting the 15-day clearing period, an act which contravened established banking rules and
practice. It is worthy of notice that the 15-day clearing period alluded to is construed as 15 banking days. It bears
stressing that the diligence required of banks is more than that of a Roman pater familias or a good father of a
family. The highest degree of diligence is expected. PNB miserably failed to do its duty of exercising
extraordinary diligence and reasonable business prudence. The disregard of its own banking policy amounts to
gross negligence, which the law defines as negligence characterized by the want of even slight care, acting or
omitting to act in a situation where there is duty to act, not inadvertently but wilfully and intentionally with a
conscious indifference to consequences in so far as other persons may be affected. With regard to collection or
encashment of checks, suffice it to say that the law imposes on the collecting bank the duty to scrutinize
diligently the checks deposited with it for the purpose of determining their genuineness and regularity. The
collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and
the law thus holds it to a high standard of conduct. A bank is expected to be an expert in banking procedures
and it has the necessary means to ascertain whether a check, local or foreign, is sufficiently funded. Philippine
National Bank vs. Spouses Cheah Chee Chong and Ofelia Camacho Cheah/Spouses Cheah Chee Chong and Ofelia
Camacho Chea vs. Philippine National Bank; G.R. Nos. 170865/G.R. No. 170892, April 25, 2012.
Damages; requisites. License to operate a cockpit is a mere privilege, and even if he was able to get a business
permit from the mayor, this did not give him a license to operate a cockpit. Without any legal right to operate a
cockpit in the municipality, petitioner is not entitled to damages. Injury alone does not give petitioner the right to
recover damages; he must also have a right of action for the legal wrong inflicted by the respondents. We need
not belabor that in order that the law will give redress for an act causing damage, there must be damnum et
injuria that act must be not only hurtful, but wrongful. Danilo A. Du vs. Venancio R. Jayoma, et al.; G.R. No.
175042, April 23, 2012.
Damages; res ipsa loquitur; elements; liability of employer. Under the doctrine of res ipsa loquitur, [w]here the
thing that caused the injury complained of is shown to be under the management of the defendant or his
servants; and the accident, in the ordinary course of things, would not happen if those who had management or
control used proper care, it affords reasonable evidence in the absence of a sufficient, reasonable and logical
explanation by defendant that the accident arose from or was caused by the defendants want of care. Res
ipsa loquitur is merely evidentiary, a mode of proof, or a mere procedural convenience, since it furnishes a
substitute for, and relieves a plaintiff of, the burden of producing a specific proof of negligence. It recognizes
that parties may establish prima facie negligence without direct proof, thus, it allows the principle to substitute
for specific proof of negligence. It permits the plaintiff to present along with proof of the accident, enough of the
attending circumstances to invoke the doctrine, create an inference or presumption of negligence and thereby
place on the defendant the burden of proving that there was no negligence on his part. The doctrine is based
partly on the theory that the defendant in charge of the instrumentality which causes the injury either knows the
cause of the accident or has the best opportunity of ascertaining it while the plaintiff has no such knowledge, and
is therefore compelled to allege negligence in general terms.
The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as follows:
1) the accident is of a kind which does not ordinarily occur unless someone is negligent;
2) the cause of the injury was under the exclusive control of the person in charge and
3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person
injured.
The aforementioned requisites having been met, there now arises a presumption of negligence which he could
have overcome by evidence that he exercised due care and diligence in preventing strangers from using his jeep.
Unfortunately, he failed to do so.
The operator on record of a vehicle is primarily responsible to third persons for the deaths or injuries consequent
to its operation, regardless of whether the employee drove the registered owners vehicle in connection with his
employment. Absent the circumstance of unauthorized use48 or that the subject vehicle was stolen which are
valid defenses available to a registered owner, he cannot escape liability for quasi-delict resulting from his jeeps
use. Oscar Del Carmen, Jr. vs. Geronimo Bacoy, guradian and representing the children, namely, Mary Marjorie B.
Monsalud, et al.;G.R. No. 173870, April 25, 2012.
Property; acquisition by prescription; confirmation of incomplete or imperfect titles; requirements. There must be
an express declaration by the State that the public dominion property is no longer intended for public service or
the development of the national wealth or that the property has been converted into patrimonial. Without such
express declaration, the property, even if classified as alienable or disposable, remains property of the public
dominion, pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such
alienable and disposable lands are expressly declared by the State to be no longer intended for public service or
for the development of the national wealth that the period of acquisitive prescription can begin to run. Such
declaration shall be in the form of a law duly enacted by Congress or a Presidential Proclamation in cases where
the President is duly authorized by law.
For one to invoke the provisions of Section 14(2) and set up acquisitive prescription against the State, it is
primordial that the status of the property as patrimonial be first established. Furthermore, the period of
possession preceding the classification of the property as patrimonial cannot be considered in determining the
completion of the prescriptive period.
Adverse, continuous, open, public possession in the concept of an owner is a conclusion of law and the burden to
prove it by clear, positive and convincing evidence is on the applicant. A claim of ownership will not proper on the
basis of tax declarations if unaccompanied by proof of actual possession.
The counting of the thirty (30)-year prescriptive period for purposes of acquiring ownership of a public land under
Section 14(2) can only start from the issuance of DARCO Conversion Order. Before the property was declared
patrimonial by virtue of such conversion order, it cannot be acquired by prescription. Jean Tan, et al. vs. Republic
of the Philippines; G.R. No. 193443, April 16, 2012.
Sale; rescission for breach of obligation to deliver; constructive delivery, execution of public instrument. A party is
entitled to demand for the rescission of their contract for the failure to deliver the physical possession of the
subject property and the certificate of title covering the same notwithstanding the absence of stipulations in the
agreement expressly indicating the consequences of such omission, pursuant to Article 1191 of the NCC, which
states that the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
Article 1498 of the NCC generally considers the execution of a public instrument as constructive delivery by the
seller to the buyer of the property subject of a contract of sale. The case at bar, however, falls among the
exceptions to the foregoing rule since a mere presumptive and not conclusive delivery is created as the
respondent failed to take material possession of the subject property.
There is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless
from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the
parties. Such would be the case, for instance, where the vendor has no control over the thing sold at the moment
of the sale, and, therefore, its material delivery could not have been made.
As a general rule, the execution of a public instrument amounts to a constructive delivery of the thing subject of
a contract of sale. However, exceptions exist, among which is when mere presumptive and not conclusive
delivery is created in cases where the buyer fails to take material possession of the subject of sale. A person who
does not have actual possession of the thing sold cannot transfer constructive possession by the execution and
delivery of a public instrument.Villamar vs. Mangaoil; G.R. No. 188661, April 11, 2012.
Surety; novation. A contract of suretyship is an agreement whereby a party, called the surety, guarantees the
performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another
party, called the obligee. Although the contract of a surety is secondary only to a valid principal obligation, the
surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom. The suretys obligation is not an original and direct one for
the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal.
Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his
liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is
directly and equally bound with the principal.
A surety is released from its obligation when there is a material alteration of the principal contract in connection
with which the bond is given, such as a change which imposes a new obligation on the promising party, or which
takes away some obligation already imposed, or one which changes the legal effect of the original contract and
not merely its form. In this case, however, no new contract was concluded and perfected as only the revision of
the work schedule originally agreed upon was the subject thereof. There was no new contract/agreement which
could be considered to have substituted the Building Contract. Philippine Charter Insurance Corporation vs.
Petroleum Distributors & Service Corporation; G.R. No. 180898. April 18, 2012.
Will, extrinsic validity. The state of being forgetful does not necessarily make a person mentally unsound so as to
render him unfit to execute a Will. Forgetfulness is not equivalent to being of unsound mind. Besides, Article 799
of the New Civil Code states: To be of sound mind, it is not necessary that the testator be in full possession of all
his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or
other cause. It shall be sufficient if the testator was able at the time of making the will to know the nature of the
estate to be disposed of, the proper objects of his bounty, and the character of the testamentary act. Bare
allegations of duress or influence of fear or threats, undue and improper influence and pressure, fraud and
trickery cannot be used as basis to deny the probate of a will. Baltazar, et. al. vs. Laxa;G.R. No. 174489, April 11,
2012.
Special Laws
Torrens System; registration; action for reconveyance; acquisitive prescription. Registration of a piece of land
under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A
certificate of title is merely an evidence of ownership or title over the particular property described therein. Thus,
notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to reconvey
the registered property to its true owners.
In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead
is the transfer of the property or its title which has been wrongfully or erroneously registered in another persons
name, to its rightful or legal owner, or to the one with a better right. An action for annulment of title or
reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the
acts.
Acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite lapse of time. In
order to ripen into ownership, possession must be in the concept of an owner, public, peaceful and uninterrupted.
Possession is open when it is patent, visible, apparent, notorious and not clandestine. It is continuous when
uninterrupted, unbroken and not intermittent or occasional; exclusive when the adverse possessor can show
exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is
so conspicuous that it is generally known and talked of by the public or the people in the neighborhood. The
party who asserts ownership by adverse possession must prove the presence of the essential elements of
acquisitive prescription.
For civil interruption to take place, the possessor must have received judicial summons. Heirs of Tanyag vs.
Gabriel, et. al.; G.R. No. 175763, April 11, 2012.
Free patent; prohibition against alienation. Section 118 of CA 141 requires that before the five year prohibition
applies, there should be an alienation or encumbrance of the land acquired under free patent or homestead.
In real property law, alienation is defined as the transfer of the property and possession of lands, tenements, or
other things from one person to another. It is the act by which the title to real estate is voluntarily resigned by
one person to another and accepted by the latter, in the forms prescribed by law. In this case, Comia did not
transfer, convey or cede the property; but rather, he relinquished, renounced and quitclaimed the property
considering that the property already belonged to the spouses. The voluntary renunciation by Comia of that
portion was not an act of alienation, but an act of correcting the inclusion of the property in his free patent.
In support of the fact that the alienation transpired prior to the grant of a free patent, it is remarkable that Comia
never contested that the spouses had been in actual possession of the subject portion even before his patent
application. The private ownership of land as when there is a prima facie proof of ownership like a duly
registered possessory information or a clear showing of open, continuous, exclusive, and notorious possession
is not affected by the issuance of a free patent over the same land. Jose Abelgas, Jr., et al. vs. Servilliano Comia,
et al.; G.R. No. 163125, April 18, 2012.
Emancipation patents; cancellation; land titles; tax declarations; mere tax declarations not conclusive evidence of
ownership or possession. Under DAR Administrative Order No. 02, Series of 1994, emancipation patents may be
cancelled by the PARAD or the DARAB for violations of agrarian laws, rules and regulations. The same
administrative order further states that administrative corrections may include non-identification of spouse,
correction of civil status, corrections of technical descriptions and other matters related to agrarian reform; and
that the DARABs decision may include cancellation of registered EP/CLOA, reimbursement of lease rental as
amortization to ARBs, reallocation of the land to qualified beneficiary, perpetual disqualification to become an
ARB, and other ancillary matters related to the cancellation of the EP or CLOA. However, the DARs issuance of
an Emancipation Patent and the corresponding OCT covering the contested lot carries with it a presumption of
regularity. The Petition to correct/cancel Pablos Emancipation Patent can prosper only if petitioners are able to
present substantial evidence that a portion of their lot was erroneously covered by the patent. Substantial
evidence refers to such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.
Well settled is the rule that tax declarations and receipts are not conclusive evidence of ownership or of the right
to possess land when not supported by any other evidence. The fact that the disputed property may have been
declared for taxation purposes in the names of the applicants for registration or of their predecessors-in-interest
does not necessarily prove ownership. They are merely indicia of a claim of ownership. Sps. Magno v. Heirs of
Parulan; G.R. No. 183916, April 25, 2012.

June 2012 Philippine Supreme Court Decisions on Civil Law

Civil Code
Agency; ratification. The complaint was anchored on the supposed failure of FEBTC to duly investigate the
authority of Antonio in contracting the exceptionally and relatively immense loans amounting to P5,000,000.00.
Marcos alleged therein that his property had thereby become unlawfully burdened by unauthorized real estate
mortgage contracts, because the loans and the mortgage contracts had been incurred by Antonio and his wife
only for themselves, to the exclusion of petitioner. Yet, Marcos could not deny that under the express terms of
the SPA, he had precisely granted to Antonio as his agent the authority to borrow money, and to transfer and
convey the property by way of mortgage to FEBTC; to sign, execute and deliver promissory notes; and to receive
the proceeds of the loans on the formers behalf. In other words, the mortgage contracts were valid and
enforceable against petitioner, who was consequently fully bound by their terms.
Moreover, even if it was assumed that Antonios obtaining the loans in his own name, and executing the
mortgage contracts also in his own name had exceeded his express authority under the SPA, Marcos was still
liable to FEBTC by virtue of his express ratification of Antonios act. Under Article 1898 of the Civil Code, the acts
of an agent done beyond the scope of his authority do not bind the principal unless the latter expressly or
impliedly ratifies the same.
In agency, ratification is the adoption or confirmation by one person of an act performed on his behalf by another
without authority. The substance of ratification is the confirmation after the act, amounting to a substitute for a
prior authority. Here, there was such a ratification by Marcos, as borne out by his execution of the letter of
acknowledgement on September 12, 1996.
But Marcos insists that the letter of acknowledgment was only a mere letter (written) on a mimeographic paper
a mere scrap of paper, a document by adhesion. The Court is confounded by Marcos dismissal of his own
express written ratification of Antonios act. Being himself a lawyer, Marcos was aware of the import and
consequences of the letter of acknowledgment. The Court cannot agree with his insistence that the letter was
worthless due to its being a contract of adhesion. The letter was not a contract, to begin with, because it was
only a unilateral act of his. Secondly, his insistence was fallacious and insincere because he knew as a lawyer that
even assuming that the letter could be treated as a contract of adhesion it was nonetheless effective and binding
like any other contract. The Court has consistently held that a contract of adhesion was not prohibited for that
reason. In Pilipino Telephone Corporation v. Tecson,for instance, the Court said that contracts of adhesion were
valid but might be occasionally struck down only if there was a showing that the dominant bargaining party left
the weaker party without any choice as to be completely deprived of an opportunity to bargain effectively. That
exception did not apply here, for, verily, Marcos, being a lawyer, could not have been the weaker party. As the
tenor of the of acknowledgment indicated, he was fully aware of the meaning and sense of every written word or
phrase, as well as of the legal effect of his confirmation thereby of his agents act. It is axiomatic that a mans
act, conduct and declaration, wherever made, if voluntary, are admissible against him, for the reason that it is fair
to presume that they correspond with the truth, and it is his fault if they do not. Marcos V. Prieto vs. Court of
Appeals, et al.; G.R. No. 158597, June 18, 2012.
Agency; ratification; agency by estoppel. Under Articles 1898 and 1910, an agents act, even if done beyond the
scope of his authority, may bind the principal if he ratifies them, whether expressly or tacitly. It must be stressed
though that only the principal, and not the agent, can ratify the unauthorized acts, which the principal must have
knowledge of.
Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs testimony that it was unaware of the
existence of Surety Bond No. G (16) 29419 and Endorsement No. 33152. There were no allegations either that
CBIC should have been put on alert with regard to Quinains business transactions done on its behalf. It is clear,
and undisputed therefore, that there can be no ratification in this case, whether express or implied.
Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the protection of
third persons. It states that the principal is solidarily liable with the agent even when the latter has exceeded his
authority, if the principal allowed him to act as though he had full powers. However, for an agency by estoppel to
exist, the following must be established:
1. The principal manifested a representation of the agents authority or knowingly allowed the agent to
assume such authority;
2. The third person, in good faith, relied upon such representation; and
3. Relying upon such representation, such third person has changed his position to his detriment.
In Litonjua, Jr. v. Eternit Corp., this Court said that [a]n agency by estoppel, which is similar to the doctrine of
apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.
This Court cannot agree with the Court of Appeals pronouncement of negligence on CBICs part. CBIC not only
clearly stated the limits of its agents powers in their contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties. Moreover, its company procedures, such as reporting
requirements, show that it has designed a system to monitor the insurance contracts issued by its agents. CBIC
cannot be faulted for Quinains deliberate failure to notify it of his transactions with Unimarine. In fact, CBIC did
not even receive the premiums paid by Unimarine to Quinain.
Furthermore, nowhere in the decisions of the lower courts was it stated that CBIC let the public, or specifically
Unimarine, believe that Quinain had the authority to issue a surety bond in favor of companies other than the
Department of Public Works and Highways, the National Power Corporation, and other government agencies.
Neither was it shown that CBIC knew of the existence of the surety bond before the endorsement extending the
life of the bond, was issued to Unimarine. For one to successfully claim the benefit of estoppel on the ground that
he has been misled by the representations of another, he must show that he was not misled through his own
want of reasonable care and circumspection. Country Bankers Insurance Corporation vs. Keppel Cebu Shipyard,
Inc., et al.; G.R. No. 166044, June 18, 2012.
Antichresis. For the contract of antichresis to be valid, Article 2134 of the Civil Code requires that the amount of
the principal and of the interest shall be specified in writing; otherwise the contract of antichresis shall be void.
In this case, the Heirs of Adolfo were indisputably unable to produce any document in support of their claim that
the contract between Adolfo and Bangis was an antichresis, hence, the CA properly held that no such relationship
existed between the parties.Aniceto Bangis, substituted by his heirs, namely Rodolfo B. Bangis, et al. vs. Heirs of
Serafin and Salud Adolfo, namely: Luz A. Banniester, et al.; G.R. No. 190875, June 13, 2012.
Contract of Adhesion. See entry under Agency; ratification (case of Prieto v. Court of Appeals).
Contracts; novation. A novation arises when there is a substitution of an obligation by a subsequent one that
extinguishes the first, either by changing the object or the principal conditions, or by substituting the person of
the debtor, or by subrogating a third person in the rights of the creditor. For a valid novation to take place, there
must be, therefore: (a) a previous valid obligation; (b) an agreement of the parties to make a new contract; (c)
an extinguishment of the old contract; and (d) a valid new contract. In short, the new obligation extinguishes the
prior agreement only when the substitution is unequivocally declared, or the old and the new obligations are
incompatible on every point. A compromise of a final judgment operates as a novation of the judgment obligation
upon compliance with either of these two conditions.
To be clear, novation is not presumed. This means that the parties to a contract should expressly agree to
abrogate the old contract in favor of a new one. In the absence of the express agreement, the old and the new
obligations must be incompatible on every point. There is incompatibility when the two obligations cannot stand
together, each one having its independent existence. If the two obligations cannot stand together, the latter
obligation novates the first. Changes that breed incompatibility must be essential in nature and not merely
accidental. The incompatibility must affect any of the essential elements of the obligation, such as its object,
cause or principal conditions thereof; otherwise, the change is merely modificatory in nature and insufficient to
extinguish the original obligation.
The receipt dated February 5, 1992 was only the proof of Servandos payment of his obligation as confirmed by
the decision of the RTC. It did not establish the novation of his agreement with the respondents. Indeed, the
Court has ruled that an obligation to pay a sum of money is not novated by an instrument that expressly
recognizes the old, or changes only the terms of payment, or adds other obligations not incompatible with the old
ones, or the new contract merely supplements the old one. A new contract that is a mere reiteration,
acknowledgment or ratification of the old contract with slight modifications or alterations as to the cause or
object or principal conditions can stand together with the former one, and there can be no incompatibility
between them. Moreover, a creditors acceptance of payment after demand does not operate as a modification of
the original contract.
Lastly, the extension of the maturity date did not constitute a novation of the previous agreement. It is settled
that an extension of the term or period of the maturity date does not result in novation.Heirs of Servando Franco
vs. Sps. Veronica & Danilo Gonzales; G.R. No. 159709, June 27, 2012.
Damages; actual damages and moral damages. For its role in the conversion of the checks, which deprived SSPI
of the use thereof, Equitable is solidarily liable with Uy to compensate SSPI for the damages it suffered.
Among the compensable damages are actual damages, which encompass the value of the loss sustained by the
plaintiff, and the profits that the plaintiff failed to obtain. Interest payments, which SSPI claims, fall under the
second category of actual damages.
SSPI computed its claim for interest payments based on the interest rate stipulated in its contract with Interco. It
explained that the stipulated interest rate is the actual interest income it had failed to obtain from Interco due to
the defendants tortious conduct.
The Court finds the application of the stipulated interest rate erroneous. SSPI did not recover interest payments
at the stipulated rate from Interco because it agreed that the delay was not Intercos fault, but that of the
defendants. If that is the case, then Interco is not in delay (at least not after issuance of the checks) and the
stipulated interest payments in their contract did not become operational. If Interco is not liable to pay for the
36% per annum interest rate, then SSPI did not lose that income. SSPI cannot lose something that it was not
entitled to in the first place. Thus, SSPIs claim that it was entitled to interest income at the rate stipulated in its
contract with Interco, as a measure of its actual damage, is fallacious.
More importantly, the provisions of a contract generally take effect only among the parties, their assigns and
heirs. SSPI cannot invoke the contractual stipulation on interest payments against Equitable because it is neither
a party to the contract, nor an assignee or an heir to the contracting parties.
Nevertheless, it is clear that defendants actions deprived SSPI of the present use of its money for a period of two
years. SSPI is therefore entitled to obtain from the tortfeasors the profits that it failed to obtain from July 1991 to
June 1993. SSPI should recover interest at the legal rate of 6% per annum, this being an award for damages
based on quasi-delict and not for a loan or forbearance of money.
Both the trial and appellate courts awarded Pardo P3 million in moral damages. Pardo claimed that he was
frightened, anguished, and seriously anxious that the government would prosecute him for money laundering and
tax evasion because of defendants actions. In other words, he was worried about the repercussions that
defendants actions would have on him.
Equitable argues that Pardos fears are all imagined and should not be compensated. The bank points out that
none of Pardos fears panned out.
Moral damages are recoverable only when they are the proximate result of the defendants wrongful act or
omission. Both the trial and appellate courts found that Pardo indeed suffered as a result of the diversion of the
three checks. It does not matter that the things he was worried and anxious about did not eventually materialize.
It is rare for a person, who is beset with mounting problems, to sift through his emotions and distinguish which
fears or anxieties he should or should not bother with. So long as the injured partys moral sufferings are the
result of the defendants actions, he may recover moral damages.
The Court, however, finds the award of P3 million excessive. Moral damages are given not to punish the
defendant but only to give the plaintiff the means to assuage his sufferings with diversions and recreation. We
find that the award of P50,000.00 as moral damages is reasonable under the circumstances. Equitable Banking
Corporation vs. Special Steel Products, Inc. and Augusto L. Pardo; G.R. No. 175350, June 13, 2012.
Damages; moral damages. The Court increased the award of damages to 500,000 as moral damages and
100,000 as exemplary damages in connection with a finding that the crime of Trafficking in Persons as a
Prostitute was committed. It quoted a previous ruling, People v. Lalli, where the Court stated that: the award
finds basis in Article 2219 of the Civil Code, which states:
Art. 2219. Moral damages may be recovered in the following and analogous cases: x x x
(3) Seduction, abduction, rape, or other lascivious acts;
The criminal case of Trafficking in Persons as a Prostitute is an analogous case to the crimes of seduction,
abduction, rape, or other lascivious acts. In fact, it is worse. To be trafficked as a prostitute without ones consent
and to be sexually violated four to five times a day by different strangers is horrendous and atrocious. There is no
doubt that Lolita experienced physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, and social humiliation when she was trafficked as a prostitute in Malaysia. Since
the crime of Trafficking in Persons was aggravated, being committed by a syndicate, the award of exemplary
damages is likewise justified.
The Court went to say that: [w]e find no legal impediment to increasing the award of moral and exemplary
damages in the case at bar. Neither is there any logical reason why we should differentiate between the victims
herein and those in that case, when the circumstances are frighteningly similar. To do so would be to say that we
discriminate one from the other, when all of these women have been the victims of unscrupulous people who
capitalized on the poverty of others. While it is true that accused-appellant was not tried and convicted of the
crime of trafficking in persons, this Court based its award of damages on the Civil Code, and not on the Anti-
Trafficking in Persons Act, as clearly explained in Lalli. The People of the Philippines vs. Nurfrashir Hashim y
Saraban, et al. Bernadette Panscala, etc.;G.R. No. 194255, June 13, 2012.
Damages; quasi-delict; vicarious liability. As a general rule, one is only responsible for his own act or omission.
Thus, a person will generally be held liable only for the torts committed by himself and not by another. This
general rule is laid down in Article 2176 of the Civil Code.
Based on the above-cited article, the obligation to indemnify another for damage caused by ones act or omission
is imposed upon the tortfeasor himself, i.e., the person who committed the negligent act or omission. The law,
however, provides for exceptions when it makes certain persons liable for the act or omission of another.
One exception is an employer who is made vicariously liable for the tort committed by his employee. Article 2180
of the Civil Code states:
Article 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
x x x x
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
x x x x
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.
Under Article 2176, in relation with Article 2180, of the Civil Code, an action predicated on an employees act or
omission may be instituted against the employer who is held liable for the negligent act or omission committed by
his employee.
Although the employer is not the actual tortfeasor, the law makes him vicariously liable on the basis of the civil
law principle of pater familias for failure to exercise due care and vigilance over the acts of ones subordinates to
prevent damage to another. In the last paragraph of Article 2180 of the Civil Code, the employer may invoke the
defense that he observed all the diligence of a good father of a family to prevent damage.
As its core defense, Filcar contends that Article 2176, in relation with Article 2180, of the Civil Code is inapplicable
because it presupposes the existence of an employer-employee relationship. According to Filcar, it cannot be held
liable under the subject provisions because the driver of its vehicle at the time of the accident, Floresca, is not its
employee but that of its Corporate Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor vehicle mishaps, the registered owner of the motor
vehicle is considered as the employer of the tortfeasor-driver, and is made primarily liable for the tort
committed by the latter under Article 2176, in relation with Article 2180, of the Civil Code. The rationale for the
rule that a registered owner is vicariously liable for damages caused by the operation of his motor vehicle is
explained by the principle behind motor vehicle registration, which has been discussed by this Court in Erezo, and
cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the owner so that if any accident happens,
or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor
can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons responsible for damages or injuries caused on public
highways. [emphasis ours]
Thus, whether there is an employer-employee relationship between the registered owner and the driver is
irrelevant in determining the liability of the registered owner who the law holds primarily and directly
responsible for any accident, injury or death caused by the operation of the vehicle in the streets and
highways. Filcar Transport Services vs. Jose A. Espinas; G.R. No. 171456, June 20, 2012.
Damages; unjust enrichment. There is unjust enrichment when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to another. In the instant case, the fraudulent scheme
concocted by Uy allowed him to improperly receive the proceeds of the three crossed checks and enjoy the
profits from these proceeds during the entire time that it was withheld from SSPI. Equitable, through its gross
negligence and mislaid trust on Uy, became an unwitting instrument in Uys scheme. Equitables fault renders it
solidarily liable with Uy, insofar as respondents are concerned. Nevertheless, as between Equitable and Uy,
Equitable should be allowed to recover from Uy whatever amounts Equitable may be made to pay under the
judgment. It is clear that Equitable did not profit in Uys scheme. Disallowing Equitables cross-claim against Uy is
tantamount to allowing Uy to unjustly enrich himself at the expense of Equitable. For this reason, the Court
allows Equitables cross-claim against Uy. Equitable Banking Corporation vs. Special Steel Products, Inc. and
Augusto L. Pardo; G.R. No. 175350, June 13, 2012.
Equitable mortgage. Lomises questions the nature of the agreement between him and Johnny, insisting that it
was a contract of loan, not an assignment of leasehold rights and sale of improvements. In other words, what
existed was an equitable mortgage, as contemplated in Article 1602, in relation with Article 1604, of the Civil
Code. An equitable mortgage has been defined as one which although lacking in some formality, or form or
words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge
real property as security for a debt, there being no impossibility nor anything contrary to law in this intent.
Article 1602 of the Civil Code lists down the circumstances that may indicate that a contract is an equitable
mortgage:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws. [Emphasis ours.]
Based on Lomises allegations in his pleadings, we consider three circumstances to determine whether his claim is
well-supported. First, Johnny was a mere college student dependent on his parents for support when the
agreement was executed, and it was Johnnys mother, Domes, who was the party actually interested in acquiring
the market stalls. Second, Lomises received onlyP48,000.00 of the P68,000.00 that Johnny claimed he gave as
down payment; Lomises said that theP20,000.00 represented interests on the loan. Third, Lomises retained
possession of the market stalls even after the execution of the agreement.
Whether separately or taken together, these circumstances do not support a conclusion that the parties
only intended to enter into a contract of loan.
That Johnny was a mere student when the agreement was executed does not indicate that he had no financial
capacity to pay the purchase price of P260,000.00.
As to the second point, Lomises contends that of the P68,000.00 given by Johnny, he only receivedP48,000.00,
with the remaining P20,000.00 retained by Johnny as interest on the loan. However, the testimonies of the
witnesses presented during trial, including Lomises himself, negate this claim. On the third point, that Lomises
retained possession of the market stalls even after the execution of his agreement with Johnny is also not an
indication that the true transaction between them was one of loan. Johnny had yet to complete his payment and,
until Lomises decided to forego with their agreement, had four more months to pay; until then, Lomises retained
ownership and possession of the market stalls.
Hence, the CA was correct in characterizing the agreement between Johnny and Lomises as a sale of
improvements and assignment of leasehold rights. Lomises Aludos, deceased, substituted by Flora Aludos vs.
Johnny M. Suerte; G.R. No. 165285, June 18, 2012.
Guarantee. By its tenor, Greys undertaking was a guarantee. It says, payment unconditionally
guaranteed within sixty (60) days from Planters Products, Inc. Invoice date up to Pesos: Two Hundred
Thousand (P200,000.00) only. As it happens, bank guarantees are highly regulated transactions under the law.
They are undertakings that are not so casually issued by banks or by their branch managers at the dorsal side of
a clients promissory note as if an afterthought. A bank guarantee is a contract that binds the bank and so may
be entered into only under authority granted by its board of directors. Such authority does not appear on any
document. Indeed, PPI had no right to expect branch manager Grey to issue one without such
authorization. United Coconut Planters Bank vs. Planters Products, Inc., Janet Layson and Gregory Grey; G.R. No.
179015, June 13, 2012.
Interest rate. We affirm the interest rate decreed by the CA. Stipulated interest rates are illegal if they are
unconscionable and courts are allowed to temper interest rates when necessary. In exercising this vested power
to determine what is iniquitous and unconscionable, the Court must consider the circumstances of each case.
What may be iniquitous and unconscionable in one case, may be just in another.
We cannot uphold the petitioners invocation of our ruling in DBP v. Court of Appeals wherein the interest rate
imposed was reduced to 10% per annum. The overriding circumstance prompting such pronouncement was the
regular payments made by the borrower. Evidently, such fact is wanting in the case at bar, hence, the petitioner
cannot demand for a similar interest rate.
The circumstances attendant herein are similar to those in Trade & Investment Development Corporation of the
Philippines v. Roblett Industrial Construction Corporation wherein we levied the legal interest rate of 12% per
annum.
However, pursuant to Bank of the Philippine Islands, Inc. v. Yu, we deem it proper to further reduce the penalty
charge decreed by the CA from 2% per month to 1% per month or 12% per annum in view of the following
factors: (1) respondent has already received P7,504,522.27 in penalty charges, and (2) the loan extended to
respondent was a short-term credit facility. RGM Industries, Inc. vs. United Pacific Capital Corporation; G.R. No.
194781, June 27, 2012.
Lease; implied lease. It bears emphasis that the respondent did not give the petitioner a notice to vacate upon
the expiration of the lease contract in December 1997 (the notice to vacate was sent only on August 5, 1998),
and the latter continued enjoying the subject premises for more than 15 days, without objection from the
respondent. By the inaction of the respondent as lessor, there can be no inference that it intended to discontinue
the lease contract. An implied new lease was therefore created pursuant to Article 1670 of the Civil Code.
An implied new lease or tacita reconduccion will set in when the following requisites are found to exist: a) the
term of the original contract of lease has expired; b) the lessor has not given the lessee a notice to vacate; and c)
the lessee continued enjoying the thing leased for fifteen days with the acquiescence of the lessor.
Since the rent was paid on a monthly basis, the period of lease is considered to be from month to month, in
accordance with Article 1687 of the Civil Code. [A] lease from month to month is considered to be one with a
definite period which expires at the end of each month upon a demand to vacate by the lessor. When the
respondent sent a notice to vacate to the petitioner on August 5, 1998, the tacita reconduccion was aborted, and
the contract is deemed to have expired at the end of that month. [A] notice to vacate constitutes an express act
on the part of the lessor that it no longer consents to the continued occupation by the lessee of its property.
After such notice, the lessees right to continue in possession ceases and her possession becomes one of
detainer.Viegely Samelo, represented by Attorney-in-Fact Cristina Samelo vs. Manotok Services, Inc., etc.; G.R.
No. 170509, June 27, 2012.
Lease; interest on unpaid rentals. The petitioner is liable to pay interest by way of damages for her failure to pay
the rentals due for the use of the subject premises. We reiterate that the respondents extrajudicial demand on
the petitioner was made on August 5, 1998. Thus, from this date, the rentals due from the petitioner shall earn
interest at 6% per annum, until the judgment in this case becomes final and executory. After the finality of
judgment, and until full payment of the rentals and interests due, the legal rate of interest to be imposed shall be
12%. Viegely Samelo, represented by Attorney-in-Fact Cristina Samelo vs. Manotok Services, Inc., etc.; G.R. No.
170509, June 27, 2012.
Mortgage; deficiency claim; allowable after extrajudicial foreclosure of mortgage. We rule that PNB had the legal
right to recover the deficiency amount. In Philippine National Bank v. Court of Appeals, we held that: it is settled
that if the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of the mortgage,
the mortgagee is entitled to claim the deficiency from the debtor. For when the legislature intends to deny the
right of a creditor to sue for any deficiency resulting from foreclosure of security given to guarantee an obligation
it expressly provides as in the case of pledges [Civil Code, Art. 2115] and in chattel mortgages of a thing sold on
installment basis [Civil Code, Art. 1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of
mortgages, while silent as to the mortgagees right to recover, does not, on the other hand, prohibit recovery of
deficiency. Accordingly, it has been held that a deficiency claim arising from the extrajudicial foreclosure is
allowed.
Indeed, as we indicated in Prudential Bank v. Martinez, the fact that the mortgaged property was sold at an
amount less than its actual market value should not militate against the right to such recovery. Francisco Rabat,
et al. vs. Philippine National Bank;

G.R. No. 158755, June 18, 2012.
Mortgage; pactum commissorium. The following are the elements of pactum commissorium:
(1) There should be a property mortgaged by way of security for the payment of the principal obligation; and
(2) There should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of
non-payment of the principal obligation within the stipulated period.
Villars purchase of the subject property did not violate the prohibition on pactum commissorium. The power of
attorney provision above did not provide that the ownership over the subject property would automatically pass
to Villar upon Galass failure to pay the loan on time. What it granted was the mere appointment of Villar as
attorney-in-fact, with authority to sell or otherwise dispose of the subject property, and to apply the proceeds to
the payment of the loan. This provision is customary in mortgage contracts, and is in conformity with Article 2087
of the Civil Code.
Galass decision to eventually sell the subject property to Villar for an additional P1,500,000.00 was well within
the scope of her rights as the owner of the subject property. The subject property was transferred to Villar by
virtue of another and separate contract, which is the Deed of Sale. Garcia never alleged that the transfer of the
subject property to Villar was automatic upon Galass failure to discharge her debt, or that the sale was simulated
to cover up such automatic transfer. Pablo P. Garcia vs. Yolanda Valdez Villar; G.R. No. 158891, June 27, 2012.
Ownership; acquisitive prescription. The claim of the Heirs of Bangis that since they have been in possession of
the subject land since 1972 or for 28 years reckoned from the filing of the complaint in 2000 then, the present
action has prescribed is untenable. It bears to note that while Bangis indeed took possession of the land upon its
alleged mortgage, the certificate of title (TCT No. 6313) remained with Adolfo and upon his demise, transferred
to his heirs, thereby negating any contemplated transfer of ownership. Settled is the rule that no title in
derogation of that of the registered owner can be acquired by prescription or adverse possession. Moreover, even
if acquisitive prescription can be appreciated in this case, the Heirs of Bangis possession being in bad faith is two
years shy of the requisite 30-year uninterrupted adverse possession required under Article 1137 of the Civil Code.
Consequently, the Heirs of Bangis cannot validly claim the rights of a builder in good faith as provided for under
Article 449 in relation to Article 448 of the Civil Code. Thus, the order for them to surrender the possession of the
disputed land together with all its improvements was properly made. Aniceto Bangis, substituted by his heirs,
namely Rodolfo B. Bangis, et al. vs. Heirs of Serafin and Salud Adolfo, namely: Luz A. Banniester, et al.; G.R. No.
190875, June 13, 2012.
Property; builder in bad faith. See entry under ownership; acquisitive prescription (case of Bangis v. Heirs of
Adolfo).
Sale at public auction; inadequacy of bid price. We have consistently held that the inadequacy of the bid price at
a forced sale, unlike that in an ordinary sale, is immaterial and does not nullify the sale; in fact, in a forced sale, a
low price is considered more beneficial to the mortgage debtor because it makes redemption of the property
easier. Francisco Rabat, et al. vs. Philippine National Bank; G.R. No. 158755, June 18, 2012.
Special Laws
Family Code; presumption of death; summary judicial proceedings under the Family Code. Under Article 41 of the
Family Code, the losing party in a summary proceeding for the declaration of presumptive death may file a
petition for certiorari with the CA on the ground that, in rendering judgment thereon, the trial court committed
grave abuse of discretion amounting to lack of jurisdiction. From the decision of the CA, the aggrieved party may
elevate the matter to this Court via a petition for review on certiorari under Rule 45 of the Rules of
Court. (Digesters Note: This case also summarizes a number of cases on proof for existence of a well-founded
belief that the absent spouse is already dead, but there is no ruling on this point and the comment by the Court
that the Republics arguments are well-taken, is obiter.) Republic of the Philippines vs. Yolanda Cadacio
Granada; G.R. No. 187512, June 13, 2012.
Land titles; conflicting titles. As held in the case of Top Management Programs Corporation v. Luis Fajardo and
the Register of Deeds of Las Pias City: if two certificates of title purport to include the same land, whether
wholly or partly, the better approach is to trace the original certificates from which the certificates of titles were
derived.
Having, thus, traced the roots of the parties respective titles supported by the records of the Register of Deeds of
Malaybalay City, the courts a quo were correct in upholding the title of the Heirs of Adolfo as against TCT No. T-
10567 of Bangis, notwithstanding its earlier issuance on August 18, 1976 or long before the Heirs of Adolfo
secured their own titles on May 26, 1998. To paraphrase the Courts ruling in Mathay v. Court of Appeals: where
two (2) transfer certificates of title have been issued on different dates, the one who holds the earlier title may
prevail only in the absence of any anomaly or irregularity in the process of its registration, which circumstance
does not obtain in this case. Aniceto Bangis, substituted by his heirs, namely Rodolfo B. Bangis, et al. vs. Heirs of
Serafin and Salud Adolfo, namely: Luz A. Banniester, et al.; G.R. No. 190875, June 13, 2012.
P.D. No. 1529; Torrens title; collateral attack. As for the spouses Decalengs contention that Certificate of Title
No. 1 does not exist, the Court fully agrees with the Court of Appeals that the same constitutes a collateral attack
of Certificate of Title No. 1. It is a hornbook principle that a certificate of title serves as evidence of an
indefeasible title to the property in favor of the person whose name appears therein. In order to establish a
system of registration by which recorded title becomes absolute, indefeasible, and imprescriptible, the legislature
passed Act No. 496, which took effect onFebruary 1, 1903. Act No. 496 placed all registered lands in the
Philippines under the Torrens system. The Torrens system requires the government to issue a certificate of title
stating that the person named in the title is the owner of the property described therein, subject to liens and
encumbrances annotated on the title or reserved by law. The certificate of title is indefeasible and imprescriptible
and all claims to the parcel of land are quieted upon issuance of the certificate. Presidential Decree No. 1529,
known as the Property Registration Decree, enacted on June 11, 1978, amended and updated Act No. 496.
Section 48 of Presidential Decree No. 1529 provides:
Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral
attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.
A Torrens title cannot be attacked collaterally, and the issue on its validity can be raised only in an action
expressly instituted for that purpose. A collateral attack is made when, in another action to obtain a different
relief, the certificate of title is assailed as an incident in said action. Sps. Ambrosio Decaleng [as substituted by his
heirs] and Julia Wanay Decaleng vs. Bishop of the Missionary District of Protestant Episcopal Church in the
United States of America, et al.; G.R. No. 171209 & UDK-13672. June 27, 2012
P.D. No. 1529; Torrens title; collateral attack; indefeasibility of title vs. possession. In Soriente v. Estate of the
Late Arsenio E. Concepcion, a similar allegation possession of the property in dispute since time immemorial
was met with rebuke as such possession, for whatever length of time, cannot prevail over a Torrens title, the
validity of which is presumed and immune to any collateral attack.
The validity of respondents certificate of title cannot be attacked by petitioner in this case for ejectment. Under
Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot
be altered, modified or cancelled, except in a direct proceeding for that purpose in accordance with law. The
issue of the validity of the title of the respondents can only be assailed in an action expressly instituted for that
purpose. Whether or not petitioner has the right to claim ownership over the property is beyond the power of the
trial court to determine in an action for unlawful detainer.
Given the foregoing, the petitioners attempt to remain in possession by casting a cloud on the respondents title
cannot prosper.
Neither will the sheer lapse of time legitimize the petitioners refusal to vacate the subject area or bar the
respondents from gaining possession thereof. As ruled in Spouses Ragudo v. Fabella Estate Tenants Association,
Inc., laches does not operate to deprive the registered owner of a parcel of land of his right to recover possession
thereof. Heirs of Jose Maligaso, Sr., etc. vs. Sps. Simon D. Encinas and Esperanza E. Encinas; G.R. No. 182716,
June 20, 2012.

July 2012 Philippine Supreme Court Decisions on Civil Law

Civil Code
Contracts; reciprocal obligations. Reciprocal obligations are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the
obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned
upon the simultaneous fulfillment of the other. For one party to demand the performance of the obligation of the
other party, the former must also perform its own obligation. Accordingly, petitioner, not having provided the
services that would require the payment of service fees as stipulated in the Lease Development Agreement, is not
entitled to collect the same. Subic Bay Metropolitan Authority vs. Honorable Court of Appeals and Subic
International Hotel Corporation; G.R. No. 192885, July 4, 2012.
Contracts; contract of sale vs. contract to sell. The elements of a contract of sale are, to wit: a) Consent or
meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject
matter; and c) Price certain in money or its equivalent. It is the absence of the first element which distinguishes
a contract of sale from that of a contract to sell.
In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, such as, in most cases, the full payment of the purchase
price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words, the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and,
thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.
In a contract of sale, on the other hand, the title to the property passes to the vendee upon the delivery of the
thing sold. Unlike in a contract to sell, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any
further act having to be performed by the seller. The vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or rescinded. Virgilio S. David vs. Misamis Occidental II Electric
Cooperative, Inc., G.R. No. 194785, July 11, 2012.
Contracts; contract of sale; delivery. Among the terms and conditions of the proposal to which MOELCI agreed, it
was stated:
2. Delivery Ninety (90) working days upon receipt of your purchase order and downpayment. C&F Manila,
freight, handling, insurance, custom duties and incidental expenses shall be for the account of MOELCI II.
On this score, it is clear that MOELCI agreed that the power transformer would be delivered and that the freight,
handling, insurance, custom duties, and incidental expenses shall be shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil Code becomes applicable. It provides:
Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the
buyer delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the cases
provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears. (Emphasis
supplied)
Thus, the delivery made by David to William Lines, Inc., as evidenced by the Bill of Lading, was deemed to be a
delivery to MOELCI. David was authorized to send the power transformer to the buyer pursuant to their
agreement. When David sent the item through the carrier, it amounted to a delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco it was pointed out that a specification in a
contract relative to the payment of freight can be taken to indicate the intention of the parties with regard to the
place of delivery. So that, if the buyer is to pay the freight, as in this case, it is reasonable to suppose that the
subject of the sale is transferred to the buyer at the point of shipment. In other words, the title to the goods
transfers to the buyer upon shipment or delivery to the carrier.
Of course, Article 1523 provides a mere presumption and in order to overcome said presumption, MOELCI should
have presented evidence to the contrary. The burden of proof was shifted to MOELCI, who had to show that the
rule under Article 1523 was not applicable. In this regard, however, MOELCI failed. Virgilio S. David vs. Misamis
Occidental II Electric Cooperative, Inc.; G.R. No. 194785, July 11, 2012.
Contracts; interpretation. The rule is that it is not the title of the contract, but its express terms or stipulations
that determine the kind of contract entered into by the parties. Virgilio S. David vs. Misamis Occidental II Electric
Cooperative, Inc.; G.R. No. 194785, July 11, 2012.
Contracts; statute of frauds. There being delivery and release, said fact constitutes partial performance which
takes the case out of the protection of the Statute of Frauds. It is elementary that the partial execution of a
contract of sale takes the transaction out of the provisions of the Statute of Frauds so long as the essential
requisites of consent of the contracting parties, object and cause of the obligation concur and are clearly
established to be present. Virgilio S. David vs. Misamis Occidental II Electric Cooperative, Inc.; G.R. No. 194785,
July 11, 2012.
Damages; attorneys fees. David was compelled to file an action against MOELCI but this reason alone will not
warrant an award of attorneys fees. It is settled that the award of attorneys fees is the exception rather than the
rule. Counsels fees are not awarded every time a party prevails in a suit because of the policy that no premium
should be placed on the right to litigate. Attorneys fees, as part of damages, are not necessarily equated to the
amount paid by a litigant to a lawyer. In the ordinary sense, attorneys fees represent the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to the latter; while in its
extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing
party to the prevailing party. Attorneys fees as part of damages are awarded only in the instances specified in
Article 2208 of the Civil Code which demands factual, legal, and equitable justification. Its basis cannot be left to
speculation or conjecture. In this regard, none was proven. Moreover, in the absence of stipulation, a winning
party may be awarded attorneys fees only in case plaintiffs action or defendants stand is so untenable as to
amount to gross and evident bad faith. MOELCIs case cannot be similarly classified. Virgilio S. David vs. Misamis
Occidental II Electric Cooperative, Inc.;G.R. No. 194785, July 11, 2012.
Damages; moral damages. A breach of contract may give rise to an award of moral damages only if the party
guilty of the breach acted fraudulently or in bad faith. Likewise, a breach of contract may give rise to exemplary
damages if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
The CIAC awarded moral and exemplary damages in favor of petitioners on the basis of respondents failure to
make payments on time and in full. The CIAC gave merit to the allegations of petitioners that the delayed and
staggered payments drained them financially and emotionally, compelled them to apply for additional loans,
affected their reputation and credit standing adversely, made them suffer mental anguish, serious anxiety and
sleepless nights, and prevented them from participating in the bidding of other projects because of their financial
problems.
However, as already explained above, with the exception of the down payment, petitioners agreed to a staggered
payment of the progress billings; hence, they cannot now claim that they were adversely affected by
respondents payments in
installment. Also, with respect to the down payment, there was no showing that respondents failure to pay the
same on time and in full was attended by fraud or bad faith or was in wanton or oppressive disregard of
petitioners rights.
More importantly, an award of moral damages must be anchored on a clear showing that the party entitled
thereto actually experienced mental anguish, besmirched reputation, sleepless nights, wounded feelings, or
similar injury. Here, while petitioners alleged that their finances were adversely affected, they did not present any
evidence thereof, such as documents evidencing the loans they were supposedly compelled to obtain.
In the same manner, respondent also failed to present sufficient evidence of their entitlement to moral and
exemplary damages. The alleged besmirched reputation it allegedly suffered as a result of the building not having
been finished on time was not supported by any evidence other than respondents bare allegation.
Absent any showing that the parties are entitled to moral and exemplary damages, their respective claims
therefor must be disallowed. Engr. Emelyne P. Cayetano, et al. vs. Colegio De San Juan De Letran-Calamba; G.R.
No. 179545, July 11, 2012.
Human relations; unjust enrichment. To allow the petitioner to leave the company before it has fulfilled the
reasonable expectation of service on his part will amount to unjust enrichment. Pertinently, Article 22 of the New
Civil Code states:
Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.
There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a person
retains the money or property of another against the fundamental principles of justice, equity and good
conscience. Two conditions must concur: (1) a person is unjustly benefited; and (2) such benefit is derived at the
expense of or with damages to another. The main objective of the principle of unjust enrichment is to prevent
one from enriching oneself at the expense of another. It is commonly accepted that this doctrine simply means
that a person shall not be allowed to profit or enrich himself inequitably at anothers expense. The enrichment
may consist of a patrimonial, physical, or moral advantage, so long as it is appreciable in money. It must have a
correlative prejudice, disadvantage or injury to the plaintiff which may consist, not only of the loss of the property
or the deprivation of its enjoyment, but also of the non-payment of compensation for a prestation or service
rendered to the defendant without intent to donate on the part of the plaintiff, or the failure to acquire something
what the latter would have obtained.
As can be gathered from the facts, PAL invested a considerable amount of money in sending the petitioner
abroad to undergo training to prepare him for his new appointment as B747-400 Captain. In the process, the
petitioner acquired new knowledge and skills which effectively enriched his technical know-how. As all other
investors, PAL expects a return on investment in the form of service by the petitioner for a period of 3 years,
which is the estimated length of time within which the costs of the latters training can be fully recovered. The
petitioner is, thus, expected to work for PAL and utilize whatever knowledge he had learned from the training for
the benefit of the company. However, after only one (1) year of service, the petitioner opted to retire from
service, leaving PAL stripped of a necessary manpower. Bibiano C. Elegir vs. Philippine Airlines, Inc.; G.R. No.
181995, July 16, 2012.
Interest; rate of stipulated interest. The Court now comes to Davids prayer that MOELCI be made to pay the
total sum of 5,472,722.27 plus the stipulated interest at 24% per annum from the filing of the complaint.
Although the Court agrees that MOELCI should pay interest, the stipulated rate is, however, unconscionable and
should be equitably reduced. While there is no question that parties to a loan agreement have wide latitude to
stipulate on any interest rate in view of the Central Bank Circular No. 905 s. 1982 which suspended the Usury
Law ceiling on interest effective January 1, 1983, it is also worth stressing that interest rates whenever
unconscionable may still be reduced to a reasonable and fair level. There is nothing in the said circular which
grants lenders carte blancheauthority to raise interest rates to levels which will either enslave their borrowers or
lead to a hemorrhaging of their assets. Accordingly, the excessive interest of 24% per annum stipulated in
the sales invoice should be reduced to 12% per annum. Virgilio S. David vs. Misamis Occidental II Electric
Cooperative, Inc.;G.R. No. 194785, July 11, 2012.
Legal separation; application of Family Code provisions to marriage entered into prior to the Family Codes
enactment; whats a vested right?; definition of net profits. This case was actually decided based on procedural
law. The decision being questioned had actually become final (in the words of the Court, immutable), so the
rest, which the tribunal set out after discussing lengthily [its adverb, not mine] the immutability of the Decision
is for the enlightenment of the parties and the public at large.
Essentially, the Court noted that even if you got married before the Family Code was enacted, how your property
is divvied up can still be governed by the Family Code because of the latters provisions allowing retroactive effect
provided there is no prejudice to any vested right (see Article 256 of the Family Code). Here, the husband was
divested of his share in the net profits of the conjugal partnership pursuant to Article 129 in relation to Article
63(2) of the Family Code. The husband argued that he already had a vested right in the net profits. The Court
said that you can impair a vested right provided the holder of the right was afforded due process, which took
place in this case, and besides, he is the guilt party and finally, the decision is IMMUTABLE. Then the Court, in
defining net profits, went into a discussion of the differences between the absolute community regime and the
conjugal partnership of gains. Again, in my view, the discussion is obiter, but if you want to slog through it, you
are welcome. Brigido B. Quia vs. Rita C. Quiao, et al.;G.R. No. 176556, July 4, 2012.
Mortgage; validity of blanket or dragnet clauses. As a general rule, a mortgage liability is usually limited to the
amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do
not limit the amount for which the mortgage may stand as security if from the four corners of the instrument the
intent to secure future and other indebtedness can be gathered.
Alternatively, while a real estate mortgage may exceptionally secure future loans or advancements, these future
debts must be specifically described in the mortgage contract. An obligation is not secured by a mortgage unless
it comes fairly within the terms of the mortgage contract.
The stipulation extending the coverage of a mortgage to advances or loans other than those already obtained or
specified in the contract is valid and has been commonly referred to as a blanket mortgage or dragnet clause.
In Prudential Bank v. Alviar, this Court elucidated on the nature and purpose of such a clause as follows:
A blanket mortgage clause, also known as a dragnet clause in American jurisprudence, is one which is
specifically phrased to subsume all debts of past or future origins. Such clauses are carefully scrutinized and
strictly construed. Mortgages of this character enable the parties to provide continuous dealings, the nature or
extent of which may not be known or anticipated at the time, and they avoid the expense and inconvenience of
executing a new security on each new transaction. A dragnet clause operates as a convenience and
accommodation to the borrowers as it makes available additional funds without their having to execute additional
security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording
fees, et cetera. xxx.
A mortgage that provides for a dragnet clause is in the nature of a continuing guaranty and constitutes an
exception to the rule than an action to foreclose a mortgage must be limited to the amount mentioned in the
mortgage contract. Its validity is anchored on Article 2053 of the Civil Code and is not limited to a single
transaction, but contemplates a future course of dealing, covering a series of transactions, generally for an
indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with
respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they
accrue, the guarantor becomes liable. In other words, a continuing guaranty is one that covers all transactions,
including those arising in the future, which are within the description or contemplation of the contract of
guaranty, until the expiration or termination thereof. Philippine Charity Sweepstakes Office (PCSO) vs. New
Dagupan Metro Gas Corporation, et al.; G.R. No. 173171, July 11, 2012.
Property; property belonging to the State. The subject lands are reclaimed lands, specifically portions of the
foreshore and offshore areas of Manila Bay. As such, these lands remain public lands and form part of the public
domain. In the case of Chavez v. Public Estates Authority and AMARI Coastal Development Corporation,
the Court held that foreshore and submerged areas irrefutably belonged to the public domain and were
inalienable unless reclaimed, classified as alienable lands open to disposition and further declared no longer
needed for public service. The fact that alienable lands of the public domain were transferred to the PEA (now
PRA) and issued land patents or certificates of title in PEAs name did not automatically make such lands private.
This Court also held therein that reclaimed lands retained their inherent potential as areas for public use or public
service. Republic of the Philippines, represented by the Philippine Reclamation Authority (PRA) vs. City of
Paraaque; G.R. No. 191109, July 18, 2012.
Special Laws
Administrative Code of 1997; definition of a GOCC. A GOCC must have been organized as a stock or non-stock
corporation. The Philippine Reclamation Authority is neither. It is not a GOCC. Instead, PRA is a government
instrumentality vested with corporate powers and performing an essential public service pursuant to Section
2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated government
instrumentality, it is exempt from payment of real property tax.Republic of the Philippines, represented by the
Philippine Reclamation Authority (PRA) vs. City of Paraaque; G.R. No. 191109, July 18, 2012.
Administrative Code; real property owned by Government. The Administrative Code allows real property owned
by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real
properties remain owned by the Republic and continue to be exempt from real estate tax. Indeed, the Republic
grants the beneficial use of its real property to an agency or instrumentality of the national government. This
happens when the title of the real property is transferred to an agency or instrumentality even as the Republic
remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption,
unless the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person. Republic of the Philippines, represented by the Philippine Reclamation Authority (PRA) vs. City of
Paraaque; G.R. No. 191109, July 18, 2012.
Interim rules on corporate rehabilitation; effect of stay order on foreclosure. A Stay Order cannot suspend the
foreclosure of accommodation mortgages, because the Stay Order may only cover the suspension of the
enforcement of all claims against the debtor, its guarantors, and sureties not solidarily liable with the debtor the
enforcement of the mortgage lien cannot be considered as a claim against a guarantor or a surety not solidarily
liable with the debtor corporations. While spouses Chua executed Continuing Guaranty and Comprehensive
Surety undertakings in favor of Allied Bank, the bank did not proceed against them as individual guarantors or
sureties. Rather, by initiating extrajudicial foreclosure proceedings, the bank was directly proceeding against the
property mortgaged to them by the spouses as security. The Civil Code provides that the property upon which a
mortgage is imposed directly and immediately subjected to the fulfillment of the obligation for whose security the
mortgage was constituted. As such, a real estate mortgage is a lien on the property itself, inseparable from the
property upon which it was constituted. In this case, we find that the undertaking of spouses Chua with respect
to the loans of petitioner corporations is the sale at public auction of certain real properties belonging to them to
satisfy the indebtedness of petitioner corporations in case of a default by the latter. This undertaking is properly
that of a third-party mortgagor or an accommodation mortgagor, whereby one mortgages ones property to stand
as security for the indebtedness of another. Situs Development Corporation, et al. vs. Asiatrust Bank, et al.; G.R.
No. 180036, July 25, 2012.
P.D. No. 1529; cancellation or discharge of mortgage. Section 62 of Presidential Decree (P.D.) No. 1529 appears
to require the execution of an instrument in order for a mortgage to be cancelled or discharged. However, this
rule presupposes that there has been a prior registration of the mortgage lien prior to its discharge. In this case,
the subject mortgage had already been cancelled or terminated upon Galangs full payment before PCSO availed
of registration in 1992. As the subject mortgage was not annotated on TCT No. 52135 at the time it was
terminated, there was no need for Peralta to secure a deed of cancellation in order for such discharge to be fully
effective and duly reflected on the face of her title. Philippine Charity Sweepstakes Office (PCSO) vs. New
Dagupan Metro Gas Corporation, et al.; G.R. No. 173171, July 11, 2012.
P.D. No. 1529; confirmation of imperfect title. The Supreme Court held that the respondent could not have
acquired title over the property through prescription because the lands were of public dominion.
That properties of the public dominion are not susceptible to prescription and that only properties of the State
that are no longer earmarked for public use, otherwise known as patrimonial, may be acquired by prescription are
fundamental, even elementary, principles in this jurisdiction. In Heirs of Mario Malabanan v. Republic, the
Supreme Court, in observance of the foregoing, clarified the import of Section 14(2) and made the following
declarations: (a) the prescriptive period for purposes of acquiring an imperfect title over a property of the State
shall commence to run from the date an official declaration is issued that such property is no longer intended for
public service or the development of national wealth; and (b) prescription will not run as against the State even if
the property has been previously classified as alienable and disposable as it is that official declaration that
converts the property to patrimonial. Republic of the Philippines vs. Metro Index Realty and Development
Corporation; G.R. No. 198585, July 2, 2012.
P.D. No. 1529; purchase of land; innocent purchaser. Soquillo was not a purchaser in good faith. He and the
heirs of Coloso, Jr. who were his predecessors-in-interest, knew about the sale made to Tortola and the
possession of the disputed property by Villaflores. Besides, Tortola registered the sale, albeit with much delay, in
2002. As of the time Tortolas complaint was titled, no registration was effected by Soquillo. Santiago V. Soquillo
vs. Jorge P. Tortola; G.R. No. 192450, July 23, 2012.
P.D. No. 1529; registration of imperfect title; elements. Section 14(1) of Presidential Decree No. 1529 refers to
the original registration of imperfect titles to public land acquired under Section 11(4) in relation to Section
48(b) of Commonwealth Act No. 141, or the Public Land Act, as amended. Section 14(1) of Presidential Decree
No. 1529 and Section 48(b) of Commonwealth Act No. 141 specify identical requirements for the judicial
confirmation of imperfect titles, to wit:
1. That the subject land forms part of the alienable and disposable lands of the public domain;
2. That the applicants, by themselves or through their predecessors-in-interest, have been in open, continuous,
exclusive and notorious possession and occupation of the subject land under a bona fide claim of ownership, and;
3. That such possession and occupation must be since June 12, 1945 or earlier. Republic of the Philippines vs.
Michael C. Santos, et al., etc.; G.R. No. 180027, July 18, 2012.
P.D. No. 1529; registration of title to land acquired by prescription. Section 14(2) of Presidential Decree No. 1529
sanctions the original registration of lands acquired by prescription under the provisions of existing law. In the
seminal case of Heirs of Mario Malabanan v. Republic, this Court clarified that the existing law mentioned
in the subject provision refers to no other than Republic Act No. 386, or the Civil Code of the
Philippines. Malabanan acknowledged that only lands of the public domain that are patrimonial in character
are susceptible to acquisitive presecription and, hence, eligible for registration under Section 14(2) of
Presidential Decree No. 1529. Applying the pertinent provisions of the Civil Code,52 Malabanan further
elucidated that in order for public land to be considered as patrimonial there must be an express declaration by
the State that the public dominion property is no longer intended for public service or the development of the
national wealth or that the property has been converted into patrimonial.
Until then, the period of acquisitive prescription against the State will not commence to run. The requirement of
an express declaration contemplated by Malabanan is separate and distinct from the mere classification of
public land as alienable and disposable. On this point, Malabanan was reiterated by the recent case of Republic
v. Rizalvo, Jr.
In this case, the respondents were not able to present any express declaration from the State, attesting to the
patrimonial character of Lot 3. To put it bluntly, the respondents were not able to prove that acquisitive
prescription has begun to run against the State, much less that they have acquired title to Lot 3 by virtue
thereof. As jurisprudence tells us, a mere certification or report classifying the subject land as alienable and
disposable is not sufficient. Republic of the Philippines vs. Michael C. Santos, et al., etc.; G.R. No. 180027, July
18, 2012.
P.D. No. 1529; value of registration; innocent purchaser. Construing the foregoing conjunctively, as to third
persons, a property registered under the Torrens system is, for all legal purposes, unencumbered or remains to
be the property of the person in whose name it is registered, notwithstanding the execution of any conveyance,
mortgage, lease, lien, order or judgment unless the corresponding deed is registered. The law does not require a
person dealing with the owner of registered land to go beyond the certificate of title as he may rely on the
notices of the encumbrances on the property annotated on the certificate of title or absence of any annotation.
Registration affords legal protection such that the claim of an innocent purchaser for value is recognized as valid
despite a defect in the title of the vendor.
A purchaser in good faith and for value is one who buys property of another, without notice that some other
person has a right to, or interest in, such property, and pays a full and fair price for the same, at the time of such
purchase, or before he has notice of the claim or interest of some other person in the property.39 Good faith is
the opposite of fraud and of bad faith, and its non-existence must be established by competent proof. Sans such
proof, a buyer is deemed to be in good faith and his interest in the subject property will not be disturbed. A
purchaser of a registered property can rely on the guarantee afforded by pertinent laws on registration that he
can take and hold it free from any and all prior liens and claims except those set forth in or preserved against the
certificate of title.
This Court cannot give credence to PCSOs claim to the contrary. PCSO did not present evidence, showing that
New Dagupan had knowledge of the mortgage despite its being unregistered at the time the subject sale was
entered into. Peralta, in the compromise agreement, even admitted that she did not inform New Dagupan of the
subject mortgage. PCSOs only basis for claiming that New Dagupan was a buyer in bad faith was the latters
reliance on a mere photocopy of TCT No. 52135. However, apart from the fact that the facsimile bore no
annotation of a lien or encumbrance, PCSO failed to refute the testimony of Cua that his verification of TCT No.
52135 with the Register of Deeds of Dagupan City confirmed Peraltas claim of a clean title.
Since PCSO had notice of New Dagupans adverse claim prior to the registration of its mortgage lien, it is bound
thereby and thus legally compelled to respect the proceedings on the validity of such adverse claim. It is
therefore of no moment if PCSOs foreclosure of the subject mortgage and purchase of the subject property at
the auction sale took place prior to New Dagupans acquisition of title as decreed in the Decision dated January
21, 1994 of RTC Branch 43. The effects of a foreclosure sale retroact to the date the mortgage was registered.43
Hence, while PCSO may be deemed to have acquired title over the subject property on May 20, 1992, such title is
rendered inferior by New Dagupans adverse claim, the validity of which was confirmed per the Decision dated
January 21, 1994 of RTC Branch 43. Philippine Charity Sweepstakes Office (PCSO) vs. New Dagupan Metro Gas
Corporation, et al.; G.R. No. 173171, July 11, 2012.
SPV Act; extinguishment of credit . Petitioners cannot take refuge in the provisions of the SPV Act of 2004 in
conjunction with Art. 1634 of the Civil Code. For the debtor to be entitled to extinguish his credit by reimbursing
the assignee under Art. 1634, the following requisites must concur:
(a) there must be a credit or other incorporeal right;
(b) the credit or other incorporeal right must be in litigation;
(c) the credit or other incorporeal right must be sold to an assignee pending litigation;
(d) the assignee must have demanded payment from the debtor;
(e) the debtor must reimburse the assignee for the price paid by the latter, the judicial costs incurred by the
latter and the interest on the price from the day on which the same was paid; and
(f) the reimbursement must be done within 30 days from the date of the assignees demand.
In this case, the credit owed by petitioner corporations to Metrobank had already been extinguished when the
bank foreclosed upon the parcel of land mortgaged to it by the spouses Chua as security for petitioners debts, in
full satisfaction of the loan the bank had extended. Therefore, during the pendency of these proceedings, what
was transferred by Metrobank to Cameron was ownership over the foreclosed property, subject only to the right
of redemption by the proper party within one year reckoned from the date of registration of the Certificate of
Sale.
Moreover, the provisions of the Civil Code on subrogation and assignment of credits are only applicable to NPLs,
defined in the SPV Act of 2002 as follows:
Non-Performing Loans or NPLs refers to loans and receivables such as mortgage loans, unsecured loans,
consumption loans, trade receivables, lease receivables, credit card receivables and all registered
and unregistered security and collateral instruments, including but not limited to, real estate mortgages, chattel
mortgages, pledges, and antichresis, whose principal and/or interest have remained unpaid for at least
one hundred eighty (180) days after they have become past due or any of the events of default under the loan
agreement has occurred.
What is involved in this case is more properly a real property acquired by a financial institution in settlement of a
loan (ROPOA). Under the law, ROPOAs are defined in this manner:
ROPOAs refers to real and other properties owned or acquired by an [financial institution] in settlement of loans
and receivables, including real properties, shares of stocks, and chattels formerly constituting collaterals for
secured loans which have been acquired by way of dation in payment (dacion en pago) or judicial or extra-
judicial foreclosure or execution of judgment.
May the subject property be considered as one acquired by Metrobank pursuant to an extrajudicial foreclosure
sale?
The Implementing Rules and Regulations of the SPV Act of 2002 provide that, in case of extrajudicial foreclosure,
a property is deemed acquired by a financial institution on the date of notarization of the Sheriffs Certificate. In
this case, a Certificate of Sale has not been executed in favor of Metrobank in deference to the Stay Order issued
by the rehabilitation court. However, we reiterate that the rehabilitation court has no jurisdiction to suspend
foreclosure proceedings over a third-party mortgage. Much less can it restrain the issuance of a Certificate of Sale
after the subject properties have been sold at public auction more than a year before the Petition for
Rehabilitation was filed. The property foreclosed by Metrobank was clearly beyond the ambit of the Stay Order.
Consequently, there was no valid ground for the Sheriff to withhold the issuance and execution of the Certificate
of Sale.
The parcel of land mortgaged to Metrobank and subsequently transferred to Cameron should be treated as a
ROPOA as provided for by law. Hence, the application of Art. 1634 finds no basis in law.Situs Development
Corporation, et al. vs. Asiatrust Bank, et al.; G.R. No. 180036, July 25, 2012.

August 2012 Philippine Supreme Court Decisions on Civil Law
Civil Code
Accion reivindicatoria. Article 434 of the Civil Code provides that in an action to recover, the property must be
identified, and the plaintiff must rely on the strength of his title and not on the weakness of the defendants
claim.
The first requisite is the identity of the land. In an accion reinvindicatoria, the person who claims that he has a
better right to the property must first fix the identity of the land he is claiming by describing the location, area
and boundaries thereof. Anent the second requisite, i.e., theclaimants title over the disputed area, the rule is that
a party can claim a right of ownership only over the parcel of land that was the object of the deed. It is settled
that what really defines a piece of land is not the area mentioned in its description, but the boundaries therein
laid down, asenclosing the land and indicating its limits. We have held, however, that in controversial cases
where there appears to be an overlapping of boundaries, the actual size of the property gains
importance. Leonardo Notarte et al. v. Godofredo Notarte, G.R. No. 180614, August 29, 2012.
Damages; actual and moral damages; factual and legal support required. Article 2199 of the Civil Code is the
statutory basis for the award of actual damages, which entitles a person to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. As such, actual damages if allowed by the RTC, being
bereft of factual support, are speculative and whimsical. Without the clear and distinct findings of fact and law,
the award amounts only to an ipse dixit on the part of the RTC, and do not attain finality.
Absent a clear and distinct statement of the factual and legal support for the award of moral damages, the award
is thus also speculative and whimsical. Moral damages constitute another judicial ipse dixit, the inevitable
consequence of which is to render the award of moral damages incapable of attaining finality. In addition, the
grant of moral damages in that manner contravenes the law that permit the recovery of moral damages as the
means to assuage physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Moral damages are not intended to enrich the
plaintiff at the expense of the defendant, but to restore the plaintiff to his status quo ante as much as
possible.University of the Philippines, et al. v. Hon. Agustin Dizon et al., G.R. No. 171182, Aug. 23, 2012.
Damages; attorneys fees. The general rule is that a successful litigant cannot recover attorneys fees as part of
the damages to be assessed against the losing party because of the policy that no premium should be placed on
the right to litigate. Prior to the effectivity of the present Civil Code, indeed, such fees could be recovered only
when there was a stipulation to that effect. It was only under the present Civil Code that the right to collect
attorneys fees in the cases mentioned in Article 2208 of the Civil Code came to be recognized. Nonetheless, with
attorneys fees being allowed in the concept of actual damages, their amounts must be factually and legally
justified in the body of the decision and not stated for the first time in the decretal portion. Stating the amounts
only in the dispositive portion of the judgment is not enough; a rendition of the factual and legal justifications for
them must also be laid out in the body of the decision. University of the Philippines, et al. v. Hon. Agustin Dizon
et al., G.R. No. 171182, Aug. 23, 2012.
Partition; oral partition. Under Article 1082 of the Civil Code, every act which is intended to put an end to
indivision among co-heirs is deemed to be a partition even though it should purport to be a sale, an exchange, or
any other transaction. Partition may thus be inferred from circumstances sufficiently strong to support the
presumption.
The validity of an oral partition is already well-settled. It is not required that the partition agreement be
registered or annotated in the OCT of the land to be valid. After exercising acts of ownership over their respective
portions of the contested estate, petitioners are estopped from denying the existence of an oral partition.
Regardless of whether a parol partition or agreement to partition is valid and enforceable at law, equity will in
proper cases, where the parol partition has actually been consummated by the taking of possession in severalty
and the exercise of ownership by the parties of the respective portions set off to each, recognize and enforce
such parol partition and the rights of the parties thereunder.Leonardo Notarte et al. v. Godofredo Notarte, G.R.
No. 180614, August 29, 2012.
Quasi-delict; negligence of hotel. The hotel business is imbued with public interest. Catering to the public,
hotelkeepers are bound to provide not only lodging for their guests but also security to the persons and
belongings of their guests. The twin duty constitutes the essence of the business. Applying by analogy Article
2000, Article 2001 and Article 2002 of the Civil Code (all of which concerned [sic] the hotelkeepers degree of
care and responsibility as to the personal effects of their guests), we hold that there is much greater reason to
apply the same if not greater degree of care and responsibility when the lives and personal safety of their guests
are involved. Otherwise, the hotelkeepers would simply stand idly by as strangers have unrestricted access to all
the hotel rooms on the pretense of being visitors of the guests, without being held liable should anything
untoward befall the unwary guests. That would be absurd, something that no good law would ever
envision. Makati Shangri-La Hotel & Resort v. Ellen Johanne Harper, et al., G.R. No. 189998, August 29, 2012.
Special Laws
Patent; issuance; homestead patent prevails over land tax declaration. When a homesteader has complied with
all the terms and conditions which entitle him to a patent for a particular tract of public land, he acquires a vested
interest therein, enough to be regarded as the equitable owner thereof. Where the right to a patent to land has
once become vested in a purchaser of public lands, it is equivalent to a patent actually issued. The execution and
delivery of patent, after the right to a particular parcel of land has become complete, are the mere ministerial
acts of the officer charged with that duty. Even without a patent, a perfected homestead is a property right in the
fullest sense, unaffected by the fact that the paramount title to the land is still in the government. Such land may
be conveyed or inherited.
As evidence of ownership of land, a homestead patent prevails over a land tax declaration. Jose Medina v. Court
of Appeals & The Heirs of the Late Abundio Castaares, G.R. No. 137582, August 29, 2012.

Civil Code
Common carrier; damages. The operator of a. school bus service is a common carrier in the eyes of the law. He is
bound to observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when
death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased
passenger may only be an unemployed high school student at the time of the accident. Spouses Teodorico and
Nanette Perea v. Spouses Nicolas and Teresita L. Zarate, et al.; G.R. No. 157917. August 29, 2012.
Contracts; rescission; consequences are restitution and in this case, each party will bear its own damage. As
correctly observed by the RTC, the rescissory action taken by GSIS is pursuant to Article 1191 of the Civil Code.
In cases involving rescission under the said provision, mutual restitution is required. The parties should be
brought back to their original position prior to the inception of the contract. Accordingly, when a decree of
rescission is handed down, it is the duty of the court to require both parties to surrender that which they have
respectively received and to place each other as far as practicable in [their] original situation. Pursuant to this,
Goldloop should return to GSIS the possession and control of the property subject of their agreements while GSIS
should reimburse Goldloop whatever amount it had received from the latter by reason of the MOA and the
Addendum.
Relevant also is the provision of Article 1192 of the Civil Code which reads: In case both parties have committed
a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it
cannot be determined which of the parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (Emphasis suppied.)
In this case, it cannot be determined with certainty which between the parties is the first infractor. It could be
GSIS because of the high probability that even before the execution of the agreements, real property taxes were
already imposed and unpaid such that when GSIS applied for building permits, the tax liability was already in the
substantial amount of P54 million. It was just that GSIS could not have been mindful of the same because of its
stand that it is tax exempt. But as this cannot be conclusively presumed, there exists an uncertainty as to which
between the failure to comply on the part of each party came first; hence, the last portion of Article 1192 finds
application. Pursuant thereto, the parties respective claims for damages are thus deemed extinguished and each
of them shall bear its own damage. Goldloop Properties, Inc. vs. Government Service Insurance System; G.R.
No. 171076, August 1, 2012.
Contracts; rescission by reason of subject being under litigation; resolution of litigation is not a condition to
rescission. Contracts which are rescissible due to fraud or bad faith include those which involve things under
litigation, if they have been entered into by the defendant without the knowledge and approval of the litigants or
of competent judicial authority. Thus, Article 1381(4) of the Civil Code provides: The following contracts are
rescissible: x x x x (4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial authority[.]
The rescission of a contract under Article 1381(4) of the Civil Code only requires the concurrence of the
following: first, the defendant, during the pendency of the case, enters into a contract which refers to the thing
subject of litigation; and second, the said contract was entered into without the knowledge and approval of the
litigants or of a competent judicial authority. As long as the foregoing requisites concur, it becomes the duty of
the court to order the rescission of the said contract.
It bears stressing that the right to ask for the rescission of a contract under Article 1381(4) of the Civil Code is
not contingent upon the final determination of the ownership of the thing subject of litigation. The primordial
purpose of Article 1381(4) of the Civil Code is to secure the possible effectivity of the impending judgment by a
court with respect to the thing subject of litigation. It seeks to protect the binding effect of a courts impending
adjudication vis--vis the thing subject of litigation regardless of which among the contending claims therein
would subsequently be upheld. Accordingly, a definitive judicial determination with respect to the thing subject of
litigation is not a condition sine qua non before the rescissory action contemplated under Article 1381(4) of the
Civil Code may be instituted. Lilia B. Luz, et al. vs. Florante Baylon; G.R. No. 182435, August 13, 2012.
Damages; moral; exemplary; attorneys fees. To be recoverable, moral damages must be capable of proof and
must be actually proved with a reasonable degree of certainty. Courts cannot simply rely on speculation,
conjecture or guesswork in determining the fact and amount of damages. Yet, nothing was adduced here to
justify the grant of moral damages. What we have was only the allegation on moral damages, with the complaint
stating that the respondents had been forced to litigate, and that they had suffered mental anguish, serious
anxiety and wounded feelings from the petitioners refusal to restore the possession of the land in question to
them. The allegation did not suffice, for allegation was not proof of the facts alleged.
The Court cannot also affirm the exemplary damages granted in favor of the respondents. Exemplary damages
were proper only if the respondents, as the plaintiffs, showed their entitlement to moral, temperate or
compensatory damages. Yet, they did not establish their entitlement to such other damages.
As to attorneys fees, the general rule is that such fees cannot be recovered by a successful litigant as part of the
damages to be assessed against the losing party because of the policy that no premium should be placed on the
right to litigate. Indeed, prior to the effectivity of the present Civil Code, such fees could be recovered only when
there was a stipulation to that effect. It was only under the present Civil Code that the right to collect attorneys
fees in the cases mentioned in Article 2208 of the Civil Code came to be recognized. Such fees are now included
in the concept of actual damages.
Even so, whenever attorneys fees are proper in a case, the decision rendered therein should still expressly state
the factual basis and legal justification for granting them. Numeriano P. Abobon vs. Felicitas Abata Abobon, et
al.; G.R. No. 155830, August 15, 2012.
Family relations; filiation and support. There are four significant procedural aspects of a traditional paternity
action that parties have to face: a prima facie case, affirmative defenses, presumption of legitimacy, and physical
resemblance between the putative father and the child. We explained that a prima facie case exists if a woman
declares supported by corroborative proof that she had sexual relations with the putative father; at this
point, the burden of evidence shifts to the putative father. We explained further that the two affirmative defenses
available to the putative father are: (1) incapability of sexual relations with the mother due to either physical
absence or impotency, or (2) that the mother had sexual relations with other men at the time of conception.
Since filiation is beyond question, support follows as a matter of obligation; a parent is obliged to support his
child, whether legitimate or illegitimate. Support consists of everything indispensable for sustenance, dwelling,
clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family.
Thus, the amount of support is variable and, for this reason, no final judgment on the amount of support is made
as the amount shall be in proportion to the resources or means of the giver and the necessities of the recipient. It
may be reduced or increased proportionately according to the reduction or increase of the necessities of the
recipient and the resources or means of the person obliged to support. Charles Gotardo v. Divina Buling; G.R.
No. 165166, August 15, 2012.
Property; dried-up riverbed. If indeed a property was the former bed of a creek that changed its course and
passed through the property of the claimant, then, pursuant to Article 461, the ownership of the old bed left to
dry by the change of course was automatically acquired by the claimant. Before such a conclusion can be
reached, the fact of natural abandonment of the old course must be shown, that is, it must be proven that the
creek indeed changed its course without artificial or man-made intervention. Thus, the claimant, in this case the
Reyeses, must prove three key elements by clear and convincing evidence. These are: (1) the old course of the
creek, (2) thenew course of the creek, and (3) the change of course of the creek from the old location to the new
location by natural occurrence.
In this regard, the Reyeses failed to adduce indubitable evidence to prove the old course, its natural
abandonment and the new course. In the face of a Torrens title issued by the government, which is presumed to
have been regularly issued, the evidence of the Reyeses was clearly wanting. Uncorroborated testimonial
evidence will not suffice to convince the Court to order the reconveyance of the property to them. Spouses
Crispin Galang and Caridad Galang vs. Spouses Conrado S. Reyes and Fe De Kastro Reyes (As substituted by their
legal heir: Hermenigildo K. Reyes); G.R. No. 184746, August 8, 2012.
Property; possession as right of the owner. It is beyond question under the law that the owner has not only the
right to enjoy and dispose of a thing without other limitations than those established by law, but also the right of
action against the holder and possessor of the thing in order to recover it. He may exclude any person from the
enjoyment and disposal of the thing, and, for this purpose, he may use such force as may be reasonably
necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his
property. Numeriano P. Abobon vs. Felicitas Abata Abobon, et al.; G.R. No. 155830, August 15, 2012.
Special Laws
Family Code; family homes exemption from foreclosure. Spouses Fortalezas argument that the subject property
is exempt from forced sale because it is a family home deserves scant consideration. As a rule, the family home is
exempt from execution, forced sale or attachment. However, Article 155(3) of the Family Code explicitly allows
the forced sale of a family home for debts secured by mortgages on the premises before or after such
constitution. In this case, there is no doubt that spouses Fortaleza voluntarily executed on January 28, 1998 a
deed of Real Estate Mortgage over the subject property which was even notarized by their original counsel of
record. And assuming that the property is exempt from forced sale, spouses Fortaleza did not set up and prove to
the Sheriff such exemption from forced sale before it was sold at the public auction. Sps. Charlie Fortaleza and
Ofelia Fortaleza vs. Sps. Raul Lapitan and Rona Lapitan; G.R. No. 178288, August 15, 2012.
P.D. No. 1529; collateral attack on titles is not allowed. In order for him to properly assail the validity of the
respondents TCT, he must himself bring an action for that purpose. Instead of bringing that direct action, he
mounted his attack as a merely defensive allegation herein. Such manner of attack against the TCT was a
collateral one, which was disallowed by Section 48 of Presidential Decree No. 1529. Numeriano P. Abobon vs.
Felicitas Abata Abobon, et al.; G.R. No. 155830, August 15, 2012.
P.D. No. 1529; registration of title. The present rule on the matter then requires that an application for original
registration be accompanied by: (1) CENRO or PENRO Certification; and (2) a copy of the original classification
approved by the DENR Secretary and certified as a true copy by the legal custodian of the official records. Medida
failed in this respect. The records only include CENRO Certifications on the subject properties alienability and
disposability, but not a copy of the original classification approved by the DENR Secretary and certified as true
copy by its legal custodian.
Furthermore, even the CENRO Certifications filed before this Court deserve scant consideration since these were
not presented during the trial. The genuineness and due execution of these documents had not been duly proven
in the manner required by law.
In view of the failure of the respondent to establish by sufficient proof that the subject parcels of land had been
classified as part of the alienable and disposable land of the public domain, his application for registration of title
should be denied. Republic of the Philippines vs. Marlon Medida;G.R. No. 195097, August 13, 2012.

September 2012 Philippine Supreme Court Decisions on Civil Law
Contracts; capacity. Contracting parties must be juristic entities at the time of the consummation of the contract.
Stated otherwise, to form a valid and legal agreement it is necessary that there be a party capable of contracting
and a party capable of being contracted with. Hence, if any one party to a supposed contract was already dead at
the time of its execution, such contract is undoubtedly simulated and false and, therefore, null and void by reason
of its having been made after the death of the party who appears as one of the contracting parties therein. The
death of a person terminates contractual capacity. De Belen Vda. de Cabalu, et al. v. Tabu, et al.; G.R. No.
188417. September 24, 2012
Contracts; future inheritance; contractual capacity Under Article 1347 of the Civil Code, no contract may be
entered into upon future inheritance except in cases expressly authorized by law. Paragraph 2 of Article 1347
characterizes a contract entered into upon future inheritance as void. The law applies when the
following requisites concur: (1) the succession has not yet been opened; (2) the object of the contract forms part
of the inheritance; and (3) the promissor has, with respect to the object, an expectancy of a right which is purely
hereditary in nature. De Belen Vda. de Cabalu, et al. v. Tabu, et al.; G.R. No. 188417. September 24, 2012
Lease; implied new lease An implied new lease will set in if it is shown that: (1) the term of the original contract
of lease has expired; (2) the lessor has not given the lessee a notice to vacate; and (3) the lessee continued
enjoying the thing leased for 15 days with the acquiescence of the lessor. This acquiescence may be inferred
from the failure of the lessor to serve notice to vacate upon the lessee. This principle is provided for under Article
1670 of the Civil Code. Thus, after the expiration of the contract of lease, the implied new lease should have only
been in a monthly basis. Zosima Inc. v. Salimbagat; G.R. No. 174376. September 12, 2012
Mortgage; requisites for validity Article 2085 of the Civil Code provides that a mortgage contract, to be valid,
must have the following requisites: (a) that it be constituted to secure the fulfillment of a principal obligation; (b)
that the mortgagor be the absolute owner of the thing mortgaged; and (c) that the persons constituting the
mortgage have free disposal of their property, and in the absence of free disposal, that they be legally authorized
for the purpose. Philippine National Bank v. Sps. Reblando; G.R. No. 194014. September 12, 2012
Obligations; solidary obligations; surety not an indispensable party Records show that when DMI secured the
surety and performance bonds from respondent in compliance with petitioners requirement, respondent bound
itself jointly and severally with DMI for the damages and actual loss that petitioner may suffer should DMI fail
to perform its obligations under the Agreement. The term jointly and severally expresses a solidary obligation
granting petitioner, as creditor, the right to proceed against its debtors, i.e., respondent or DMI.
The nature of the solidary obligation under the surety does not make one an indispensable party. An
indispensable party is a party-in-interest without whom no final determination can be had of an action, and who
shall be joined mandatorily either as plaintiffs or defendants. The presence of indispensable parties is necessary
to vest the court with jurisdiction, thus, without their presence to a suit or proceeding, the judgment of a court
cannot attain real finality. The absence of an indispensable party renders all subsequent actions of the court null
and void for want of authority to act, not only as to the absent parties but even as to those
present. Living@Sense, Inc. v. Malayan Insurance Company, Inc.; G.R. No. 193753. September 26, 2012
Prescription; actions; attorneys fees We agree with the trial and appellate courts, for as the records bear, that
the ten (10)-year prescriptive period to file an action based on the subject promissory notes was interrupted by
the several letters exchanged between the parties. This is in conformity with the second and third circumstances
under Article 1155 of the New Civil Code (NCC) which provides that the prescription of actions is interrupted
when: (1) they are filed before the court; (2) there is a written extrajudicial demand by the creditors; and (3)
there is any written acknowledgment of the debt by the debtor.
Regarding the award of attorneys fees, the applicable provision is Article 2208(2) of the NCC which allows the
grant thereof when the defendants act or omission compelled the plaintiff to litigate or to incur expenses to
protect its interest. Considering the circumstances that led to the filing of the complaint in court, and the clear
refusal of the petitioners to satisfy their existing debt to the bank despite the long period of time and the
accommodations granted to it by the respondent to enable them to satisfy their obligations, we agree that the
respondent was compelled by the petitioners acts to litigate for the protection of the banks interests, making the
award of attorneys fees proper.Magdiwang Realty Corp., et al. v. Manila Banking Corp.; G.R. No. 195592.
September 5, 2012
Publication requirement; laws The publication requirement covers not only statutes but administrative
regulations and issuances, as clearly outlined in Taada v.Tuvera. As opposed toHonasan II v. The Panel of
Investigating Prosecutors of the Department of Justice, where the Court held that OMB-DOJ Joint Circular No. 95-
001 is only an internal arrangement between the DOJ and the Office of the Ombudsman outlining the authority
and responsibilities among prosecutors of both offices in the conduct of preliminary investigation, the assailed
Joint Committees Rules of Procedure regulate not only the prosecutors of the DOJ and the Comelec but also the
conduct and rights of persons, or the public in general. The publication requirement should, therefore, not be
ignored.
Publication is a necessary component of procedural due process to give as wide publicity as possible so that all
persons having an interest in the proceedings may be notified thereof. The requirement of publication is intended
to satisfy the basic requirements of due process. It is imperative for it will be the height of injustice to punish or
otherwise burden a citizen for the transgressions of a law or rule of which he had no notice whatsoever. Arroyo v.
Dept of Justice; G.R. No. 199082/G.R. No. 199085/G.R. No. 199118. September 18, 2012
Publication requirement; regulations Publication is a basic postulate of procedural due process. The purpose of
publication is to duly inform the public of the contents of the laws which govern them and regulate their
activities. Article 2 of the Civil Code, as amended by Section 1 of Executive Order No. 200, states that [l]aws
shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a
newspaper of general circulation in the Philippines, unless it is otherwise provided. Section 18, Chapter 5, Book I
of Executive Order No. 292 or the Administrative Code of 1987 similarly provides that [l]aws shall take effect
after fifteen (15) days following the completion of their publication in the Official Gazette or in a newspaper of
general circulation, unless it is otherwise provided.
Procedural due process demands that administrative rules and regulations be published in order to be effective.
There are, however, several exceptions to the requirement of publication. First, an interpretative regulation does
not require publication in order to be effective. The applicability of an interpretative regulation needs nothing
further than its bare issuance for it gives no real consequence more than what the law itself has already
prescribed. It add[s] nothing to the law and do[es] not affect the substantial rights of any person. Second, a
regulation that is merely internal in nature does not require publication for its effectivity. It seeks to regulate only
the personnel of the administrative agency and not the general public. Third, a letter of instruction issued by an
administrative agency concerning rules or guidelines to be followed by subordinates in the performance of their
duties does not require publication in order to be effective. Asociation of Southern Tagalog Electric Cooperatives,
Inc., et al. v. Energy Regulatory Commission; G.R. No. 192117/G.R. No. 192118. September 18, 2012
Tort; medical negligence; requisites; doctors not guarantors of care The type of lawsuit which has been called
medical malpractice or, more appropriately, medical negligence, is that type of claim which a victim has available
to him or her to redress a wrong committed by a medical professional which has caused bodily harm. In order to
successfully pursue such a claim, a patient must prove that a health care provider, in most cases a physician,
either failed to do something which a reasonably prudent health care provider would have done, or that he or she
did something that a reasonably prudent provider would not have done; and that the failure or action caused
injury to the patient. Stated otherwise, the complainant must prove: (1) that the health care provider, either by
his act or omission, had been negligent, and (2) that such act or omission proximately caused the injury
complained of.
In medical negligence cases, it is settled that the complainant has the burden of establishing breach of duty on
the part of the doctors or surgeons. It must be proven that such breach of duty has a causal connection to the
resulting death of the patient. A verdict in malpractice action cannot be based on speculation or conjecture.
Causation must be proven within a reasonable medical probability based upon competent expert testimony.
Doctors are protected by a special law. They are not guarantors of care. They do not even warrant a good result.
They are not insurers against mishaps or unusual consequences. Furthermore, they are not liable for honest
mistake of judgment. Cereno v. Court of Appeal,s et al.; G.R. No. 167366. September 26, 2012
Unjust enrichment; implied trusts The statutory basis for unjust enrichment is found in Article 22 of the Civil
Code, which provides:
Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.
Under the foregoing provision, there is unjust enrichment when: (1) a person is unjustly benefited; and (2) such
benefit is derived at the expense of or with damages to another. GSIS, et al. v. COA, et al.; G.R. No. 162372.
September 11, 2012
Special Laws
Contracts; rescission R.A. No. 6552 (or the Realty Installment Buyer Act) recognizes the right of the seller to
cancel the contract but any such cancellation must be done in conformity with the requirements therein
prescribed. In addition to the notarial act of rescission, the seller is required to refund to the buyer the cash
surrender value of the payments on the property. The actual cancellation of the contract can only be deemed to
take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of cancellation or
demand for rescission by a notarial act and the full payment of the cash surrender value. Planters Devt Bank v.
Chandumal; G.R. No. 195619. September 5, 2012.

October 2012 Philippine Supreme Court Decisions on Civil Law
Civil Code
Assignment of credit; dation in payment. An assignment of credit is an agreement by virtue of which the owner of
a credit, known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and
without the consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. It
may be in the form of sale, but at times it may constitute a dation in payment, such as when a debtor, in order to
obtain a release from his debt, assigns to his creditor a credit he has against a third person. As a dation in
payment, the assignment of credit operates as a mode of extinguishing the obligation; the delivery and
transmission of ownership of a thing (in this case, the credit due from a third person) by the debtor to the
creditor is accepted as the equivalent of the performance of the obligation.
The terms of the compromise judgment of the parties, however, did not convey an intent to equate the
assignment of Magdalenas retirement benefits as the equivalent of the payment of the debt due the spouses
Serfino. There was actually no assignment of credit; if at all, the compromise judgment merely identified the fund
from which payment for the judgment debt would be sourced. Only when Magdalena has received and turned
over to the spouses Serfino the portion of her retirement benefits corresponding to the debt due would the debt
be deemed paid. Since no valid assignment of credit took place, the spouses Serfino cannot validly claim
ownership of the retirement benefits that were deposited with FEBTC. Without ownership rights over the amount,
they suffered no pecuniary loss that has to be compensated by actual damages. Sps. Godfrey and Gerardina
Serfino vs. Far East Bank and Trust Company, Inc., now Bank of the Philippine Islands.G.R. No. 171845. October
10, 2012
Compromise agreement; relation to original agreement; interest. Petitioner argues that the compromise
agreement created an obligation separate from the original loan, for which respondent is now liable. By stating
that the compromise agreement and the original loan transaction are distinct, petitioner would now attempt to
exact payment on both. This goes against the very purpose of the parties entering into a compromise agreement,
which was to extinguish the obligation under the loan. Petitioner may not seek the enforcement of both the
compromise agreement and payment of the loan, even in the event that the compromise agreement remains
unfulfilled.
The Court had previously tagged a 5% monthly interest rate agreed upon as excessive, iniquitous,
unconscionable and exorbitant, contrary to morals, and the law. We need not unsettle the principle we had
affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive,
iniquitous, unconscionable, and exorbitant. Arthur F. Mechavez vs. Marlyn M, Bermudez G.R. No. 185368. October
11, 2012
Construction contract; progress billing; unjust enrichment. The owners approval of progress billing is merely
provisional. Progress billings are but preliminary estimates of the value of the periodic accomplishments of the
contractor. It is the right of every owner to reevaluate or re-measure the work of its contractor during the
progress of the work.
The rationale underlying the owners right to seek an evaluation of the contractors work is the right to pay only
the true value of the work as may be reasonably determined under the circumstances. This is consistent with the
law against unjust enrichment under Article 22 of the Civil Code which states that every person who through an
act of performance by another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him. R.V. Santos Company, Inc. vs.
Belle Corporation G.R. Nos. 159561-62. October 3, 2012.
Contracts; extension; performance security; public bidding. The extension of the option period means that the
Comelec had more time to determine the propriety of exercising the option. With the extension, the Comelec
could acquire the subject PCOS machines under the same terms and conditions as earlier agreed upon. The end
result is that the Comelec acquired the subject PCOS machines with its meager budget and was able to utilize the
rentals paid for the 2010 elections as part of the purchase price.
It must be pointed out that public biddings are held for the best protection of the public and to give the public the
best possible advantages by means of open competition between the bidders. What are prohibited are
modifications or amendments which give the winning bidder an edge or advantage over the other bidders who
took part in the bidding, or which make the signed contract unfavorable to the government. In this case, the
extension of the option period and the eventual purchase of the subject goods resulted in more benefits and
advantages to the government and to the public in general. The advantage to the government, time and
budget constraints, the application of the rules on valid amendment of government contracts, and the successful
conduct of the May 2010 elections are among the factors looked into in arriving at the conclusion that the
assailed Resolutions issued by the Comelec and the agreement and deed entered into between the Comelec and
Smartmatic-TIM, are valid. Archbishop Fernando R. Capalla, et al. vs. The Hon. Commission on
Elections/Solidarity for Sovereignty etc. G.R. No. 201112/G.R. No. 201121/G.R. No. 201127/G.R. No. 201413.
October 23, 2012
Contracts; freedom to stipulate. Art. 1306 of the Civil Code guarantees the freedom of parties to stipulate the
terms of their contract provided that they are not contrary to law, morals, good customs, public order, or public
policy. Here, both parties knew for a fact that the property subject of their contract was occupied by informal
settlers, whose eviction would entail court actions that in turn, would require some amount of time. They also
knew that the length of time that would take to conclude such court actions was not within their power to
determine. Despite such knowledge, both parties still agreed to the stipulation that the payment of the balance of
the purchase price will be deferred until the informal settlers are ejected. Thus, PLU cannot be allowed to renege
on its agreement. The parties intended the performance of the obligation until the squatters are duly evicted. P.L.
Uy Realty Corporation vs. ALS Management and Development Corporation and Antonio K. Litonjua G.R. No.
166642. October 24, 2012
Contracts; simulation. In a contract of sale, its perfection is consummated at the moment there is a meeting of
the minds upon the thing that is the object of the contract and upon the price. If the parties state a false cause in
the contract to conceal their real agreement, the contract is only relatively simulated and the parties are still
bound by their real agreement. In absolute simulation, there is a colorable contract but it has no substance as the
parties have no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the
parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each
other what they may have given under the contract.
In the case at bench, no valid sale of the subject property actually took place between the alleged vendors,
Ireneo and Salvacion; and the alleged vendees, Spouses Intac. There was simply no consideration and no intent
to sell it. Marietto, a witness to the execution of the absolute deed of sale, testified that Ireneo personally told
him that he was going to execute a document of sale because Spouses Intac needed to borrow the title to the
property and use it as collateral for their loan application. Aside from the plain denial, petitioners could not show
any tangible evidence of any payment therefor. Their failure to prove their payment only strengthened Mariettos
story that there was no payment made because Ireneo had no intention to sell. Heirs of Dr. Mario S. Intac and
Angelina Mendoza-Intac vs. Court of Appeals and Spouses Marcelo Roy, Jr. and Josefina Mendoza-Roy, et
al. G.R. No. 173211. October 11, 2012
Co-ownership; action for ejectment. Article 487 of the Civil Code provides that anyone of the co-owners may
bring an action for ejectment without joining the others. The action is not limited to ejectment cases but includes
all kinds of suits for recovery of possession because the suit is presumed to have been instituted for the benefit of
all. A co-owner is not even a necessary party to an action for ejectment, for complete relief could be afforded
even in his absence, Hence, Exequiel, a co-owner, may bring the action for unlawful detainer even without the
special power of attorney of his coheirs. Heirs of Albina G. Ampil, namely Precious A. Zavalla, Eduardo Ampil, et
al. vs. Teresa Manahan and Mario Manahan G.R. No. 175990. October 11, 2012
Damages; proof of pecuniary loss. The spouses Serfino invoke American common law that imposes a duty upon a
bank receiving a notice of adverse claim to the fund in a depositors account to freeze the account for a
reasonable length of time, sufficient to allow the adverse claimant to institute legal proceedings to enforce his
right to the fund. To adopt the foreign rule, however, goes beyond the power of this Court to promulgate rules
governing pleading, practice and procedure in all courts. The rule reflects a matter of policy that is better
addressed to the Bangko Sentral ng Pilipinas. Essentially, these statutes do not impose a duty on banks to freeze
the deposit upon a mere notice of adverse claim; they first require either a court order or an indemnity bond. The
banks contractual relations are with its depositor, not with the third party. In the absence of any positive duty of
the bank to an adverse claimant, there could be no breach that entitles the latter to moral damages. Sps. Godfrey
and Gerardina Serfino vs. Far East Bank and Trust Company, Inc., now Bank of the Philippine Islands. G.R. No.
171845. October 10, 2012
Damages; temperate, moderate, exemplary. Petitioner assails the award of P50,000 as moral damages granted to
the heirs of Henry Go despite the fact that neither Henry Go nor any of his heirs testified on matters that could be
the basis for such monetary award. Indeed, in this case, since respondent Henry Go was not able to testify, there
is then no evidence on record to prove that he suffered mental anguish, besmirched reputation, sleepless nights,
wounded feelings or similar injury by reason of petitioners conduct.
However, there was no error committed by the lower courts with regard to the award of temperate or moderate
damages of P100,000 to respondents Lao Lim and Go. The purpose for respondents trip to Hong Kong was to
conduct business negotiations, but respondents were not able to meet their counterparts as they were not
allowed to board the PR300 flight. Understandably, it is difficult, if not impossible, to adduce solid proof of the
losses suffered by respondents due to their failure to make it to their business meetings. Thus, it is only just that
respondents be awarded temperate or moderate damages. Since respondent is entitled to temperate damages,
then the court may also award exemplary damages. Philippine Airlines, Inc. vs. Francisco Lao Lim, The Heirs of
Henry Go, Manuel Limtiong and Rainbow Tours and Travel, Inc. G.R. No. 168987. October 17, 2012
Land ownership. The bare allegation of respondents that they had been in peaceful and continuous possession of
the lot in question because their predecessor-in-interest had been in possession thereof in the concept of an
owner from time immemorial, cannot prevail over the tax declarations and other documentary evidence
presented by petitioners. In the absence of any supporting evidence, that of the petitioners deserves more
probative value. A perusal of the records shows that respondents occupation of the lot in question was by mere
tolerance. From the minutes of the meeting in the Barangay Lupon, Perfecto admitted that in Albina permitted
them to use the lots on the condition that they would vacate the same should Albina need it. Heirs of Albina G.
Ampil, namely Precious A. Zavalla, Eduardo Ampil, et al. vs. Teresa Manahan and Mario Manahan G.R. No.
175990. October 11, 2012
Mortgage; escalation clause. We consider to be unsubstantiated the petitioners claim of their lack of consent to
the escalation clauses. They did not adduce evidence to show that they did not assent to the increases in the
interest rates. The records reveal instead that they requested only the reduction of the interest rate or the
restructuring of their loans. Escalation clauses are valid and do not contravene public policy. These clauses are
common in credit agreements as means of maintaining fiscal stability and retaining the value of money on long-
term contracts. Any increase in the rate of interest made pursuant to an escalation clause must be the result of
an agreement between the parties. Thus, any change must be mutually agreed upon, otherwise, the change
carries no binding effect. Spouses Humberto Delos Santos and Carmencita Delos Santos vs. Metropolitan Bank
and Trust Company G.R. No. 153852. October 24, 2012
Novation; lease agreement; default. Article 1292 of the Civil Code provides that in novation, it is imperative that
it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible
with each other. In this case, the cause in a contract of lease is the enjoyment of the thing; in a contract of
deposit, it is the safekeeping of the thing. They thus create essentially distinct obligations that would result in a
novation only if the parties entered into one after the other concerning the same subject matter.
The turning point in this case is whether or not the parties subsequently entered into an agreement for the
storage of the buses that superseded their prior lease agreement involving the same buses. RCJ failed to present
any clear proof that it agreed with Master Tours to abandon the lease of the buses and in its place constitute RCJ
as depositary of the same, providing storage service to Master Tours for a fee. The only evidence RCJ relied on is
Master Tours letter in which it demanded the return of the four buses which were placed in RCJs garage for
safekeeping. For one thing, the letter does not on its face constitute an agreement. It contains no contractual
stipulations respecting some warehousing arrangement between the parties concerning the buses. The idea of
RCJ safekeeping the buses for Master Tours is actually consistent with their lease agreement. In fact, the lessee
of a movable property has an obligation to return the thing leased, upon the termination of the lease, just as he
received it. Apart from delivering the buses to RCJ, the agreement did not require any further act from Master
Tours as a condition to the exercise of its right to collect the lease fee. RCJ Bus Lines, Incorporated vs. Master
Tours and Travel CorporationG.R. No. 177232. October 11, 2012
Novation; loan; restructuring. Article 1292 of the Civil Code contemplates two kinds of novation. Novation is never
presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the
parties, or by their acts that are too clear and unmistakable. The contracting parties must incontrovertibly
disclose that their object in executing the new contract is to extinguish the old one. Upon the other hand, no
specific form is required for an implied novation, and all that is prescribed by law would be an incompatibility
between the two contracts. Nonetheless, both kinds of novation must still be clearly proven.
Without a written contract stating in unequivocal terms that the parties were novating the original loan
agreement, eliminating an express novation, the Court looks to whether there is an incompatibility between the
Floor Stock Line secured by Trust receipts and the subsequent restructured Omnibus Line which was supposedly
approved by PNB. The test of incompatibility is whether the two obligations can stand together, each one having
its independent existence. The obligation is not novated by an instrument that expressly recognizes the old,
changes only the terms of payment, adds other obligations not incompatible with the old ones, or the new
contract merely supplements the old one. Besides, novation does not extinguish criminal liability. Philippine
National Bank Vs. Lilian S. Soriano G.R. No. 164051, October 3, 2012.
Obligations; default in performance; liquidated damages. The parties to a contract are allowed to stipulate on
liquidated damages to be paid in case of breach. A perusal of the significant provisions of the Construction
Contract and the relevant construction documents would show that the rights to liquidated damages and to
terminate the contract are distinct remedies that are available to respondent. As long as the contractor fails to
finish the works within the period agreed upon by the parties without justifiable reason and after the owner
makes a demand, then liability for damages as a consequence of such default arises.
With the modification of the contract period, petitioner was obliged to perform the works and deliver the units.
Yet it still reneged on its obligation. Assuming that the reasons for valid extension indeed exist, still, petitioner
should bear the consequences for the delay when petitioner failed to meet its new deadline. While the Court has
reduced the amount of liquidated damages in some cases because of partial fulfillment of the contract and/or the
amount is unconscionable, the Court does not find the same to be applicable in this case. As of the last certified
billing, petitioners percentage accomplishment was only 62.57%. Hence, the Court applied the general rule not
to ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as they are not
contrary to law, morals, good customs, public order or public policy. Atlantic Erectors, Inc. vs. Court of Appeals
and Herbal Cove Realty Corporation. G.R. No. 170732. October 11, 2012
Obligations; delay; additional works and change order; principle of quantum meruit. Petitioner insists that
respondent should pay the remaining balance on the contract price, that it was respondents additional works and
change orders which caused the delay in the completion of the proposed project. Respondent anchors its non-
payment of the remaining balance primarily on the defects and delays incurred by petitioner in the completion of
the construction project.
Testimonial and documentary proof strongly show that the delay was caused by the additional works and change
order works required by respondent which were not part of the original Agreement. Pursuant to the
aforementioned contractual obligations, petitioner completed the construction of the four-storey commercial
building and two-storey kitchen with dining hall. Thus, this Court finds no legal basis for respondent to not
comply with its obligation to pay the balance of the contract price due the petitioner. Under the principle
of quantum meruit, a contractor is allowed to recover the reasonable value of the thing or service rendered in
order to avoid unjust enrichment. Robert Pascua, doing business under the name and style Tri-Web Construction
vs. G & G Realty Corporation G.R. No. 196383. October 15, 2012
Obligations; payment; extinguishment of obligation. Respondents obligation consists of payment of a sum of
money. In order to extinguish said obligation, payment should be made to the proper person as set forth in
Article 1240 of the Civil Code. Admittedly, payment of the remaining balance of P200,000 was not made to the
creditors themselves. Respondent claims that Losloso was the authorized agent of petitioners, but the latter
dispute it. Loslosos authority to receive payment was embodied in petitioners letter addressed to respondent
where they informed respondent of the amounts they advanced for the payment of the 1997 real estate taxes. In
said letter, petitioners reminded respondent of her remaining balance, together with the amount of taxes paid.
Taking into consideration the busy schedule of respondent, petitioners advised the latter to leave the payment to
a certain Dori who admittedly is Losloso, or to her trusted helper. This is an express authority given to Losloso
to receive payment. Spouses Miniano B. Dela Cruz and Leta L. Dela Cruz vs. Ana Marie Concepcion G.R. No.
172825. October 11, 2012
Regalian doctrine; public land. Under the Regalian doctrine, land that has not been acquired from the
government, either by purchase, grant, or any other mode recognized by law, belongs to the State as part of the
public domain. Thus, it is indispensable for a person claiming title to a public land to show that his title was
acquired through such means. To prove that the subject property is alienable and disposable land of the public
domain, respondents presented the CENRO Certificate. However, a CENRO or PENRO Certification is not enough
to certify that a land is alienable and disposable. The applicant for land registration must prove that the DENR
Secretary had approved the land classification and released the land of the public domain as alienable and
disposable, and that the land subject of the application for registration falls within the approved area per
verification through survey by the PENRO or CENRO. In addition, the applicant for land registration must present
a copy of the original classification approved by the DENR Secretary and certified as a true copy by the legal
custodian of the official records.
Although the survey and certification were done declaring certain portions of the public domain situated in Cebu
City as alienable and disposable, an actual copy of such classification, certified as true by the legal custodian of
the official records, was not presented in evidence. Unfortunately, respondents were not able to discharge the
burden of overcoming the presumption that the land they sought to be registered forms part of the public
domain. Republic of the Philippines vs. Gloria Jaralve (deceased), substituted by Alan Jess Jaralve-Document, Jr.,
et al. G.R. No. 175177. October 24, 2012
Succession; extra-judicial settlement of estate; grounds for nullity. Upon the death of Anunciacion, her children
and Enrique acquired their respective inheritances, entitling them to their pro indivisoshares in her whole estate.
In the execution of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale in favor of spouses Uy,
all the heirs of Anunciacion should have participated. Considering that Eutropia and Victoria were admittedly
excluded and that then minors Rosa and Douglas were not properly represented therein, the settlement was not
valid and binding upon them and consequently, a total nullity.
However, while the settlement of the estate is null and void, the subsequent sale of the subject properties made
by Enrique and his children, Napoleon, Alicia and Visminda, in favor of the respondents is valid but only with
respect to their proportionate shares. With respect to Rosa and Douglas who were minors at the time of the
execution of the settlement and sale, their natural guardian and father, Enrique, represented them in the
transaction. However, on the basis of the laws prevailing at that time, Enrique was merely clothed with powers of
administration and bereft of any authority to dispose of their 2/16 shares in the estate of their mother,
Anunciacion.
A father or mother, as the natural guardian of the minor under parental authority, does not have the power to
dispose or encumber the property of the latter. Such power is granted by law only to a judicial guardian of the
wards property and even then only with courts prior approval. Napoleon D. Neri, et al. vs Heirs of Hadji Yusop
Uy and Julpha Ibrahim Uy. G.R. No. 194366. October 10, 2012
SPECIAL LAWS
BOT Law; water rights; appropriation. Foreign ownership of a hydropower facility is not prohibited under existing
laws. The construction, rehabilitation and development of hydropower plants are among those infrastructure
projects which even wholly-owned foreign corporations are allowed to undertake under the Amended Build-
Operate-Transfer (Amended BOT) Law (R.A. No. 7718). Executive Order No. 215 allowed the entry of private
sector the Independent Power Producers (IPPs) to participate in the power generation activities in the country.
Further, water right is defined in the Water Code as the privilege granted by the government to appropriate and
use water. Under the Water Code concept of appropriation, a foreign company may not be said to be
appropriating our natural resources if it utilizes the waters collected in the dam and converts the same into
electricity through artificial devices. Since the National Power Corporation (NPC) remains in control of the
operation of the dam by virtue of water rights granted to it, there is no legal impediment to foreign-owned
companies undertaking the generation of electric power using waters already appropriated by NPC, the holder of
water permit. Initiative For Dialoque and Emprovement Through Alternative Legal Services, Inc., Et Al. vs. Power
Sector Assets and Liabilities Management Corpotation Etc., et aAl. G.R. No. 192088. October 9, 2012
Homestead patent; five-year prohibitory period; no distinction between consummated and executory sale; unjust
enrichment. The five-year prohibitory period following the issuance of the homestead patent is provided under
Section 118 of the Public Land Act. It bears stressing that the law was enacted to give the homesteader or
patentee every chance to preserve for himself and his family the land that the State had gratuitously given to him
as a reward for his labour in cleaning and cultivating it.
In the present case, the negotiations for the purchase of the properties covered by the patents issued in 1991
were made in 1995 and, eventually, an undated Deed of Conditional Sale was executed. Petitioner raises the
issue whether by a deed of conditional sale there was alienation or encumbrance within the contemplation of
the law. The prohibition does not distinguish between consummated and executory sale. The conditional sale
entered into by the parties is still a conveyance of the homestead patent; that the formal deed of sale was
executed after the expiration of the staid period did not and could not legalize a contract that was void from its
inception. Nevertheless, petitioner does not err in seeking the return of the down payment as a consequence of
the sale having been declared void. The rule is settled that the declaration of nullity of a contract which is void ab
initio operates to restore things to the state and condition in which they were found before the execution
thereof. Filinvest Land, Inc., Efren C. Gutierrer vs. Abdul Backy, Abehera, Baiya, Edris, et al. G.R. No. 174715.
October 11, 2012
Republic Act (RA) No. 26; certificate of title; reconstitution; sources. The Office of the Solicitor General raised the
issue that the Domingos did not comply with Sections 12 and 13 of RA No. 26 because they failed to notify the
heirs of the Spouses Ramoso and a certain Senen Gabaldon of the reconstitution proceedings for an original
certificate of title. Respondents argue that the names of the heirs of the Spouses Ramoso and Gabaldon do not
appear in the owners duplicate, hence need not be notified.
RA No. 26 provides two procedures and sets of requirements in the reconstitution of lost or destroyed certificates
of title depending on the source of the petition for reconstitution. Section 10 in relation to Section 9, and on the
other, Sections 12 and 13. Section 10 of RA No. 26 applies if the source is the owners duplicate certificate, which
shall be published in the manner stated in section nine. Section 9 of RA No. 26 states that the notice shall
specify the number of the certificate of title, the name of the registered owner, the names of the interested
parties appearing in the reconstituted certificate of title, the location of the property, and the date on which all
persons having an interest in the property must appear and file such claim as they may have. The respondents
complied with these requirements and thus the RTC validly acquired jurisdiction to hear and decide the petition
for reconstitution. Republic of the Philippines vs. Angel T. Domingo and Benjamin T. Domingo. G.R. No. 197315.
October 10, 2012
Realty Installment Buyer Protection Act; contract to sell. A contract is what the law defines it to be, and not what
it is called by the contracting parties. A contract to sell is defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds itself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
The Shelter Contract Award granted to respondent expressly stipulates that upon completion of payment of the
amount representing the full value of the House and Lot subject of the Contract Award, the Union shall execute a
Deed of Transfer and shall cause the issuance of the corresponding Transfer Certificate of Title in favor of and in
the name of the Awardee. It cannot be denied, therefore, that the parties entered into a contract to sell in the
guise of a reimbursement scheme requiring respondent to make monthly reimbursement payments which are, in
actuality, installment payments for the value of the subject house and lot.
While the Court agreed that the cancellation of a contract to sell may be done outside of court, however, the
cancellation by the seller must be in accordance with Sec. 3(b) of R.A. No. 6552, which requires a notarial act of
rescission and the refund to the buyer of the full payment of the cash surrender value of the payments on the
property. In the present case, petitioner failed to prove that the Shelter Contract Award had been cancelled in
accordance with R.A. No. 6552, which would have been the basis for the illegality of respondents continuous
possession of the subject premises. Hence, the action for ejectment must fail. Associated Marine Office and
Seamens Union Of The Philippines vs. Noriel Decena G.R. No. 178584. October 8, 2012.

November 2012 Philippine Supreme Court Decisions on Civil Law
Civil Code
Co-ownership; validity of partition contracts. Contrary to the finding of the Court of Appeals, the subdivision
agreements forged by Mendoza and her alleged co-owners were not for the partition ofpro-indiviso shares of co-
owners of Lot 733 but were actually conveyances, disguised as partitions, of portions of Lot 733 specifically Lots
733-A and 733-B, and portions of the subsequent subdivision of Lot 733-C. It cannot be overemphasized enough
that the two deeds of absolute sale over portions of substantially the same parcel of land antedated the
subdivision agreements in question and their execution acknowledged too before a notary public. Rupeta Cano
Vda. De Viray and Jesus Carlo Gerard Viray v. Spouses Jose Usi and Amelita Usi, G.R.No.192486. November
21,2012.
Constructive delivery; execution of public instrument only prima facie presumption of delivery.Article 1477 of the
Civil Code recognizes that the ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. Related to this article is Article 1497 which provides that [t]he thing sold shall be
understood as delivered, when it is placed in the control and possession of the vendee. With respect to
incorporeal property, Article 1498 of the Civil Code lays down the general rule: the execution of a public
instrument shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred. However, the execution of a public instrument gives
rise only to a prima facie presumption of delivery, which is negated by the failure of the vendee to take actual
possession of the land sold. [A] person who does not have actual possession of the thing sold cannot transfer
constructive possession by the execution and delivery of a public instrument. In this case, no constructive
delivery of the land transpired upon the execution of the deed of sale since it was not the spouses Villamor, Sr.
but the respondents who had actual possession of the land. The presumption of constructive delivery is
inapplicable and must yield to the reality that the petitioners were not placed in possession and control of the
land. Sps. Erosto Santiago and Nelsi Santiago v. Mancer Villamor, et al.; G.R. No. 168499. November 26,2012
Contracts; inadequacy of consideration does not render the contract void; need not be monetary.Inadequacy of
consideration does not vitiate a contract unless it is proven which in the case at bar was not, that there was
fraud, mistake or undue influence. While consideration is usually in the form of money or property, it need not be
monetary. Eduardo M. Cojuangco, Jr. vs. Republic of the Philippines; G.R. No. 180705. November 27, 2012.
Contracts; requisites; disputable presumption that there is sufficient consideration for a Contract. Under Art. 1318
of the Civil Code, there is no contract unless the following requisites concur: (1) consent of the contracting
parties;(2) object certain which is the subject matter of the contract; (3) cause of the obligation which is
established. The following contract is inexistent and void from the beginning: those whose cause or object did not
exist at the time of the transaction. There is a disputable presumption that there was a sufficient consideration
for a contract. The rule then is that the party who stands to profit from a declaration of the nullity of a contract
on the ground of insufficiency of consideration which would necessarily refer to one who asserts such nullity
has the burden of overthrowing the presumption offered by the Rules of Court. Eduardo M. Cojuangco, Jr. vs.
Republic of the Philippines; G.R. No. 180705. November 27, 2012.
Damages; entitlement; when death results from delict. Anent the award of damages, when death occurs due to a
crime, the following may be recovered: (1) civil indemnity ex delicto for the death of the victim; (2) actual or
compensatory damages; (3) moral damages; (4) exemplary damages; (5) attorneys fees and expenses of
litigation; and (6) interest, in proper cases. People of the Philippines v. Marcial M. Malicdem; G.R. No. 184601.
November 12, 2012.
Damages; exemplary damages in delict; awarded when there is an aggravating circumstance, whether ordinary
or qualifying. Unlike the criminal liability which is basically a State concern, the award of damages, however, is
likewise, if not primarily, intended for the offended party who suffers thereby. It would make little sense for an
award of exemplary damages to be due the private offended party when the aggravating circumstance is ordinary
but to be withheld when it is qualifying. Withal, the ordinary or qualifying nature of an aggravating circumstance
is a distinction that should only be of consequence to the criminal, rather than to the civil, liability of the offender.
In fine, relative to the civil aspect of the case, an aggravating circumstance, whether ordinary or qualifying,
should entitle the offended party to an award of exemplary damages within the unbridled meaning of Article 2230
of the Civil Code. People of the Philippines v. Marcial M. Malicdem;G.R. No. 184601. November 12, 2012.
Damages for violation of right to privacy; inviolability of diplomatic residence. As already exhaustively discussed
by both the RTC and the CA, Nestor himself admitted that he caused the taking of the pictures of Lavinas
residence without the latters knowledge and consent. Nestor reiterates that he did so sans bad faith or malice.
However, Nestors surreptitious acts negate his allegation of good faith. If it were true that Lavina kept ivories in
his diplomatic residence, then, his behavior deserves condemnation. However, that is not the issue in the case at
bar. Nestor violated the New Civil Code prescriptions concerning the privacy of ones residence and he cannot
hide behind the cloak of his supposed benevolent intentions to justify the invasion. Hence, the award of damages
and attorneys fees in Lavinas favor is proper. Nestor N. Padalhin, et al. Vs. Nelson D. Lavia.G.R. No. 183026.
November 14,2012.
Filiation; support; entitlement; clear and convincing proof of filiation. Time and again, this Court has ruled that a
high standard of proof is required to establish paternity and filiation. An order for support may create an
unwholesome situation or may be an irritant to the family or the lives of the parties so that it must be issued only
if paternity or filiation is established by clear and convincing evidence. Antonio Perla v. Mirasol Baring and Randy
B. Perla; G.R. No. 172471, November 12, 2012.
Filiation; open and continuous possession of status. To prove open and continuous possession of the status of an
illegitimate child, there must be evidence of the manifestation of the permanent intention of the supposed father
to consider the child as his, by continuous and clear manifestations of parental affection and care, which cannot
be attributed to pure charity. Such acts must be of such a nature that they reveal not only the conviction of
paternity, but also the apparent desire to have and treat the child as such in all relations in society and in life, not
accidentally, but continuously. Here, the single instance that Antonio allegedly hugged Randy and promised to
support him cannot be considered as proof of continuous possession of the status of a child. To emphasize, [t]he
fathers conduct towards his son must be spontaneous and uninterrupted for this ground to exist. Antonio Perla
v. Mirasol Baring and Randy B. Perla; G.R. No. 172471, November 12, 2012.
Filiation; proof; Certificate of Live Birth; not competent proof of paternity when putative father had no hand in
preparation; Baptismal Certificate; per se not a competent proof of filiation or circumstantial evidence to prove
filiation. Just like in a birth certificate, the lack of participation of the supposed father in the preparation of a
baptismal certificate renders this document incompetent to prove paternity. And while a baptismal certificate
may be considered a public document, it can only serve as evidence of the administration of the sacrament on
the date specified but not the veracity of the entries with respect to the childs paternity. Thus, baptismal
certificates are per se inadmissible in evidence as proof of filiation and they cannot be admitted indirectly as
circumstantial evidence to prove the same. Antonio Perla v. Mirasol Baring and Randy B. Perla; G.R. No. 172471,
November 12, 2012.
Laches; elements. The elements of laches must be proven positively. Laches is evidentiary in nature, a fact that
cannot be established by mere allegations in the pleadings. Evidence is of utmost importance in establishing the
existence of laches because there is no absolute rule as to what constitutes laches or staleness of demand; each
case is to be determined according to the particular circumstances. Verily, the application of laches is addressed
to the sound discretion of the court as its application is controlled by equitable considerations.
Laches is not concerned only with the mere lapse of time. The following elements must be present in order to
constitute laches: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made for which the complaint seeks a remedy; (2) delay in asserting the
complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having
been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that
the complaint would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in
the event the relief is accorded to the complainant, or the suit is not held to be barred. Jack Arroyo v. Bocago
Inland Devt Corp. (BIDECO), G.R. No. 167880 November 14,2012
Lease; rescission in reciprocal obligation. Article 1191 of the Civil Code provides that the power to rescind
obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him. A lease contract is a reciprocal contract. By signing the lease agreement, the lessor grants possession
over his/her property to the lessee for a period of time in exchange for rental payment. Indeed, rescission is
statutorily recognized in a contract of lease. The aggrieved party is given the option to the aggrieved party to ask
for: (1) the rescission of the contract; (2) rescission and indemnification for damages; or (3) only indemnification
for damages, allowing the contract to remain in force. Sps. Socrates Sy and Cely Sy v. Andoks Litson
Corporation. G.R. No. 192108. November 21, 2012.
Marriage; petition for nullity of marriage; AM No. 02-11-10; appearance by the Office of the Solicitor General still
required. The Resolution nowhere stated that appeals by the OSG were no longer required. On the contrary, the
Resolution explicitly required the OSG to actively participate in all stages of the proceedings. Arabelle Mendoza v.
Republic of the Philippines and Dominic Mendoza, G.R. No. 157649. November 12, 2012.
Marriage; psychological incapacity; elements. Psychological incapacity under Article 36 of the Family
Code contemplates an incapacity or inability to take cognizance of and to assume basic marital obligations, and is
not merely the difficulty, refusal, or neglect in the performance of marital obligations or ill will. It consists of: (a)
a true inability to commit oneself to the essentials of marriage; (b) the inability must refer to the essential
obligations of marriage, that is, the conjugal act, the community of life and love, the rendering of mutual help,
and the procreation and education of offspring; and (c) the inability must be tantamount to a psychological
abnormality. Proving that a spouse failed to meet his or her responsibility and duty as a married person is not
enough; it is essential that he or she must be shown to be incapable of doing so due to some psychological
illness. Republic v. Court of Appeals and Eduardo de Quintos, Jr., G.R. No. 159594. November 12, 2012.
Marriage; psychological incapacity; expert evidence; thorough and in-depth assessment required. The expert
evidence presented in cases of declaration of nullity of marriage based on psychological incapacity presupposes a
thorough and in-depth assessment of the parties by the psychologist or expert to make a conclusive diagnosis of
a grave, severe and incurable presence of psychological incapacity. Republic v. Court of Appeals and Eduardo de
Quintos, Jr., G.R. No. 159594. November 12, 2012.
Marriage; psychological incapacity; proof of natal or disabling supervening factor required. It is not enough that
the respondent, alleged to be psychologically incapacitated, had difficulty in complying with his marital
obligations, or was unwilling to perform these obligations. Proof of a natal or supervening disabling factor an
adverse integral element in the respondents personality structure that effectively incapacitated him from
complying with his essential marital obligations must be shown. Republic v. Court of Appeals and Eduardo de
Quintos, Jr., G.R. No. 159594. November 12, 2012.
Marriage; psychological incapacity; Santos and Molina guidelines. The pronouncements in Santosand Molina have
remained as the precedential guides in deciding cases grounded on the psychological incapacity of a spouse. But
the Court has declared the existence or absence of the psychological incapacity based strictly on the facts of each
case and not on a priori assumptions, predilections or generalizations. Indeed, the incapacity should be
established by the totality of evidence presented during trial, making it incumbent upon the petitioner to
sufficiently prove the existence of the psychological incapacity. Republic v. Court of Appeals and Eduardo de
Quintos, Jr., G.R. No. 159594. November 12, 2012.
Marriage; psychological incapacity; three basic requirements. To entitle petitioner spouse to a declaration of the
nullity of his or her marriage, the totality of the evidence must sufficiently prove that respondent spouses
psychological incapacity was grave, incurable and existing prior to the time of the marriage. Arabelle Mendoza v.
Republic of the Philippines and Dominic Mendoza, G.R. No. 157649. November 12, 2012.
Marriage; psychological incapacity; totality of evidence proving incapacity required. Even if the expert opinions of
psychologists are not conditions sine qua non in the granting of petitions for declaration of nullity of marriage, the
actual medical examination was to be dispensed with only if the totality of evidence presented was enough to
support a finding of his psychological incapacity. This did not mean that the presentation of any form of medical
or psychological evidence to show the psychological incapacity would have automatically ensured the granting of
petition for declaration of nullity of marriage. What was essential, we should emphasize herein, was the
presence of evidence that can adequately establish the partys psychological condition. But where, like here, the
parties had full opportunity to present the professional and expert opinions of psychiatrists tracing the root cause,
gravity and incurability of the alleged psychological incapacity, then the opinions should be represented and be
weighed by the trial courts in order to determine and decide whether or not to declare the nullity of the
marriages. It bears repeating that the trial courts, as in all other cases they try, must always base their
judgments not solely on the expert opinions presented by the parties but on the totality of evidence adduced in
the course of their proceedings. Arabelle Mendoza v. Republic of the Philippines and Dominic Mendoza, G.R. No.
157649. November 12, 2012.
Mortgage; mortgagee in good faith relying on Torrens Certificate of Title; Indefeasibility. Primarily, it bears noting
that the doctrine of mortgagee in good faith is based on the rule that all persons dealing with property covered
by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title. This is in
deference to the public interest in upholding the indefeasibility of a certificate of title as evidence of lawful
ownership of the land or of any encumbrance thereon. In the case of banks and other financial institutions,
however, greater care and due diligence are required since they are imbued with public interest, failing which
renders the mortgagees in bad faith. Thus, before approving a loan application, it is a standard operating practice
for these institutions to conduct an ocular inspection of the property offered for mortgage and to verify the
genuineness of the title to determine the real owner(s) thereof. The apparent purpose of an ocular inspection is
to protect the true owner of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title thereto. Philippine Banking Corporation v.
Arturo Dy, et al., G.R. No. 183774. November 14, 2012
Property; accretion; elements; By law, accretion the gradual and imperceptible deposit made through the
effects if the current of the water belongs to the owner if the land adjacent to the banks of rivers where it
forms. The drying up of the river is not accretion. Hence, the dried-up riverbed belongs to the State as property
of public dominion, not to the riparian owner, unless a law vests the ownership in some other person. Republic of
the Philippines v. Arcadio Ivan Santos III and Arcadio Santos, Jr. G.R. No. 160453. November 12, 2012
Property; builder in good faith; not limited to those claiming ownership over property; builder in good faith;
landowners options. Article 448 of the Civil Code applies when the builder believes that he is the owner of the
land or that by some title he has the right to build thereon, or that, at least, he has a claim of title thereto.
In Tuatis, we ruled that the seller (the owner of the land) has two options under Article 448: (1) he may
appropriate the improvements for himself after reimbursing the buyer (the builder in good faith) the necessary
and useful expenses under Articles 546 and 548 of the Civil Code; or (2) he may sell the land to the buyer, unless
its value is considerably more than that of the improvements, in which case, the buyer shall pay reasonable
rent. Communities Cagayan, Inc. v. Sps. Arsenio (deceased) and Angeles Nanol, et al. G.R. No. 176791.
November 14, 2012
Quieting of title. The issues in a case for quieting of title are fairly simple; the plaintiff need to prove only two
things, namely: (1) the plaintiff or complainant has a legal or an equitable title to or interest in the real property
subject of the action; and (2) that the deed, claim, encumbrance or proceeding claimed to be casting a cloud on
his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy. Stated differently, the plaintiff must show that he has a legal or at least an equitable title over the real
property in dispute, and that some deed or proceeding beclouds its validity or efficacy. Joaquin G. Chung, Jr., et
al. Vs. Jack Daniel Mondragon, et al.; G.R. No. 179754. November 21, 2012.
Quieting of title; legal or equitable title in quieting of title. An action for quieting of title is essentially a common
law remedy grounded on equity. The competent court is tasked to determine the respective rights of the
complainant and other claimants, not only to place things in their proper place, to make the one who has no
rights to said immovable respect and not disturb the other, but also for the benefit of both, so that he who has
the right would see every cloud of doubt over the property dissipated, and he could afterwards without fear
introduce the improvements he may desire, to use, and even to abuse the property as he deems best. But for an
action to quiet title to prosper, two indispensable requisites must concur, namely: (1) the plaintiff or complainant
has a legal or an equitable title to or interest in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or legal efficacy.Dionisio Mananquil, et al. v. Roberto
Moico; G.R. No. 180076. November 20, 2012.
Sales; Art 1544; elements of double sale. A double sale situation, which would call, if necessary, the application
of Art. 1544 of the Civil Code, arises when, as jurisprudence teaches, the following requisites concur: (a) The two
(or more) sales transactions must constitute valid sales; (b) The two (or more) sales transactions must pertain to
exactly the same subject matter; (c) The two (or more) buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests; and (d) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought from the very same seller. Rupeta Cano Vda. De Viray
and Jesus Carlo Gerard Viray v. Spouses Jose Usi and Amelita Usi, G.R.No.192486. November 21,2012.
Sales; contract of sale; purchasers in good faith. A purchaser in good faith is one who buys property without
notice that some other person has a right to or interest in such property and pays its fair price before he has
notice of the adverse claims and interest of another person in the same property. However, where the land sold
is in the possession of a person other than the vendor, the purchaser must be wary and must investigate the
rights of the actual possessor; without such inquiry, the buyer cannot be said to be in good faith and cannot have
any right over the property.Sps. Erosto Santiago and Nelsi Santiago v. Mancer Villamor, et al.; G.R. No. 168499.
November 26,2012.
Succession; will; attestation clause; statement of number of pages; mandatory requirement; substantial
compliance only when evidence aliunde is not necessary.The law is clear that the attestation must state the
number of pages used upon which the will is written. The purpose of the law is to safeguard against possible
interpolation or omission of one or some of its pages and prevent any increase or decrease in the pages. While
Article 809 allows substantial compliance for defects in the form of the attestation clause, Richard likewise failed
in this respect. The statement in the Acknowledgment portion of the subject last will and testament that it
consists of 7 pages including the page on which the ratification and acknowledgment are written cannot be
deemed substantial compliance. The will actually consists of 8 pages including its acknowledgment which
discrepancy cannot be explained by mereexamination of the will itself but through the presentation of
evidence. Richard B. Lopez v. Diana Jeanne Lopez, et al., G.R. No. 189984. November 12, 2012.
Special Laws
Family Code; abandonment not a ground for declaration of nullity.Abandonment was not one of the grounds for
the nullity of marriage under the Family Code. It did not also constitute psychological incapacity, it being instead
a ground for legal separation under Article 55(10) of the Family Code.Republic v. Court of Appeals and Eduardo
de Quintos, Jr., G.R. No. 159594. November 12, 2012.
Land Titles and Deeds; confirmation of imperfect title; requirements. Under Section 14(1) of Presidential Decree
No. 1529 (Property Registration Decree), then, applicants for confirmation of imperfect title must prove the
following, namely: (a) that the land forms part of the disposable and alienable agricultural lands of the public
domain; and (b) that they have been in open, continuous, exclusive, and notorious possession and occupation of
the land under a bona fide claim of ownership either since time immemorial or since June 12, 1945. Republic of
the Philippines v. Arcadio Ivan Santos III and Arcadio Santos, Jr. G.R. No. 160453. November 12, 2012
Land Titles and Deeds; property of public dominion; proof of alienability and disposability; not subject to
acquisitive prescription. The principle that the riparian owner whose land receives the gradual deposits of soil
does not need to make an express act of possession, and that no acts of possession are necessary in that
instance because it is the law itself that pronounces the alluvium to belong to the riparian owner from the time
that the deposit created by the current of the water becomes manifest has no applicability herein. This is simply
because the lot was not formed through accretion. Hence the ownership of the land adjacent to the river bank by
respondents predecessor-in-interest did not translate to possession of the subject lot that would ripen to
acquisitive prescription.
Yet, even conceding, for the sake of argument that respondents possessed the subject lot for more than thirty
years in the character they claimed, they did not thereby acquire the land by prescription or by other means
without any competent proof that the land was already declared as alienable and disposable by the government.
Absent that declaration, the land still belonged to the State as part of its public dominion. Republic of the
Philippines v. Arcadio Ivan Santos III and Arcadio Santos, Jr. G.R. No. 160453. November 12, 2012
Maceda Law; entitlement to cash surrender value; requisites; cancellation of contract; requisites. In this
connection, we deem it necessary to point out that, under the Maceda Law, the actual cancellation of a contract
to sell takes place after 30 days from receipt by the buyer of the notarized notice of cancellation, and upon full
payment of the cash surrender value to the buyer. In other words, before a contract to sell can be validly and
effectively cancelled, the seller has (1) to send a notarized notice of cancellation to the buyer and (2) to refund
the cash surrender value. Until and unless the seller complies with these twin mandatory requirements, the
contract to sell between the parties remains valid and subsisting. Thus, the buyer has the right to continue
occupying the property subject of the contract to sell, and may still reinstate the contract by updating the
account during the grace period and before the actual cancellation of the contract. Communities Cagayan, Inc. v.
Sps. Arsenio (deceased) and Angeles Nanol, et al. G.R. No. 176791. November 14, 2012.

December 2012 Philippine Supreme Court Decisions on Civil Law
Civil Code
Damages; When Applicable. It is essential that for damages to be awarded, a claimant must satisfactorily prove
during the trial that they have a factual basis, and that the defendants acts have a causal connection to them.
Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. They
are, however, not recoverable as a matter of right. They are awarded only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. Albert M. Ching, et al. vs. Felix M. Bantolo, et al.; G.R. No.
177086. December 5, 2012
Sale of Real Property; Must be in a Public Document; requirement only for convenience. Article 1358 of the Civil
Code provides that acts and contracts which have for their object the transmission of real rights over immovable
property or the sale of real property must appear in a public document. If the law requires a document or other
special form, the contracting parties may compel each other to observe that form, once the contract has been
perfected. In Fule v. Court of Appeals, the Court held that Article 1358 of the Civil Code, which requires the
embodiment of certain contracts in a public instrument, is only for convenience, and registration of the
instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third
parties. Non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights
and obligations of the parties thereunder. Lagrimas de Jesus Zamora v. Spouses Beatriz Zamora et al., G.R. No.
162930. December 5, 2012.
Unjust enrichment; reimbursement. It is well-established that equity as a rule will follow the law and will not
permit that to be done indirectly which, because of public policy, cannot be done directly. Surely, a contract that
violates the Constitution and the law is null and void, vests no rights, creates no obligations and produces no
legal effect at all. Corollary thereto, under Article 1412 of the Civil Code, petitioner cannot have the subject
properties deeded to him or allow him to recover the money he had spent for the purchase thereof. The law will
not aid either party to an illegal contract or agreement; it leaves the parties where it finds them. Indeed, one
cannot salvage any rights from an unconstitutional transaction knowingly entered into. Neither can the Court
grant petitioners claim for reimbursement on the basis of unjust enrichment. As held in Frenzel v. Catito, a case
also involving a foreigner seeking monetary reimbursement for money spent on purchase of Philippine land, the
provision on unjust enrichment does not apply if the action is proscribed by the Constitution. Willem Beumer v.
Avelina Amores, G.R. No. 195670. December 3, 2012.
Special Laws
Public Land Act; Five-year Prohibition for Alienation of Homestead Patent; Sale; Void Contract. To reiterate,
Section 118 of the Public Land Act, as amended, reads that [e]xcept in favor of the Government or any of its
branches, units, or institutions, or legally constituted banking corporations, lands acquired under free patent or
homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the
application and for a term of five years from and after the date of issuance of the patent or grant x x x. The
provisions of law are clear and explicit. A contract which purports to alienate, transfer, convey, or encumber any
homestead within the prohibitory period of five years from the date of the issuance of the patent is void from its
execution. In a number of cases, this Court has held that such provision is mandatory.Alejandro Binayug and Ana
Binayug vs. Eugenio Ugaddan, et al. G.R. No. 181623. December 5, 2012.

January 2013 Philippine Supreme Court Decisions on Civil Law
Compromise Agreement; definition and nature; distinction between judicial and extrajudicial.Under Article 2028 of
the Civil Code, a compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. Accordingly, a compromise is either judicial, if the objective is
to put an end to a pending litigation, or extrajudicial, if the objective is to avoid a litigation. As a contract, a
compromise is perfected by mutual consent. However, a judicial compromise, while immediately binding between
the parties upon its execution, is not executory until it is approved by the court and reduced to a judgment. The
validity of a compromise is dependent upon its compliance with the requisites and principles of contracts dictated
by law. Also, the terms and conditions of a compromise must not be contrary to law, morals, good customs,
public policy and public order. Land Bank of the Philippines vs. Heirs of Spouses Jorja Rigor Soriano and Magin
Soriano; G.R. No. 178312. January 30, 2013
Contract; contract of suretyship; definition; nature of liability of surety; suretys liability is direct, primary and
absolute as well as joint and several. A contract of suretyship is defined as an agreement whereby a party, called
the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or
undertaking in favor of a third party, called the obligee. It includes official recognizances, stipulations, bonds or
undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act
No. 2206 (An Act Relative to Recognizances, Stipulations, Bonds and Undertakings, and to Allow Certain
Corporations to be Accepted as Surety Thereon). We have consistently held that a suretys liability is joint and
several, limited to the amount of the bond, and determined strictly by the terms of contract of suretyship in
relation to the principal contract between the obligor and the obligee. It bears stressing, however, that although
the contract of suretyship is secondary to the principal contract, the suretys liability to the obligee is nevertheless
direct, primary, and absolute. The Manila Insurance Company, Inc. vs. Spouses Roberto and Aida Amurao; G.R.
No. 179628. January 16, 2013
Contract; law between the parties; rules on interpretation; easement of right of way; just compensation;
attorneys fees; exception rather than the general rule. Indeed, the rule is settled that a contract constitutes the
law between the parties who are bound by its stipulations which, when couched in clear and plain language,
should be applied according to their literal tenor. Courts cannot supply material stipulations, read into the
contract words it does not contain or, for that matter, read into it any other intention that would contradict its
plain import. Neither can they rewrite contracts because they operate harshly or inequitably as to one of the
parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve
one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not.
Where the right of way easement, as in this case, similarly involves transmission lines which not only endangers
life and limb but restricts as well the owners use of the land traversed thereby, the ruling in Gutierrez remains
doctrinal and should be applied. It has been ruled that the owner should be compensated for the monetary
equivalent of the land if, as here, the easement is intended to perpetually or indefinitely deprive the owner of his
proprietary rights through the imposition of conditions that affect the ordinary use, free enjoyment and disposal
of the property or through restrictions and limitations that are inconsistent with the exercise of the attributes of
ownership, or when the introduction of structures or objects which, by their nature, create or increase the
probability of injury, death upon or destruction of life and property found on the land is necessary. Measured not
by the takers gain but the owners loss, just compensation is defined as the full and fair equivalent of the
property taken from its owner by the expropriator.
The determination of just compensation in eminent domain proceedings is a judicial function and no statute,
decree, or executive order can mandate that its own determination shall prevail over the courts findings. Any
valuation for just compensation laid down in the statutes may serve only as a guiding principle or one of the
factors in determining just compensation, but it may not substitute the courts own judgment as to what amount
should be awarded and how to arrive at such amount. Hence, Section 3A of R.A. No. 6395, as amended (An Act
Revising the Charter of the National Power Corporation), is not binding upon this Court.
For want of a statement of the rationale for the award in the body of the RTCs 14 March 2000 Decision, we are
constrained, however, to disallow the grant of attorneys fees in favor of the Spouses Cabahug in an amount
equivalent to 5% of the just compensation due as well as the legal interest thereon. Considered the exception
rather than the general rule, the award of attorneys fees is not due every time a party prevails in a suit because
of the policy that no premium should be set on the right to litigate. Jesus L. Cabahug and Coronacion M. Cabahug
vs. National Power Corporation; G.R. No. 186069. January 30, 2013
Contract; perfection of contracts; consent; offer and acceptance; contract of sale; consensual in nature. Contracts
are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The requisite acceptance of the offer is expressed in
Article 1319 of the Civil Code which states:
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
In Palattao v. Court of Appeals, this Court held that if the acceptance of the offer was not absolute, such
acceptance is insufficient to generate consent that would perfect a contract. Thus:
Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds.
Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and
terms of payment, a contract is produced. The offer must be certain. To convert the offer into a contract, the
acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a
new proposal, constitutes a counter-offer and is a rejection of the original offer. Consequently, when something is
desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent
because any modification or variation from the terms of the offer annuls the offer.
The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the
minds. Where a party sets a different purchase price than the amount of the offer, such acceptance was qualified
which can be at most considered as a counter-offer; a perfected contract would have arisen only if the other
party had accepted this counteroffer. In Villanueva v. Philippine National Bank this Court further elucidated on the
meaning of unqualified acceptance, as follows:
While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it
assents to those points in the offer which, under the operative facts of each contract, are not only material but
motivating as well. Anything short of that level of mutuality produces not a contract but a mere counter-offer
awaiting acceptance. More particularly on the matter of the consideration of the contract, the offer
and its acceptance must be unanimous both on the rate of the payment and on its term. An
acceptance of an offer which agrees to the rate but varies the term is ineffective. (Emphasis supplied)
A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely
an offer by one party without acceptance of the other, there is no contract. When the contract of sale is not
perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the
parties. Heirs of Fausto C. Ignacio vs. Home Bankers Savings and Trust Co., et al.; G.R. No. 177783. January 23,
2013
Damages; moral damages; requisites; granted when rights of individuals are violated; exemplary damages; actual
damages; nature; in the absence of proof, temperate damages may be awarded; attorneys fees; exception
rather than the general rule. Moral damages are awarded to compensate the claimant for physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation
and similar injury. Jurisprudence has established the following requisites for the award of moral damages: (1)
there is an injury whether physical, mental or psychological, which was clearly sustained by the claimant; (2)
there is a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of
the cases stated in Article 2219 of the Civil Code.
Pertinent to the case at hand, Article 32 of the Civil Code provides for the award of moral damages in cases
where the rights of individuals, including the right against deprivation of property without due process of law, are
violated. In Quisumbing v. Manila Electric Company, this Court treated the immediate disconnection of electricity
without notice as a form of deprivation of property without due process of law, which entitles the subscriber
aggrieved to moral damages. We stressed:
More seriously, the action of the defendant in maliciously disconnecting the electric service constitutes a breach
of public policy. For public utilities, broad as their powers are, have a clear duty to see to it that they do not
violate nor transgress the rights of the consumers. Any act on their part that militates against the ordinary norms
of justice and fair play is considered an infraction that gives rise to an action for damages. Such is the case at
bar.
In addition to moral damages, exemplary damages are imposed by way of example or correction for the public
good. In this case, to serve as an example that before disconnection of electric supply can be effected by a
public utility, the requisites of law must be complied with we sustain the award of exemplary damages to
respondents.
Actual damages are compensation for an injury that will put the injured party in the position where it was before
the injury. They pertain to such injuries or losses that are actually sustained and susceptible of measurement.
Except as provided by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary
loss as is duly proven. Basic is the rule that to recover actual damages, not only must the amount of loss be
capable of proof; it must also be actually proven with a reasonable degree of certainty premised upon competent
proof or the best evidence obtainable.
Actual or compensatory damages cannot be presumed, but must be duly proved with a reasonable degree of
certainty. The award is dependent upon competent proof of the damage suffered and the actual amount thereof.
The award must be based on the evidence presented, not on the personal knowledge of the court; and certainly
not on flimsy, remote, speculative and unsubstantial proof.
Nonetheless, in the absence of competent proof on the amount of actual damages suffered, a party is entitled to
temperate damages. Temperate or moderate damages, which are more than nominal but less than compensatory
damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved with certainty. The amount thereof is usually left to the discretion
of the courts but the same should be reasonable, bearing in mind that temperate damages should be more than
nominal but less than compensatory.
An award of attorneys fees has always been the exception rather than the rule. Attorneys fees are not awarded
every time a party prevails in a suit. The policy of the Court is that no premium should be placed on the right to
litigate. The trial court must make express findings of fact and law that bring the suit within the exception. What
this demands is that factual, legal or equitable justifications for the award must be set forth not only in
the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative and
conjectural. Manila Electric Company (MERALCO) vs. Atty. P.M. Castillo, doing business under the trade name and
style of Permanent Light Manufacturing Enterprises, et al.; G.R. No. 182976. January 14, 2013
Damages; moral damages; when awarded. The Court has awarded moral damages in termination cases when
bad faith, malice or fraud attend the employees dismissal or where the act oppresses labor, or where it was done
in a manner contrary to morals, good customs or public policy. General Milling Corporation vs. Violeta L.
Viajar; G.R. No. 181738. January 30, 2013
Effectivity of laws; generally, no retroactive effect; exception, when law is procedural. As a general rule, laws
shall have no retroactive effect. However, exceptions exist, and one such exception concerns a law that is
procedural in nature. The reason is that a remedial statute or a statute relating to remedies or modes of
procedure does not create new rights or take away vested rights but only operates in furtherance of the remedy
or the confirmation of already existing rights. A statute or rule regulating the procedure of the courts will be
construed as applicable to actions pending and undetermined at the time of its passage. All procedural laws are
retroactive in that sense and to that extent. The retroactive application is not violative of any right of a person
who may feel adversely affected, for, verily, no vested right generally attaches to or arises from procedural
laws. Spouses Augusto G. Dacudao and Ofelia R. Dacudao vs. Secretary of Justice Raul M. Gonzales of the
Department of Justice; G.R. No. 188056. January 8, 2013
Ejectment; unlawful detainer; estoppel against tenants; conclusive presumption; foreclosure of mortgage; title to
land remains in the mortgagor until expiration of redemption period; inchoate character of purchasers
right. [T]he only question that the courts resolve in ejectment proceedings is: who is entitled to the physical
possession of the premises, that is, to the possession de facto and not to the possession de jure. It does not even
matter if a partys title to the property is questionable.
In an unlawful detainer case, the sole issue for resolution is the physical or material possession of the property
involved, independent of any claim of ownership by any of the party litigants. Where the issue of ownership is
raised by any of the parties, the courts may pass upon the same in order to determine who has the right to
possess the property. The adjudication is, however, merely provisional and would not bar or prejudice an action
between the same parties involving title to the property.
[I]n unlawful detainer, one unlawfully withholds possession thereof after the expiration or termination of his right
to hold possession under any contract, express or implied. In such case, the possession was originally lawful but
became unlawful by the expiration or termination of the right to possess; hence, the issue of rightful possession
is decisive for, in such action, the defendant is in actual possession and the plaintiffs cause of action is the
termination of the defendants right to continue in possession.
The conclusive presumption found in Section 2 (b), Rule 131 of the Rules of Court, known asestoppel against
tenants, provides as follows:
Sec. 2. Conclusive presumptions. The following are instances of conclusive presumptions:
(b) The tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation
of landlord and tenant between them. (Emphasis supplied).
It is clear from the abovequoted provision that what a tenant is estopped from denying is the title of his landlord
at the time of the commencement of the landlord-tenant relation. If the title asserted is one that is alleged to
have been acquired subsequent to the commencement of that relation, the presumption will not apply. Hence,
the tenant may show that the landlords title has expired or been conveyed to another or himself; and he is not
estopped to deny a claim for rent, if he has been ousted or evicted by title paramount.
It is settled that during the period of redemption, it cannot be said that the mortgagor is no longer the owner of
the foreclosed property, since the rule up to now is that the right of a purchaser at a foreclosure sale is merely
inchoate until after the period of redemption has expired without the right being exercised. The title to land sold
under mortgage foreclosure remains in the mortgagor or his grantee until the expiration of the redemption period
and conveyance by the masters deed. Indeed, the rule has always been that it is only upon the expiration of the
redemption period, without the judgment debtor having made use of his right of redemption, that the ownership
of the land sold becomes consolidated in the purchaser.
Stated differently, under Act. No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted in
or Annexed to Real Estate Mortgages), the purchaser in a foreclosure sale has, during the redemption period,
only an inchoate right and not the absolute right to the property with all the accompanying incidents. He only
becomes an absolute owner of the property if it is not redeemed during the redemption period. Juanita Ermitao,
represented by her Attorney-in-fact, Isabelo Ermitaovs. Lailanie M. Paglas; G.R. No. 174436. January 23, 2013
Interest; 12% interest rate doctrine in Eastern Shipping Lines vs. CA. [T]he imposition of 12% interest is still
warranted in the case at bar, not from the date of sale on November 9, 1994, as the respondents insist; but from
the finality of the decision up to the satisfaction of judgment in line with the doctrine laid down in Eastern
Shipping Lines, Inc. v. Court of Appeals. [T]he payment of 12% interest from the finality of judgment is in
order pursuant to Eastern Shippings Lines, Inc. where the Court held that:
When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.
When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.
Spouses Ricardo and Elena Golez vs. Spouses Carlos and Amelita Navarro; G.R. No. 192532. January 30, 2013
Legal Compensation; mode of extinguishing obligations; difference with conventional compensation;
requisites. Compensation is a mode of extinguishing to the concurrent amount the obligations of persons who in
their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes
place by operation of law when all the requisites are present, as opposed to conventional compensation which
takes place when the parties agree to compensate their mutual obligations even in the absence of some
requisites. Legal compensation requires the concurrence of the following conditions:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
Mondragon Personal Sales, Inc. vs. Victoriano S. Sola, Jr.; G.R. No. 174882. January 21, 2013
Marriage; essential and formal requisites; marriage license; certification of non-issuance by civil registrar; diligent
search requirement compared to presumption of regularity in performance of official duties; effect of absence of
marriage license. As the marriage of Gloria and Syed was solemnized on January 9, 1993, Executive Order No.
209, or the Family Code of the Philippines, is the applicable law. The pertinent provisions that would apply to this
particular case are Articles 3, 4 and 35(3), which read as follows:
Art. 3. The formal requisites of marriage are:
(1) Authority of the solemnizing officer;
(2) A valid marriage license except in the cases provided for in Chapter 2 of this Title; and
(3) A marriage ceremony which takes place with the appearance of the contracting parties before the solemnizing
officer and their personal declaration that they take each other as husband and wife in the presence of not less
than two witnesses of legal age.
Art. 4. The absence of any of the essential or formal requisites shall render the marriage voidab initio, except as
stated in Article 35(2).
A defect in any of the essential requisites shall render the marriage voidable as provided in Article 45.
An irregularity in the formal requisites shall not affect the validity of the marriage but the party or parties
responsible for the irregularity shall be civilly, criminally and administratively liable.
Art. 35. The following marriages shall be void from the beginning:
x x x x
(3) Those solemnized without a license, except those covered by the preceding Chapter.
Under Sec. 3(m), Rule 131 of the Rules of Court, it is a disputable presumption that an official duty has been
regularly performed, absent contradiction or other evidence to the contrary. We held, The presumption of
regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a duty. No
such affirmative evidence was shown that the Municipal Civil Registrar was lax in performing her duty of checking
the records of their office, thus the presumption must stand. In fact, proof does exist of a diligent search having
been conducted, as Marriage License No. 996967 was indeed located and submitted to the court. The fact that
the names in said license do not correspond to those of Gloria and Syed does not overturn the presumption that
the registrar conducted a diligent search of the records of her office.
In the case of Cario v. Cario, following the case of Republic, it was held that the certification of the Local Civil
Registrar that their office had no record of a marriage license was adequate to prove the non-issuance of said
license. The case of Cario further held that the presumed validity of the marriage of the parties had been
overcome, and that it became the burden of the party alleging a valid marriage to prove that the marriage was
valid, and that the required marriage license had been secured.
Article 4 of the Family Code is clear when it says, The absence of any of the essential or formal requisites shall
render the marriage void ab initio, except as stated in Article 35(2). Article 35(3) of the Family Code also
provides that a marriage solemnized without a license is void from the beginning, except those exempt from the
license requirement under Articles 27 to 34, Chapter 2, Title I of the same Code. Syed Azhar Abbas vs. Gloria Goo
Abbas; G.R. No. 183896. January 30, 2013
Marriage; psychological incapacity; definition; burden of proof; sexual infidelity and abandonment do not
necessarily constitute psychological incapacity; psychological fitness as a wife not equated with professional
relationship; doubts are resolved in favor of marriage. Article 36 of the Family Code governs psychological
incapacity as a ground for declaration of nullity of marriage. It provides that [a] marriage contracted by any
party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital
obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its
solemnization. In interpreting this provision, we have repeatedly stressed that psychological incapacity
contemplates downright incapacity or inability to take cognizance of and to assume the basic marital
obligations; not merely the refusal, neglect or difficulty, much less ill will, on the part of the errant spouse. The
plaintiff bears the burden of proving the juridical antecedence (i.e., the existence at the time of the celebration of
marriage), gravity and incurability of the condition of the errant spouse.
In any event, sexual infidelity and abandonment of the conjugal dwelling, even if true, do not necessarily
constitute psychological incapacity; these are simply grounds for legal separation. To constitute psychological
incapacity, it must be shown that the unfaithfulness and abandonment are manifestations of a disordered
personality that completely prevented the erring spouse from discharging the essential marital obligations.
Aside from the time element involved, a wifes psychological fitness as a spouse cannot simply be equated with
her professional/work relationship; workplace obligations and responsibilities are poles apart from their marital
counterparts. While both spring from human relationship, their relatedness and relevance to one another should
be fully established for them to be compared or to serve as measures of comparison with one another.
Once again, we stress that marriage is an inviolable social institution protected by the State. Any doubt should be
resolved in favor of its existence its existence and continuation and against its dissolution and nullity. It cannot be
dissolved at the whim of the parties nor by transgressions made by one party to the other during the
marriage. Republic of the Philippines vs. Cesar Encelan; G.R. No. 170022. January 9, 2013
Possession; de jure vs. de facto nature of possession; elements of forcible entry. Ownership carries the right of
possession, but the possession contemplated by the concept of ownership is not exactly the same as the
possession in issue in a forcible entry case. Possession in forcible entry suits refers only to possession de facto, or
actual or material possession, and not possession flowing out of ownership; these are different legal concepts for
which the law provides different remedies for recovery of possession. As the court explained in Pajuyo v. Court of
Appeals, and again in the more recent cases of Gonzaga v. Court of Appeals, De Grano v. Lacaba, and Lagazo v.
Soriano, the word possession in forcible entry suits refers to nothing more than prior physical possession or
possession de facto, not possession de jure or legal possession in the sense contemplated in civil law. Title is not
the issue, and its absence is not a ground for the courts to withhold relief from the parties in an ejectment
case. Thus, in a forcible entry case, a party who can prove prior possession can recover such possession even
against the owner himself.
Whatever may be the character of his possession, if he has in his favor prior possession in time, he has the
security that entitles him to remain on the property until a person with a better right lawfully ejects him. He
cannot be ejected by force, violence or terror not even by its owners. For these reasons, an action for forcible
entry is summary in nature aimed only at providing an expeditious means of protecting actual possession.
Ejectment suits are intended to prevent breach of x x x 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 is his. Thus, lest the purpose of
these summary proceedings be defeated, any discussion or issue of ownership is avoided unless it is necessary to
resolve the issue of de facto possession.
Under Section 1, Rule 70 of the Rules of Court, for a forcible entry suit to prosper, the plaintiff must allege and
prove: (1) prior physical possession of the property; and (2) unlawful deprivation of it by the defendant through
force, intimidation, strategy, threat or stealth. As in any civil case, the burden of proof lies with the complainants
(the respondents in this case) who must establish their case by preponderance of evidence. Nenita Quality Foods
Corporation vs. Crisostomo Galabo, et al.;G.R. No. 174191. January 30, 2013
Quasi-contracts; definition; requisites of solutio indebiti. A quasi-contract involves a juridical relation that the law
creates on the basis of certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment. The
Civil Code provides an enumeration of quasi-contracts, but the list is not exhaustive and merely provides
examples.
Article 2154 embodies the concept solutio indebiti which arises when something is delivered through mistake to
a person who has no right to demand it. It obligates the latter to return what has been received through
mistake. Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first, that
something has been unduly delivered through mistake; andsecond, that something was received when there was
no right to demand it. Metropolitan Bank & Trust Company vs. Absolute Management Corporation; G.R. No.
170498. January 9, 2013
Torts; abuse of rights; elements; award of damages. While the Court mindfully notes that damages may be
recoverable due to an abuse of right under Article 21 in conjunction with Article 19 of the Civil Code of the
Philippines, the following elements must, however, obtain: (1) there is a legal right or duty; (2) exercised in bad
faith; and (3) for the sole intent of prejudicing or injuring another. Records reveal that none of these elements
exists in the case at bar and thus, no damages on account of abuse of right may he recovered. Eleazar S. Padillo
vs. Rural Bank of Nabunturan, Inc., et al.; G.R. No. 199338. January 21, 2013
Torts; proximate cause; vicarious liability is not applicable in the absence of employer-employee or principal-
agent relationship; contracts; requisites of stipulation pour autrui; Lease; act of parking a vehicle in a garage
upon payment of a fixed amount, is a lease; obligations of lessor; contracts of adhesion; actual damages must be
proved with reasonable degree of certainty. Proximate cause has been defined as that cause, which, in natural
and continuous sequence, unbroken by any efficient intervening cause, produces the injury or loss, and without
which the result would not have occurred.
Neither will the vicarious liability of an employer under Article 2180 of the Civil Code apply in this case. It is
uncontested that Pea and Gaddi were assigned as security guards by AIB to BSP pursuant to the Guard Service
Contract. Clearly, therefore, no employer-employee relationship existed between BSP and the security guards
assigned in its premises. Consequently, the latters negligence cannot be imputed against BSP but should be
attributed to AIB, the true employer of Pea and Gaddi. In the case of Soliman, Jr. v. Tuazon, the Court
enunciated thus:
It is settled that where the security agency, as here, recruits, hires and assigns the work of its watchmen or
security guards, the agency is the employer of such guards and watchmen. Liability for illegal or harmful acts
committed by the security guards attaches to the employer agency, and not to the clients or customers of such
agency. As a general rule, a client or customer of a security agency has no hand in selecting who among the pool
of security guards or watchmen employed by the agency shall be assigned to it; the duty to observe the diligence
of a good father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded
from the client whose premises or property are instructions or directions to the security guards assigned to it,
does not, by itself, render the client responsible as an employer of the security guards concerned and liable for
their wrongful acts or omissions. Those instructions or directions are ordinarily no more than requests commonly
envisaged in the contract for services entered into with the security agency.
Nor can it be said that a principal-agent relationship existed between BSP and the security guards Pea and
Gaddi as to make the former liable for the latters complained act. Article 1868 of the Civil Code states that [b]y
the contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter. The basis for agency therefore is representation,
which element is absent in the instant case. Records show that BSP merely hired the services of AIB, which, in
turn, assigned security guards, solely for the protection of its properties and premises. Nowhere can it be inferred
in the Guard Service Contract that AIB was appointed as an agent of BSP. Instead, what the parties intended was
a pure principal-client relationship whereby for a consideration, AIB rendered its security services to BSP.
[I]n order that a third person benefited by the second paragraph of Article 1311, referred to as a stipulation pour
autrui, may demand its fulfillment, the following requisites must concur: (1) There is a stipulation in favor of a
third person; (2) The stipulation is a part, not the whole, of the contract; (3) The contracting parties clearly and
deliberately conferred a favor to the third person the favor is not merely incidental; (4) The favor is
unconditional and uncompensated; (5) The third person communicated his or her acceptance of the favor before
its revocation; and (6) The contracting parties do not represent, or are not authorized, by the third party.
It has been held that the act of parking a vehicle in a garage, upon payment of a fixed amount, is a lease. Even
in a majority of American cases, it has been ruled that where a customer simply pays a fee, parks his car in any
available space in the lot, locks the car and takes the key with him, the possession and control of the car,
necessary elements in bailment, do not pass to the parking lot operator, hence, the contractual relationship
between the parties is one of lease.
Article 1654 of the Civil Code provides that [t]he lessor (BSP) is obliged: (1) to deliver the thing which is the
object of the contract in such a condition as to render it fit for the use intended; (2) to make on the same during
the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless
there is a stipulation to the contrary; and (3) to maintain the lessee in the peaceful and adequate enjoyment of
the lease for the entire duration of the contract. In relation thereto, Article 1664 of the same Code states that
[t]he lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the
thing leased; but the lessee shall have a direct action against the intruder.
[C]ontracts of adhesion are not void per se. It is binding as any other ordinary contract and a party who enters
into it is free to reject the stipulations in its entirety. If the terms thereof are accepted without objection, as in
this case, where plaintiffs-appellants have been leasing BSPs parking space for more or less 20 years, then the
contract serves as the law between them.
It is axiomatic that actual damages must be proved with reasonable degree of certainty and a party is entitled
only to such compensation for the pecuniary loss that was duly proven. Thus, absent any competent proof of the
amount of damages sustained, the CA properly deleted the said awards.Spouses Benjamin C. Mamaril and Sonia
P. Mamaril vs. The Boy Scout of the Philippines, et al.; G.R. No. 179382. January 14, 2013
Special laws
Usury Law; CB Circular No. 905; suspension of ceilings for interest rates does not authorize excessive and
unconscionable interest rates; effect of void stipulation of usurious interest. The power of the Central Bank to
effectively suspend the Usury Law pursuant to P.D. No. 1684(Amending Further Act No. 2655, as amended,
Otherwise Known As The Usury Law) has long been recognized and upheld in many cases. As the Court
explained in the landmark case of Medel v. CA, citing several cases, CB Circular No. 905 (Amendment of Books I
to IV of the Manual of Regulations for Banks and Other Financial Intermediaries) did not repeal nor in anyway
amend the Usury Law but simply suspended the latters effectivity; that a [CB] Circular cannot repeal a law,
[for] only a law can repeal another law; that by virtue of CB Circular No. 905, the Usury Law has been rendered
ineffective; and Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender
and borrower may agree upon. [B]y lifting the interest ceiling, CB Circular No. 905 merely upheld the parties
freedom of contract to agree freely on the rate of interest. It cited Article 1306 of the New Civil Code, under
which the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority to raise interest rates to
levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. As held in Castro v.
Tan:
The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily
assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of
property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the
human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one
that may be sustained within the sphere of public or private morals.
Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down for being
contrary to morals, if not against the law. Indeed, under Article 1409 of the Civil Code, these contracts are
deemed inexistent and void ab initio, and therefore cannot be ratified, nor may the right to set up their illegality
as a defense be waived.
Nonetheless, the nullity of the stipulation of usurious interest does not affect the lenders right to recover the
principal of a loan, nor affect the other terms thereof. Thus, in a usurious loan with mortgage, the right to
foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay
the debt due. The debt due is considered as without the stipulated excessive interest, and a legal interest of
12% per annum will be added in place of the excessive interest formerly imposed, following the guidelines laid
down in the landmark case ofEastern Shipping Lines, Inc. v. Court of Appeals, regarding the manner of
computing legal interest.Advocates for Truth in Lending, Inc. vs. Bangko Sentral Monetary Board, Represented by
its Chairman, Governor Armando M. Tatangco, Jr., etc.; G.R. No. 192986. January 15, 2013

February 2013 Philippine Supreme Court Decisions on Civil Law
Civil Code
Common Carrier; requisite before presumption of negligence arises; bill of lading; interpretation thereof; inherent
nature of the subject shipment or its packaging as ground for exempting common carrier from liability; failure to
prove negligence does not entitle claimant for damages. Though it is true that common carriers are presumed to
have been at fault or to have acted negligently if the goods transported by them are lost, destroyed, or
deteriorated, and that the common carrier must prove that it exercised extraordinary diligence in order to
overcome the presumption, the plaintiff must still, before the burden is shifted to the defendant, prove that the
subject shipment suffered actual shortage. This can only be done if the weight of the shipment at the port of
origin and its subsequent weight at the port of arrival have been proven by a preponderance of evidence, and it
can be seen that the former weight is considerably greater than the latter weight, taking into consideration the
exceptions provided in Article 1734 of the Civil Code.
The Berth Term Grain Bill of Lading states that the subject shipment was carried with the qualification Shippers
weight, quantity and quality unknown, meaning that it was transported with the carrier having been oblivious of
the weight, quantity, and quality of the cargo. This interpretation of the quoted qualification is supported
by Wallem Philippines Shipping, Inc. v. Prudential Guarantee & Assurance, Inc., a case involving an analogous
stipulation in a bill of lading, wherein the Supreme Court held that:
Indeed, as the bill of lading indicated that the contract of carriage was under a said to weigh clause, the
shipper is solely responsible for the loading while the carrier is oblivious of the contents of the
shipment. (Emphasis supplied)
Hence, the weight of the shipment as indicated in the bill of lading is not conclusive as to the actual weight of the
goods. Consequently, the respondent must still prove the actual weight of the subject shipment at the time it was
loaded at the port of origin so that a conclusion may be made as to whether there was indeed a shortage for
which petitioner must be liable.
The shortage, if any, may have been due to the inherent nature of the subject shipment or its packaging since
the subject cargo was shipped in bulk and had a moisture content of 12.5%.
Considering that respondent was not able to establish conclusively that the subject shipment weighed 3,300
metric tons at the port of loading, and that it cannot therefore be concluded that there was a shortage for which
petitioner should be responsible; bearing in mind that the subject shipment most likely lost weight in transit due
to the inherent nature of Soya Bean Meal; assuming that the shipment lost weight in transit due to desorption,
the shortage of 199.863 metric tons that respondent alleges is a minimal 6.05% of the weight of the entire
shipment, which is within the allowable 10% allowance for loss; and noting that the respondent was not able to
show negligence on the part of the petitioner and that the weighing methods which respondent relied upon to
establish the shortage it alleges is inaccurate, respondent cannot fairly claim damages against petitioner for the
subject shipments alleged shortage. Asian Terminals, Inc. vs. Simon Enterprises, Inc.;G.R. No. 177116. February
27, 2013
Contract; contract to sell; sellers obligation to deliver the corresponding certificates of title is simultaneous and
reciprocal to the buyers full payment of the purchase price; rescission; effects; requires mutual restitution;
Subdivision and Condominium Buyers Protective Decree (PD 957); intent of PD 957 to protect the buyer against
unscrupulous developers, operators and/or sellers; damages; when moral damages may be awarded; when
exemplary damages may be awarded; propriety of award of attorneys fees. It is settled that in a contract to sell,
the sellers obligation to deliver the corresponding certificates of title is simultaneous and reciprocal to the buyers
full payment of the purchase price. In this relation, Section 25 of PD 957 (Regulating the Sale of Subdivision Lots
and Condominiums, Providing Penalties for Violations Thereof), which regulates the subject transaction, imposes
on the subdivision owner or developer the obligation to cause the transfer of the corresponding certificate of title
to the buyer upon full payment, to wit:
Sec. 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer
upon full payment of the lot or unit. No fee, except those required for the registration of the deed of sale in
the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or
unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the
mortgage or the corresponding portion thereof within six months from such issuance in order that the title over
any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith. (Emphasis supplied.)
The long delay in the performance of GPIs obligation from date of demand on September 16, 2002 was
unreasonable and unjustified. It cannot therefore be denied that GPI substantially breached its contract to sell
with Sps. Fajardo which thereby accords the latter the right to rescind the same pursuant to Article 1191 of the
Code, viz:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.
Rescission does not merely terminate the contract and release the parties from further obligations to each other,
but abrogates the contract from its inception and restores the parties to their original positions as if no contract
has been made. Consequently, mutual restitution, which entails the return of the benefits that each party may
have received as a result of the contract, is thus required.
To be sure, it has been settled that the effects of rescission as provided for in Article 1385 of the Code are
equally applicable to cases under Article 1191, to wit:
x x x Mutual restitution is required in cases involving rescission under Article 1191. This means
bringing the parties back to their original status prior to the inception of the contract. Article 1385 of the Civil
Code provides, thus:
ART. 1385. Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; consequently, it can be carried
out only when he who demands rescission can return whatever he may be obligated to restore.
Neither shall rescission take place when the things which are the object of the contract are legally in the
possession of third persons who did not act in bad faith.
In this case, indemnity for damages may be demanded from the person causing the loss.
The Court has consistently ruled that this provision applies to rescission under Article 1191:
[S]ince Article 1385 of the Civil Code expressly and clearly states that rescission creates the obligation to return
the things which were the object of the contract, together with their fruits, and the price with its interest, the
Court finds no justification to sustain petitioners position that said Article 1385 does not apply to rescission under
Article 1191. x x x (Emphasis supplied; citations omitted.)
As a necessary consequence, considering the propriety of the rescission as earlier discussed, Sps. Fajardo must
be able to recover the price of the property pegged at its prevailing market value consistent with the Courts
pronouncement in Solid Homes, viz:
Indeed, there would be unjust enrichment if respondents Solid Homes, Inc. & Purita Soliven are made to pay only
the purchase price plus interest. It is definite that the value of the subject property already escalated after almost
two decades from the time the petitioner paid for it.Equity and justice dictate that the injured party
should be paid the market value of the lot, otherwise, respondents Solid Homes, Inc. & Purita
Soliven would enrich themselves at the expense of herein lot owners when they sell the same lot at
the present market value. Surely, such a situation should not be countenanced for to do so would be contrary
to reason and therefore, unconscionable. Over time, courts have recognized with almost pedantic adherence that
what is inconvenient or contrary to reason is not allowed in law. (Emphasis supplied.)
On this score, it is apt to mention that it is the intent of PD 957 (Regulating the Sale of Subdivision Lots and
Condominiums, Providing Penalties for Violations Thereof) to protect the buyer against unscrupulous developers,
operators and/or sellers who reneged on their obligations. Thus, in order to achieve this purpose, equity and
justice dictate that the injured party should be afforded full recompense and as such, be allowed to recover the
prevailing market value of the undelivered lot which had been fully paid for.
Furthermore, the Court finds that there is proper legal basis to accord moral and exemplary damages and
attorneys fees, including costs of suit. Verily, GPIs unjustified failure to comply with its obligations as above
discussed caused Sps. Fajardo serious anxiety, mental anguish and sleepless nights, thereby justifying the award
of moral damages. In the same vein, the payment of exemplary damages remains in order so as to prevent
similarly minded subdivision developers to commit the same transgression. And finally, considering that Sps.
Fajardo were constrained to engage the services of counsel to file this suit, the award of attorneys fees must be
likewise sustained. Gotesco Properties, Inc., et al. vs. Sps. Eugenio and Angelina Fajardo; G.R. No. 201167.
February 27, 2013
Contracts; interpretation thereof; intention of the parties; relativity of contracts; credit line; definition; trust
receipt; characteristics; coverage; contract of adhesion; generally not a one-sided document; interest rate;
parties have the right to agree on rate of interest; interest rate must not be excessive, iniquitous, unconscionable
and exorbitant; attorneys fees; award must rest on a factual basis and legal justification stated in the body of the
decision under review. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. In determining their intention, their
contemporaneous and subsequent acts shall be principally considered.
Under the notion of relativity of contracts embodied in Article 1311 of the Civil Code, contracts take effect only
between the parties, their assigns and heirs. Hence, the farmer-participants, not being themselves parties to the
contractual documents signed by Gloria, were not to be thereby liable.
A credit line is really a loan agreement between the parties. According to Rosario Textile Mills Corporation v.
Home Bankers Savings and Trust Co.:
x x x [A] credit line is that amount of money or merchandise which a banker, a merchant, or supplier agrees to
supply to a person on credit and generally agreed to in advance. It is a fixed limit of credit granted by a bank,
retailer, or credit card issuer to a customer, to the full extent of which the latter may avail himself of his dealings
with the former but which he must not exceed and is usually intended to cover a series of transactions in which
case, when the customers line of credit is nearly exhausted, he is expected to reduce his indebtedness by
payments before making any further drawings.
A trust receipt is a security transaction intended to aid in financing importers and retail dealers who do not have
sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to
acquire credit except through utilization, as collateral, of the merchandise imported or purchased. It is a security
agreement that secures an indebtedness and there can be no such thing as security interest that secures no
obligation.
The contract, its label notwithstanding, was not a trust receipt transaction in legal contemplation or within the
purview of the Trust Receipts Law (Presidential Decree No. 115) such that its breach would render Gloria
criminally liable for estafa. Under Section 4 of the Trust Receipts Law, the sale of goods by a person in the
business of selling goods for profit who, at the outset of the transaction, has, as against the buyer, general
property rights in such goods, or who sells the goods to the buyer on credit, retaining title or other interest as
security for the payment of the purchase price, does not constitute a trust receipt transaction and is outside the
purview and coverage of the law.
In Land Bank v. Perez, the Court has elucidated on the coverage of Section 4 (of the Trust Receipts Law), to wit:
There are two obligations in a trust receipt transaction. The first is covered by the provision that refers to money
under the obligation to deliver it (entregarla) to the owner of the merchandise sold. The second is covered by the
provision referring to merchandise received under the obligation to return it (devolverla) to the owner. Thus,
under the Trust Receipts Law, intent to defraud is presumed when (1) the entrustee fails to turn over the
proceeds of the sale of goods covered by the trust receipt to the entruster; or (2) when the entrustee fails to
return the goods under trust, if they are not disposed of in accordance with the terms of the trust receipts.
In all trust receipt transactions, both obligations on the part of the trustee exist in the alternative the return of
the proceeds of the sale or the return or recovery of the goods, whether raw or processed. When both parties
enter into an agreement knowing that the return of the goods subject of the trust receipt is not
possible even without any fault on the part of the trustee, it is not a trust receipt transaction
penalized under Section 13 of P.D. 115; the only obligation actually agreed upon by the parties
would be the return of the proceeds of the sale transaction. This transaction becomes a mere loan,
where the borrower is obligated to pay the bank the amount spent for the purchase of the goods.
(Bold emphasis supplied)
A contract of adhesion prepared by one party, usually a corporation, is generally not a one-sided document as
long as the signatory is not prevented from studying it before signing. At any rate, the social stature of the
parties, the nature of the transaction, and the amount involved were also factors to be considered in determining
whether the aggrieved party exercised adequate care and diligence in studying the contract prior to its
execution. Thus, [u]nless a contracting party cannot read or does not understand the language in which the
agreement is written, he is presumed to know the import of his contract and is bound thereby.
The Usury Law allowed the parties in a loan agreement to exercise discretion on the interest rate to be charged.
Once a judicial demand for payment has been made, however, Article 2212 of the Civil Code should apply, that
is: Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be
silent upon this point.
The Central Bank circulars on interest rates granted to the parties leeway on the rate of interest agreed upon. In
this regard, the Court has said:
The Usury Law had been rendered legally ineffective by Resolution No. 224 dated 3 December 1982 of the
Monetary Board of the Central Bank, and later by Central Bank Circular No. 905(Amendment of Books I to IV of
the Manual of Regulations for Banks and Other Financial Intermediaries) which took effect on 1 January 1983.
These circulars removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The
effect of these circulars is to allow the parties to agree on any interest that may be charged on a loan. The virtual
repeal of the Usury Law is within the range of judicial notice which courts are bound to take into account.
Although interest rates are no longer subject to a ceiling, the lender does not have an unbridled license to impose
increased interest rates. The lender and the borrower should agree on the imposed rate, and such imposed rate
should be in writing.
Accordingly, the interest rate agreed upon should not be excessive, iniquitous, unconscionable and exorbitant;
otherwise, the Court may declare the rate illegal.
The award of attorneys fees must rest on a factual basis and legal justification stated in the body of the decision
under review. Absent the statement of factual basis and legal justification, attorneys fees are to be disallowed.
In Abobon v. Abobon, the Court has expounded on the requirement for factual basis and legal justification in
order to warrant the grant of attorneys fees to the winning party, viz:
As to attorneys fees, the general rule is that such fees cannot be recovered by a successful litigant as part of the
damages to be assessed against the losing party because of the policy that no premium should be placed on the
right to litigate. Indeed, prior to the effectivity of the present Civil Code, such fees could be recovered only when
there was a stipulation to that effect. It was only under the present Civil Code that the right to collect attorneys
fees in the cases mentioned in Article 2208 of the Civil Code came to be recognized. Such fees are now included
in the concept of actual damages.
Even so, whenever attorneys fees are proper in a case, the decision rendered therein should still expressly state
the factual basis and legal justification for granting them. Granting them in the dispositive portion of the
judgment is not enough; a discussion of the factual basis andlegal justification for them must be laid out in the
body of the decision.
Sps. Dela Cruz vs. Planters Products, Inc.; G.R. No. 158649. February 18, 2013
Contract; rescission under Article 1191; recognizes an implied resolutory condition in reciprocal obligations;
effects thereof. The action for the rescission of the deed of sale on the ground that Advanced Foundation did not
comply with its obligation actually seeks one of the alternative remedies available to a contracting party under
Article 1191 of the Civil Code, to wit:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage Law.
Article 1191 of the Civil Code recognizes an implied or tacit resolutory condition in reciprocal obligations. The
condition is imposed by law, and applies even if there is no corresponding agreement thereon between the
parties. The explanation for this is that in reciprocal obligations a party incurs in delay once the other party has
performed his part of the contract; hence, the party who has performed or is ready and willing to perform may
rescind the obligation if the other does not perform, or is not ready and willing to perform.
It is true that the rescission of a contract results in the extinguishment of the obligatory relation as if it was never
created, the extinguishment having a retroactive effect. The rescission is equivalent to invalidating and unmaking
the juridical tie, leaving things in their status before the celebration of the contract. However, until the contract is
rescinded, the juridical tie and the concomitant obligations subsist. Teodoro A. Reyes vs. Ettore Rossi; G.R. No.
159823. February 18, 2013.
Ejectment; distinction between a summary action of ejectment and a plenary action for recovery of possession
and/or ownership of the land; power of the inferior courts to rule on the question of ownership in ejectment
suits; partition; validity of oral partition; actual possession and exercise of dominion over definite portions of the
property are considered strong proof of an oral partition; ownership; tax declarations and tax receipts alone are
not conclusive evidence. It is well to be reminded of the settled distinction between a summary action of
ejectment and a plenary action for recovery of possession and/or ownership of the land. What really distinguishes
an action for unlawful detainer from a possessory action (accion publiciana) and from a reinvindicatory action
(accion reinvindicatoria) is that the first is limited to the question of possession de facto. Unlawful detainer suits
(accion interdictal) together with forcible entry are the two forms of ejectment suit that may be filed to recover
possession of real property. Aside from the summary action of ejectment, accion publiciana or the plenary action
to recover the right of possession and accion reinvindicatoria or the action to recover ownership which also
includes recovery of possession, make up the three kinds of actions to judicially recover possession.
Under Section 3 of Rule 70 of the Rules of Court, the Summary Procedure governs the two forms of ejectment
suit, the purpose being to provide an expeditious means of protecting actual possession or right to possession of
the property. They are not processes to determine the actual title to an estate. If at all, inferior courts are
empowered to rule on the question of ownership raised by the defendant in such suits, only to resolve the issue
of possession and its determination on the ownership issue is not conclusive.
The validity of an oral partition is well-settled in our jurisdiction. In Vda. de Espina v. Abaya, this Court declared
that an oral partition is valid:
Anent the issue of oral partition, We sustain the validity of said partition. An agreement of partition may be
made orally or in writing. An oral agreement for the partition of the property owned in common is valid and
enforceable upon the parties. The Statute of Frauds has no operation in this kind of agreements, for partition is
not a conveyance of property but simply a segregation and designation of the part of the property which belong
to the co-owners.
In Maestrado v. CA, the Supreme Court upheld the partition after it found that it conformed to the alleged oral
partition of the heirs, and that the oral partition was confirmed by the notarized quitclaims executed by the heirs
subsequently. In Maglucot-Aw v. Maglucot, the Supreme Court elaborated on the validity of parol partition:
On general principle, independent and in spite of the statute of frauds, courts of equity have enforce [sic] oral
partition when it has been completely or partly performed.
Regardless of whether a parol partition or agreement to partition is valid and enforceable at law, equity will [in]
proper cases[,] where the parol partition has actually been consummated by the taking of possession in severalty
and the exercise of ownership by the parties of the respective portions set off to each, recognize and enforce
such parol partition and the rights of the parties thereunder. Thus, it has been held or stated in a number of
cases involving an oral partition under which the parties went into possession, exercised acts of ownership, or
otherwise partly performed the partition agreement, that equity will confirm such partition and in a proper case
decree title in accordance with the possession in severalty.
In numerous cases it has been held or stated that parol partition may be sustained on the ground of estoppel of
the parties to assert the rights of a tenant in common as to parts of land divided by parol partition as to which
possession in severalty was taken and acts of individual ownership were exercised. And a court of equity will
recognize the agreement and decree it to be valid and effectual for the purpose of concluding the right of the
parties as between each other to hold their respective parts in severalty.
A parol partition may also be sustained on the ground that the parties thereto have acquiesced in and ratified the
partition by taking possession in severalty, exercising acts of ownership with respect thereto, or otherwise
recognizing the existence of the partition.
A number of cases have specifically applied the doctrine of part performance, or have stated that a part
performance is necessary, to take a parol partition out of the operation of the statute of frauds. It has been held
that where there was a partition in fact between tenants in common, and a part performance, a court of equity
would have regard to and enforce such partition agreed to by the parties.
It is settled that tax declarations and tax receipts alone are not conclusive evidence of ownership. They are
merely indicia of a claim of ownership,61 but when coupled with proof of actual possession of the property, they
can be the basis of claim of ownership through prescription. In the absence of actual, public and adverse
possession, the declaration of the land for tax purposes does not prove ownership. Casilang vs. Casilang-Dizon, et
al.; G.R. No. 180269. February 20, 2013
Mortgage; accommodation mortgage; sanctioned under Article 2085 of the Civil Code; accommodation mortgagor
is ordinarily not the recipient of the loan; reasonable promptness in attacking the validity of a mortgage;
unreasonable delay may delay may amount to ratification. The validity of an accommodation mortgage is allowed
under Article 2085 of the Civil Code which provides that [t]hird persons who are not parties to the principal
obligation may secure the latter by pledging or mortgaging their own property. An accommodation mortgagor,
ordinarily, is not himself a recipient of the loan, otherwise that would be contrary to his designation as such.
It bears stressing that an accommodation mortgagor, ordinarily, is not himself a recipient of the loan, otherwise
that would be contrary to his designation as such. We have held that it is not always necessary that the
accommodation mortgagor be apprised beforehand of the entire amount of the loan nor should it first be
determined before the execution of the Special Power of Attorney in favor of the debtor. This is especially true
when the words used by the parties indicate that the mortgage serves as a continuing security for credit obtained
as well as future loan availments.
Mortgagors desiring to attack a mortgage as invalid should act with reasonable promptness, and unreasonable
delay may amount to ratification. Spouses Ramos vs. Raul Obispo and Far East Bank and Trust Co.; G.R. No.
193804. February 27, 2013
Tort; Doctrine of Last Clear Chance; definition and characteristics; contributory negligence; definition; effect;
apportionment of damages between parties who are both negligent involving banking transactions; highest
degree of diligence is required for banks. The doctrine of last clear chance, stated broadly, is that the negligence
of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the
defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the
plaintiff notwithstanding the plaintiffs negligence. The doctrine necessarily assumes negligence on the part of the
defendant and contributory negligence on the part of the plaintiff, and does not apply except upon that
assumption. Stated differently, the antecedent negligence of the plaintiff does not preclude him from recovering
damages caused by the supervening negligence of the defendant, who had the last fair chance to prevent the
impending harm by the exercise of due diligence. Moreover, in situations where the doctrine has been applied, it
was defendants failure to exercise such ordinary care, having the last clear chance to avoid loss or injury, which
was the proximate cause of the occurrence of such loss or injury.
A collecting bank is guilty of contributory negligence when it accepted for deposit a post-dated check
notwithstanding that said check had been cleared by the drawee bank which failed to return the check within the
24-hour reglementary period.
In the cited case of Philippine Bank of Commerce v. Court of Appeals, while the Court found petitioner bank as
the culpable party under the doctrine of last clear chance since it had, thru its teller, the last opportunity to avert
the injury incurred
by its client simply by faithfully observing its own validation procedure, it nevertheless ruled that the plaintiff
depositor (private respondent) must share in the loss on account of its contributory negligence. Thus:
The foregoing notwithstanding, it cannot be denied that, indeed, private respondent was likewise negligent in not
checking its monthly statements of account. Had it done so, the company would have been alerted to the series
of frauds being committed against RMC by its secretary. The damage would definitely not have ballooned to such
an amount if only RMC, particularly Romeo Lipana, had exercised even a little vigilance in their financial
affairs. This omission by RMC amounts to contributory negligence which shall mitigate the damages
that may be awarded to the private respondent under Article 2179 of the New Civil Code, to wit:
x x x. When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury
being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the
damages to be awarded.
In view of this, we believe that the demands of substantial justice are satisfied by allocating the damage on a
60-40 ratio. Thus, 40% of the damage awarded by the respondent appellate court, except the award of
P25,000.00 attorneys fees, shall be borne by private respondent RMC; only the balance of 60% needs to be paid
by the petitioners. The award of attorneys fees shall be borne exclusively by the petitioners. (Italics in the
original; emphasis supplied)
Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he
has suffered, which falls below the standard to which he is required to conform for his own protection.
Admittedly, petitioners acceptance of the subject check for deposit despite the one year postdate written on its
face was a clear violation of established banking regulations and practices. In such instances, payment should be
refused by the drawee bank and returned through the PCHC within the 24-hour reglementary period. As aptly
observed by the CA, petitioners failure to comply with this basic policy regarding post-dated checks was a telling
sign of its lack of due diligence in handling checks coursed through it.
It bears stressing that the diligence required of banks is more than that of a Roman paterfamiliasor a good
father of a family. The highest degree of diligence is expected, considering the nature of the banking business
that is imbued with public interest. While it is true that respondents liability for its negligent clearing of the check
is greater, petitioner cannot take lightly its own violation of the long-standing rule against encashment of post-
dated checks and the injurious consequences of allowing such checks into the clearing system. Allied Banking
Corporation vs. Bank of the Philippine Islands; G.R. No. 188363. February 27, 2013
Special Laws
Torrens system; curtain principle; right to rely on the Torrens certificate of title; exception, when the party has
actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry;
purchaser in good faith; definition. Under the Torrens system of land registration, the registered owner of realty
cannot be deprived of her property through fraud, unless a transferee acquires the property as an innocent
purchaser for value. A transferee who acquires the property covered by a reissued owners copy of the certificate
of title without taking the ordinary precautions of honest persons in doing business and examining the records of
the proper Registry of Deeds, or who fails to pay the full market value of the property is not considered an
innocent purchaser for value.
Under the Torrens system of land registration, the State is required to maintain a register of landholdings that
guarantees indefeasible title to those included in the register. The system has been instituted to combat the
problems of uncertainty, complexity and cost associated with old title systems that depended upon proof of an
unbroken chain of title back to a good root of title. The State issues an official certificate of title to attest to the
fact that the person named is the owner of the property described therein, subject to such liens and
encumbrances as thereon noted or what the law warrants or reserves.
One of the guiding tenets underlying the Torrens system is the curtain principle, in that one does not need to go
behind the certificate of title because it contains all the information about the title of its holder. This principle
dispenses with the need of proving ownership by long complicated documents kept by the registered owner,
which may be necessary under a private conveyancing system, and assures that all the necessary information
regarding ownership is on the certificate of title. Consequently, the avowed objective of the Torrens system is to
obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate and,
as a rule, to dispense with the necessity of inquiring further; on the part of the registered owner, the system
gives him complete peace of mind that he would be secured in his ownership as long as he has not voluntarily
disposed of any right over the covered land.
The Philippines adopted the Torrens system through Act No. 496, also known as the Land Registration Act, which
was approved on November 6, 1902 and took effect on February 1, 1903. In this jurisdiction, therefore, a person
dealing in registered land has the right to rely on the Torrens certificate of title and to dispense with the need of
inquiring further, except when the party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry.
Good faith is the honest intention to abstain from taking unconscientious advantage of another. It means the
freedom from knowledge and circumstances which ought to put a person on inquiry. Given this notion of good
faith, therefore, a purchaser in good faith is one who buys the property of another without notice that some other
person has a right to, or interest in, such property and pays full and fair price for the same. Spouses Cusi vs. Lilia
V. De Vera, et al.; G.R. Nos. 195825/195871. February 27, 2013
Torrens System; right to rely on Torrens title. [It is a] settled principle that one who deals with property
registered under the Torrens System need not go beyond the same, but only has to rely on the title. Moreover,
since the subject property was already covered by a Torrens title at the time that respondents bought the same,
the law does not require them to go beyond what appears on the face of the title. The lot has, thus, passed to
respondents, who are presumed innocent purchasers for value, in the absence of any allegation to the
contrary. Mercado, et al. vs. Sps. Espina;G.R. No. 173987. February 25, 2013

March 2013 Philippine Supreme Court Decisions on Civil Law
Contracts; contract of sale; perfection; essential elements; stages. A contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract and upon the price. Thus, for a
contract of sale to be valid, all of the following essential elements must concur: a) consent or meeting of the
minds; b) determinate subject matter; and c) price certain in money or its equivalent.
As for the price, fixing it can never be left to the decision of only one of the contracting parties. But a price fixed
by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
As regards consent, when there is merely an offer by one party without acceptance of the other, there is no
contract. The decision to accept a bidders proposal must be communicated to the bidder. However, a binding
contract may exist between the parties whose minds have met, although they did not affix their signatures to any
written document, as acceptance may be expressed or implied. It can be inferred from the contemporaneous and
subsequent acts of the contracting parties. Thus, the Supreme Court has held:
x x x The rule is that except where a formal acceptance is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it
may be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the
accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus,
acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of
sale.
Contracts undergo three stages: (a) negotiation that begins from the time the prospective contracting parties
indicate interest in the contract and ends at the moment of their agreement; (b) perfection or birth that which
takes place when the parties agree upon all the essential elements of the contract; and (c) consummation that
occurs when the parties fulfill or perform the terms agreed upon, culminating in the extinguishment
thereof. Robern Development Corporation, et al. vs. Peoples Landless Association represented by Florida Ramos,
et al.; G.R. No. 173622. March 11, 2013
Contracts; obligatory nature of contracts; interpretation; Joint Affidavit of Undertaking may be a contract in itself;
due execution; default, elements; judicial demand; computation of interest.Contracts are obligatory no matter
what their forms may be, whenever the essential requisites for their validity are present. In determining whether
a document is an affidavit or a contract, the Court looks beyond the title of the document, since the denomination
or title given by the parties in their document is not conclusive of the nature of its contents. In the construction
or interpretation of an instrument, the intention of the parties is primordial and is to be pursued. If the terms of
the document are clear and leave no doubt on the intention of the contracting parties, the literal meaning of its
stipulations shall control. If the words appear to be contrary to the parties evident intention, the latter shall
prevail over the former.
A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that it contains
stipulations characteristic of a contract. The Joint Affidavit of Undertaking contained a stipulation where
Cruz and Leonardo promised to replace the damaged car of Gruspe, 20 days from October 25, 1999 or up to
November 15, 1999, of the same model and of at least the same quality. In the event that they cannot replace
the car within the same period, they would pay the cost of Gruspes car in the total amount of P350,000, with
interest at 12% per month for any delayed payment after November 15, 1999, until fully paid.
An allegation of vitiated consent must be proven by preponderance of evidence. Although the
undertaking in the affidavit appears to be onerous and lopsided, this does not necessarily prove the alleged
vitiation of consent. They, in fact, admitted the genuineness and due execution of the Joint Affidavit and
Undertaking when they said that they signed the same to secure possession of their vehicle.
In order that the debtor may be in default, it is necessary that the following requisites be present: (1) that the
obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance judicially and extrajudicially. Default generally begins from the moment the
creditor demands the performance of the obligation. Rodolfo G. Cruz and Esperanza Ibias vs. Atty. Delfin
Gruspe; G.R. No. 191431. March 13, 2013
Contracts; parties may establish any agreement, term, and condition they may deem advisable, provided they are
not contrary to law, morals or public policy; if the language used is clear, there is no need for construction;
mortgage; courts duty, merely to interpret the intent of the parties; even if not expressly so stated, the
mortgage extends to the improvements; machineries and equipment are considered real properties. As held
in Gateway Electronics Corp. v. Land Bank of the Philippines,the rule in this jurisdiction is that the contracting
parties may establish any agreement, term, and condition they may deem advisable, provided they are not
contrary to law, morals or public policy. The right to enter into lawful contracts constitutes one of the liberties
guaranteed by the Constitution.
It has been explained by the Supreme Court in Norton Resources and Development Corporation v. All Asia Bank
Corporation in reiteration of the ruling in Benguet Corporation v. Cabildo that:
A courts purpose in examining a contract is to interpret the intent of the contracting parties, as objectively
manifested by them. The process of interpreting a contract requires the court to make a preliminary inquiry as to
whether the contract before it is ambiguous. A contract provision is ambiguous if it is susceptible of two
reasonable alternative interpretations. Where the written terms of the contract are not ambiguous and can only
be read one way, the court will interpret the contract as a matter of law.
Then till now the pronouncement has been that if the language used is as clear as day and readily
understandable by any ordinary reader, there is no need for construction.
Law and jurisprudence provide and guide that even if not expressly so stated, the mortgage extends to the
improvements.
Article 2127 of the Civil Code provides:
Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or
income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing
to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with
the declarations, amplifications and limitations established by law, whether the estate remains in the possession
of the mortgagor, or it passes into the hands of a third person.
In the early case of Bischoff v. Pomar and Cia. General de Tabacos, the Court ruled that even if the machinery in
question was not included in the mortgage expressly, Article 111 of the [old] Mortgage Law provides that chattels
permanently located in a building, either useful or ornamental, or for the service of some industry even though
they were placed there after the creation of the mortgage shall be considered as mortgaged with the estate,
provided they belong to the owner of said estate.
The real estate mortgage over the machineries and equipment is even in full accord with the classification of such
properties by the Civil Code of the Philippines as immovable property. Thus:
Article 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
xxxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of
the said industry or works.
Star Two (SPV-AMC), Inc. vs. Paper City Corporation of the Philippines; G.R. No. 169211. March 6, 2013
Property; encroachment on property; builder in bad faith; options available to owner of the land; rules in the
determining the reckoning period for valuing the property. Under Article 448 pertaining to encroachments in good
faith, as well as Article 450 referring to encroachments in bad faith, the owner of the land encroached upon
petitioner herein has the option to require respondent builder to pay the price of the land.
Although these provisions of the Civil Code do not explicitly state the reckoning period for valuing the
property, Ballatan v. Court of Appeals already specifies that in the event that the seller elects to sell the lot, the
price must be fixed at the prevailing market value at the time of payment.
More recently, Tuatis v. Spouses Escol illustrates that the present or current fair value of the land is to be
reckoned at the time that the landowner elected the choice, and not at the time that the property was purchased.
In Sarmiento v. Agana, we reckoned the valuation of the property at the time that the real owner of the land
asked the builder to vacate the property encroached upon. Moreover, the oft-cited case Depra v. Dumlao likewise
ordered the courts of origin to compute the current fair price of the land in cases of encroachment on real
properties. Vda. de Roxas v. Our Ladys Foundation, Inc.; G.R. No. 182378. March 6, 2013
Special Laws
Agrarian Reform; land ownership; mere issuance of the Certificate of Land Transfer does not vest full ownership
on the holder and does not automatically operate to divest the land owner of all of his rights over the
landholding; requirements to effect a transfer of ownership; agricultural lands; any sale or disposition of
agricultural lands made after the effectivity of R.A. No. 6657 which has been found contrary to its provisions shall
be null and void; procedures for the reallocation of farmholdings covered by P.D. No. 27 by reason of
abandonment or the refusal to become a beneficiary; requisites of abandonment. The mere issuance of the
Certificate of Land Transfer (CLT) does not vest full ownership on the holder and does not automatically
operate to divest the landowner of all of his rights over the landholding. The holder must first comply with certain
mandatory requirements to effect a transfer of ownership. Under R.A. No. 6657 (Comprehensive Agrarian Reform
Law of 1988) in relation with P.D. No. 27 (Decreeing the Emancipation of Tenants from the Bondage of the Soil,
Transferring to Them the Ownership of the Land they Till and Providing the Instruments and Mechanism
Therefor) and E.O. No. 228 (Declaring Full Land Ownership to Qualified Farmer Beneficiaries Covered by P.D. No.
27: Determining the Value of Remaining Unvalued Rice and Corn Lands Subject to P.D. No. 27; and Providing for
the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner), the title to the
landholding shall be issued to the tenant-farmer only upon the satisfaction of the following requirements: (1)
payment in full of the just compensation for the landholding, duly determined by final judgment of the proper
court; (2) possession of the qualifications of a farmer-beneficiary under the law; (3) full-pledged membership of
the farmer-beneficiary in a duly recognized farmers cooperative; and (4) actual cultivation of the landholding. We
explained in several cases that while a tenant with a CLT is deemed the owner of a landholding, the CLT does
not vest full ownership on him. The tenant-holder of a CLT merely possesses an inchoate right that is subject
to compliance with certain legal preconditions for perfecting title and acquiring full ownership.
Pursuant to R.A. No. 6657 (Comprehensive Agrarian Reform Law of 1988) in relation with P.D. No. 27(Decreeing
the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them the Ownership of the Land they
Till and Providing the Instruments and Mechanism Therefor), any sale or disposition of agricultural lands made
after the effectivity of R.A. No. 6657 which has been found contrary to its provisions shall be null and void. The
proper procedure for the reallocation of the disputed lot must be followed to ensure that there indeed
exist grounds for the cancellation of the CLT or for forfeiture of rights under it, and that the lot is subsequently
awarded to a qualified farmer-tenant pursuant to the law.
Under Ministry Memorandum Circular No. 04-83 (Supplemental Guidelines to Govern Transfer Action of Areas
Covered by P.D. 27 by Reason of Abandonment, Waiver of Rights and Illegal Transactions) in relation with
Ministry Memorandum Circular No. 08-80 (Guidelines in the Disposition and Reallocation of Farmholdings of
Tenant-Farmers who Refuses to Become Beneficiaries of P.D. No. 27) and Ministry Memorandum Circular No. 07-
79 (Rules and Regulations Governing Transactions Involving Lands Covered by P.D. No. 27), the following
procedures must be observed for the reallocation of farmholdings covered by P.D. No. 27 by reason of
abandonment or the refusal to become a beneficiary, among others:
I. Investigation Procedure
1. The conduct of verification by the concerned Agrarian Reform Team Leader (ARTL) to ascertain the reasons
for the refusal. All efforts shall be exerted to convince the tenant-farmer to become a beneficiary and to comply
with his obligations as such beneficiary.
2. If the tenant-farmer still refuses, the ARTL shall determine the substitute. The ARTL shall first consider the
immediate member of the tenant-farmers family who assisted in the cultivation of the land, and who is willing to
be substituted to all the rights and obligations of the tenant-farmer. In the absence or refusal of such member,
the ARTL shall choose one from a list of at least three qualified tenants recommended by the President of the
Samahang Nayon or, in default, any organized farmer association, subject to the award limits under P.D. No. 27.
3. Formal notice of the report shall be given to the concerned farmer-beneficiary together with all the pertinent
documents and evidences.
4. The ARTL shall submit the records of the case with his report and recommendation to the District
Officer within 5 days from the ARTLs determination of the substitute. The District Officer shall likewise submit
his report and recommendation to the Regional Director and the latter to the Bureau of Agrarian Legal Assistance,
for review, evaluation, and preparation of the final draft decision for final approval.
5. The decision shall declare the cancellation of the CLT if issued.
In the event of the farmer-beneficiarys death, the transfer or reallocation of his landholding to his heirs shall be
governed by Ministry Memorandum Circular No. 19-78 (Rules and Regulations In Case of Death of a Tenant-
Beneficiary).
For abandonment to exist, the following requisites must concur: (1) a clear intent to abandon; and (2) an
external act showing such intent. The term is defined as the willful failure of the ARB, together with his farm
household, to cultivate, till, or develop his land to produce any crop, or to use the land for any specific economic
purpose continuously for a period of two calendar years. It entails, among others, the relinquishment of
possession of the lot for at least two (2) calendar years and the failure to pay the amortization for the same
period. What is critical in abandonment is intent which must be shown to be deliberate and clear. The intent must
be established by the factual failure to work on the landholding absent any valid reason as well as a clear intent,
which is shown as a separate element. Heirs of Lorenzo Buensuceso vs. Perez; G.R. No. 173926. March 6, 2013
General Banking Law and Act No. 3135; right of redemption; period; juridical entities; General Banking Law of
2000 merely modified the time for the exercise of such right by reducing the one-year period originally provided
in Act No. 3135; right of redemption, being statutory, it must be exercised in the manner prescribed by the
statute, and within the prescribed time limit to make it effective. The law governing cases of extrajudicial
foreclosure of mortgage is Act No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted
In or Annexed to Real-Estate Mortgages), as amended by Act No. 4118 (An Act to Amend Act No. 3135). Section
6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the
debtor, his successors-in interest or any judicial creditor or judgment creditor of said debtor, or any person
having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-
six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.
The one-year period of redemption is counted from the date of the registration of the certificate of sale. In this
case, the parties provided in their real estate mortgage contract that upon petitioners default and the latters
entire loan obligation becoming due, respondent may immediately foreclose the mortgage judicially in accordance
with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended (An Act to Regulate the
Sale of Property Under Special Powers Inserted In or Annexed to Real-Estate Mortgages).
However, Section 47 of R.A. No. 8791 otherwise known as The General Banking Law of 2000 which took effect
on June 13, 2000, amended Act No. 3135. Said provision reads:
SECTION 47. Foreclosure of Real Estate Mortgage. In the event of foreclosure, whether judicially or
extrajudicially, of any mortgage on real estate which is security for any loan or other credit accommodation
granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of the real estate, to redeem the property by paying
the amount due under the mortgage deed, with interest thereon at the rate specified in the mortgage, and all the
costs and expenses incurred by the bank or institution from the sale and custody of said property less the income
derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extrajudicial
foreclosure shall have the right to enter upon and take possession of such property immediately after the date of
the confirmation of the auction sale and administer the same in accordance with law. Any petition in court to
enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due
course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will
pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding.
Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial
foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after,
the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no
case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of property
that has been sold in a foreclosure saleprior to the effectivity of this Act shall retain their redemption rights until
their expiration. (Emphasis supplied.)
Under the new law, an exception is thus made in the case of juridical persons which are allowed to exercise the
right of redemption only until, but not after, the registration of the certificate of foreclosure sale and in no case
more than three (3) months after foreclosure, whichever comes first.
Section 47 (of the General Banking Law of 2000) did not divest juridical persons of the right to redeem their
foreclosed properties but only modified the time for the exercise of such right by reducing the one-year period
originally provided in Act No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted In or
Annexed to Real-Estate Mortgages). The new redemption period commences from the date of foreclosure sale,
and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier.
There is likewise no retroactive application of the new redemption period because Section 47 (of the General
Banking Law of 2000) exempts from its operation those properties foreclosed prior to its effectivity and whose
owners shall retain their redemption rights under Act No. 3135 (An Act to Regulate the Sale of Property Under
Special Powers Inserted In or Annexed to Real-Estate Mortgages).
The right of redemption being statutory, it must be exercised in the manner prescribed by the statute, and within
the prescribed time limit, to make it effective. Furthermore, as with other individual rights to contract and to
property, it has to give way to police power exercised for public welfare. Goldenway Merchandising Corporation
vs. Equitable PCI Bank; G.R. No. 195540. March 13, 2013

April 2013 Philippine Supreme Court Decisions on Civil Law
Contract; Rescission; effect. Rescission entails a mutual restitution of benefits received. An injured party who has
chosen rescission is also entitled to the payment of damages. Sandoval Shipyards, Inc. v. Philippine Merchant
Marine Academy (PMMA); G.R. No. 188633. April 10, 2013
Obligation; Extinguishment of obligations; consignation; when tender of payment not necessary; judicial in
character; difference between consignation and tender of payment. Under Article 1256 of the Civil Code, the
debtor shall be released from responsibility by the consignation of the thing or sum due, without need of prior
tender of payment, when the creditor is absent or unknown, or when he is incapacitated to receive the payment
at the time it is due, or when two or more persons claim the same right to collect, or when the title to the
obligation has been lost.
Consignation is necessarily judicial. Article 1258 of the Civil Code specifically provides that consignation shall be
made by depositing the thing or things due at the disposal of judicialauthority. The said provision clearly
precludes consignation in venues other than the courts.
Elsewhere, what may be made is a valid tender of payment, but not consignation. The two, however, are to be
distinguished.
Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an
act preparatory to the consignation, which is the principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while
consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. (8 Manresa 325).
Sps. Cacayorin v. Armed Forces and Police Mutual Benefit Association, Inc.; G.R. No. 171298. April 15, 2013
Property; Ejectment; only issue is who is entitled to physical possession; forcible entry; prior physical possession
is vital; judgment conclusive between the parties and their successors-in-interest; effects if prevailing party is a
usufructuary; usufruct; death of usufructuary extinguishes usufruct. Ejectment cases forcible entry and unlawful
detainer are summary proceedings designed to provide expeditious means to protect actual possession or the
right to possession of the property involved. The only question that the courts resolve in ejectment proceedings
is: who is entitled to the physical possession of the premises, that is, to the possession de facto and not to the
possession de jure. It does not even matter if a partys title to the property is questionable. Thus, an ejectment
case will not necessarily be decided in favor of one who has presented proof of ownership of the subject
property.
Indeed, possession in ejectment cases means nothing more than actual physical possession, not legal
possession in the sense contemplated in civil law. In a forcible entry case, prior physical possession is the
primary consideration[.] A party who can prove prior possession can recover such possession even against the
owner himself. Whatever may be the character of his possession, if he has in his favor prior possession in time,
he has the security that entitles him to remain on the property until a person with a better right lawfully ejects
him. [T]he party in peaceable, quiet possession shall not be thrown out by a strong hand, violence, or terror.
The judgment in an ejectment case is conclusive between the parties and their successors-in interest by title
subsequent to the commencement of the action; hence, it is enforceable by or against the heirs of the deceased.
This judgment entitles the winning party to: (a) the restitution of the premises, (b) the sum justly due as arrears
of rent or as reasonable compensation for the use and occupation of the premises, and (c) attorneys fees and
costs.
[T]he right to the usufruct is now rendered moot by the death of Wilfredo since death extinguishes a usufruct
under Article 603(1) of the Civil Code. This development deprives the heirs of the usufructuary the right to retain
or to reacquire possession of the property even if the ejectment judgment directs its restitution.
Thus, what actually survives under the circumstances is the award of damages, by way of compensation. Rivera-
Calingasan v. Rivera; G.R. No. 171555. April 17, 2013
Property; Public property; public plaza forms part of the public dominion; cannot be the object of appropriation,
lease, any other contractual undertaking; void contracts. [Public plaza is for] public use and thereby, forming
part of the public dominion. Accordingly, it cannot be the object of appropriation either by the State or by private
persons. Nor can it be the subject of lease or any other contractual undertaking. In Villanueva v. Castaeda, Jr.,
citing Espiritu v. Municipal Council of Pozorrubio, the Court pronounced that:
x x x Town plazas are properties of public dominion, to be devoted to public use and to be made available to the
public in general. They are outside the commerce of man and cannot be disposed of or even leased by the
municipality to private parties.
In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is contrary to law,
morals, good customs, public order or public policy is considered void and as such, creates no rights or
obligations or any juridical relations. Land Bank of the Philippines v. Cacayurin; G.R. No. 191667. April 17, 2013
Special Laws
Foreclosure of Mortgage pursuant to P.D. No. 385; when its purpose is served; when hearing is necessary before
issuance of writ of possession; foreclosure of mortgage under Section 33, Rule 39 of the Rules on Civil Procedure;
when issuance of writ of possession is not ministerial. While the Supreme Court had already declared in Philippine
National Bank v. Adil that once the property of a debtor is foreclosed and sold to a GFI, it would be mandatory for
the court to place the GFI in the possession and control of the propertypursuant to Section 4 of P.D. No.
385 (Requiring Government Financial Institutions to Foreclose Mandatorily All Loans with Arrearages, Including
Interest and Charges Amounting to at Least Twenty (20%) of the Total Outstanding Obligation) this rule
should not be construed as absolute or without exception.
The evident purpose underlying P.D. 385 is sufficiently served by allowing foreclosure proceedings initiated by
GFIs to continue until a judgment therein becomes final and executory, without a restraining order, temporary or
permanent injunction against it being issued. But if a parcel of land is occupied by a party other than the
judgment debtor, the proper procedure is for the court to order a hearing to determine the nature of said adverse
possession before it issues a writ of possession. This is because a third party, who is not privy to the debtor, is
protected by the law. Such third party may be ejected from the premises only after he has been given an
opportunity to be heard, to comply with the time honored principle of due process.
In the same vein, under Section 33 of Rule 39 of the Rules on Civil Procedure, the possession of a mortgaged
property may be awarded to a purchaser in the extrajudicial foreclosure, unless a third party is actually holding
the property adversely vis--vis the judgment debtor.
[T]he obligation of a court to issue a writ of possession in favor of the purchaser in an extrajudicial foreclosure
sale ceases to be ministerial, once it appears that there is a third party who is in possession of the property and is
claiming a right adverse to that of the debtor/mortgagor. We explained in Philippine National Bank v. Austria that
the foregoing doctrinal pronouncements are not without support in substantive law, to wit:
x x x. Notably, the Civil Code protects the actual possessor of a property, to wit:
Art. 433. Actual possession under claim of ownership raises a disputable presumption of ownership. The true
owner must resort to judicial process for the recovery of the property.
Under the aforequoted provision, one who claims to be the owner of a property possessed by another must bring
the appropriate judicial action for its physical recovery. The term judicial process could mean no less than an
ejectment suit or reivindicatory action, in which the ownership claims of the contending parties may be properly
heard and adjudicated.
Royal Savings Bank v. Asia, et al.; G.R. No. 183658. April 10, 2013
Family Code; Declaration of Presumptive Death; judgment is immediately final and executory; proper remedy is a
special civil action for certiorari filed in the Court of Appeals; decision of Court of Appeals reviewable by the
Supreme Court via certiorari under Rule 45. [It is improper to avail of] an ordinary appeal as a vehicle for
questioning a trial courts decision in a summary proceeding for the declaration of presumptive death under
Article 41 of the Family Code.
As explained in Republic v. Tango, the remedy of a losing party in a summary proceeding is not an ordinary
appeal, but a petition for certiorari, to wit:
By express provision of law, the judgment of the court in a summary proceeding shall be immediately final and
executory. As a matter of course, it follows that no appeal can be had of the trial courts judgment in a summary
proceeding for the declaration of presumptive death of an absent spouse under Article 41 of the Family Code. It
goes without saying, however, that an aggrieved party may file a petition for certiorari to question abuse of
discretion amounting to lack of jurisdiction. Such petition should be filed in the Court of Appeals in accordance
with the Doctrine of Hierarchy of Courts. To be sure, even if the Courts original jurisdiction to issue a writ
of certiorari is concurrent with the RTCs and the Court of Appeals in certain cases, such concurrence does not
sanction an unrestricted freedom of choice of court forum. From the decision of the Court of Appeals, the losing
party may then file a petition for review oncertiorari under Rule 45 of the Rules of Court with the Supreme Court.
This is because the errors which the court may commit in the exercise of jurisdiction are merely errors of
judgment which are the proper subject of an appeal.
When the OSG filed its notice of appeal under Rule 42, it availed itself of the wrong remedy. As a result, the
running of the period for filing of a Petition for Certiorari continued to run and was not tolled. Upon lapse of that
period, the Decision of the RTC could no longer be questioned. Republic of the Philippines v. Narceda; G.R. No.
182760. April 10, 2013
The Subdivision and Condominium Buyers Protective Decree; contract to sell; validity is not affected by lack of
certificate of registration of subdivision developer and failure to register the contract before the Register of
Deeds; Maceda Law. In Spouses Co Chien v. Sta. Lucia Realty and Development Corporation, Inc. this Court has
already ruled that the lack of a certificate of registration and a license to sell on the part of a subdivision
developer does not result to the nullification or invalidation of the contract to sell it entered into with a buyer. The
contract to sell remains valid and subsisting. In said case, the Court upheld the validity of the contract to sell
notwithstanding violations by the developer of the provisions of PD 957. We held that nothing in PD 957 provides
for the nullity of a contract validly entered into in cases of violation of any of its provisions such as the lack of a
license to sell.
Moreover, Flora claims that the contract she entered into with Moldex is void because of the latters failure to
register the contract to sell/document of conveyance with the Register of Deeds, in violation of Section 1730 of
PD 957. However, just like in Section 5 which did not penalize the lack of a license to sell with the nullification of
the contract, Section 17 similarly did not mention that the developers or Moldexs failure to register the contract
to sell or deed of conveyance with the Register of Deeds resulted to the nullification or invalidity of the said
contract or deed [T]hus, non-registration of an instrument of conveyance will not affect the validity of a
contract to sell. It will remain valid and effective between the parties thereto as under PD 1529 or The Property
Registration Decree, registration merely serves as a constructive notice to the whole world to bind third parties.
Under the Maceda Law, the defaulting buyer who has paid at least two years of installments has the right of
either to avail of the grace period to pay or, the cash surrender value of the payments made:
Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments,
including residential condominium apartments but excluding industrial lots, commercial buildings and sales to
tenants under Republic Act Numbered Thirty-eight Hundred Forty-four, as amended by Republic Act Numbered
Sixty-three Hundred Eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled
to the following rights in case he defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him
which is hereby fixed at the rate of one month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract
and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That
the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of
installment payments made.
Moldex Realty, Inc. v. Saberon; G.R. No. 176289. April 8, 2013

Civil Code
Contract; Rescission; effect. Rescission entails a mutual restitution of benefits received. An injured party who has
chosen rescission is also entitled to the payment of damages. Sandoval Shipyards, Inc. v. Philippine Merchant
Marine Academy (PMMA); G.R. No. 188633. April 10, 2013
Obligation; Extinguishment of obligations; consignation; when tender of payment not necessary; judicial in
character; difference between consignation and tender of payment. Under Article 1256 of the Civil Code, the
debtor shall be released from responsibility by the consignation of the thing or sum due, without need of prior
tender of payment, when the creditor is absent or unknown, or when he is incapacitated to receive the payment
at the time it is due, or when two or more persons claim the same right to collect, or when the title to the
obligation has been lost.
Consignation is necessarily judicial. Article 1258 of the Civil Code specifically provides that consignation shall be
made by depositing the thing or things due at the disposal of judicialauthority. The said provision clearly
precludes consignation in venues other than the courts.
Elsewhere, what may be made is a valid tender of payment, but not consignation. The two, however, must be
distinguished.
Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an
act preparatory to the consignation, which is the principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while
consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. (8 Manresa 325).
Sps. Cacayorin v. Armed Forces and Police Mutual Benefit Association, Inc.; G.R. No. 171298. April 15, 2013
Property; Ejectment; only issue is who is entitled to physical possession; forcible entry; prior physical possession
is vital; judgment conclusive between the parties and their successors-in-interest; effects if prevailing party is a
usufructuary; usufruct; death of usufructuary extinguishes usufruct. Ejectment cases forcible entry and unlawful
detainer are summary proceedings designed to provide expeditious means to protect actual possession or the
right to possession of the property involved. The only question that the courts resolve in ejectment proceedings
is: who is entitled to the physical possession of the premises, that is, to the possession de facto and not to the
possession de jure. It does not even matter if a partys title to the property is questionable. Thus, an ejectment
case will not necessarily be decided in favor of one who has presented proof of ownership of the subject
property.
Indeed, possession in ejectment cases means nothing more than actual physical possession, not legal
possession in the sense contemplated in civil law. In a forcible entry case, prior physical possession is the
primary consideration[.] A party who can prove prior possession can recover such possession even against the
owner himself. Whatever may be the character of his possession, if he has in his favor prior possession in time,
he has the security that entitles him to remain on the property until a person with a better right lawfully ejects
him. [T]he party in peaceable, quiet possession shall not be thrown out by a strong hand, violence, or terror.
The judgment in an ejectment case is conclusive between the parties and their successors-in interest by title
subsequent to the commencement of the action; hence, it is enforceable by or against the heirs of the deceased.
This judgment entitles the winning party to: (a) the restitution of the premises, (b) the sum justly due as arrears
of rent or as reasonable compensation for the use and occupation of the premises, and (c) attorneys fees and
costs.
[T]he right to the usufruct is now rendered moot by the death of Wilfredo since death extinguishes a usufruct
under Article 603(1) of the Civil Code. This development deprives the heirs of the usufructuary the right to retain
or to reacquire possession of the property even if the ejectment judgment directs its restitution.
Thus, what actually survives under the circumstances is the award of damages, by way of compensation. Rivera-
Calingasan v. Rivera; G.R. No. 171555. April 17, 2013
Property; Public property; public plaza forms part of the public dominion; cannot be the object of appropriation,
lease, any other contractual undertaking; void contracts. A pPublic plaza is for public use and therefore forms
part of the public dominion. Accordingly, it cannot be the object of appropriation either by the State or by private
persons. Nor can it be the subject of lease or any other contractual undertaking. In Villanueva v. Castaeda, Jr.,
citing Espiritu v. Municipal Council of Pozorrubio, the Court pronounced that:
x x x Town plazas are properties of public dominion, to be devoted to public use and to be made available to the
public in general. They are outside the commerce of man and cannot be disposed of or even leased by the
municipality to private parties.
In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is contrary to law,
morals, good customs, public order or public policy is considered void and as such, creates no rights or
obligations or any juridical relations. Land Bank of the Philippines v. Cacayurin; G.R. No. 191667. April 17, 2013
Special Laws
Foreclosure of Mortgage pursuant to P.D. No. 385; when its purpose is served; when hearing is necessary before
issuance of writ of possession; foreclosure of mortgage under Section 33, Rule 39 of the Rules on Civil Procedure;
when issuance of writ of possession is not ministerial. Indeed, while the Court had already declared in Philippine
National Bank v. Adil that once the property of a debtor is foreclosed and sold to a GFI, it would be mandatory for
the court to place the GFI in the possession and control of the propertypursuant to Section 4 of P.D. No.
385 (Requiring Government Financial Institutions to Foreclose Mandatorily All Loans with Arrearages, Including
Interest and Charges Amounting to at Least Twenty (20%) of the Total Outstanding Obligation) this rule
should not be construed as absolute or without exception.
The evident purpose underlying P.D. 385 is sufficiently served by allowing foreclosure proceedings initiated by
GFIs to continue until a judgment therein becomes final and executory, without a restraining order, temporary or
permanent injunction against it being issued. But if a parcel of land is occupied by a party other than the
judgment debtor, the proper procedure is for the court to order a hearing to determine the nature of said adverse
possession before it issues a writ of possession. This is because a third party, who is not privy to the debtor, is
protected by the law. Such third party may be ejected from the premises only after he has been given an
opportunity to be heard, to comply with the time honored principle of due process.
In the same vein, under Section 33 of Rule 39 of the Rules on Civil Procedure, the possession of a mortgaged
property may be awarded to a purchaser in the extrajudicial foreclosure, unless a third party is actually holding
the property adversely vis--vis the judgment debtor.
The obligation of a court to issue a writ of possession in favor of the purchaser in an extrajudicial foreclosure sale
ceases to be ministerial, once it appears that there is a third party who is in possession of the property and is
claiming a right adverse to that of the debtor/mortgagor. The Supreme Court explained in Philippine National
Bank v. Austria that the foregoing doctrinal pronouncements are not without support in substantive law:
x x x. Notably, the Civil Code protects the actual possessor of a property, to wit:
Art. 433. Actual possession under claim of ownership raises a disputable presumption of ownership. The true
owner must resort to judicial process for the recovery of the property.
Under the aforequoted provision, one who claims to be the owner of a property possessed by another must bring
the appropriate judicial action for its physical recovery. The term judicial process could mean no less than an
ejectment suit or reivindicatory action, in which the ownership claims of the contending parties may be properly
heard and adjudicated.
Royal Savings Bank v. Asia, et al.; G.R. No. 183658. April 10, 2013
Family Code; Declaration of Presumptive Death; judgment is immediately final and executory; proper remedy is a
special civil action for certiorari filed in the Court of Appeals; decision of Court of Appeals reviewable by the
Supreme Court via certiorari under Rule 45. It is improper to avail of an ordinary appeal as a vehicle for
questioning a trial courts decision in a summary proceeding for the declaration of presumptive death under
Article 41 of the Family Code.
As explained in Republic v. Tango, the remedy of a losing party in a summary proceeding is not an ordinary
appeal, but a petition for certiorari, to wit:
By express provision of law, the judgment of the court in a summary proceeding shall be immediately final and
executory. As a matter of course, it follows that no appeal can be had of the trial courts judgment in a summary
proceeding for the declaration of presumptive death of an absent spouse under Article 41 of the Family Code. It
goes without saying, however, that an aggrieved party may file a petition for certiorari to question abuse of
discretion amounting to lack of jurisdiction. Such petition should be filed in the Court of Appeals in accordance
with the Doctrine of Hierarchy of Courts. To be sure, even if the Courts original jurisdiction to issue a writ
of certiorari is concurrent with the RTCs and the Court of Appeals in certain cases, such concurrence does not
sanction an unrestricted freedom of choice of court forum. From the decision of the Court of Appeals, the losing
party may then file a petition for review oncertiorari under Rule 45 of the Rules of Court with the Supreme Court.
This is because the errors which the court may commit in the exercise of jurisdiction are merely errors of
judgment which are the proper subject of an appeal.
When the OSG filed its notice of appeal under Rule 42, it availed itself of the wrong remedy. As a result, the
running of the period for filing of a Petition for Certiorari continued to run and was not tolled. Upon lapse of that
period, the Decision of the RTC could no longer be questioned. Republic of the Philippines v. Narceda; G.R. No.
182760. April 10, 2013.

June 2013 Philippine Supreme Court Decisions on Civil Law
Contract; contract of carriage; definition; common carrier; definition; breach of contract of carriage; entitlement
to damages; contract of services; standard of care required; damages; when recoverable; quasi-delict; solidary
liability of joint tortfeasors. A contract of carriage is defined as one whereby a certain person or association of
persons obligate themselves to transport persons, things, or news from one place to another for a fixed price. On
its face, the airplane ticket is a valid written contract of carriage. This Court has held that when an airline issues a
ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the
passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage.
Under Article 1732 of the Civil Code, this persons, corporations, firms, or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public is called a common carrier.
In contrast, the contractual relation between Sampaguita Travel and respondents is a contract for services.
Since the contract between the parties is an ordinary one or services, the standard of care required of respondent
is that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable care consistent
with that which an ordinarily prudent person would have observed when confronted with a similar situation. The
test to determine whether negligence attended the performance of an obligation is: did the defendant in doing
the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of negligence.
For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a reasonable
degree of certainty, premised upon competent proof and the best evidence obtainable by the injured party. To
justify an award of actual damages, there must be competent proof of the actual amount of loss. Credence can
be given only to claims which are duly supported by receipts.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in
order upon a showing that the defendant acted fraudulently or in bad faith. What the law considers as bad faith
which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in
the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. In the same vein, to
warrant the award of exemplary damages, defendant must have acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Nominal damages are recoverable where a legal right is technically violated and must be vindicated against an
invasion that has produced no actual present loss of any kind or where there has been a breach of contract and
no substantial injury or actual damages whatsoever have been or can be shown. Under Article 2221 of the Civil
Code, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss
suffered.
The amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained
by respondents considering the concept and purpose of such damages. The amount of nominal damages to be
awarded may also depend on certain special reasons extant in the case. The amount of such damages is
addressed to the sound discretion of the court and taking into account the relevant circumstances, such as the
failure of some respondents to board the flight on schedule and the slight breach in the legal obligations of the
airline company to comply with the terms of the contract, i.e., the airplane ticket and of the travel agency to
make the correct bookings.
Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the bookings which led to the
erroneous cancellation of respondents bookings. Their negligence is the proximate cause of the technical injury
sustained by respondents. Therefore, they have become joint tortfeasors, whose responsibility for quasi-
delict, under Article 2194 of the Civil Code, is solidary. Cathay Pacific Airways v. Juanita Reyes, et al., G.R. No.
185891, June 26, 2013
Contract; contract of sale; disputable presumptions; failure to pay the price; effect of; double sale; effect;
registration in good faith; buyer in good faith; duty of a buyer when a piece of land is in the actual possession of
third persons. Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1)
private transactions have been fair and regular; (2) the ordinary course of business has been followed; and
(3) there was sufficient consideration for a contract. These presumptions operate against an adversary who has
not introduced proof to rebut them. They create the necessity of presenting evidence to rebut the prima
facie case they created, and which, if no proof to the contrary is presented and offered, will prevail. The burden
of proof remains where it is but, by the presumption, the one who has that burden is relieved for the time being
from introducing evidence in support of the averment, because the presumption stands in the place of evidence
unless rebutted.
Granting that there was no delivery of the consideration, the seller would have no right to sell again what he no
longer owned. His remedy would be to rescind the sale for failure on the part of the buyer to perform his part of
their obligation pursuant to Article 1191 of the New Civil Code. In the case of Clara M. Balatbat v. Court Of
Appeals and Spouses Jose Repuyan and Aurora Repuyan, it was written:
The failure of the buyer to make good the price does not, in law, cause the ownership to revest to
the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New
Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation or to rescind
the contract. [Emphases supplied]
[O]wnership of an immovable property which is the subject of a double sale shall be transferred: (1) to the
person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the person who presents the
oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith
and registration in good faith. Good faith must concur with the registration. If it would be shown that a buyer was
in bad faith, the alleged registration they have made amounted to no registration at all.
When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and
should investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a
buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read the public manuscript,
that is, to look and see who is there upon it and what his rights are. A want of caution and diligence, which an
honest man of ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a
want of good faith. The buyer who has failed to know or discover that the land sold to him is in adverse
possession of another is a buyer in bad faith.
[I]f a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any right. If the registration is
done in bad faith, it is as if there is no registration at all, and the buyer who has first taken possession of the
property in good faith shall be preferred. Hospicio D. Rosaroso, et al. v. Lucila Laborte Soria, et al., G.R. No.
194846, June 19, 2013
Contract; contract of sale; elements; contract to sell; elements; difference between a contract of sale and a
contract to sell; effect of non-payment in a contract of sale; laches; definition; Torrens system; exception to
general rule that action to recover registered land covered by the Torrens System may not be barred by
laches. A contract of sale is defined under Article 1458 of the Civil Code:
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other to pay therefore a price certain in money or its equivalent.
The elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price; (b) determinate subject matter; and (c) price certain in money or its
equivalent.
A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:
[A] bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold, whereas in
a contract to sell, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full
payment of the purchase price.
Even assuming, arguendo, that the petitioner was not paid, such non payment is immaterial and has no effect on
the validity of the contract of sale. A contract of sale is a consensual contract and what is required is the meeting
of the minds on the object and the price for its perfection and validity. In this case, the contract was perfected
the moment the petitioner and the respondent agreed on the object of the sale the two-hectare parcel of land,
and the price Three Thousand Pesos (P3,000.00). Non-payment of the purchase price merely gave rise to a
right in favor of the petitioner to either demand specific performance or rescission of the contract of sale.
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that
which, by exercising due diligence could or should have been done earlier. It should be stressed that laches is not
concerned only with the mere lapse of time. As a general rule, an action to recover registered land covered by
the Torrens System may not be barred by laches. Neither can laches be set up to resist the enforcement of an
imprescriptible legal right. In exceptional cases, however, the Court allowed laches as a bar to recover a titled
property. Thus, inRomero v. Natividad, the Court ruled that laches will bar recovery of the property even if the
mode of transfer was invalid. Likewise, in Vda. de Cabrera v. CA, the Court ruled:
In our jurisdiction, it is an enshrined rule that even registered owners of property may be barred from
recovering possession of property by virtue of laches. Under the Land Registration Act (now the Property
Registration Decree), no title to registered land in derogation to that of the registered owner shall be acquired by
prescription or adverse possession. The same is not true with regard to laches.
More particularly, laches will bar recovery of a property, even if the mode of transfer used by an alleged member
of a cultural minority lacks executive approval. Thus, in Heirs of Dicman v. Cario, the Court upheld the Deed of
Conveyance of Part Rights and Interests in Agricultural Land executed by Ting-el Dicman in favor of Sioco Cario
despite lack of executive approval. The Court stated that despite the judicial pronouncement that the sale of real
property by illiterate ethnic minorities is null and void for lack of approval of competent authorities, the right to
recover possession has nonetheless been barred through the operation of the equitable doctrine of laches. Ali
Akang v. Municipality of Isulan, Sultan Kudarat Province, G.R. No. 186014, June 26, 2013
Contract; contract of sale; disqualification of a lawyer to buy under Article 1491; elements of a contract;
autonomous nature; obligatory nature of contract; interpretation; courts have no authority to alter a contract by
construction or to make a new contract for the parties; penal clause; generally substitutes the indemnity for
damages and the payment of interests in case of non-compliance. Admittedly, Article 1491 (5) of the Civil
Code prohibits lawyers from acquiring by purchase or assignment the property or rights involved which are the
object of the litigation in which they intervene by virtue of their profession. The CA lost sight of the fact,
however, that the prohibition applies only during the pendency of the suit and generally does not cover contracts
for contingent fees where the transfer takes effect only after the finality of a favorable judgment.
Defined as a meeting of the minds between two persons whereby one binds himself, with respect to the other to
give something or to render some service, a contract requires the concurrence of the following requisites: (a)
consent of the contracting parties; (b) object certain which is the subject matter of the contract; and, (c) cause of
the obligation which is established.
Viewed in the light of the autonomous nature of contracts enunciated under Article 1306 of the Civil Code, on the
other hand, we find that the Kasunduan was correctly found by the RTC to be a valid and binding contract
between the parties.
Obligations arising from contracts, after all, have the force of law between the contracting parties who are
expected to abide in good faith with their contractual commitments, not weasel out of them. Moreover, when the
terms of the contract are clear and leave no doubt as to the intention of the contracting parties, the rule is settled
that the literal meaning of its stipulations should govern. In such cases, courts have no authority to alter a
contract by construction or to make a new contract for the parties. Since their duty is confined to the
interpretation of the one which the parties have made for themselves without regard to its wisdom or folly, it has
been ruled that courts cannot supply material stipulations or read into the contract words it does not contain.
Indeed, courts will not relieve a party from the adverse effects of an unwise or unfavorable contract freely
entered into.
An accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation,
the foregoing stipulation is a penal clause which serves to strengthen the coercive force of the obligation and
provides for liquidated damages for such breach. The obligor would then be bound to pay the stipulated
indemnity without the necessity of proof of the existence and the measure of damages caused by the breach.
In obligations with a penal clause, the penalty generally substitutes the indemnity for damages and the payment
of interests in case of non-compliance. Usually incorporated to create an effective deterrent against breach of the
obligation by making the consequences of such breach as onerous as it may be possible, the rule is settled that a
penal clause is not limited to actual and compensatory damages. Heirs of Manuel Uy Ek Liong v. Mauricia Meer
Castillo, Heirs of Buenaflor C. Umali, represented by Nancy Umali, et al., G.R. No. 176425, June 5, 2013.
Contract; default of debtor; definition; requisites; liquidated damages; stipulation therefor; double function;
penalty clause; definition; function. Default or mora on the part of the debtor is the delay in the fulfillment of the
prestation by reason of a cause imputable to the former. It is the nonfulfillment of an obligation with respect to
time.
It is a general rule that one who contracts to complete certain work within a certain time is liable for the damage
for not completing it within such time, unless the delay is excused or waived.
In this jurisdiction, the following requisites must be present in order that the debtor may be in default: (1) that
the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance judicially or extrajudicially.
Liability for liquidated damages is governed by Articles 2226 to 2228 of the Civil Code. A stipulation for liquidated
damages is attached to an obligation in order to ensure performance and has a double function: (1) to provide
for liquidated damages, and (2) to strengthen the coercive force of the obligation by the threat of greater
responsibility in the event of breach. The amount agreed upon answers for damages suffered by the owner due
to delays in the completion of the project. As a precondition to such award, however, there must be proof of the
fact of delay in the performance of the obligation.
A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part
of the obligor in case of breach of an obligation. It functions to strengthen the coercive force of obligation and to
provide, in effect, for what could be the liquidated damages resulting from such a breach. The obligor would then
be bound to pay the stipulated indemnity without the necessity of proof on the existence and on the measure of
damages caused by the breach. It is well-settled that so long as such stipulation does not contravene law,
morals, or public order, it is strictly binding upon the obligor. J Plus Asia Development Corporation v. Utility
Assurance Corporation, G.R. No. 199650, June 26, 2013
Contract; rescission under Article 1191; mutual restitution; contracts; definition. Mutual restitution is required in
cases involving rescission under Article 1191 of the Civil Code; such restitution is necessary to bring back the
parties to their original situation prior to the inception of the contract.
As a general rule, a contract is a meeting of minds between two persons. The Civil Code upholds the spirit over
the form; thus, it deems an agreement to exist, provided the essential requisites are present. A contract is upheld
as long as there is proof of consent, subject matter and cause. Moreover, it is generally obligatory in whatever
form it may have been entered into. From the moment there is a meeting of minds between the parties, [the
contract] is perfected. Fil-Estate Gold and Development, Inc., et al. v. Vertex Sales and Trading, Inc., G.R. No.
202079, June 10, 2013.
Contract; void contracts; effect. A void contract is equivalent to nothing; it produces no civil effect; and it does
not create, modify or extinguish a juridical relation. Joselito C. Borromeo v. Juan T. Mina,G.R. No. 193747, June
5, 2013.
Credit; concurrence and preference of credit; tax clearance is not required for the approval of a project of
partition. The position of the BIR, insisting on prior compliance with the tax clearance requirement as a condition
for the approval of the project of distribution of the assets of a bank under liquidation, is contrary to both the
letter and intent of the law on liquidation of banks by the PDIC.
The law expressly provides that debts and liabilities of the bank under liquidation are to be paid in accordance
with the rules on concurrence and preference of credit under the Civil Code. Duties, taxes, and fees due the
Government enjoy priority only when they are with reference to a specific movable property, under Article
2241(1) of the Civil Code, or immovable property, under Article 2242(1) of the same Code. However, with
reference to the other real and personal property of the debtor, sometimes referred to as free property, the
taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242(1) of the
Civil Code, such as the corporate income tax, will come only in ninth place in the order of preference. On the
other hand, if the BIRs contention that a tax clearance be secured first before the project of distribution of the
assets of a bank under liquidation may be approved, then the tax liabilities will be given absolute preference in all
instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code. In order to secure
a tax clearance which will serve as proof that the taxpayer had completely paid off his tax liabilities, PDIC will be
compelled to settle and pay first all tax liabilities and deficiencies of the bank, regardless of the order of
preference under the pertinent provisions of the Civil Code. Following the BIRs stance, therefore, only then may
the project of distribution of the banks assets be approved and the other debts and claims thereafter settled,
even though under Article 2244 of the Civil Code such debts and claims enjoy preference over taxes and
assessments due the National Government. Philippine Deposit Insurance Corporation v. Bureau of Internal
Revenue, G.R. No. 172892, June 13, 2013
Damages; Attorneys fees; dual concept of attorneys fees; an award of attorneys fees under Article 2208
demands factual, legal, and equitable justification. Article 2208 of the New Civil Code of the Philippines states the
policy that should guide the courts when awarding attorneys fees to a litigant. As a general rule, the parties may
stipulate the recovery of attorneys fees. In the absence of such stipulation, this article restrictively enumerates
the instances when these fees may be recovered.
In ABS-CBN Broadcasting Corp. v. CA, this Court had the occasion to expound on the policy behind the grant of
attorneys fees as actual or compensatory damages:
(T)he law is clear that in the absence of stipulation, attorneys fees may be recovered as actual or compensatory
damages under any of the circumstances provided for in Article 2208 of the Civil Code. The general rule is that
attorneys fees cannot be recovered as part of damages because of the policy that no premium should be placed
on the right to litigate. They are not to be awarded every time a party wins a suit.
The power of the court to award attorneys fees under Article 2208 demands factual, legal, and equitable
justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his
rights, still attorneys fees may not be awarded where no sufficient showing of bad faith could be reflected in a
partys persistence in a case other than an erroneous conviction of the righteousness of his cause.
We have consistently held that an award of attorneys fees under Article 2208 demands factual, legal, and
equitable justification to avoid speculation and conjecture surrounding the grant thereof. Due to the special
nature of the award of attorneys fees, a rigid standard is imposed on the courts before these fees could be
granted. Hence, it is imperative that they clearly and distinctly set forth in their decisions the basis for the award
thereof. It is not enough that they merely state the amount of the grant in the dispositive portion of their
decisions. It bears reiteration that the award of attorneys fees is an exception rather than the general rule; thus,
there must be compelling legal reason to bring the case within the exceptions provided under Article 2208 of the
Civil Code to justify the award. Philippine National Construction Corporation v. Apac Marketing Corporation,
represented by Cesar M. Ong, Jr., G.R. No. 190957, June 5, 2013.
Damages; nominal damages; when warranted in labor cases. [W]hile Van Doorn has a just and valid cause to
terminate the respondents employment, it failed to meet the requisite procedural safeguards provided under
Article 283 of the Labor Code. In the termination of employment under Article 283, Van Doorn, as the employer,
is required to serve a written notice to the respondents and to the DOLE of the intended termination of
employment at least one month prior to the cessation of its fishing operations. Poseidon could have easily filed
this notice, in the way it represented Van Doorn in its dealings in the Philippines. While this omission does not
affect the validity of the termination of employment, it subjects the employer to the payment of indemnity in the
form of nominal damages. Poseidon International Maritime Services, Inc. v. Tito R. Tamala, et al.,G.R. No.
186475, June 26, 2013
Damages; temperate damages; when warranted. Article 2224 of the New Civil Code provides that (t)emperate or
moderate damages, which are more than nominal but less than compensatory damages may be recovered when
the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case,
proved with certainty. People of the Philippines v. Reggie Bernardo, G.R. No. 198789, June 3, 2013.
Interest rates; a stipulated interest of 24% per annum is not unconscionable; surcharge on principal loan; a
surcharge of 1% per month on the principal loan is valid; surcharge or penalty partakes of the nature of
liquidated damages; different from interest payment. In Villanueva v. Court of Appeals, where the issue raised
was whether the 24% p.a. stipulated interest rate is unreasonable under the circumstances, we answered in the
negative and held:
In Spouses Zacarias Bacolor and Catherine Bacolor v. Banco Filipino Savings and Mortgage Bank, Dagupan City
Branch, this Court held that the interest rate of 24% per annum on a loan of P244,000.00, agreed upon by the
parties, may not be considered as unconscionable and excessive. As such, the Court ruled that the borrowers
cannot renege on their obligation to comply with what is incumbent upon them under the contract of loan as the
said contract is the law between the parties and they are bound by its stipulations.
Also, in Garcia v. Court of Appeals, this Court sustained the agreement of the parties to a 24%per annum interest
on an P8,649,250.00 loan finding the same to be reasonable and clearly evidenced by the amended credit line
agreement entered into by the parties as well as two promissory notes executed by the borrower in favor of the
lender.
Based on the above jurisprudence, the Court finds that the 24% per annum interest rate, provided for in the
subject mortgage contracts for a loan of P225,000.00, may not be considered unconscionable. Moreover,
considering that the mortgage agreement was freely entered into by both parties, the same is the law between
them and they are bound to comply with the provisions contained therein.
In Ruiz v. CA, we held:
The 1% surcharge on the principal loan for every month of default is valid. This surcharge or penalty stipulated
in a loan agreement in case of default partakes of the nature of liquidated damages under Art. 2227 of the New
Civil Code, and is separate and distinct from interest payment. Also referred to as a penalty clause, it is expressly
recognized by law. It is an accessory undertaking to assume greater liability on the part of an obligor in case of
breach of an obligation. The obligor would then be bound to pay the stipulated amount of indemnity without the
necessity of proof on the existence and on the measure of damages caused by the breach.
Spouses Florentino T. Mallari and Aurea V. Mallari v. Prudential Bank of the Philippines, G.R. No. 197861, June 5,
2013
Tort; collateral source rule; unjust enrichment; elements. As part of American personal injury law, the collateral
source rule was originally applied to tort cases wherein the defendant is prevented from benefiting from the
plaintiffs receipt of money from other sources. Under this rule, if an injured person receives compensation for his
injuries from a source wholly independent of the tortfeasor, the payment should not be deducted from the
damages which he would otherwise collect from the tortfeasor. In a recent Decision by the Illinois Supreme
Court, the rule has been described as an established exception to the general rule that damages in negligence
actions must be compensatory. The Court went on to explain that although the rule appears to allow a double
recovery, the collateral source will have a lien or subrogation right to prevent such a double recovery. In Mitchell
v. Haldar, the collateral source rule was rationalized by the Supreme Court of Delaware:
The collateral source rule is predicated on the theory that a tortfeasor has no interest in, and therefore no right
to benefit from monies received by the injured person from sources unconnected with the defendant. According
to the collateral source rule, a tortfeasor has no right to any mitigation of damages because of payments or
compensation received by the injured person from an independent source. The rationale for the collateral source
rule is based upon the quasi-punitive nature of tort law liability. It has been explained as follows:
The collateral source rule is designed to strike a balance between two competing principles of tort law: (1) a
plaintiff is entitled to compensation sufficient to make him whole, but no more; and (2) a defendant is liable for
all damages that proximately result from his wrong. A plaintiff who receives a double recovery for a single tort
enjoys a windfall; a defendant who escapes, in whole or in part, liability for his wrong enjoys a windfall. Because
the law must sanction one windfall and deny the other, it favors the victim of the wrong rather than the
wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full value of his or her negligent conduct even if it results
in a windfall for the innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the responsibility for losses on the party causing them.
Its application is justified so that the wrongdoer should not benefit from the expenditures made by the injured
party or take advantage of contracts or other relations that may exist between the injured party and third
persons. Thus, it finds no application to cases involving no-fault insurances under which the insured is
indemnified for losses by insurance companies, regardless of who was at fault in the incident generating the
losses.
To constitute unjust enrichment, it must be shown that a party was unjustly enriched in the sense that the term
unjustly could mean illegally or unlawfully. A claim for unjust enrichment fails when the person who will benefit
has a valid claim to such benefit. Mitsubishi Motors Philippines Salaried Employees Union v. Mitsubishi Motors
Philippines Corporation, G.R. No. 175773, June 17, 2013.
Unjust enrichment; definition; elements. Unjust enrichment is a term used to depict result or effect of failure to
make remuneration of or for property or benefits received under circumstances that give rise to legal or equitable
obligation to account for them. To be entitled to remuneration, one must confer benefit by mistake, fraud,
coercion, or request. Unjust enrichment is not itself a theory of reconveyance. Rather, it is a prerequisite for the
enforcement of the doctrine of restitution. There is unjust enrichment when:
1. A person is unjustly benefited; and
2. Such benefit is derived at the expense of or with damages to another.
Philippine Transmarine Carriers, Inc. v. Leandro Legaspi, G.R. No. 202791, June 10, 2013.
Special Laws
Family Code; support; in proportion to the resources or means of the giver and to the needs of the recipient;
support pendente lite in cases of legal separation and petitions for declaration of nullity or annulment of
marriage; judicial determination is guided by the Rule on Provisional Orders; support in arrears; deductions from
accrued support pendente lite; judgment for support does not become final. As a matter of law, the amount of
support which those related by marriage and family relationship is generally obliged to give each other shall be in
proportion to the resources or means of the giver and to the needs of the recipient. Such support comprises
everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in
keeping with the financial capacity of the family.
Upon receipt of a verified petition for declaration of absolute nullity of void marriage or for annulment of voidable
marriage, or for legal separation, and at any time during the proceeding, the court, motu proprio or upon verified
application of any of the parties, guardian or designated custodian, may temporarily grant support pendente
lite prior to the rendition of judgment or final order. Because of its provisional nature, a court does not need to
delve fully into the merits of the case before it can settle an application for this relief. All that a court is tasked to
do is determine the kind and amount of evidence which may suffice to enable it to justly resolve the application.
It is enough that the facts be established by affidavits or other documentary evidence appearing in the record.
Judicial determination of support pendente lite in cases of legal separation and petitions for declaration of nullity
or annulment of marriage are guided by the provisions of the Rule on Provisional Orders.
On the issue of crediting of money payments or expenses against accrued support, we find as relevant the
following rulings by US courts.
In Bradford v. Futrell, appellant sought review of the decision of the Circuit Court which found him in arrears with
his child support payments and entered a decree in favor of appellee wife. He complained that in determining the
arrearage figure, he should have been allowed full credit for all money and items of personal property given by
him to the children themselves, even though he referred to them as gifts. The Court of Appeals of Maryland ruled
that in the suit to determine amount of arrears due the divorced wife under decree for support of minor children,
the husband (appellant) was not entitled to credit for checks which he had clearly designated as gifts, nor was he
entitled to credit for an automobile given to the oldest son or a television set given to the children. Thus, if the
children remain in the custody of the mother, the father is not entitled to credit for money paid directly to the
children if such was paid without any relation to the decree.
In Martin, Jr. v. Martin, the Supreme Court of Washington held that a father, who is required by a divorce decree
to make child support payments directly to the mother, cannot claim credit for payments voluntarily made directly
to the children. However, special considerations of an equitable nature may justify a court in crediting such
payments on his indebtedness to the mother, when such can be done without injustice to her.
Suffice it to state that the matter of increase or reduction of support should be submitted to the trial court in
which the action for declaration for nullity of marriage was filed, as this Court is not a trier of facts. The amount
of support may be reduced or increased proportionately according to the reduction or increase of the necessities
of the recipient and the resources or means of the person obliged to support. As we held in Advincula v.
Advincula:
Judgment for support does not become final. The right to support is of such nature that its allowance is
essentially provisional; for during the entire period that a needy party is entitled to support, his or her alimony
may be modified or altered, in accordance with his increased or decreased needs, and with the means of the
giver. It cannot be regarded as subject to final determination.
Susan Lim-Lua v. Danilo Y. Lua, G.R. Nos. 175279-80, June 5, 2013.
Family Code; Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages; not
applicable in an action for recognition of foreign judgment; foreign judgment relating to the marital status of a
person; special proceeding for cancellation or correction of entries in the civil registry under Rule 108 of the Rules
of Court; the first husband has a right to file the petition; effect of a foreign divorce decree to a Filipino spouse;
Article 26 of the Family Code.The Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages (A.M. No. 02-11-10-SC) does not apply in a petition to recognize a foreign judgment relating
to the status of a marriage where one of the parties is a citizen of a foreign country. Moreover, in Juliano-Llave v.
Republic, this Court held that the rule in A.M. No. 02-11-10-SC that only the husband or wife can file a
declaration of nullity or annulment of marriage does not apply if the reason behind the petition is bigamy.
A foreign judgment relating to the status of a marriage affects the civil status, condition and legal capacity of its
parties. However, the effect of a foreign judgment is not automatic. To extend the effect of a foreign judgment in
the Philippines, Philippine courts must determine if the foreign judgment is consistent with domestic public policy
and other mandatory laws. Article 15 of the Civil Code provides that [l]aws relating to family rights and duties, or
to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though
living abroad. This is the rule of lex nationalii in private international law. Thus, the Philippine State may require,
for effectivity in the Philippines, recognition by Philippine courts of a foreign judgment affecting its citizen, over
whom it exercises personal jurisdiction relating to the status, condition and legal capacity of such citizen.
A petition to recognize a foreign judgment declaring a marriage void does not require relitigation under a
Philippine court of the case as if it were a new petition for declaration of nullity of marriage. Philippine courts
cannot presume to know the foreign laws under which the foreign judgment was rendered. They cannot
substitute their judgment on the status, condition and legal capacity of the foreign citizen who is under the
jurisdiction of another state. Thus, Philippine courts can only recognize the foreign judgment as a fact according
to the rules of evidence.
Since the recognition of a foreign judgment only requires proof of fact of the judgment, it may be made in a
special proceeding for cancellation or correction of entries in the civil registry under Rule 108 of the Rules of
Court. Rule 1, Section 3 of the Rules of Court provides that [a] special proceeding is a remedy by which a party
seeks to establish a status, a right, or a particular fact. Rule 108 creates a remedy to rectify facts of a persons
life which are recorded by the State pursuant to the Civil Register Law or Act No. 3753. These are facts of public
consequence such as birth, death or marriage, which the State has an interest in recording. There is no doubt
that the prior spouse has a personal and material interest in maintaining the integrity of the marriage he
contracted and the property relations arising from it. There is also no doubt that he is interested in the
cancellation of an entry of a bigamous marriage in the civil registry, which compromises the public record of his
marriage. The interest derives from the substantive right of the spouse not only to preserve (or dissolve, in
limited instances) his most intimate human relation, but also to protect his property interests that arise by
operation of law the moment he contracts marriage. These property interests in marriage include the right to be
supported in keeping with the financial capacity of the family and preserving the property regime of the
marriage.
Section 2(a) of A.M. No. 02-11-10-SC does not preclude a spouse of a subsisting marriage to question the validity
of a subsequent marriage on the ground of bigamy. On the contrary, when Section 2(a) states that [a] petition
for declaration of absolute nullity of void marriage may be filedsolely by the husband or the wife it refers
to the husband or the wife of the subsisting marriage. Under Article 35(4) of the Family Code, bigamous
marriages are void from the beginning. Thus, the parties in a bigamous marriage are neither the husband nor the
wife under the law. The husband or the wife of the prior subsisting marriage is the one who has the personality
to file a petition for declaration of absolute nullity of void marriage under Section 2(a) of A.M. No. 02-11-10-SC.
[A] Filipino citizen cannot dissolve his marriage by the mere expedient of changing his entry of marriage in the
civil registry. However, this does not apply in a petition for correction or cancellation of a civil registry entry based
on the recognition of a foreign judgment annulling a marriage where one of the parties is a citizen of the foreign
country. There is neither circumvention of the substantive and procedural safeguards of marriage under
Philippine law, nor of the jurisdiction of Family Courts under R.A. No. 8369. A recognition of a foreign judgment is
not an action to nullify a marriage. It is an action for Philippine courts to recognize the effectivity of a foreign
judgment, which presupposes a case which was already tried and decided under foreign law. The
procedure in A.M. No. 02-11-10-SC does not apply in a petition to recognize a foreign judgment annulling a
bigamous marriage where one of the parties is a citizen of the foreign country. Neither can R.A. No. 8369 define
the jurisdiction of the foreign court.
Article 26 of the Family Code confers jurisdiction on Philippine courts to extend the effect of a foreign divorce
decree to a Filipino spouse without undergoing trial to determine the validity of the dissolution of the marriage.
The second paragraph of Article 26 of the Family Code provides that [w]here a marriage between a Filipino
citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse
capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law. The
second paragraph of Article 26 of the Family Code only authorizes Philippine courts to adopt the effects of a
foreign divorce decree precisely because the Philippines does not allow divorce. Philippine courts cannot try the
case on the merits because it is tantamount to trying a case for divorce. Minoru Fujiki v. Maria Paz Galela
Marinay, et al., G.R. No. 196049, June 26, 2013.
Family Courts Act of 1997; Violence Against Women and Children Act of 2004; Family Courts; jurisdiction; a
special court of the same level as RTC; RTCs designated as family courts remain possessed of authority as courts
of general original jurisdiction. At the outset, it must be stressed that Family Courts are special courts, of the
same level as Regional Trial Courts. Under R.A. 8369, otherwise known as the Family Courts Act of 1997, family
courts have exclusive original jurisdiction to hear and decide cases of domestic violence against women and
children. In accordance with said law, the Supreme Court designated from among the branches of the Regional
Trial Courts at least one Family Court in each of several key cities identified. To achieve harmony with the first
mentioned law, Section 7 of R.A. 9262 now provides that Regional Trial Courts designated as Family Courts shall
have original and exclusive jurisdiction over cases of VAWC defined under the latter law.
Inspite of its designation as a family court, the RTC of Bacolod City remains possessed of authority as a court of
general original jurisdiction to pass upon all kinds of cases whether civil, criminal, special proceedings, land
registration, guardianship, naturalization, admiralty or insolvency. It is settled that RTCs have jurisdiction to
resolve the constitutionality of a statute, this authority being embraced in the general definition of the judicial
power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental
law. The Constitution vests the power of judicial review or the power to declare the constitutionality or validity of
a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or
regulation not only in this Court, but in all RTCs. Jesus C. Garcia v. The Hon. Ray Alan T. Drilon, et al.,G.R. No.
179267, June 25, 2013
Torrens system; purpose. Torrens title; generally conclusive evidence of the ownership of the land; not subject to
collateral attack; Land Registration Authority; functions. The real purpose of the Torrens system is to quiet title to
land and to stop forever any question as to its legality. Once a title is registered, the owner may rest secure,
without the necessity of waiting in the portals of the court, or sitting on the mirador su casa, to avoid the
possibility of losing his land. A Torrens title is generally a conclusive evidence of the ownership of the land
referred to therein. A strong presumption exists that Torrens titles are regularly issued and that they are valid.
Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, explicitly
provides that [a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding in accordance with law.
The duty of LRA officials to issue decrees of registration is ministerial in the sense that they act under the orders
of the court and the decree must be in conformity with the decision of the court and with the data found in the
record. They have no discretion in the matter. However, if they are in doubt upon any point in relation to the
preparation and issuance of the decree, these officials ought to seek clarification from the court. They act, in this
respect, as officials of the court and not as administrative officials, and their act is the act of the court. They are
specifically called upon to extend assistance to courts in ordinary and cadastral land registration
proceedings. Deogenes O. Rodriguez v. Hon. Court of Appeals and Philippine Chinese Charitable Association,
Inc., G.R. No. 184589, June 13, 2013

July 2013 Philippine Supreme Court Decisions on Civil Law
Civil Code
Agency; apparent authority of an agent based on estoppel; concept. In Woodchild Holdings, Inc. v. Roxas Electric
and Construction Company, Inc. the Court stated that persons dealing with an assumed agency, whether the
assumed agency be a general or special one, are bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. In other words, when the petitioner relied only on
the words of respondent Alejandro without securing a copy of the SPA in favor of the latter, the petitioner is
bound by the risk accompanying such trust on the mere assurance of Alejandro.
The same Woodchild case stressed that apparent authority based on estoppel can arise from the principal who
knowingly permit the agent to hold himself out with authority and from the principal who clothe the agent
with indicia of authority that would lead a reasonably prudent person to believe that he actually has such
authority. Apparent authority of an agent arises only from acts or conduct on the part of the principal and such
acts or conduct of the principal must have been known and relied upon in good faith and as a result of the
exercise of reasonable prudence by a third person as claimant and such must have produced a change of position
to its detriment. In the instant case, the sale to the Spouses Lajarca and other transactions where Alejandro
allegedly represented a considerable majority of the co-owners transpired after the sale to the petitioner; thus,
the petitioner cannot rely upon these acts or conduct to believe that Alejandro had the same authority to
negotiate for the sale of the subject property to him. Reman Recio v. Heirs of Spouses Aguego and Maria
Altamirano, G.R. No.182349, July 24, 2013.
Agency; definition under the Civil Code; form of contract. Article 1868 of the Civil Code defines a contract of
agency as a contract whereby a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. It may be express, or implied
from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing
that another person is acting on his behalf without authority.
As a general rule, a contract of agency may be oral.
However, it must be written when the law requires a specific form. Specifically, Article 1874 of the Civil Code
provides that the contract of agency must be written for the validity of the sale of a piece of land or any interest
therein. Otherwise, the sale shall be void. A related provision, Article 1878 of the Civil Code, states that special
powers of attorney are necessary to convey real rights over immovable properties. Sally Yoshizaki v. Joy Training
Center of Aurora, Inc., G.R. No. 174978, July 31, 2013.
Agency; general power of attorney; an agency couched in general terms comprises only acts of administration.
The certification is a mere general power of attorney which comprises all of Joy Trainings business. Article 1877
of the Civil Code clearly states that [a]n agency couched in general terms comprises only acts of
administration, even if the principal should state that he withholds no power or that the agent may
execute such acts as he may consider appropriate, or even though the agency should authorize a
general and unlimited management. Sally Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No.
174978, July 31, 2013.

Agency; sale of property by a supposed agent is unenforceable if there is really no agency to sell such property;
persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of the
agents authority. Necessarily, the absence of a contract of agency renders the contract of sale unenforceable;
Joy Training effectively did not enter into a valid contract of sale with the spouses Yoshizaki. Sally cannot also
claim that she was a buyer in good faith. She misapprehended the rule that persons dealing with a registered
land have the legal right to rely on the face of the title and to dispense with the need to inquire further, except
when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry. This rule applies when the ownership of a parcel of land is disputed and not
when the fact of agency is contested. Sally Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, July
31, 2013.
Agency; special power of attorney; must express the powers of the agent in clear and unmistakable language;
when there is any reasonable doubt that the language so used conveys such power, no such construction shall be
given the document. We unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals that a special
power of attorney must express the powers of the agent in clear and unmistakable language for the
principal to confer the right upon an agent to sell real estate. When there is any reasonable doubt that the
language so used conveys such power, no such construction shall be given the document. The purpose of the law
in requiring a special power of attorney in the disposition of immovable property is to protect the interest of an
unsuspecting owner from being prejudiced by the unwarranted act of another and to caution the buyer to assure
himself of the specific authorization of the putative agent. Sally Yoshizaki v. Joy Training Center of Aurora,
Inc., G.R. No. 174978, July 31, 2013.
Agency; special power of attorney for sale of property; must expressly mention a sale or include a sale as a
necessary ingredient of the authorized act. The special power of attorney mandated by law must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the authorized act. We
unequivocably declared in Cosmic Lumber Corporation v. Court of Appealsthat a special power of attorney must
express the powers of the agent in clear and unmistakable language for the principal to confer the right
upon an agent to sell real estate. When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document. The purpose of the law in requiring a special power of
attorney in the disposition of immovable property is to protect the interest of an unsuspecting owner from being
prejudiced by the unwarranted act of another and to caution the buyer to assure himself of the specific
authorization of the putative agent. Sally Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, July
31, 2013.
Agency; special power of attorney; required for an agent to sell an immovable property; authority must be in
writing, otherwise sale is void. In Alcantara v. Nido, the Court emphasized the requirement of an SPA before an
agent may sell an immovable property. In the said case, Revelen was the owner of the subject land. Her mother,
respondent Brigida Nido accepted the petitioners offer to buy Revelens land at Two Hundred Pesos (P200.00)
per sq m. However, Nido was only authorized verbally by Revelen. Thus, the Court declared the sale of the said
land null and void under Articles 1874 and 1878 of the Civil Code. Reman Recio v. Heirs of Spouses Aguego and
Maria Altamirano, G.R. No.182349, July 24, 2013.

Arrastre operator; functions; duty to take good care of goods and to turn them over to the party entitled to their
possession. The functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ships tackle. Being the custodian of the goods
discharged from a vessel, an arrastre operators duty is to take good care of the goods and to turn them over to
the party entitled to their possession. Handling cargo is mainly the arrastre operators principal work so its
drivers/operators or employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody. Asian Terminals, Inc. v. Philam Insurance Co., Inc. (now Chartis
Philippines Insurance Inc.)/ Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v. Westwind
Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and
Asian Terminals, Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.
Attorneys fees; dual concept. In order to resolve the issues in this case, it is necessary to discuss the two
concepts of attorneys fees ordinary and extraordinary. In its ordinary sense, it is the reasonable compensation
paid to a lawyer by his client for legal services rendered. In its extraordinary concept, it is awarded by the court
to the successful litigant to be paid by the losing party as indemnity for damages. Francisco L. Rosario, Jr. v.
Lellani De Guzman, Arleen De Guzman, et al.,G.R. No. 191247, July 10, 2013.
Attorneys fees for professional services rendered; may be claimed in the very action itself or in a separate action;
prescription for oral contract of attorneys fees is 6 years; concept of quantum meruit; guidelines under the Code
of Professional Responsibility. The Court now addresses two important questions: (1) How can attorneys fees for
professional services be recovered? (2) When can an action for attorneys fees for professional services be filed?
The case of Traders Royal Bank Employees Union-Independent v. NLRC is instructive:
As an adjunctive episode of the action for the recovery of bonus differentials in NLRC-NCR Certified Case No.
0466, private respondents present claim for attorneys fees may be filed before the NLRC even though or, better
stated, especially after its earlier decision had been reviewed and partially affirmed. It is well settled that a claim
for attorneys fees may be asserted either in the very action in which the services of a lawyer had been rendered
or in a separate action.
With respect to the first situation, the remedy for recovering attorneys fees as an incident of the main action may
be availed of only when something is due to the client. Attorneys fees cannot be determined until after the main
litigation has been decided and the subject of the recovery is at the disposition of the court. The issue over
attorneys fees only arises when something has been recovered from which the fee is to be paid. While a claim
for attorneys fees may be filed before the judgment is rendered, the determination as to the propriety of the fees
or as to the amount thereof will have to be held in abeyance until the main case from which the lawyers claim for
attorneys fees may arise has become final. Otherwise, the determination to be made by the courts will be
premature. Of course, a petition for attorneys fees may be filed before the judgment in favor of the client is
satisfied or the proceeds thereof delivered to the client.
It is apparent from the foregoing discussion that a lawyer has two options as to when to file his claim for
professional fees. Hence, private respondent was well within his rights when he made his claim and waited for
the finality of the judgment for holiday pay differential, instead of filing it ahead of the awards complete
resolution. To declare that a lawyer may file a claim for fees in the same action only before the judgment is
reviewed by a higher tribunal would deprive him of his aforestated options and render ineffective the foregoing
pronouncements of this Court.
In this case, petitioner opted to file his claim as an incident in the main action, which is permitted by the rules. As
to the timeliness of the filing, this Court holds that the questioned motion to determine attorneys fees was
seasonably filed.
The records show that the August 8, 1994 RTC decision became final and executory on October 31, 2007. There
is no dispute that petitioner filed his Motion to Determine Attorneys Fees on September 8, 2009, which was only
about one (1) year and eleven (11) months from the finality of the RTC decision. Because petitioner claims to
have had an oral contract of attorneys fees with the deceased spouses, Article 1145 of the Civil Code16 allows
him a period of six (6) years within which to file an action to recover professional fees for services rendered.
Respondents never asserted or provided any evidence that Spouses de Guzman refused petitioners legal
representation. For this reason, petitioners cause of action began to run only from the time the respondents
refused to pay him his attorneys fees, as similarly held in the case of Anido v. Negado.
With respect to petitioners entitlement to the claimed attorneys fees, it is the Courts considered view that he is
deserving of it and that the amount should be based on quantum meruit. Quantum meruit literally meaning as
much as he deserves is used as basis for determining an attorneys professional fees in the absence of an
express agreement. The recovery of attorneys fees on the basis of quantum meruit is a device that prevents an
unscrupulous client from running away with the fruits of the legal services of counsel without paying for it and
also avoids unjust enrichment on the part of the attorney himself. An attorney must show that he is entitled to
reasonable compensation for the effort in pursuing the clients cause, taking into account certain factors in fixing
the amount of legal fees.
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining the proper amount of
attorney fees, to wit:
Rule 20.1 A lawyer shall be guided by the following factors in determining his fees:
a) The time spent and the extent of the services rendered or required;
b) The novelty and difficulty of the questions involved;
c) The importance of the subject matter;
d) The skill demanded;
e) The probability of losing other employment as a result of acceptance of the proffered case;
f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he belongs;
g) The amount involved in the controversy and the benefits resulting to the client from the service;
h) The contingency or certainty of compensation;
i) The character of the employment, whether occasional or established; and
j) The professional standing of the lawyer.
Francisco L. Rosario, Jr. v. Lellani De Guzman, Arleen De Guzman, et al., G.R. No. 191247, July 10, 2013.
Attorneys fees; recoverable in actions for indemnity under workmens compensation and employers liability
laws. However, the Court finds that the petitioner is entitled to attorneys fees pursuant to Article 2208(8) of the
Civil Code which states that the award of attorneys fees is justified in actions for indemnity under workmens
compensation and employers liability laws.Camilo A. Esguerra v. United Philippines Lines, Inc., et al., G.R. No.
199932, July 3, 2013.
Attorneys fees; when recoverable. The Court of Appeals rightfully upheld the NLRCs affirmance of the grant of
attorneys fees to San Miguel. Thereby, the NLRC did not commit any grave abuse of its discretion, considering
that San Miguel had been compelled to litigate and to incur expenses to protect his rights and interest. In
Producers Bank of the Philippines v. Court of Appeals, the Court ruled that attorneys fees could be awarded to a
party whom an unjustified act of the other party compelled to litigate or to incur expenses to protect his interest.
It was plain that petitioners refusal to reinstate San Miguel with backwages and other benefits to which he had
been legally entitled was unjustified, thereby entitling him to recover attorneys fees. Zuellig Freight and Cargo
Systems v. National Labor Relations Commission, et al., G.R. No. 157900, July 22, 2013
Attorneys fees; when recoverable. With respect to the award of attorneys fees, Article 2208 of the Civil Code
provides, among others, that such fees may be recovered when exemplary damages are awarded, when the
defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest, and where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just and demandable claim. Joyce V. Ardiente v. Spouses Javier and Ma. Theresa
Pastofide, G.R. No. 161921, July 17, 2013.
Common carriers; extraordinary diligence in vigilance of goods transported; cargoes while being unloaded
generally remain under the custody of the carrier. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported
by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them. Asian Terminals, Inc. v. Philam Insurance Co., Inc.
(now Chartis Philippines Insurance Inc.)/ Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v.
Westwind Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance
Co., Inc. and Asian Terminals, Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.
Contract; absolutely simulated contracts; void from the beginning. The Court is in accord with the observation
and findings of the (RTC, Kalibo, Aklan) thus:
The amplitude of foregoing undisputed facts and circumstances clearly shows that the sale of the land in
question was purely simulated. It is void from the very beginning (Article 1346, New Civil Code). If the sale was
legitimate, defendant Glenda should have immediately taken possession of the land, declared in her name for
taxation purposes, registered the sale, paid realty taxes, introduced improvements therein and should not have
allowed plaintiff to mortgage the land. These omissions properly militated against defendant Glendas submission
that the sale was legitimate and the consideration was paid.
Dr. Lorna C. Formaran v. Dr. Glenda B. Ong and Solomon S. Ong, G.R. No. 186264, July 8, 2013.
Contract of sale; elements. A valid contract of sale requires: (a) a meeting of minds of the parties to transfer
ownership of the thing sold in exchange for a price; (b) the subject matter, which must be a possible thing; and
(c) the price certain in money or its equivalent. Reman Recio v. Heirs of Spouses Aguego and Maria
Altamirano, G.R. No.182349, July 24, 2013.
Contract to sell; payment of the price; positive suspension condition; effect of failure to pay. Clearly, the RTC
arrived at the above-quoted conclusion based on its mistaken premise that rescission is applicable to the case.
Hence, its determination of whether there was substantial breach. As may be recalled, however, the CA, in its
assailed Decision, found the contract between the parties as a contract to sell, specifically of a real property on
installment basis, and as such categorically declared rescission to be not the proper remedy. This is considering
that in a contract to sell, payment of the price is a positive suspensive condition, failure of which is not a breach
of contract warranting rescission under Article 1191 of the Civil Code but rather just an event that prevents the
supposed seller from being bound to convey title to the supposed buyer. Also, and as correctly ruled by the CA,
Article 1191 cannot be applied to sales of real property on installment since they are governed by the Maceda
Law.
There being no breach to speak of in case of non-payment of the purchase price in a contract to sell, as in this
case, the RTCs factual finding that Lourdes was willing and able to pay her obligation a conclusion arrived at in
connection with the said courts determination of whether the non-payment of the purchase price in accordance
with the terms of the contract was a substantial breach warranting rescission therefore loses significance. The
spouses Bonrostros reliance on the said factual finding is thus misplaced. They cannot invoke their readiness and
willingness to pay their obligation on November 24, 1993 as an excuse from being made liable for interest beyond
the said date. Sps. Nameal and Lourdes Bonrostro v. Sps. Juan and Constacia Luna, G.R. No.172346, July 24,
2013.
Damages; damages for loss of earning capacity; must be duly proven by documentary evidence; exceptions. The
Supreme Court agrees with the Court of Appeals when it removed the RTCs award respecting the indemnity for
the loss of earning capacity. As it has already previously ruled that damages for loss of earning capacity is in the
nature of actual damages, which as a rule must be duly proven by documentary evidence, not merely by the self-
serving testimony of the widow.
By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary
evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws,
and judicial notice may be taken of the fact that in the deceaseds line of work no documentary evidence is
available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under
current labor laws. People of the Philippines v. Garry Vergara y Oriel and Joseph Incencio y Paulino, G.R. No.
177763, July 3, 2013
Damages; exemplary damages; concept. As for exemplary damages, Article 2229 provides that exemplary
damages may be imposed by way of example or correction for the public good. Nonetheless, exemplary damages
are imposed not to enrich one party or impoverish another, but to serve as a deterrent against or as a negative
incentive to curb socially deleterious actions. In the instant case, the Court agrees with the CA in sustaining the
award of exemplary damages, although it reduced the amount granted, considering that respondent spouses
were deprived of their water supply for more than nine (9) months, and such deprivation would have continued
were it not for the relief granted by the RTC. Joyce V. Ardiente v. Spouses Javier and Ma. Theresa Pastofide, G.R.
No. 161921, July 17, 2013.
Damages; exemplary damages; awarded if there is an aggravating circumstance, whether ordinary or
qualifying. Unlike the criminal liability which is basically a State concern, the award of exemplary damages,
however, is likewise, if not primarily, intended for the offended party who suffers thereby. It would make little
sense for an award of exemplary damages to be due the private offended party when the aggravating
circumstance is ordinary but to be withheld when it is qualifying. Withal, the ordinary or qualifying nature of an
aggravating circumstance is a distinction that should only be of consequence to the criminal, rather than to the
civil, liability of the offender. In fine, relative to the civil aspect of the case, an aggravating circumstance, whether
ordinary or qualifying, should entitle the offended party to an award of exemplary damages within the unbridled
meaning of Article 2230 of the Civil Code. People of the Philippines v. Garry Vergara y Oriel and Joseph Incencio y
Paulino, G.R. No. 177763, July 3, 2013.
Damages; interest thereon; where obligation does not constitute a loan or forbearance of money.The CA erred in
imposing an interest rate of 12% on the award of damages. Under Article 2209 of the Civil Code, when an
obligation not constituting a loan or forbearance of money is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of 6% per annum. In the similar case of
Belgian Overseas Chartering and Shipping NV v. Philippine First Insurance Co., lnc., the Court reduced the rate of
interest on the damages awarded to the carrier therein to 6% from the time of the filing of the complaint until
the finality of the decision. Asian Terminals, Inc. v. Philam Insurance Co., Inc. (now Chartis Philippines Insurance
Inc.)/ Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v. Westwind Shipping Corporation and
Asian Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and Asian Terminals,
Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.
Damages; moral damages; when recoverable. In Philippine National Bank v. Spouses Rocamora, the Supreme
Court said that:
Moral damages are not recoverable simply because a contract has been breached. They are recoverable only if
the defendant acted fraudulently or in bad faith or in wanton disregard of his contractual obligations. The breach
must be wanton, reckless, malicious or in bad faith, and oppressive or abusive. Likewise, a breach of contract
may give rise to exemplary damages only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.
Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No. 177050, July 1, 2013.
Damages; moral damages; awarded where the victim of a crime suffered a violent death, even in the absence of
proof of mental and emotional suffering of the victims heirs. The Supreme Court sustained the RTCs award for
moral damages in the amount of P50,000.00 even in the absence of proof of mental and emotional suffering of
the victims heirs. As borne out by human nature and experience, a violent death invariably and necessarily brings
about emotional pain and anguish on the part of the victims family. While no amount of damages may totally
compensate the sudden and tragic loss of a loved one it is nonetheless awarded to the heirs of the deceased to
at least assuage them. People of the Philippines v. Garry Vergara y Oriel and Joseph Incencio y Paulino, G.R. No.
177763, July 3, 2013
Damages; moral and exemplary damages in claims for disability benefits; not recoverable where employer was
not negligent in affording the employee with medical treatment, and employer did not forsake employee during
the period of disability. The CA correctly denied an award of moral and exemplary damages. The respondents
were not negligent in affording the petitioner with medical treatment neither did they forsake him during his
period of disability. Camilo A. Esguerra v. United Philippines Lines, Inc., et al., G.R. No. 199932, July 3, 2013.

Human Relations; abuse of rights; Article 19 of the Civil Code; concept; damages as reliefs. The principle of
abuse of rights as enshrined in Article 19 of the Civil Code provides that every person must, in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and
good faith.
In this regard, the Courts ruling in Yuchengco v. The Manila Chronicle Publishing Corporation is instructive, to
wit:
xxxx
This provision of law sets standards which must be observed in the exercise of ones rights as well as in the
performance of its duties, to wit: to act with justice; give everyone his due; and observe honesty and good faith.
In Globe Mackay Cable and Radio Corporation v. Court of Appeals, it was elucidated that while Article 19 lays
down a rule of conduct for the government of human relations and for the maintenance of social order, it does
not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would
be proper. The Court said:
One of the more notable innovations of the New Civil Code is the codification of some basic principles that are to
be observed for the rightful relationship between human beings and for the stability of the social order. [REPORT
ON THE CODE COMMISSION ON THE PROPOSED CIVIL CODE OF THE PHILIPPINES, p. 39]. The framers of the
Code, seeking to remedy the defect of the old Code which merely stated the effects of the law, but failed to draw
out its spirit, incorporated certain fundamental precepts which were designed to indicate certain norms that
spring from the fountain of good conscience and which were also meant to serve as guides for human conduct
[that] should run as golden threads through society, to the end that law may approach its supreme ideal, which is
the sway and dominance of justice. (Id.)Foremost among these principles is that pronounced in Article 19 x x x.
xxxx
This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain
standards which must be observed not only in the exercise of ones rights, but also in the performance of ones
duties. These standards are the following: to act with justice; to give everyone his due; and to observe honesty
and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in their exercise, the
norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because
recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is
exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But while Article
19 lays down a rule of conduct for the government of human relations and for the maintenance of social order, it
does not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21
would be proper. Joyce V. Ardiente v. Spouses Javier and Ma. Theresa Pastofide, G.R. No. 161921, July 17, 2013.
Human Relations; civil case for fraud; Article 33 of the Civil Code provides that a civil case for damages based on
fraud may proceed independently of the criminal case therefor; said civil case will not operate as a prejudicial
question that will justify the suspension of a criminal case. It is well settled that a civil action based on
defamation, fraud and physical injuries may be independently instituted pursuant to Article 33 of the Civil
Code, and does not operate as a prejudicial question that will justify the suspension of a criminal case. This was
precisely the Courts thrust in G.R. No. 148193, thus:
Moreover, neither is there a prejudicial question if the civil and the criminal action can, according to law, proceed
independently of each other. Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases
provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil action may be brought by the
offended party. It shall proceed independently of the criminal action and shall require only a preponderance of
evidence. In no case, however, may the offended party recover damages twice for the same act or omission
charged in the criminal action.
In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the alleged fraud
committed by respondent and his mother in selling the disputed lot to PBI is an independent civil action under
Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify the suspension of
the criminal case at bar. Rafael Jose Consing, Jr. v. People of the Philippines, G.R. No. 161075, July 15, 2013.
Letter of credit; definition; nature. A letter of credit is a financial device developed by merchants as a convenient
and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller,
who refuses to part with his goods before he is paid, and a buyer, who wants to have control of his goods before
paying. However, letters of credit are employed by the parties desiring to enter into commercial transactions, not
for the benefit of the issuing bank but mainly for the benefit of the parties to the original transaction, in these
cases, Nichimen Corporation as the seller and Universal Motors as the buyer. Hence, the latter, as the buyer of
the Nissan CKD parts, should be regarded as the person entitled to delivery of the goods. Accordingly, for
purposes of reckoning when notice of loss or damage should be given to the carrier or its agent, the date of
delivery to Universal Motors is controlling. Asian Terminals, Inc. v. Philam Insurance Co., Inc. (now Chartis
Philippines Insurance Inc.)/ Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v. Westwind
Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and
Asian Terminals, Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.
Mortgage; includes all natural or civil fruits and improvements found on the mortgaged property when the
secured obligation becomes due; in case of non-payment of the secured debt, foreclosure proceedings shall cover
not only the hypothecated property but all its accessions and accessories as well; indispensable requisite that
mortgagor be the absolute owner of the encumbered property. Rent, as an accessory, follows the principal. In
fact, when the principal property is mortgaged, the mortgage shall include all natural or civil fruits and
improvements found thereon when the secured obligation becomes due as provided in Article 2127 of the Civil
Code, viz:
Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or
income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing
to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with
the declarations, amplifications and limitations established by law, whether the estate remains in the possession
of the mortgagor, or it passes into the hands of a third person.
Consequently, in case of non-payment of the secured debt, foreclosure proceedings shall cover not only the
hypothecated property but all its accessions and accessories as well. This was illustrated in the early case of Cu
Unjieng e Hijos v. Mabalacat Sugar Co. where the Court held:
That a mortgage constituted on a sugar central includes not only the land on which it is built but also the
buildings, machinery, and accessories installed at the time the mortgage was constituted as well as the buildings,
machinery and accessories belonging to the mortgagor, installed after the constitution thereof x x x [.]
Applying such pronouncement in the subsequent case of Spouses Paderes v. Court of Appeals, the Court declared
that the improvements constructed by the mortgagor on the subject lot are covered by the real estate mortgage
contract with the mortgagee bank and thus included in the foreclosure proceedings instituted by the latter.
However, the rule is not without qualifications. In Castro, Jr. v. CA the Court explained that Article 2127 is
predicated on the presumption that the ownership of accessions and accessories also belongs to the mortgagor
as the owner of the principal. After all, it is an indispensable requisite of a valid real estate mortgage that the
mortgagor be the absolute owner of the encumbered property. Philippine National Bank v. Sps. Bernard and
Cresencia Maraon, G.R.No. 189316, July 1, 2013.
Mortgage; mortgagee in good faith; right to have mortgage lien carried over and annotated on the new certificate
of title. The protection afforded to PNB as a mortgagee in good faith refers to the right to have its mortgage lien
carried over and annotated on the new certificate of title issued to Spouses Maraon as so adjudged by the RTC.
Thereafter, to enforce such lien thru foreclosure proceedings in case of non- payment of the secured debt, as
PNB did so pursue. The principle, however, is not the singular rule that governs real estate mortgages and
foreclosures attended by fraudulent transfers to the mortgagor. Philippine National Bank v. Sps. Bernard and
Cresencia Maraon, G.R.No. 189316, July 1, 2013.
Obligations; conditions; fulfillment thereof; deemed fulfilled when obligor voluntarily prevents it fulfillment;
requisites. The spouses Bonrostro want to be relieved from paying interest on the amount of P214,492.62 which
the spouses Luna paid to Bliss as amortizations by asserting that they were prevented by the latter from fulfilling
such obligation. They invoke Art. 1186 of the Civil Code which provides that the condition shall be deemed
fulfilled when the obligor voluntarily prevents its fulfillment.
However, the Court finds Art. 1186 inapplicable to this case. The said provision explicitly speaks of a situation
where it is the obligor who voluntarily prevents fulfillment of the condition. Here, Constancia is not the obligor but
the obligee. Moreover, even if this significant detail is to be ignored, the mere intention to prevent the happening
of the condition or the mere placing of ineffective obstacles to its compliance, without actually preventing
fulfillment is not sufficient for the application of Art. 1186. Two requisites must concur for its application, to wit:
(1) intent to prevent fulfillment of the condition; and, (2) actual prevention of compliance. Sps. Nameal and
Lourdes Bonrostro v. Sps. Juan and Constacia Luna, G.R. No.172346, July 24, 2013.
Obligations; constructive fulfillment; Article 1186 of the Civil Code; requisites. As aptly pointed out by the CA,
Article 1186 of the Civil Code, which states that the condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment, does not apply in this case, viz:
Article 1186 enunciates the doctrine of constructive fulfillment of suspensive conditions, which applies when the
following three (3) requisites concur, viz: (1) The condition is suspensive; (2) The obligor actually prevents the
fulfillment of the condition; and (3) He acts voluntarily. Suspensive condition is one the happening of which gives
rise to the obligation. It will be irrational for any Bank to provide a suspensive condition in the Promissory Note or
the Restructuring Agreement that will allow the debtor-promissor to be freed from the duty to pay the loan
without paying it.
Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No. 177050, July 1, 2013.

Obligations; if an obligation consists of payment of money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest. Under Article 2209 ofthe Civil Code, [i]fthe obligation consists in the
payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation,
the legal interest x x x. There being no stipulation on interest in case ofdelay in the payment ofamortization, the
CA thus correctly imposed interest at the legal rate which is now 12%per annum. Sps. Nameal and Lourdes
Bonrostro v. Sps. Juan and Constacia Luna, G.R. No.172346, July 24, 2013.
Penalties and interest rates; penalties and interest rates should be expressly stipulated in writing.As to the
imposition of additional interest and penalties not stipulated in the Promissory Notes, this should not be allowed.
Article 1956 of the Civil Code specifically states that no interest shall be due unless it has been expressly
stipulated in writing. Thus, the payment of interest and penalties in loans is allowed only if the parties agreed to
it and reduced their agreement in writing. Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No.
177050, July 1, 2013.
Prescription; Article 1144 of the Civil Code. We concur with the CAs ruling that respondents action did not yet
prescribe. The legal provision governing this case was not Article 1146 of the Civil Code,but Article 1144 of
the Civil Code, which states:
Article 1144. The following actions must be brought within ten years from the time the cause of action accrues:
(1)Upon a written contract; (2) Upon an obligation created by law; (3)Upon a judgment.
Vector Shipping Corporation, et al. v. American Home Assurance Co., et al., G.R. No. 159213, July 3, 2013.
Property; co-ownership; sale of co-owned property; if only one co-owner agreed to the sale, said co-owner only
sold his aliquot share in the subject property. But as held by the appellate court, the sale between the petitioner
and Alejandro is valid insofar as the aliquot share of respondent Alejandro is concerned. Being a co-owner,
Alejandro can validly and legally dispose of his share even without the consent of all the other co-heirs. Since the
balance of the full price has not yet been paid, the amount paid shall represent as payment to
his aliquot share. This then leaves the sale of the lot of the Altamiranos to the Spouses Lajarca valid only insofar
as their shares are concerned, exclusive of the aliquot part of Alejandro, as ruled by the CA. Reman Recio v. Heirs
of Spouses Aguego and Maria Altamirano, G.R. No.182349, July 24, 2013.
Property; patrimonial property and property of public dominion; patrimonial property of the State may be the
object of prescription, however, those intended for some public service or the development of national wealth are
property of public dominion, which are not susceptible to acquisition by prescription; public domain lands become
patrimonial property only if there is a declaration that these are alienable or disposable, together with an express
government manifestation that the property is already patrimonial or no longer retained for public service or the
development of national wealth. Under Article 422 of the Civil Code, public domain lands become patrimonial
property only if there is a declaration that these are alienable or disposable, together with an express government
manifestation that the property is already patrimonial or no longer retained for public service or the development
of national wealth. Only when the property has become patrimonial can the prescriptive period for the acquisition
of property of the public dominion begin to run. Also under Section 14(2) of Presidential Decree (P.D.) No. 1529,
it is provided that before acquisitive prescription can commence, the property sought to be registered must not
only be classified as alienable and disposable, it must also be expressly declared by the State that it is no longer
intended for public service or the development of the national wealth, or that the property has been converted
into patrimonial. Absent such an express declaration by the State, the land remains to be property of public
dominion. Dream Village Neighborhood Association, Inc., represented by its Incumbent President Greg Seriego v.
Bases Conversion Development Authority, G.R. No.192896, July 24, 2013.
Rent; civil fruit; rightful recipient. Rent is a civil fruit that belongs to the owner of the property producing it by
right of accession. The rightful recipient of the disputed rent in this case should thus be the owner of the subject
lot at the time the rent accrued. Philippine National Bank v. Sps. Bernard and Cresencia Maraon, G.R.No.
189316, July 1, 2013.
Subrogation; basis; definition. Consistent with the pertinent law and jurisprudence, therefore, Exhibit I was
already enough by itself to prove the payment of P7,455,421.00 as the full settlement of Caltexs claim. The
payment made to Caltex as the insured being thereby duly documented, respondent became subrogated as a
matter of course pursuant to Article 2207 of the Civil Code. In legal contemplation, subrogation is the
substitution of another person in the place of the creditor, to whose rights he succeeds in relation to the debt;
and is independent of any mere contractual relations between the parties to be affected by it, and is broad
enough to cover every instance in which one party is required to pay a debt for which another is primarily
answerable, and which in equity and conscience ought to be discharged by the latter. Vector Shipping
Corporation, et al. v. American Home Assurance Co., et al., G.R. No. 159213, July 3, 2013.
Subrogation in insurance cases; accrues simply upon payment by the insurance company of the insurance claim;
payment by the insurer to the insured operates as an equitable assignment to the insurer of all remedies that the
insured may have against the third party whose negligence or wrongful act caused the loss. The Court holds that
petitioner Philam has adequately established the basis of its claim against petitioners ATI and Westwind. Philam,
as insurer, was subrogated to the rights of the consignee, Universal Motors Corporation, pursuant to the
Subrogation Receipt executed by the latter in favor of the former. The right of subrogation accrues simply upon
payment by the insurance company of the insurance claim. Petitioner Philams action finds support in Article 2207
of the Civil Code, which provides as follows:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall
be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. x x
x.
Yet, even with the exclusion of Marine Certificate No. 708-8006717-4, the Subrogation Receipt, on its own, is
adequate proof that petitioner Philam paid the consignees claim on the damaged goods. Petitioners ATI and
Westwind failed to offer any evidence to controvert the same. In Malayan Insurance Co., Inc. v. Alberto, the
Court explained the effect of payment by the insurer of the insurance claim in this wise:
We have held that payment by the insurer to the insured operates as an equitable assignment to the insurer of all
the remedies that the insured may have against the third party whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract. It accrues simply
upon payment by the insurance company of the insurance claim. The doctrine of subrogation has its roots in
equity. It is designed to promote and accomplish justice; and is the mode that equity adopts to compel the
ultimate payment of a debt by one who, in justice, equity, and good conscience, ought to pay. Asian Terminals,
Inc. v. Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.)/ Philam Insurance Co., Inc. (now
Chartis Philippines Insurance Inc.) v. Westwind Shipping Corporation and Asian Terminals, Inc./ Westwind
Shipping Corporation v. Philam Insurance Co., Inc. and Asian Terminals, Inc., G.R. Nos. 181163/181262/181319,
July 24, 2013.
Tender of payment; concept; tender of payment, if refused without just cause, will discharge the debtor only
after a valid consignation with the court; when tender of payment is not accompanied by the means of payment,
and the debtor did not take any immediate step to make a consignation, then interest is not suspended from the
time of such tender. Tender of payment is the manifestation by the debtor of a desire to comply with or pay an
obligation. If refused without just cause, the tender of payment will discharge the debtor of the obligation to pay
but only after a valid consignation of the sum due shall have been made with the proper court. Consignation is
the deposit of the [proper amount with a judicial authority] in accordance with rules prescribed by law, after the
tender of payment has been refused or because of circumstances which render direct payment to the creditor
impossible or inadvisable.
Tender of payment, without more, produces no effect. [T]o have the effect of payment and the consequent
extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and
consignation.
As to the effect of tender of payment on interest, noted civilist Arturo M. Tolentino explained as follows:
When a tender of payment is made in such a form that the creditor could have immediately realized payment if
he had accepted the tender, followed by a prompt attempt of the debtor to deposit the means of payment in
court by way of consignation, the accrual of interest on the obligation will be suspended from the date of such
tender. But when the tender of payment is not accompanied by the means of payment, and the
debtor did not take any immediate step to make a consignation, then interest is not suspended from
the time of such tender. x x x x (Emphasis supplied) Sps. Nameal and Lourdes Bonrostro v. Sps. Juan and
Constacia Luna, G.R. No.172346, July 24, 2013.
Special Laws
Act No. 3135; foreclosure sale; personal notice to the mortgagor in extrajudicial foreclosure proceedings is
necessary where there is a stipulation to this effect, and failure to comply with the stipulated notice requirement
is a contractual breach sufficient to render the foreclosure sale null and void. It has been consistently held that
unless the parties stipulate, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not
necessary because Section 3117 of Act 3135 only requires the posting of the notice of sale in three public places
and the publication of that notice in a newspaper of general circulation.
In this case, the parties stipulated in paragraph 11 of the Mortgage that:
11. All correspondence relative to this mortgage, including demand letters, summons, subpoenas, or notification
of any judicial or extra-judicial action shall be sent to the Mortgagor at xxx or at the address that may hereafter
be given in writing by the Mortgagor or the Mortgagee;
However, no notice of the extrajudicial foreclosure was sent by DBP to petitioners about the foreclosure sale
scheduled on July 11, 1994. The letters dated January 28, 1994 and March 11, 1994 advising petitioners to
immediately pay their obligation to avoid the impending foreclosure of their mortgaged properties are not the
notices required in paragraph 11 of the Mortgage. The failure of DBP to comply with their contractual agreement
with petitioners, i.e., to send notice, is a breach sufficient to invalidate the foreclosure sale. Carlos Lim, et al. v.
Development Bank of the Philippines,G.R. No. 177050, July 1, 2013.
Bases Conversion Development Authority (BCDA); BCDA holds title to Fort Bonifacio; Dream Village sits on the
abandoned C-5 Road, which lies outside the areas declared in Proclamation Nos. 2476 and 172 as alienable and
disposable. That the BCDA has title to Fort Bonifacio has long been decided with finality. In Samahan ng Masang
Pilipino sa Makati, Inc. v. BCDA, it was categorically ruled as follows:
First, it is unequivocal that the Philippine Government, and now the BCDA, has title and ownership over Fort
Bonifacio. The case of Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati is final and
conclusive on the ownership of the then Hacienda de Maricaban estate by the Republic of the Philippines. Clearly,
the issue on the ownership of the subject lands in Fort Bonifacio is laid to rest. Other than their view that the USA
is still the owner of the subject lots, petitioner has not put forward any claim of ownership or interest in
them. Dream Village Neighborhood Association, Inc., represented by its Incumbent President Greg Seriego v.
Bases Conversion Development Authority, G.R. No.192896, July 24, 2013.
Common Carrier; Carriage of Goods by Sea Act (COGSA); prescriptive period for filing an action for loss or
damage of goods. The prescriptive period for filing an action for the loss or damage of the goods under the
COGSA is found in paragraph (6), Section 3, thus:
(6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the
carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of
the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence
of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent,
the notice must be given within three days of the delivery. Said notice of loss or damage maybe endorsed upon
the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if
the state of the goods has at the time of their receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit
is brought within one year after delivery of the goods or the date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the
delivery of the goods or the date when the goods should have been delivered. Asian Terminals, Inc. v. Philam
Insurance Co., Inc. (now Chartis Philippines Insurance Inc.)/ Philam Insurance Co., Inc. (now Chartis Philippines
Insurance Inc.) v. Westwind Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v.
Philam Insurance Co., Inc. and Asian Terminals, Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.
Common Carrier; Carriage of Goods by Sea Act (COGSA); prescriptive period for filing an action for loss or
damage of goods. The prescriptive period for filing an action for the loss or damage of the goods under the
COGSA is found in paragraph (6), Section 3, thus:
(6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the
carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of
the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence
of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent,
the notice must be given within three days of the delivery. Said notice of loss or damage maybe endorsed upon
the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if
the state of the goods has at the time of their receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit
is brought within one year after delivery of the goods or the date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the
delivery of the goods or the date when the goods should have been delivered. Asian Terminals, Inc. v. Philam
Insurance Co., Inc. (now Chartis Philippines Insurance Inc.)/ Philam Insurance Co., Inc. (now Chartis Philippines
Insurance Inc.) v. Westwind Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v.
Philam Insurance Co., Inc. and Asian Terminals, Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.
Family Code; marriage; void ab initio for lack of a marriage license; no inconsistency in finding the marriage null
and void ab initio and, at the same time, non-existent; contracts which are absolutely simulated or fictitious are
inexistent and void from the beginning. There is no inconsistency in finding the marriage between Benjamin and
Sally null and void ab initio and, at the same time, non-existent. Under Article 35 of the Family Code, a marriage
solemnized without a license, except those covered by Article 34 where no license is necessary, shall be void
from the beginning. In this case, the marriage between Benjamin and Sally was solemnized without a license. It
was duly established that no marriage license was issued to them and that Marriage License No. N-07568 did not
match the marriage license numbers issued by the local civil registrar of Pasig City for the month of February
1982. The case clearly falls under Section 3 of Article 3520 which made their marriage void ab initio. The
marriage between Benjamin and Sally was also non-existent. Applying the general rules on void or inexistent
contracts under Article 1409 of the Civil Code, contracts which are absolutely simulated or fictitious are inexistent
and void from the beginning. Thus, the Court of Appeals did not err in sustaining the trial courts ruling that the
marriage between Benjamin and Sally was null and void ab initio and non-existent. Sally Go-Bangayan v.
Benjamin Bangayan, Jr., G.R. No. 201061, July 3, 2013.
Family Code; marriage license; certification from the local civil registrar is adequate to prove the non-issuance of
a marriage license and, absent any suspicious circumstance, the certification enjoys probative value. The
certification from the local civil registrar is adequate to prove the non-issuance of a marriage license and absent
any suspicious circumstance, the certification enjoys probative value, being issued by the officer charged under
the law to keep a record of all data relative to the issuance of a marriage license. Sally Go-Bangayan v. Benjamin
Bangayan, Jr., G.R. No. 201061, July 3, 2013.
Family Code; property relations in cases of cohabitation without the benefit of marriage; rules. The Court of
Appeals correctly ruled that the property relations of Benjamin and Sally is governed by Article 148 of the Family
Code which states:
Art. 148. In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of
the parties through their actual joint contribution of money, property, or industry shall be owned by them in
common in proportion to their respective contributions. In the absence of proof to the contrary, their
contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to
joint deposits of money and evidences of credit.
If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the
absolute community of conjugal partnership existing in such valid marriage. If the party who acted in bad faith is
not validly married to another, his or her share shall be forfeited in the manner provided in the last paragraph of
the preceding Article.
The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.
Benjamin and Sally cohabitated without the benefit of marriage. Thus, only the properties acquired by them
through their actual joint contribution of money, property, or industry shall be owned by them in common in
proportion to their respective contributions. Sally Go-Bangayan v. Benjamin Bangayan, Jr., G.R. No. 201061, July
3, 2013.
Land ownership; decree of registration for which an OCT was issued is accorded greater weight as against tax
declarations and tax receipts in the name of another; tax declarations and tax receipts only become the basis of a
claim of ownership when coupled with proof of actual possession of property. In the case of Ferrer-Lopez v.
CA, the Court ruled that as against an array of proofs consisting of tax declarations and/or tax receipts which are
not conclusive evidence of ownership nor proof of the area covered therein, an original certificate of title, which
indicates true and legal ownership by the registered owners over the disputed premises, must prevail.
Accordingly, respondents Decree No. 98992 for which an original certificate of title was issued should be
accorded greater weight as against the tax declarations and tax receipts presented by petitioners in this case.
Besides, tax declarations and tax receipts may only become the basis of a claim for ownership when they are
coupled with proof of actual possession of the property. Heirs of Alejandra Delfin, namely, Leopoldo Delfin, et al.
v. Avelina Rabadon, G.R. No. 165014, July 31, 2013.
Land registration; decree of registration bars all claims and rights which arose or may have existed prior to the
decree of registration. It is an elemental rule that a decree of registration bars all claims and rights which arose
or may have existed prior to the decree of registration. By the issuance of the decree, the land is bound and title
thereto quieted, subject only to certain exceptions under the property registration decree. Heirs of Alejandra
Delfin, namely, Leopoldo Delfin, et al. v. Avelina Rabadon, G.R. No. 165014, July 31, 2013.
Republic Act No. 26; reconstitution of title; nature of proceeding; Torrens system; sources of reconstitution;
mandatory requirements of publication, posting, and notice. At the outset, the Court notes that the present
amended petition for reconstitution is anchored on the owners duplicate copy of TCT No. 8240 a source for
reconstitution of title under Section 3(a)29 of RA 26 which, in turn, is governed by the provisions of Section 10 in
relation to Section 9 of RA 26 with respect to the publication, posting, and notice requirements. Section 10 reads:
SEC. 10. Nothing hereinbefore provided shall prevent any registered owner or person in interest from filing the
petition mentioned in section five of this Act directly with the proper Court of First Instance, based on sources
enumerated in sections 2(a), 2(b), 3(a), 3(b), and/or 4(a) of this Act: Provided, however, That the court shall
cause a notice of the petition, before hearing and granting the same, to be published in the manner stated in
section nine hereof: And, provided, further, That certificates of title reconstituted pursuant to this section shall
not be subject to the encumbrance referred to in section seven of this Act.
Corollarily, Section 9 reads in part:
SEC. 9. x x x Thereupon, the court shall cause a notice of the petition to be published, at the expense of the
petitioner, twice in successive issues of the Official Gazette, and to be posted on the main entrance of the
provincial building and of the municipal building of the municipality or city in which the land lies, at least thirty
days prior to the date of hearing, and after hearing, shall determine the petition and render such judgment as
justice and equity may require. x x x.
The foregoing provisions, therefore, clearly require that (a) notice of the petition should be published in two (2)
successive issues of the Official Gazette; and (b) publication should be made at least thirty (30) days prior to the
date of hearing. Substantial compliance with this jurisdictional requirement is not enough; it bears stressing that
the acquisition of jurisdiction over a reconstitution case is hinged on a strict compliance with the requirements of
the law. Republic of the Philippines v. Ricordito N. De Asis, Jr., G.R. No. 193874, July 24, 2013.
Torrens system; the issue on the validity of title necessitates a remand of the case. The Court recognizes the
importance of protecting the countrys Torrens system from fake land titles and deeds. Considering that there is
an issue on the validity of the title of petitioner VSD, which title is alleged to be traceable to OCT No. 994
registered on April 19, 1917, which mother title was held to be inexistent in Manotok Realty, Inc. v. CLT
Realty Development Corporation, in the interest of justice, and to safeguard the correct titling of properties,
a remand is proper to determine which of the parties derived valid title from the legitimate OCT No. 994
registered on May 3, 1917. Since this Court is not a trier of facts and not capacitated to appreciate evidence
of the first instance, the Court may remand this case to the Court of Appeals for further proceedings, as it has
been similarly tasked in Manotok Realty, Inc. v. CLT Realty Development Corporation. VSD Realty &
Development Corporation v. Uniwide Sales, Inc. and Dolores Baello Tejada, G.R. No. 170677, July 31, 2013
Torrens system; Torrens title; lands under a Torrens title cannot be acquired by prescription or adverse
possession. Moreover, it is a settled rule that lands under a Torrens title cannot be acquired by prescription or
adverse possession. Section 47 of P.D. No. 1529, the Property Registration Decree, expressly provides that no
title to registered land in derogation of the title of the registered owner shall be acquired by prescription or
adverse possession. And, although the registered landowner may still lose his right to recover the possession of
his registered property by reason of laches, nowhere has Dream Village alleged or proved laches, which has been
defined as such neglect or omission to assert a right, taken in conjunction with lapse of time and other
circumstances causing prejudice to an adverse party, as will operate as a bar in equity. Put any way, it is a delay
in the assertion of a right which works disadvantage to another because of the inequity founded on some change
in the condition or relations of the property or parties. It is based on public policy which, for the peace of society,
ordains that relief will be denied to a stale demand which otherwise could be a valid claim. Dream Village
Neighborhood Association, Inc., represented by its Incumbent President Greg Seriego v. Bases Conversion
Development Authority, G.R. No.192896, July 24, 2013.

August 2013 Philippine Supreme Court Decisions on Civil Law
Compensation; Concept; Requisites. Compensation is a mode of extinguishing to the concurrent amount, the
debts of persons who in their own right are creditors and debtors of each other. The object of compensation is
the prevention of unnecessary suits and payments through the mutual extinction by operation of law of
concurring debts. Article 1279 of the Civil Code provides for the requisites for compensation to take effect:
Article 1279. In order that compensation may be proper, it is necessary:
(1)That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
other;
(2)That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3)That the two debts be due;
(4)That they be liquidated and demandable;
(5)That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
Adelaida Soriano v. People of the Philippines, G.R. No. 181692, August 14, 2013.
Compensation; when both debts are liquidated and demandable. A debt is liquidated when the amount is known
or is determinable by inspection of the terms and conditions of relevant documents. Adelaida Soriano v. People of
the Philippines, G.R. No. 181692, August 14, 2013.
Contracts; determination of nature of contract. In determining the nature of a contract, courts are not bound by
the title or name given by the parties. The decisive factor in evaluating such agreement is the intention of the
parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions
and deeds prior to, during and immediately after executing the agreement. As such, therefore, documentary and
parol evidence may be submitted and admitted to prove such intention. Hur Tin Yang v. People of the
Philippines, G.R. No. 195117, August 14, 2013.
Co-ownership; rights of co-owners. Having succeeded to the property as heirs of Gregoria and Romana,
petitioners and respondents became co-owners thereof. As co-owners, they may use the property owned in
common, provided they do so in accordance with the purpose for which it is intended and in such a way as not to
injure the interest of the co-ownership or prevent the other co-owners from using it according to their
rights. They have the full ownership of their parts and of the fruits and benefits pertaining thereto, and may
alienate, assign or mortgage them, and even substitute another person in their enjoyment, except when personal
rights are involved. Each co-owner may demand at any time the partition of the thing owned in common, insofar
as his share is concerned. Finally, no prescription shall run in favor of one of the co-heirs against the others so
long as he expressly or impliedly recognizes the co-ownership. Antipolo Ining (deceased), survived by Manuel
Villanueva, Teodora Villanueva-Francisco, Camilo Francisco, Adolfo Francisco, Lucimo Francisco, Jr., Milagros
Francisco,Celedonio Francisco, Herminigildo Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea
(deceased) survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry
Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon
Gonzales and Remedios Rimon Cordero; and Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro
Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega, Restonilo I. Vega, Crispulo M. Vega, Milbuena Vega-
Restituto and Lenard Vega, G.R. No. 174727, August 12, 2013.
Co-ownership; prescription; for prescription to set in, the repudiation must be done by a co-owner;
requisites. Time and again, it has been held that a co-owner cannot acquire by prescription the share of the
other co-owners, absent any clear repudiation of the co-ownership. In order that the title may prescribe in favor
of a co-owner, the following requisites must concur: (1) the co-owner has performed unequivocal acts of
repudiation amounting to an ouster of the other co-owners; (2) such positive acts of repudiation have been made
known to the other co-owners; and (3) the evidence thereof is clear and convincing. In fine, since none of the
co-owners made a valid repudiation of the existing co-ownership, Leonardo could seek partition of the property at
any time.Antipolo Ining (deceased), survived by Manuel Villanueva, Teodora Villanueva-Francisco, Camilo
Francisco, Adolfo Francisco, Lucimo Francisco, Jr., Milagros Francisco,Celedonio Francisco, Herminigildo
Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea (deceased) survived by Edilberto Ibea,
Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz;
Dolores Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon Gonzales and Remedios Rimon Cordero;
and Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro Ining, Jr. v. Leonardo R. Vega,
substituted by Lourdes Vega, Restonilo I. Vega, Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R.
No. 174727, August 12, 2013.
Damages; actual damages; requires competent proof of the actual amount of loss. To justify an award for actual
damages, there must be competent proof of the actual amount of loss. Credence can be given only to claims duly
supported by receipts. Respondents did not submit any documentary proof, like receipts, to support their claim
for actual damages. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No.
170942, August 28, 2013.
Damages; attorneys fees; allowed when exemplary damages are awarded or where the plaintiff has incurred
expenses to protect his interest by reason of defendants act or omission. Article 2208 of the Civil Code allows
recovery of attorneys fees when exemplary damages are awarded or where the plaintiff has incurred expenses to
protect his interest by reason of defendants act or omission. Considering that exemplary damages were properly
awarded here, and that respondents hired a private lawyer to litigate its cause, the Supreme Court agrees with
the RTC and CA that the P30,000.00 allowed as attorneys fees were appropriate and reasonable. Comsavings
Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No. 170942, August 28, 2013.

Damages; Award of attorneys fees and litigation expenses and costs; justified when there is bad faith. Even
granting that Atty. Sabitsana has ceased to act as the Muertegui familys lawyer, he still owed them his
loyalty. The termination of attorney-client relation provides no justification for a lawyer to represent an interest
adverse to or in conflict with that of the former client on a matter involving confidential information which the
lawyer acquired when he was counsel. The clients confidence once reposed should not be divested by mere
expiration of professional employment. This is underscored by the fact that Atty. Sabitsana obtained information
from Carmen which he used to his advantage and to the detriment of his client.
[F]rom the foregoing disquisition, it can be seen that petitioners are guilty of bad faith in pursuing the sale of the
lot despite being apprised of the prior sale in respondents favor. Moreover, petitioner Atty. Sabitsana has
exhibited a lack of loyalty toward his clients, the Muerteguis, and by his acts, jeopardized their interests instead
of protecting them. Over and above the trial courts and the CAs findings, this provides further justification for
the award of attorneys fees, litigation expenses and costs in favor of the respondent. Spouses Celemencio C.
Sabitsana, Jr. and Ma. Rosario M. Sabitsana v. Juanito F. Muertegui, represented by his attorney-in-fact, Domingo
A. Muertegui, Jr., G.R. No. 181359, August 5, 2013.
Damages; Attorneys fees; what constitute bad faith. There was no gross and evident bad faith on the part of
Asian Construction in filing its complaint against Sumitomo since it was merely seeking payment of its unpaid
works done pursuant to the Agreement. Neither can its subsequent refusal to accept Sumitomos offered
compromise be classified as a badge of bad faith since it was within its right to either accept or reject the same
owing to its contractual nature. Absent any other just or equitable reason to rule otherwise, these incidents are
clearly off-tangent with a finding of gross and evident bad faith which altogether negates Sumitomos entitlement
to attorneys fees. Asian Construction and Development Corporation v. Sumitomo Corporation / Sumitomo
Corporation v. Asia Construction and Development Corporation, G.R. No. 196723 / G.R. No. 196728, August 28,
2013.
Damages; Attorneys fees; when awarded. Jurisprudence dictates that in the absence of a governing stipulation,
attorneys fees may be awarded only in case the plaintiffs action or defendants stand is so untenable as to
amount to gross and evident bad faith. This is embodied in Article 2208 of the Civil Code which states:
Article 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
x x x x
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just
and demandable claim;
x x x x
Asian Construction and Development Corporation v. Sumitomo Corporation / Sumitomo Corporation v. Asia
Construction and Development Corporation, G.R. No. 196723 / G.R. No. 196728, August 28, 2013.
Damages; Exemplary damages; the law allows the grant of exemplary damages to set an example for the public
good. The law allows the grant of exemplary damages to set an example for the public good. The business of a
bank is affected with public interest; thus, it makes a sworn profession of diligence and meticulousness ingiving
irreproachable service. For this reason, the bank should guard against injury attributable to negligence or bad
faith on its part. The banking sector must at all times maintain a high level of meticulousness. The grant of
exemplary damages is justified by the initial carelessness of petitioner, aggravated by its lack of promptness in
repairing its error. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No.
170942, August 28, 2013.
Damages; Moral damages; recoverable for acts or actions referred to in Article 20 of the Civil Code. In their
amended complaint, respondents claimed that the acts of GCB Builders and Comsavings Bank had caused them
to suffer sleepless nights, worries and anxieties. The claim was well founded. Danilo worked in Saudi Arabia in
order to pay the loan used for the construction of their family home. His anxiety and anguish over the incomplete
and defective construction of their house, as well as the inconvenience he and his wife experienced because of
this suit were not easily probable. On her part, Estrella was a mere housewife, but was the attorney-in-fact of
Danilo in matters concerning the loan transaction. With Danilo working abroad, she was alone in overseeing the
house construction and the progress of the present case. Given her situation, she definitely experienced worries
and sleepless nights. The award of moral damages of P100,000.00 awarded by the CA as exemplary damages is
proper. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No. 170942,
August 28, 2013.
Damages; Temperate damages; may be recovered when the court finds that some pecuniary loss was suffered
but its amount cannot be proved with certainty. Nonetheless, it cannot be denied that they had suffered
substantial losses. Article 2224 of the Civil Code allows the recovery of temperate damages when the court finds
that some pecuniary loss was suffered but its amount cannot be proved with certainty. In lieu of actual damages,
therefore, temperate damages of P25,000.00 are awarded. Such amount, in the courts view, is reasonable under
the circumstances. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No.
170942, August 28, 2013.

Damages; Interests; Eastern Shipping Lines guidelines as modified by BSP-MB Circular No. 799. The Supreme
Court set out the following guidelines on damages and interest due:
1. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on Damages of the
Civil Code govern in determining the measure of recoverable damages.
2. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate
of interest, as well as the accrual thereof, is imposed, as follows:
(a) When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of of
stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 the Civil Code.
(b) When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code),
but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.
(c) When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit. Dario Nacar v. Gallery Frames and/or Felipe Borde, Jr., G.R. No. 189871, August 13, 2013.
Gross negligence; concept. Based on the provisions, a banking institution like Comsavings Bank is obliged to
exercise the highest degree of diligence as well as high standards of integrity and performance in all its
transactions because its business is imbued with public interest. As aptly declared in Philippine National Bank v.
Pike: [T]he stability of banks largely depends on the confidence of the people in the honesty and efficiency of
banks. Gross negligence connotes want of care in the performance of ones duties; it is a negligence
characterized by the want of even slight care, acting or omitting to act in a situation where there is duty to act,
not inadvertently but willfully and intentionally, with a conscious indifference to consequences insofar as other
persons may be affected. It evinces a thoughtless disregard of consequences without exerting any effort to avoid
them. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No. 170942, August
28, 2013.
Interest; Legal rate of interest effective July 1, 2013; pursuant to BSP Circular 799, series of 2013, the legal rate
of interest shall be 6% per annum. The Court held that [P]ursuant to Circular No. 799, series of 2013 of
the Bangko Sentral ng Pilipinas which took effect July 1, 2013, the amount of P6,000.00, erroneously paid by
Petitioner to the bank, shall earn interest at the rate of 6% per annum computed from the filing of the Petition in
Civil Case No. 5535 up to its full satisfaction.Virginia M. Venzon v. Rural Bank of Buenavista, Inc., represented by
Lourdesita E. Parajes, G.R. No. 178031, August 28, 2013.
Interest; legal rate of interest; interest at 6% per annum imposed on award in favor of illegally dismissed
employees. Interest at the rate of 6% per annum must be imposed on the award for separation pay, back
wages, and attorneys fees to illegally dismissed employees in accordance with Circular No. 799, Series of 2013 of
the Bangko Sentral ng Pilipinas which took effect July 1, 2013.Vicente Ang v. Seferino San Joaquin, Jr., and
Diosdado Fernandez, G.R. No. 185549, August 7, 2013.
Interest; legal interest; where obligation constitutes a loan or forbearance of money, goods or credit; legal rate
allowed in judgments. In the absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in
judgments shall no longer be 12% per annum. As reflected in the case of Eastern Shipping Lines and Subsection
X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of
Regulations for Non-Bank Financial Institutions, before its amendment by BSP-MB Circular No. 799, the interest
rate will now be 6% per annum effective July 1, 2013. Dario Nacar v. Gallery Frames and/or Felipe Borde,
Jr., G.R. No. 189871, August 13, 2013.
Interest; Legal interest; prospective application. It should be noted that the new rate could only be applied
prospectively and not retroactively. Consequently, the 12% per annum legal interest shall apply only until June
30, 2013. Come July 1, 2013 the new rate of 6% per annum shall be the prevailing rate of interest when
applicable. Nonetheless, with regard to those judgments that have become final and executory prior to July 1,
2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein. Dario Nacar v. Gallery Frames and/or Felipe Borde, Jr., G.R. No. 189871, August 13, 2013.

Laches; definition. The Court observes that laches had already set in, thereby precluding the Andrades from
pursuing their claim. Case law defines laches as the failure to assert a right for an unreasonable and unexplained
length of time, warranting a presumption that the party entitled to assert it has either abandoned or declined to
assert it. Bobby Tan v. Grace Andrade, et al./Grace Andrade, et al. v. Bobby Tan, G.R. Nos. 171904 & 172017,
August 7, 2013.

Quasi-contracts; solutio indebiti; concept. In a controversy over payment made after the foreclosure of the
mortgaged property, the Court held: Since respondent was not entitled to receive the said amount, as it is
deemed fully paid from the foreclosure of petitioners property since its bid price at the auction sale covered all
that petitioner owed it by way of principal, interest, attorneys fees and charges, it must return the same to
petitioner. If something is received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. Virginia M. Venzon v. Rural Bank of Buenavista, Inc., represented by
Lourdesita E. Parajes, G.R. No. 178031, August 28, 2013.

Sales; double sale involving unregistered land; Article 1544 of the Civil Code does not apply; prior sale, even if
made through an unnotarized deed of sale, prevails; registration of second sale is unavailing as registration does
not vest title; Under Act 3344, registration if instruments affecting unregistered lands is without prejudice to a
third party with a better right; actual and prior knowledge of the first sale makes the subsequent buyers
purchasers in bad faith. Article 1544 of the Civil Code does not apply to sales involving unregistered land. Both
the trial court and the CA are, however, wrong in applying Article 1544 of the Civil Code. Both courts seem to
have forgotten that the provision does not apply to sales involving unregistered land. Suffice it to state that the
issue of the buyers good or bad faith is relevant only where the subject of the sale is registered land, and the
purchaser is buying the same from the registered owner whose title to the land is clean. In such case, the
purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for
value.
The sale to respondent Juanito was executed on September 2, 1981 via an unnotarized deed of sale, while the
sale to petitioners was made via a notarized document only on October 17, 1991, or ten years thereafter. Thus,
Juanito who was the first buyer has a better right to the lot, while the subsequent sale to petitioners is null and
void, because when it was made, the seller Garcia was no longer the owner of the lot. Nemo dat quod non habet.
The fact that the sale to Juanito was not notarized does not alter anything, since the sale between him and
Garcia remains valid nonetheless. Notarization, or the requirement of a public document under the Civil Code, is
only for convenience, and not for validity or enforceability. And because it remained valid as between Juanito and
Garcia, the latter no longer had the right to sell the lot to petitioners, for his ownership thereof had ceased.
Nor can petitioners registration of their purchase have any effect on Juanitos rights. The mere registration of a
sale in ones favor does not give him any right over the land if the vendor was no longer the owner of the land,
having previously sold the same to another even if the earlier sale was unrecorded. Neither could it validate the
purchase thereof by petitioners, which is null and void. Registration does not vest title; it is merely the evidence
of such title. Our land registration laws do not give the holder any better title than what he actually has.
Under Act No. 3344, registration of instruments affecting unregistered lands is without prejudice to a third party
with a better right. The aforequoted phrase has been held by the Court to mean that the mere registration of a
sale in ones favor does not give him any right over the land if the vendor was not anymore the owner of the land
having previously sold the same to somebody else even if the earlier sale was unrecorded.
Petitioners defense of prescription, laches and estoppel are unavailing since their claim is based on a null and
void deed of sale. The fact that the Muerteguis failed to interpose any objection to the sale in petitioners favor
does not change anything, nor could it give rise to a right in their favor; their purchase remains void and
ineffective as far as the Muerteguis are concerned. Spouses Celemencio C. Sabitsana, Jr. and Ma. Rosario M.
Sabitsana v. Juanito F. Muertegui, represented by his attorney-in-fact, Domingo A. Muertegui, Jr., G.R. No.
181359, August 5, 2013.

Sales; actual and prior knowledge of the first sale makes the subsequent buyers purchasers in bad
faith. Petitioners actual and prior knowledge of the first sale to Juanito makes them purchasers in bad faith. It
also appears that petitioner Atty. Sabitsana was remiss in his duties as counsel to the Muertegui family. Instead
of advising the Muerteguis to register their purchase as soon as possible to forestall any legal complications that
accompany unregistered sales of real property, he did exactly the opposite: taking advantage of the situation and
the information he gathered from his inquiries and investigation, he bought the very same lot and immediately
caused the registration thereof ahead of his clients, thinking that his purchase and prior registration would
prevail. The Court cannot tolerate this mercenary attitude. Instead of protecting his clients interest, Atty.
Sabitsana practically preyed on him. Spouses Celemencio C. Sabitsana, Jr. and Ma. Rosario M. Sabitsana v.
Juanito F. Muertegui, represented by his attorney-in-fact, Domingo A. Muertegui, Jr., G.R. No. 181359, August 5,
2013.

Succession; siblings are heirs of decedent who died without issue. Since Leon died without issue, his heirs are his
siblings, Romana and Gregoria, who thus inherited the property in equal shares. In turn, Romanas and Gregorias
heirs the parties herein became entitled to the property upon the sisters passing. Under Article 777 of the
Civil Code, the rights to the succession are transmitted from the moment of death. Antipolo Ining (deceased),
survived by Manuel Villanueva, Teodora Villanueva-Francisco, Camilo Francisco, Adolfo Francisco, Lucimo
Francisco, Jr., Milagros Francisco,Celedonio Francisco, Herminigildo Francisco; Ramon Tresvalles, Roberto
Tajonera, Natividad Ining-Ibea (deceased) survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen Ibea,
Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores Ining-Rimon (deceased) survived by
Jesus Rimon, Cesaria Rimon Gonzales and Remedios Rimon Cordero; and Pedro Ining (deceased) survived by
Elisa Tan Ining (wife) and Pedro Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega, Restonilo I. Vega,
Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R. No. 174727, August 12, 2013.
Special Laws
Correction of name; adversary proceeding; impleading and notice to affected and interested parties; when failure
to implead and notify is cured by publication of notice of hearing; strict compliance with the Rules of Court
mandated when petition involves substantial and controversial alterations. Respondents birth certificate shows
that her full name is Anita Sy, that she is a Chinese citizen and a legitimate child of Sy Ton and Sotera Lugsanay.
In filing the petition, however, she seeks the correction of her first name and surname, her status from
legitimate to illegitimate and her citizenship from Chinese to Filipino. Thus, respondent should have
impleaded and notified not only the Local Civil Registrar but also her parents and siblings as the persons who
have interest and are affected by the changes or corrections respondent wanted to make.
The fact that the notice of hearing was published in a newspaper of general circulation and notice thereof was
served upon the State will not change the nature of the proceedings taken. A reading of Sections 4 and 5, Rule
108 of the Rules of Court shows that the Rules mandate two sets of notices to different potential oppositors: one
given to the persons named in the petition and another given to other persons who are not named in the petition
but nonetheless may be considered interested or affected parties. Summons must, therefore, be served not for
the purpose of vesting the courts with jurisdiction but to comply with the requirements of fair play and due
process to afford the person concerned the opportunity to protect his interest if he so chooses.
While there may be cases where the Court held that the failure to implead and notify the affected or interested
parties may be cured by the publication of the notice of hearing, earnest efforts were made by petitioners in
bringing to court all possible interested parties. Such failure was likewise excused where the interested parties
themselves initiated the corrections proceedings; when there is no actual or presumptive awareness of the
existence of the interested parties; or when a party is inadvertently left out.
It is clear from the foregoing discussion that when a petition for cancellation or correction of an entry in the civil
register involves substantial and controversial alterations, including those on citizenship, legitimacy of paternity or
filiation, or legitimacy of marriage, a strict compliance with the requirements of Rule 108 ofthe Rules of Court is
mandated. If the entries in the civil register could be corrected or changed through mere summary proceedings
and not through appropriate action wherein all parties who may be affected by the entries are notified or
represented, the door to fraud or other mischief would be set open, the consequence of which might be
detrimental and far reaching. Republic of the Philppines v. Dr. Norma S. Lugsanay Uy, G.R. No. 198010, August
12, 2013.
Correction of name; Appropriate adversary proceeding; definition. What is meant by appropriate adversary
proceeding? Blacks Law Dictionary defines adversary proceeding as follows:
One having opposing parties; contested, as distinguished from an ex parte application, one of which the party
seeking relief has given legal warning to the other party, and afforded the latter an opportunity to contest it.
Excludes an adoption proceeding. Republic of the Philppines v. Dr. Norma S. Lugsanay Uy, G.R. No. 198010,
August 12, 2013.
Correction of name; errors in a civil registry and facts established in an appropriate adversary proceeding. It has
been settled in a number of cases starting with Republic v. Valencia that even substantial errors in a civil registry
may be corrected and the true facts established provided the parties aggrieved by the error avail themselves of
the appropriate adversary proceeding. The pronouncement of the Court in that case is illuminating:
It is undoubtedly true that if the subject matter of a petition is not for the correction of clerical errors of a
harmless and innocuous nature, but one involving nationality or citizenship, which is indisputably substantial as
well as controverted, affirmative relief cannot be granted in a proceeding summary in nature. However, it is also
true that a right in law may be enforced and a wrong may be remedied as long as the appropriate remedy is
used. This Court adheres to the principle that even substantial errors in a civil registry may be corrected and the
true facts established provided the parties aggrieved by the error avail themselves of the appropriate adversary
proceeding. Republic of the Philppines v. Dr. Norma S. Lugsanay Uy, G.R. No. 198010, August 12, 2013.
Family Relations; Conjugal property; presumption that all property of the marriage is presumed to belong to the
conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife; for
presumption to apply, party invoking the same must preliminarily prove that the property was indeed acquired
during the marriage; presumption cannot apply where there is no showing as to when the property alleged to be
conjugal was acquired. Pertinent to the resolution of this second issue is Article 160 of the Civil Code which states
that [a]ll property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife. For this presumption to apply, the party invoking the same
must, however, preliminarily prove that the property was indeed acquired during the marriage. As held in Go v.
Yamane:
x x As a condition sine qua non for the operation of [Article 160] in favor of the conjugal partnership, the party
who invokes the presumption must first prove that the property was acquired during the marriage.
In other words, the presumption in favor of conjugality does not operate if there is no showing of when the
property alleged to be conjugal was acquired. Moreover, the presumption may be rebutted only with strong,
clear, categorical and convincing evidence. There must be strict proof of the exclusive ownership of one of the
spouses, and the burden of proof rests upon the party asserting it.
In this case, there is no evidence to indicate when the property was acquired by petitioner Josefina. Thus, we
agree with petitioner Josefinas declaration in the deed of absolute sale she executed in favor of the respondent
that she was the absolute and sole owner of the property. Bobby Tan v. Grace Andrade, et al./Grace Andrade, et
al. v. Bobby Tan, G.R. Nos. 171904 & 172017, August 7, 2013.
Family relations. Under the Family Code, family relations, which is the primary basis for succession, exclude
relations by affinity. Antipolo Ining (deceased), survived by Manuel Villanueva, Teodora Villanueva-Francisco,
Camilo Francisco, Adolfo Francisco, Lucimo Francisco, Jr., Milagros Francisco,Celedonio Francisco, Herminigildo
Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea (deceased) survived by Edilberto Ibea,
Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz;
Dolores Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon Gonzales and Remedios Rimon Cordero;
and Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro Ining, Jr. v. Leonardo R. Vega,
substituted by Lourdes Vega, Restonilo I. Vega, Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R.
No. 174727, August 12, 2013.
Land titles; indefeasibility of certificate of title to public land issued pursuant to a grant or patent; false statement
exception; reversion of land. The certificate of title issued pursuant to any grant or patent involving public lands is
as conclusive and indefeasible as any other certificate of title issued to private lands in the ordinary or cadastral
registration proceedings. It is not subject to collateral attack. However, Section 91 of Commonwealth Act No. 141
(The Public Land Act) provides for the cancellation of the concession, title or permit granted for any false
statement in the application or omission of facts in the application.
Once a patent is registered and the corresponding certificate of title is issued, the land covered by it ceases to be
part of the public domain and becomes private property, and the Torrens Title issued pursuant to the patent
becomes indefeasible upon the expiration of one year from the date of issuance of such patent. However, as held
in The Director of Lands v. De Luna, et al., even after the lapse of one year, the State may still bring an action
under Section 101 of Commonwealth Act No. 141 for the reversion to the public domain of land which has been
fraudulently granted to private individuals. The burden of proof rests on the party who asserts the affirmative of
an issue. Republic of the Philippines v. Angeles Bellate, and Spouses Jesus Cabanto and Marieta Juanerio, G.R.
No. 175685, August 7, 2013.
Land titles; Fraud in an application for grant of title to public land or patent; definition. It was held on Libudan v.
Gil that [t]he fraud must consist in an intentional omission of facts required by law to be stated in the application
or a willful statement of a claim against the truth. It must show some specific acts intended to deceive and
deprive another of his right. The fraud must be actual and extrinsic, not merely constructive or intrinsic; the
evidence thereof must be clear, convincing and more than merely preponderant, because the proceedings which
are assailed as having been fraudulent are judicial proceedings which by law, are presumed to have been fair and
regular.Republic of the Philippines v. Angeles Bellate, and Spouses Jesus Cabanto and Marieta Juanerio, G.R. No.
175685, August 7, 2013.
Trust receipts; purpose. To emphasize, the Trust Receipts Law was created to to aid in financing importers and
retail dealers who do not have sufficient funds or resources to finance the importation or purchase of
merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the
merchandise imported or purchased. Hur Tin Yang v. People of the Philippines, G.R. No. 195117, August 14,
2013.
Trust receipts; when not a trust receipts transaction. Nonetheless, when both parties enter into an agreement
knowing fully well that the return of the goods subject of the trust receipt is not possible even without any fault
on the part of the trustee, it is not a trust receipt transaction penalized under Sec. 13 of PD 115 in relation to Art.
315, par. 1(b) of the RPC, as the only obligation actually agreed upon by the parties would be the return of the
proceeds of the sale transaction. This transaction becomes a mere loan, where the borrower is obligated to pay
the bank the amount spent for the purchase of the goods. Hur Tin Yang v. People of the Philippines, G.R. No.
195117, August 14, 2013.

September 2013 Philippine Supreme Court Decisions on Civil Law
Civil registry; nature of civil register books; books making up the civil register and all documents relating thereto
are public documents and shall be prima facie evidence of the facts therein contained; as public documents, they
are admissible in evidence even without further proof of their due execution and genuineness.There is no
question that the documentary evidence submitted by petitioner are all public documents. As provided in the Civil
Code:
ART. 410. The books making up the civil register and all documents relating thereto shall be considered public
documents and shall be prima facie evidence of the facts therein contained.
As public documents, they are admissible in evidence even without further proof of their due execution and
genuineness. Thus, the RTC erred when it disregarded said documents on the sole ground that the petitioner did
not present the records custodian of the NSO who issued them to testify on their authenticity and due execution
since proof of authenticity and due execution was not anymore necessary. Moreover, not only are said documents
admissible, they deserve to be given evidentiary weight because they constitute prima facie evidence of the facts
stated therein. And in the instant case, the facts stated therein remain unrebutted since neither the private
respondent nor the public prosecutor presented evidence to the contrary. In Yasuo Iwasawa v. Felisa Custodio
Gangan (a.k.a. Felisa Gangan Arambulo and Felisa Gangan Iwasawa), et al., G.R. No. 204169, September 11,
2013.
Contracts; contract to sell distinguished from contract of sale; in a contract to sell, ownership remains with the
vendor and does not pass to the vendee until full payment of the purchase price; a deed of sale is absolute when
there is no stipulation in the contract that title to the property remains with the seller until the full payment of the
purchase price. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not
pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a
suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising. To
differentiate, a deed of sale is absolute when there is no stipulation in the contract that title to the property
remains with the seller until full payment of the purchase price. Ramos v. Heruela held that Articles 1191 and
1592 of the Civil Code are applicable to contracts of sale, while R.A. No. 6552 applies to contracts to sell. Manuel
Uy & Sons, Inc. v. Valbueco, Incorporated, G.R. No. 179594, September 11, 2013.
Contracts; lease contracts; lease contracts survive the death of the parties and continue to bind the heirs except
if the contract states otherwise; the provision in the lease contract stating that this contract is nontransferable
unless prior written consent of the lessor is obtained in writing refers to transfers inter vivos and not
transmissions mortis causa. The Supreme Court has previously ruled that lease contracts, by their nature, are not
personal. The general rule, therefore, is lease contracts survive the death of the parties and continue to bind the
heirs except if the contract states otherwise. In Sui Man Hui Chan v. Court of Appeals, we held that: A lease
contract is not essentially personal in character. Thus, the rights and obligations therein are transmissible to the
heirs. The general rule, therefore, is that heirs are bound by contracts entered into by their predecessors-in-
interest except when the rights and obligations arising therefrom are not transmissible by (1) their nature, (2)
stipulation or (3) provision of law. In the subject Contract of Lease, not only were there no stipulations
prohibiting any transmission of rights, but its very terms and conditions explicitly provided for the transmission of
the rights of the lessor and of the lessee to their respective heirs and successors. The contract is the law between
the parties. The death of a party does not excuse nonperformance of a contract, which involves a property right,
and the rights and obligations thereunder pass to the successors or representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the other party has a property interest in the
subject matter of the contract. Section 6 of the lease contract provides that [t]his contract is nontransferable
unless prior consent of the lessor is obtained in writing. Section 6 refers to transfers inter vivos and not
transmissions mortis causa. What Section 6 seeks to avoid is for the lessee to substitute a third party in place of
the lessee without the lessors consent. Manuel Uy & Sons, Inc. v. Valbueco, Incorporated, G.R. No. 179594,
September 11, 2013.
Contracts; lease contracts; sublease arrangement; concept. Assignment or transfer of lease, which is covered by
Article 1649 of the Civil Code, is different from a sublease arrangement, which is governed by Article 1650 of the
same Code. In a sublease, the lessee becomes in turn a lessor to a sub-lessee. The sub-lessee then becomes
liable to pay rentals to the original lessee. However, the juridical relation between the lessor and lessee is not
dissolved. The parties continue to be bound by the original lease contract. Thus, in a sublease arrangement,
there are at least three parties and two distinct juridical relations. Manuel Uy & Sons, Inc. v. Valbueco,
Incorporated, G.R. No. 179594, September 11, 2013.
Contracts; lease contracts; lessees right upon the termination of the lease to (a) claim reimbursement from the
lessor for half the value of the useful improvements introduced by the lessee in good faith, or to (b) demolish of
such improvements. The CA erred in not applying Article 1678 of the Civil Code which provides: Art. 1678. If the
lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended,
without altering the form or substance of the property leased, the lessor upon the termination of the lease shall
pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said
amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby.
He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to
ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental
objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by
paying their value at the time the lease is extinguished.
The foregoing provision applies if the improvements were: (1) introduced in good faith; (2) useful; and (3)
suitable to the use for which the lease is intended, without altering the form and substance. We find that the
aforementioned requisites are satisfied in this case. The buildings were constructed before Germans demise,
during the subsistence of a valid contract of lease. It does not appear that HDSJ prohibited German from
constructing the buildings. Thus, HDSJ should have reimbursed German (or his estate) half of the value of the
improvements as of 2001. If HDSJ is not willing to reimburse the Inocencios, then the latter should be allowed to
demolish the buildings.Manuel Uy & Sons, Inc. v. Valbueco, Incorporated, G.R. No. 179594, September 11, 2013.
Contracts; tortious interference; elements; exception. As correctly pointed out by the Inocencios, tortious
interference has the following elements: (1) existence of a valid contract; (2) knowledge on the part of the third
person of the existence of the contract; and (3) interference of the third person without legal justification or
excuse. In So Ping Bun v. Court of Appeals, we held that there was no tortious interference if the intrusion was
impelled by purely economic motives. In So Ping Bun, we explained that: Authorities debate on whether
interference may be justified where the defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for interfering with the business relations of
another exists where the actors motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities believe that it is not necessary that the
interferers interest outweighs that of the party whose rights are invaded, and that an individual acts under an
economic interest that is substantial, not merely de minimis, such that wrongful and malicious motives are
negatived, for he acts in self-protection. Moreover, justification for protecting ones financial position should not
be made to depend on a comparison of his economic interest in the subject matter with that of others. It is
sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. Analita
P. Inocencion, substituting for Ramon Inocencion (deceased) v. Hospicio de San Jose, G.R. No. 201787,
September 25, 2013.
Damages; loss of earning capacity; compensation for lost income is in the nature of damages and as such
requires due proof of the damages suffered; there must be unbiased proof of the deceaseds income. In People v.
Caraig, the Supreme Court had drawn two exceptions to the rule that documentary evidence should be
presented to substantiate the claim for damages for loss of earning capacity, and have thus awarded damages
where there is testimony that the victim was either (1) self-employed earning less than the minimum wage under
current labor laws, and judicial notice may be taken of the fact that in the victims line of work no documentary
evidence is available; or (2) employed as a daily-wage worker earning less than the minimum wage under current
labor laws. In People of the Philippines v. Edwin Ibanez y Albante, et al., G.R. No. 197813, September 25, 2013.

Estoppel; requisites. For estoppel to take effect, there must be knowledge of the real facts by the party sought to
be estopped and reliance by the party claiming estoppel on the representation made by the former. In this case,
petitioner cannot be estopped from asking for the return of the vessel in the condition that it had been at the
time it was seized by respondent because he had not known of the deteriorated condition of the ship. Ernesto Dy
v. Hon. Gina M. Bibat-Palamos, in her capacity as Presiding Judge of the RTC, Branch 64, Makati City, and Orix
Metro Leasing and Finance Corporation, G.R. No. 196200, September 11, 2013.
Interest; Judgment award; imposition of interests; under BSP Circular No. 799, effective on July 1, 2013, the
interest rate to be imposed for a loan or forbearance of money, goods or credits and the rate allowed in
judgments in the absence of stipulation thereon, was changed from 12% to 6%.Notice must be taken that in
Resolution No. 796 dated May 16, 2013, the Monetary Board of the Bangko Sentral ng Pilipinas approved the
revision of the interest rate to be imposed for the loan or forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of an express contract as to such rate of interest. Thus, under BSP
Circular No. 799, issued on June 21, 2013 and effective on July 1, 2013, the said rate of interest is now back at
six percent (6%), S.C. Megaworld Construction and Development Corporation v. Engr. Luis U. Parada,
represented by Engr. Leonardo A. Parada of Genlite Industries, G.R. No. 183804, September 11, 2013.
Laches; concept; the question of laches is addressed to the sound discretion of the court and, being an equitable
doctrine, its application is controlled by equitable considerations. Laches has been defined as the failure or
neglect for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could
or should have been done earlier, thus, giving rise to a presumption that the party entitled to assert it either has
abandoned or declined to assert it.
On this score, it is a well-settled principle of law that laches is a recourse in equity, which is, applied only in the
absence of statutory law. And though laches applies even to imprescriptible actions, its elements must be proved
positively. Ultimately, the question of laches is addressed to the sound discretion of the court and, being an
equitable doctrine, its application is controlled by equitable considerations. Citibank, N.A. and the Citigroup
Private Bank v. Ester H. Tanco-Gabaldon, et al./ Carol Lim v. Ester H. Tanco-Gabaldon, et al., G.R. No.
198444/G.R. No. 198469-70, September 4, 2013.
Obligations; novation; concept; elements. In novation, a subsequent obligation extinguishes a previous one
through substitution either by changing the object or principal conditions, by substituting another in place of the
debtor, or by subrogating a third person into the rights of the creditor. Novation requires (a) the existence of a
previous valid obligation; (b) the agreement of all parties to the new contract; (c) the extinguishment of the old
contract; and (d) the validity of the new one. There cannot be novation in this case since the proposed
substituted parties did not agree to the PRAs supposed assignment of its obligations under the contract for the
electrical and light works at Heritage Park to the HPMC. The latter definitely and clearly rejected the PRAs
assignment of its liability under that contract to the HPMC. Philippine Reclamation Authority (formerly known as
the Public Estates Authority v. Romago, Inc./Romago, Inc. Vs. Philippine Reclamation Authority,G.R. Nos. 174665
and 175221, September 18, 2013.
Obligations; novation as a mode of extinguishing an obligation; concept; novation is never presumed but must be
clearly and unequivocally shown. Novation is a mode of extinguishing an obligation by changing its objects or
principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the
rights of the creditor. It is the substitution of a new contract, debt, or obligation for an existing one between the
same or different parties. The settled rule is that novation is never presumed, but must be clearly and
unequivocally shown. In order for a new agreement to supersede the old one, the parties to a contract must
expressly agree that they are abrogating their old contract in favor of a new one. Thus, the mere substitution of
debtors will not result in novation, and the fact that the creditor accepts payments from a third person, who has
assumed the obligation, will result merely in the addition of debtors and not novation, and the creditor may
enforce the obligation against both debtors. If there is no agreement as to solidarity, the first and new debtors
are considered obligated jointly. Philippine Reclamation Authority (formerly known as thePublic Estates Authority
v. Romago, Inc./Romago, Inc. Vs. Philippine Reclamation Authority,G.R. Nos. 174665 and 175221, September 18,
2013.
SPECIAL LAWS
Land registration; an applicant who seeks to have a land registered in his name has the burden of proving that he
is its owner in fee simple. As held in Republic v. Lee:
The most basic rule in land registration cases is that no person is entitled to have land registered under the
Cadastral or Torrens system unless he is the owner in fee simple of the same, even though there is no opposition
presented against such registration by third persons. x x x In order that the petitioner for the registration of his
land shall be permitted to have the same registered, and to have the benefit resulting from the certificate of title,
finally, issued, the burden is upon him to show that he is the real and absolute owner, in fee simple.
In First Gas Power Corporation v. Republic of the Philippines, Represented by the Office of the Solicitor
General, G.R. No. 169461, September 2, 2013.

Land registration; Nature of land registration proceedings; land registration proceedings are in rem in nature and,
hence, by virtue of the publication requirement, all claimants and occupants of the subject property are deemed
to be notified of the existence of a cadastral case involving the subject lots; parties are precluded from re-
litigating the same issues already determined by final judgment. In this case, records disclose that petitioner itself
manifested during the proceedings before the RTC that there subsists a decision in a previous cadastral case, i.e.,
Cad. Case No. 37, which covers the same lots it applied apprised of the existence of the foregoing decision even
before the rendition of the RTC Decision and Amended Order through the LRA Report dated as early as
November 24, 1998 which, as above-quoted, states that the subject lots were previously applied for registration
of title in the [c]adastral proceedings and were both decided under [Cad. Case No. 37], GLRO Record No. 1969,
and are subject to the following annotation x x x: Lots 1298 (45-1) [and] 1315 (61-1) Pte. Nueva doc. Since it
had been duly notified of an existing decision which binds over the subject lots, it was incumbent upon petitioner
to prove that the said decision would not affect its claimed status as owner of the subject lots in fee simple.
In First Gas Power Corporation v. Republic of the Philippines, Represented by the Office of the Solicitor
General, G.R. No. 169461, September 2, 2013.

Land registration proceedings; nature; being a proceeding in rem, there is no need to give personal notice to the
owners or claimants of the land sought to be registered in order to vest the courts with power and authority over
the res. Since no issue was raised as to Antonia Victorinos compliance with the prerequisites of notice and
publication, she is deemed to have followed such requirements. As a consequence, petitioner is deemed
sufficiently notified of the hearing of Antonias application. Hence, she cannot claim that she is denied due
process. In Crisanta Guido-Enriquez v. Alicia I. Victorino, et al., G.R. No. 180427, September 30, 2013.

Land registration; requirement that the application for land registration must state the full names and addresses
of all occupants of the land and those of the adjoining owners, if known, and if not known, it must state the
extent of the search made to find them. As to the alleged denial of petitioners right to due process due to
Antonia Victorinos failure to identify petitioner as indispensable party in her application for registration, as well as
to serve her with actual and personal notice, Section 15 of Presidential Decree No. 1529 simply requires that the
application for registration shall state the full names and addresses of all occupants of the land and those of the
adjoining owners, if known, and, if not known, it shall state the extent of the search made to find them. A
perusal of Antonia Victorinos Application shows that she enumerated the adjoining owners. She also indicated
therein that, to the best of her knowledge, no person has any interest or is in possession of the subject land. The
fact that she did not identify petitioner as an occupant or an adjoining owner is not tantamount to denial of
petitioners right to due process and does not nullify the RTC Decision granting such application. In Crisanta
Guido-Enriquez v. Alicia I. Victorino, et al., G.R. No. 180427, September 30, 2013.

Land Registration; Torrens title; conclusive evidence of ownership of the land; the phrase married to is merely
descriptive of the civil status of the registered owner. A Torrens title is generally a conclusive evidence of the
ownership of the land referred to, because there is a strong presumption that it is valid and
regularly issued.25 The phrase married to is merely descriptive of the civil status of the registered owner. In
Juan Sevilla Salas, Jr. v. Eden Villena Aguil, G.R. No. 202370, September 23, 2013.

Marriage; property regimes for marriages that are subsequently declared void under Article 36 of the Family
Code; property acquired during the marriage is presumed to have been obtained through the couples joint
efforts and governed by the rules on co-ownership. In Dio v. Dio, the Supreme Court held that Article 147 of
the Family Code applies to the union of parties who are legally capacitated and not barred by any impediment to
contract marriage, but whose marriage is nonetheless declared void under Article 36 of the Family Code, as in
this case. Article 147 of the Family Code provides:
ART. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other
as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be
owned by them in equal shares and the property acquired by both of them through their work or
industry shall be governed by the rules on coownership.
In the absence of proof to the contrary, properties acquired while they lived together shall be
presumed to have been obtained by their joint efforts, work or industry, and shall be owned by
them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the
other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the formers
efforts consisted in the care and maintenance of the family and of the household.
Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during
cohabitation and owned in common, without the consent of the other, until after the termination of their
cohabitation.
When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-
ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the
common children or their descendants, each vacant share shall belong to the respective surviving descendants. In
the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take
place upon termination of the cohabitation. (Emphasis supplied)
Under this property regime, property acquired during the marriage is prima facie presumed to have been
obtained through the couples joint efforts and governed by the rules on co-ownership. InJuan Sevilla Salas, Jr. v.
Eden Villena Aguil, G.R. No. 202370, September 23, 2013.

Marriage; nullity of marriage; a judicial declaration of nullity is required before a valid subsequent marriage can
be contracted, or else, what transpires is a bigamous marriage. The Supreme Court has consistently held that a
judicial declaration of nullity is required before a valid subsequent marriage can be contracted; or else, what
transpires is a bigamous marriage, which is void from the beginning as provided in Article 35(4) of the Family
Code of the Philippines. In Yasuo Iwasawa v. Felisa Custodio Gangan (a.k.a. Felisa Gangan Arambulo and
Felisa Gangan Iwasawa), et al., G.R. No. 204169, September 11, 2013.
Realty Installment Buyer Act; right of buyer to refund on installments in case he defaults in the payments of
succeeding installments accrues only when he has paid at least two years of installments. Under R.A. No. 6552,
the right of the buyer to refund accrues only when he has paid at least two years of installments. In this case,
respondent has paid less than two years of installments; hence, it is not entitled to a refund. Manuel Uy & Sons,
Inc. v. Valbueco, Incorporated,G.R. No. 179594, September 11, 2013.

November 2013 Philippine Supreme Court Decisions on Civil Law
CIVIL CODE
Contracts; binding effect. It is hornbook doctrine in the law on contracts that the parties are bound by the
stipulations, clauses, terms and conditions they have agreed to provided that such stipulations, clauses, terms
and conditions are not contrary to law, morals, public order or public policy. Consolidated Industrial Gases, Inc. v.
Alabang Medical Center, G.R. No. 181983, November 13, 2013.
Contracts; breach of; when moral damages may be awarded. In Francisco v. Ferrer,this Court ruled that moral
damages may be awarded on the following bases:
To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless,
malicious, in bad faith, oppressive or abusive.
Under the provisions of this law, in culpa contractual or breach of contract, moral damages may be recovered
when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive
of tort resulting in physical injuries.
Moral damages may be awarded in breaches of contracts where the defendant acted fraudulently or in bad faith.
Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that
partakes of the nature of fraud.
The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for
the law always presumes good faith. It is not enough that one merely suffered sleepless nights, mental anguish,
serious anxiety as the result of the actuations of the other party. Invariably such action must be shown to have
been willfully done in bad faith or will ill motive. Mere allegations of besmirched reputation, embarrassment and
sleepless nights are insufficient to warrant an award for moral damages. It must be shown that the proximate
cause thereof was the unlawful act or omission of the [private respondent] petitioners.
An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury,
whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be culpable
act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate
cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code. Alejandro V. Tankeh v. Development Bank of the Philippines, et
al., G.R. No. 171428, November 11, 2013.
Contracts; breach of; damages; exemplary damages; concept. Exemplary damages are discussed in Article 2229
of the Civil Code, as follows:
ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction of the public good, in
addition to moral, temperate, liquidated or compensatory damages.
Exemplary damages are further discussed in Articles 2233 and 2234, particularly regarding the pre-requisites of
ascertaining moral damages and the fact that it is discretionary upon this Court to award them or not:
ART. 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not
they should be adjudicated.
ART. 2234. While the amount of the exemplary damages need not be proven, the plaintiff must show that he is
entitled to moral, temperate or compensatory damages before the court may consider the question of whether or
not exemplary damages should be awarded x x x
The purpose of exemplary damages is to serve as a deterrent to future and subsequent parties from the
commission of a similar offense. The case of People v. Rante citing People v. Dalisay held that:
Also known as punitive or vindictive damages, exemplary or corrective damages are intended to serve as a
deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of the rights of
an injured or a punishment for those guilty of outrageous conduct. These terms are generally, but not always,
used interchangeably. In common law, there is preference in the use of exemplary damages when the award is to
account for injury to feelings and for the sense of indignity and humiliation suffered by a person as a result of an
injury that has been maliciously and wantonly inflicted, the theory being that there should be compensation for
the hurt caused by the highly reprehensible conduct of the defendantassociated with such circumstances as
willfulness, wantonness, malice, gross negligence or recklessness, oppression, insult or fraud or gross fraudthat
intensifies the injury. The terms punitive or vindictive damages are often used to refer to those species of
damages that may be awarded against a person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer and others like him from similar conduct in the
future.
To justify an award for exemplary damages, the wrongful act must be accompanied by bad faith, and an award
of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent
manner. Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11,
2013.
Contracts; fraud; concept; dolo incidente distinguished from dolo causante. In Solidbank Corporation v. Mindanao
Ferroalloy Corporation, et al.,this Court elaborated on the distinction between dolo causante and dolo incidente:
Fraud refers to all kinds of deception whether through insidious machination, manipulation, concealment or
misrepresentation that would lead an ordinarily prudent person into error after taking the circumstances into
account. In contracts, a fraud known as dolo causante or causal fraud is basically a deception used by one party
prior to or simultaneous with the contract, in order to secure the consent of the other. Needless to say, the deceit
employed must be serious. In contradistinction, only some particular or accident of the obligation is referred to by
incidental fraud or dolo incidente, or that which is not serious in character and without which the other party
would have entered into the contract anyway.Alejandro V. Tankeh v. Development Bank of the Philippines, et
al., G.R. No. 171428, November 11, 2013.
Contracts; fraud; dolo incidente and dolo causante; effect on contracts.The distinction between fraud as a ground
for rendering a contract voidable or as basis for an award of damages is provided in Article 1344: In order that
fraud may make a contract voidable, it should be serious and should not have been employed by both contracting
parties. Incidental fraud only obliges the person employing it to pay damages. (1270) There are two types of
fraud contemplated in the performance of contracts: dolo incidente or incidental fraud and dolo causante or fraud
serious enough to render a contract voidable.
This fraud or dolo which is present or employed at the time of birth or perfection of a contract may either be dolo
causante or dolo incidente. The first, or causal fraud referred to in Article 1338, are those deceptions or
misrepresentations of a serious character employed by one party and without which the other party would not
have entered into the contract. Dolo incidente, or incidental fraud which is referred to in Article 1344, are those
which are not serious in character and without which the other party would still have entered into the contract.
Dolo causante determines or is the essential cause of the consent, while dolo incidente refers only to some
particular or accident of the obligation. The effects of dolo causante are the nullity of the contract and the
indemnification of damages, and dolo incidente also obliges the person employing it to pay damages.

Alejandro
V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11, 2013.
Contracts; fraud; quantum of evidence required to prove existence of; clear and convincing evidence. Neither law
nor jurisprudence distinguishes whether it is dolo incidente or dolo causante that must be proven by clear and
convincing evidence. It stands to reason that both dolo incidente and dolo causante must be proven by clear and
convincing evidence. The only question is whether this fraud, when proven, may be the basis for making a
contract voidable (dolo causante), or for awarding damages (dolo incidente), or both.
The standard of proof required is clear and convincing evidence. This standard of proof is derived from American
common law. It is less than proof beyond reasonable doubt (for criminal cases) but greater than preponderance
of evidence (for civil cases). The degree of believability is higher than that of an ordinary civil case. Civil cases
only require a preponderance of evidence to meet the required burden of proof. However, when fraud is alleged
in an ordinary civil case involving contractual relations, an entirely different standard of proof needs to be
satisfied. The imputation of fraud in a civil case requires the presentation of clear and convincing evidence. Mere
allegations will not suffice to sustain the existence of fraud. The burden of evidence rests on the part of the
plaintiff or the party alleging fraud. The quantum of evidence is such that fraud must be clearly and convincingly
shown. Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11,
2013.
Contracts; Reciprocal obligations; concept; for failing to perform all its correlative obligation under the reciprocal
contract, a party cannot unilaterally demand performance by the other party. Reciprocal obligations are those
which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that
the performance of one is conditioned upon the simultaneous fulfillment of the other. In reciprocal obligations,
neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what
is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.
In reciprocal obligations, before a party can demand the performance of the obligation of the other, the former
must also perform its own obligation. Consolidated Industrial Gases, Inc. v. Alabang Medical Center, G.R. No.
181983, November 13, 2013.
Contracts; rescission; grounds. Rescission of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental violations as would defeat the very object of the parties in making the
agreement. Whether a breach is substantial is largely determined by the attendant circumstances. Consolidated
Industrial Gases, Inc. v. Alabang Medical Center, G.R. No. 181983, November 13, 2013.
Damages; actual damages; concept; when awarded. For damages to be recovered, the best evidence obtainable
by the injured party must be presented. Actual or compensatory damages cannot be presumed, but must be
proved with reasonable degree of certainty. The Court cannot rely on speculation, conjecture or guesswork as to
the fact and amount of damages, but must depend upon competent proof that they have been suffered and on
evidence of the actual amount. If the proof is flimsy and unsubstantial, no damages will be
awarded. Consolidated Industrial Gases, Inc. v. Alabang Medical Center, G.R. No. 181983, November 13, 2013.
Estoppel; cannot be made to apply against the government. Granting that the persons representing the
government was negligent, the doctrine of estoppel cannot be taken against the Republic. It is a well-settled rule
that the Republic or its government is not estopped by mistake or error on the part of its officials or agents.
In any case, even granting that the said official was negligent, the doctrine of estoppel cannot operate against
the State. It is a well-settled rule in our jurisdiction that the Republic or its government is usually not estopped
by mistake or error on the part of its officials or agents (Manila Lodge No. 761 vs. CA, 73 SCRA 166, 186;
Republic vs. Marcos, 52 SCRA 238, 244; Luciano vs. Estrella, 34 SCRA 769). Republic of the Philippines v. Antonio
Bacas, et al., G.R. No. 182913, November 20, 2013.
Sales; sale of real property; authority of the agent must be in writing; otherwise the sale is null and void. Articles
1874 of the Civil Code provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void.
Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the authority of the agent to sell a
real property must be conferred in writing, to wit:
Art. 1878. Special powers of attorney are necessary in the following cases:
(1) x x x
x x x
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
x x x.
The foregoing provisions explicitly require a written authority when the sale of a piece of land is through an
agent, whether the sale is gratuitously or for a valuable consideration. Absent such authority in writing, the sale is
null and void. Spouses Eliseo R. Bautista and Emperatriz C. Bautista v. Spouses Mila Jalandoni and Antonio
Jalandoni and Manila Credit Corporation, G.R. No. 171464/G.R. No. 199341, November 27, 2013.
Sales; sale of real property; buyer in good faith; conditions to prove good faith; failure to verify extent and nature
of agents authority. A buyer in good faith is one who buys the property of another without notice that some
other person has a right to or interest in such property. He is a buyer for value if he pays a full and fair price at
the time of the purchase or before he has notice of the claim or interest of some other person in the property.
Good faith connotes an honest intention to abstain from taking unconscientious advantage of another.To prove
good faith, the following conditions must be present: (a) the seller is the registered owner of the land; (b) the
owner is in possession thereof; and (3) at the time of the sale, the buyer was not aware of any claim or interest
of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to
convey title to the property. All these conditions must be present, otherwise, the buyer is under obligation to
exercise extra ordinary diligence by scrutinizing the certificates of title and examining all factual circumstances to
enable him to ascertain the sellers title and capacity to transfer any interest in the property. Spouses Eliseo R.
Bautista and Emperatriz C. Bautista v. Spouses Mila Jalandoni and Antonio Jalandoni and Manila Credit
Corporation, G.R. No. 171464/G.R. No. 199341, November 27, 2013.
Sales; sale of real property on installment; grace period. Section 3(a) of R.A. 6552 provides that the total grace
period corresponds to one month for every one year of installment payments made, provided that the buyer may
exercise this right only once in every five years of the life of the contract and its extensions. The buyers failure to
pay the installments due at the expiration of the grace period allows the seller to cancel the contract after 30
days from the buyers receipt of the notice of cancellation or demand for rescission of the contract by a notarial
act.
Sale of real property on installment; cash surrender value; when the buyer is entitled thereto. Republic Act No.
6552, also known as the Maceda Law, or the Realty Installment Buyer Protection Act, has the declared public
policy of protecting buyers of real estate on installment payments against onerous and oppressive conditions.
Section 3 of R.A. 6552 provides for the rights of a buyer who has paid at least two years of installments but
defaults in the payment of succeeding installments. Section 3 provides that in all transactions or contracts
involving the sale or financing of real estate on installment payments, including residential condominium
apartments but excluding industrial lots, commercial buildings and sales to tenants under R.A. No. 3844, as
amended by R.A. No. 6389, where the buyer has paid at least two years of installments, the buyer is entitled to
the following rights in case he defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him
which is hereby fixed at the rate of one month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract
and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That
the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of
installment payments made. Gatchalian Realty, Inc. v. Evelyn Angeles, G.R. No. 202358, November 27, 2013.
Sales; sale of real property on installment; cancellation of; twin requirements of a notarized notice of cancellation
and a refund of the cash surrender value. The Court has been consistent in ruling that a valid and effective
cancellation under R.A. 6552 must comply with the mandatory twin requirements of a notarized notice of
cancellation and a refund of the cash surrender value.
In Olympia Housing, Inc. v. Panasiatic Travel Corp., the Court ruled that the notarial act of rescission must be
accompanied by the refund of the cash surrender value.
The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period
following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the
full payment of the cash surrender value.
In Pagtalunan v. Dela Cruz Vda. De Manzano, the Court ruled that there is no valid cancellation of the Contract to
Sell in the absence of a refund of the cash surrender value. It stated that Sec. 3 (b) of R.A. No. 6552 requires
refund of the cash surrender value of the payments on the property to the buyer before cancellation of the
contract. The provision does not provide a different requirement for contracts to sell which allow possession of
the property by the buyer upon execution of the contract like the instant case. Hence, petitioner cannot insist on
compliance with the requirement by assuming that the cash surrender value payable to the buyer had been
applied to rentals of the property after respondent failed to pay the installments due. Gatchalian Realty, Inc. v.
Evelyn Angeles,G.R. No. 202358, November 27, 2013.
SPECIAL LAWS
Land registration; application for land registration requires that the names and addresses of all adjoining owners
and occupants be stated, if known, and if not known, to state the search made to find them; omission thereof
constitutes fraud. The governing rule in the application for registration of lands at that time was Section 21 of Act
496 which provided for the form and content of an application for registration, and it provides that the application
shall be in writing, signed and sworn to by applicant, or by some person duly authorized in his behalf. It shall also
state the name in full and the address of the applicant, and also the names and addresses of all adjoining owners
and occupants, if known; and, if not known, it shall state what search has been made to find them.
The reason behind the law was explained in the case of Fewkes vs. Vasquez,where it was noted that under
Section 21 of the Land Registration Act an application for registration of land is required to contain, among
others, a description of the land subject of the proceeding, the name, status and address of the applicant, as well
as the names and addresses of all occupants of the land and of all adjoining owners, if known, or if unknown, of
the steps taken to locate them. When the application is set by the court for initial hearing, it is then that notice
(of the hearing), addressed to all persons appearing to have an interest in the lot being registered and the
adjoining owners, and indicating the location, boundaries and technical description of the land being registered,
shall be published in the Official Gazette for two consecutive times. It is this publication of the notice of hearing
that is considered one of the essential bases of the jurisdiction of the court in land registration cases, for the
proceedings being in rem, it is only when there is constructive seizure of the land, effected by the publication and
notice, that jurisdiction over the res is vested on the court. Furthermore, it is such notice and publication of the
hearing that would enable all persons concerned, who may have any rights or interests in the property, to come
forward and show to the court why the application for registration thereof is not to be granted.Republic of the
Philippines v. Antonio Bacas, et al., G.R. No. 182913, November 20, 2013.
Land registration; any title to inalienable public land is void ab initio; all proceedings of the Land Registration
Court involving the such property is without legal effect, hence cannot attain finality. InCollado v. Court of
Appeals and the Republic, the Court declared that any title to an inalienable public land is void ab initio. Any
procedural infirmities attending the filing of the petition for annulment of judgment are immaterial since the LRC
never acquired jurisdiction over the property. All proceedings of the LRC involving the property are null and void
and, hence, did not create any legal effect. A judgment by a court without jurisdiction can never attain finality.
The Land Registration Court has no jurisdiction over non-registrable properties, such as public navigable rivers
which are parts of the public domain, and cannot validly adjudge the registration of title in favor of private
applicant. Republic of the Philippines v. Antonio Bacas, et al., G.R. No. 182913, November 20, 2013.
Land registration; confirmation and registration of imperfect and incomplete title; qualifications. C.A. No. 141
governs the classification and disposition of lands of the public domain. Section 11 of C.A. No. 141 provides, as
one of the modes of disposing public lands that are suitable for agriculture, the confirmation of imperfect or
incomplete titles. Section 48, on the other hand, enumerates those who are considered to have acquired an
imperfect or incomplete title over public lands and, therefore, entitled to confirmation and registration under the
Land Registration Act.
As amended by P.D. No. 1073 on January 25, 1977, Section 48(b) of C.A. No. 141 provides:
Section 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming
to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply
to the Court of First Instance [now Regional Trial Court] of the province where the land is located for
confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to
wit:
x x x x
(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition or ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for
confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to
have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title
under the provisions of this chapter.
Prior to the amendment introduced by P.D. No. 1073, Section 48(b) of C.A. No. 141, then operated under the
Republic Act (R.A.) No. 1942 (June 22, 1957) amendment, which reads:
(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive
and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition or ownership, for at least thirty years, immediately preceding the filing of the application for
confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to
have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title
under the provisions of this chapter.
xxx
In relation to C.A. No. 141, Section 14 of Presidential Decree P.D.) No. 1529 or the Property Registration Decree
specifies those who are qualified to register their incomplete title over an alienable and disposable public land
under the Torrens system. P.D. No. 1529, which was approved on June 11, 1978, superseded and codified all
laws relative to the registration of property.
The pertinent portion of Section 14 of P.D. No. 1529 reads:
Section 14. Who may apply. The following persons may file in the proper Court of First Instance [now Regional
Trial Court] an application for registration of title to land, whether personally or through their duly authorized
representatives:
(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive
and notorious possession and occupation of alienable and disposable lands of the public domain under a bona
fide claim of ownership since June 12, 1945, or earlier.
Roman Catholic Archbishop of Manila v. Cresencia Sta. Teresa Ramos, assisted by her husband, Ponciano
Francisco, G.R. No. 179181, November 18, 2013.
Land registration; confirmation and registration of imperfect and incomplete title; open, continuous, exclusive and
notorious possession. The possession contemplated by Section 48(b) of C.A. No. 141 is actual, not fictional or
constructive. In Carlos v Republic of the Philippines,the Court explained the character of the required possession,
as follows:
The law speaks of possession and occupation. Since these words are separated by the conjunction and, the clear
intention of the law is not to make one synonymous with the other. Possession is broader than occupation
because it includes constructive possession. When, therefore, the law adds the word occupation, it seeks to
delimit the all-encompassing effect of constructive possession. Taken together with the words open, continuous,
exclusive and notorious, the word occupation serves to highlight the fact that for an applicant to qualify, his
possession must not be a mere fiction. Actual possession of a land consists in the manifestation of acts of
dominion over it of such a nature as a party would naturally exercise over his own property.
Proof of actual possession of the property at the time of the filing of the application is required because the
phrase adverse, continuous, open, public, and in concept of owner, the RCAM used to describe its alleged
possession, is a conclusion of law,not an allegation of fact. Possession is open when it is patent, visible, apparent
[and] notorious x x x continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive
when [the possession is characterized by acts manifesting] exclusive dominion over the land and an appropriation
of it to [the applicant's] own use and benefit; and notorious when it is so conspicuous that it is generally known
and talked of by the public or the people in the neighborhood.Roman Catholic Archbishop of Manila v. Cresencia
Sta. Teresa Ramos, assisted by her husband, Ponciano Francisco, G.R. No. 179181, November 18, 2013.
Land registration; lands forming part of a military reservation are inalienable, hence not registrable. The law
governing the applications was Commonwealth Act (C.A.) No. 141,as amended by RA 1942, particularly Sec.
48(b) which provided that those who by themselves or through their predecessors in interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a
bona fide claim of acquisition of ownership, for at least thirty years immediately preceding the filing of the
application for confirmation of title except when prevented by war or force majeure. These shall be conclusively
presumed to have performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.
As can be gleaned therefrom, the necessary requirements for the grant of an application for land registration are
the following:
1. The applicant must, by himself or through his predecessors-in-interest, have been in possession and
occupation of the subject land;
2. The possession and occupation must be open, continuous, exclusive and notorious;
3. The possession and occupation must be under a bona fide claim of ownership for at least thirty years
immediately preceding the filing of the application; and
4. The subject land must be an agricultural land of the public domain. As earlier stated, in 1938, President
Quezon issued Presidential Proclamation No. 265, which took effect on March 31, 1938, reserving for the use of
the Philippine Army parcels of the public domain situated in the barrios of Bulua and Carmen, then Municipality of
Cagayan, Misamis Oriental. The subject parcels of land were withdrawn from sale or settlement or reserved for
military purposes, subject to private rights, if any there be.
Such power of the President to segregate lands was provided for in Section 64(e) of the old Revised
Administrative Code and C.A. No. 141 or the Public Land Act. Later, the power of the President was restated in
Section 14, Chapter 4, Book III of the 1987 Administrative Code. When a property is officially declared a military
reservation, it becomes inalienable and outside the commerce ofman.It may not be the subject of a contract or of
a compromise agreement. A property continues to be part of the public domain, not available for private
appropriation or ownership, until there is a formal declaration on the part of the government to withdraw it from
being such. In the case ofRepublic v. Court of Appeals and De Jesus, it was even stated that
Lands covered by reservation are not subject to entry, and no lawful settlement on them can
beacquired.The claims of persons who have settled on, occupied, and improved a parcel of public land which is
later included in a reservation are considered worthy of protection and are usually respected, but where the
President, as authorized by law, issues a proclamation reserving certain lands and warning all persons to depart
therefrom, this terminates any rights previously acquired in such lands by a person who was settled thereon in
order to obtain a preferential right of purchase. And patents for lands which have been previously granted,
reserved from sale, or appropriate, are void. Republic of the Philippines v. Antonio Bacas, et al., G.R. No. 182913,
November 20, 2013.
Trademark registration; not a mode of acquiring ownership but merely creates presumption of the validity of the
registration, of the registrants ownership of the trademark and of the exclusive right to the use thereof. It must
be emphasized that registration of a trademark, by itself, is not a mode of acquiring ownership.If the applicant is
not the owner of the trademark, he has no right to apply for its registration. Registration merely creates a prima
facie presumption of the validity of the registration, of the registrants ownership of the trademark, and of the
exclusive right to the use thereof. Such presumption, just like the presumptive regularity in the performance of
official functions, is rebuttable and must give way to evidence to the contrary.
Clearly, it is not the application or registration of a trademark that vests ownership thereof, but it is the
ownership of a trademark that confers the right to register the same. A trademark is an industrial property over
which its owner is entitled to property rights which cannot be appropriated by unscrupulous entities that, in one
way or another, happen to register such trademark ahead of its true and lawful owner. The presumption of
ownership accorded to a registrant must then necessarily yield to superior evidence of actual and real ownership
of a trademark.
The Courts pronouncement in Berris Agricultural Co., Inc. v. Abyadang is instructive on this point:
The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or distributor
of the goods made available to the purchasing public. x x x A certificate of registration of a mark, once issued,
constitutes prima facie evidence of the validity of the registration, of the registrants ownership of the mark, and
of the registrants exclusive right to use the same in connection with the goods or services and those that are
related thereto specified in the certificate. x x x In other words, the prima facie presumption brought about by
the registration of a mark may be challenged and overcome in an appropriate action, x x x by evidence of prior
use by another person, i.e. , it will controvert a claim of legal appropriation or of ownership based on registration
by a subsequent user. This is because a trademark is a creation of use and belongs to one who first used it in
trade or commerce.
Birkenstock Orthopaedi GmBH and Co. Kg, etc. v. Philippine Shoe Expo Marketing Corp., G.R. No. 194307,
November 20, 2013.

December 2013 Philippine Supreme Court Decisions on Civil Law
Contracts; concept of contracts. A contract is what the law defines it to be, taking into consideration its essential
elements, and not what the contracting parties call it. The real nature of a contract may be determined from the
express terms of the written agreement and from the contemporaneous and subsequent acts of the contracting
parties. However, in the construction or interpretation of an instrument, the intention of the parties is primordial
and is to be pursued. The denomination or title given by the parties in their contract is not conclusive of the
nature of its contents. ACE Foods, Inc. v. Micro Pacific Technologies Co., Ltd., G.R. No. 200602, December 11,
2013.
Contracts; contract of loan; interest stipulated; reduced for being iniquitous and unconscionable. Parties to a loan
contract have wide latitude to stipulate on any interest rate in view of the Central Bank Circular No. 905 s. 1982
which suspended the Usury Law ceiling on interest effective January 1, 1983. It is, however, worth stressing that
interest rates whenever unconscionable may still be declared illegal. There is nothing in the circular which grants
lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to
a hemorrhaging of their assets.In Menchavez v. Bermudez, the interest rate of 5% per month, which when
summed up would reach 60% per annum, is null and void for being excessive, iniquitous, unconscionable and
exorbitant, contrary to morals, and the law. Florpina Benvidez v. Nestor Salvador, G.R. No. 173331, December
11, 2013.
Damages; award of costs; when entitled. Costs shall be allowed to the prevailing party as a matter of course
unless otherwise provided in the Rules of Court. The costs Ramirez may recover are those stated in Section 10,
Rule 142 of the Rules of Court. For instance, Ramirez may recover the lawful fees he paid in docketing his action
for annulment of sale before the trial court. The court adds thereto the amount of P3,530 or the amount of
docket and lawful fees paid by Ramirez for filing this petition before this Court. 35(35) The court deleted the
award of moral and exemplary damages; hence, the restriction under Section 7, Rule 142 of the Rules of
Courtwould have prevented Ramirez to recover any cost of suit. But the court certifies, in accordance with said
Section 7, that Ramirezs action for annulment of sale involved a substantial and important right such that he is
entitled to an award of costs of suit. Needless to stress, the purpose of paragraph N of the real estate mortgage
is to apprise the mortgagor, Ramirez, of any action that the mortgagee-bank might take on the subject
properties, thus according him the opportunity to safeguard his rights. Jose T. Ramirez v. The Manila Banking
Corporation, G.R. No. 198800, December 11, 2013.
Damages; exemplary damages; when entitled. No exemplary damages can be awarded since there is no basis for
the award of moral damages and there is no award of temperate, liquidated or compensatory
damages.Exemplary damages are imposed by way of example for the public good, in addition to moral,
temperate, liquidated or compensatory damages. Jose T. Ramirez v. The Manila Banking Corporation, G.R. No.
198800, December 11, 2013.
Damages; moral damages; when entitled. Nothing supports the trial courts award of moral damages. There was
no testimony of any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury suffered by Ramirez. The award of moral damages
must be anchored on a clear showing that Ramirez actually experienced mental anguish, besmirched reputation,
sleepless nights, wounded feelings or similar injury. Ramirezs testimony is also wanting as to the moral damages
he suffered.Jose T. Ramirez v. The Manila Banking Corporation, G.R. No. 198800, December 11, 2013.
Foreclosure; extrajudicial foreclosure; notice of extrajudicial foreclosure proceedings not necessary unless
stipulated by the parties. In Carlos Lim, et al. v. Development Bank of the Philippines, the court held that unless
the parties stipulate, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary
because Section 3 of Act No. 3135 only requires the posting of the notice of sale in three public places and the
publication of that notice in a newspaper of general circulation. In this case, the parties stipulated in paragraph N
of the real estate mortgage that all correspondence relative to the mortgage including notifications of extrajudicial
actions shall be sent to mortgagor Ramirez at his given address. Respondent had no choice but to comply with
this contractual provision it has entered into with Ramirez. The contract is the law between them. Hence, the
court cannot agree with the bank that paragraph N of the real estate mortgage does not impose an additional
obligation upon it to provide personal notice of the extrajudicial foreclosure sale to the mortgagor Ramirez. Jose
T. Ramirez v. The Manila Banking Corporation, G.R. No. 198800, December 11, 2013.
Foreclosure of mortgage; proceeds; obligations covered. The petitioner contends that there was no excess or
surplus that needs to be returned to the respondent because her other outstanding obligations and those of her
attorney-in-fact were paid out of the proceeds.
The relevant provision, Section 4 of Rule 68 of the Rules of Civil Procedure, mandates that:
Section 4. Disposition of proceeds of sale. The amount realized from the foreclosure sale of the mortgaged
property shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when
there shall be any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior
encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers
or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to
the person entitled to it.
Thus, in the absence of any evidence showing that the mortgage also covers the other obligations of the
mortgagor, the proceeds from the sale should not be applied to them. Philippine Bank of Communication v. Mary
Ann O. Yeung, G.R. No. 179691, December 4, 2013.
Laches; concept of. Well settled is the rule that the elements of laches must be proven positively. Laches is
evidentiary in nature, a fact that cannot be established by mere allegations in the pleadings and cannot be
resolved in a motion to dismiss. At this stage therefore, the dismissal of the complaint on the ground of laches is
premature. Those issues must be resolved at the trial of the case on the merits, wherein both parties will be
given ample opportunity to prove their respective claims and defenses. Modesto Sanchez v. Andrew
Sanchez, G.R. No. 187661, December 4, 2013.
Mortgage; redemption period; reckoning of the period of redemption by the mortgagor or his successor-in-
interest starts from the registration of the sale in the Register of Deeds. The reckoning of the period of
redemption by the mortgagor or his successor-in-interest starts from the registration of the sale in the Register of
Deeds. Although Section 6 of Act No. 3135, as amended, specifies that the period of redemption
starts from and after the date of the sale, jurisprudence has since settled that such period is more appropriately
reckoned from the date of registration.United Coconut Planters Bank v. Christopher Lumbo and Milagros
Lumbo, G.R. No. 162757, December 11, 2013.
Obligations; force majeure; concept of force majeure. Anent petitioners reliance on force majeure, suffice it to
state that Peakstars breach of its obligations to Metro Concast arising from the MoA cannot be classified as a
fortuitous event under jurisprudential formulation.
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough
that the event should not have been foreseen or anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the
same.
To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and
unexpected occurrence or of the failure of the debtor to comply with obligations must be independent of human
will; (b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it
must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill
obligations in a normal manner; and, (d) the obligor must be free from any participation in the aggravation of the
injury or loss. Metro Concast Steel Corp., Spouses Jose S. Dychiao and Tiu Oh Yan, et al. v. Allied Bank
Corporation, G.R. No. 177921, December 4, 2013.
Obligations; modes of extinguishment. Article 1231 of the Civil Code states that obligations are extinguished
either by payment or performance, the loss of the thing due, the condonation or remission of the debt, the
confusion or merger of the rights of creditor and debtor, compensation or novation. Metro Concast Steel Corp.,
Spouses Jose S. Dychiao and Tiu Oh Yan, et al. v. Allied Bank Corporation, G.R. No. 177921, December 4, 2013.
Obligations; novation; extinctive novation distinguished from modificatory novation.To be sure, novation, in its
broad concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by
the creation of a new obligation that takes the place of the former; it is merely modificatory when the old
obligation subsists to the extent it remains compatible with the amendatory agreement. In either case, however,
novation is never presumed, and the animus novandi, whether totally or partially, must appear by express
agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken. ACE Foods, Inc. v.
Micro Pacific Technologies Co., Ltd., G.R. No. 200602, December 11, 2013.
Property; action for reconveyance; prescriptive period; exception. The Court likewise takes note that Paraguyas
complaint is likewise in the nature of an action for reconveyance because it also prayed for the trial court to order
Sps. Crucillo to surrender ownership and possession of the properties in question to [Paraguya], vacating them
altogether . . . . Despite this, Paraguyas complaint remains dismissible on the same ground because the
prescriptive period for actions for reconveyance is ten (10) years reckoned from the date of issuance of the
certificate of title, except when the owner is in possession of the property, in which case the action for
reconveyance becomes imprescriptible. Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo and
the Register of Deeds of Sorsogon, G.R. No. 200265, December 2, 2013.
Property; possessor in good faith; reimbursement of necessary and useful expenses. Dionisio was well aware that
this temporary arrangement may be terminated at any time. Respondents cannot now refuse to vacate the
property or eventually demand reimbursement of necessary and useful expenses under Articles 448 and 546 of
the New Civil Code, because the provisions apply only to a possessor in good faith, i.e., one who builds on land
with the belief that he is the owner thereof. Persons who occupy land by virtue of tolerance of the owners are not
possessors in good faith.Heirs of Cipriano Trazona, et al. v. Heirs of Dionisio Caada, et al., G.R. No. 175874,
December 11, 2013.
Property; Spanish titles can no longer be used as evidence of ownership after six (6) months from the effectivity
of PD 892. Based on Section 1 of PD 892, entitled Discontinuance of the Spanish Mortgage System of
Registration and of the Use of Spanish Titles as Evidence in Land Registration Proceedings, Spanish titles can no
longer be used as evidence of ownership after six (6) months from the effectivity of the law, or starting August
16, 1976. Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo and the Register of Deeds of
Sorsogon, G.R. No. 200265, December 2, 2013.
Property; waiver of interest; when absolute and unconditional.Lucila did not say, to put everything in proper
order, I promise to waive my right to the property, which is a future undertaking, one that is demandable only
when everything is put in proper order. But she instead said, to put everything in proper order, I hereby waive
etc. The phrase hereby waive means that Lucila was, by executing the affidavit, already waiving her right to the
property, irreversibly divesting herself of her existing right to the same. After he and his co-owner Emelinda
accepted the donation, Isabelo became the owner of half of the subject property having the right to demand its
partition.Isabelo C. Dela Cruz v. Lucila C. Dela Cruz, G.R. No. 192383, December 4, 2013.
Quasi-contract; unjust enrichment; concept of; elements.In light of the foregoing, it is unfair to deny petitioner a
refund of all his contributions to the car plan. Under Article 22 of the Civil Code, [e]very person who through an
act of performance by another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him. Antonio Locsin II v. Mekeni Food
Corporation, G.R. No. 192105, December 9, 2013.
Quasi-contract; concept of quasi-contract. Article 2142 of the same Code likewise clarifies that there are certain
lawful, voluntary and unilateral acts which give rise to the juridical relation of quasi-contract, to the end that no
one shall be unjustly enriched or benefited at the expense of another. In the absence of specific terms and
conditions governing the car plan arrangement between the petitioner and Mekeni, a quasi-contractual relation
was created between them.Antonio Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9, 2013.
Quasi-delict; elements. Article 2176 of the Civil Code provides that [w]hoever by act or omission causes damage
to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is a quasi-delict. Under this provision, the
elements necessary to establish a quasi-delict case are: (1) damages to the plaintiff; (2) negligence, by act or
omission, of the defendant or by some person for whose acts the defendant must respond, was guilty; and (3)
the connection of cause and effect between such negligence and the damages. These elements show that the
source of obligation in a quasi-delict case is the breach or omission of mutual duties that civilized society imposes
upon its members, or which arise from non-contractual relations of certain members of society to others.Dra.
Leila A. Dela Llana v. Rebecca Biong, doing business under the name and style of Pongkay Trading,G.R. No.
182356, December 4, 2013.
Quasi-delict; quantum of proof; preponderance of evidence. Based on these requisites, Dra. dela Llana must first
establish by preponderance of evidence the three elements of quasi-delict before we determine Rebeccas liability
as Joels employer. She should show the chain of causation between Joels reckless driving and her whiplash
injury. Only after she has laid this foundation can the presumption that Rebecca did not exercise the diligence
of a good father of a family in the selection and supervision of Joel arise.Once negligence, the damages and
the proximate causation are established, this Court can then proceed with the application and the interpretation
of the fifth paragraph of Article 2180 of the Civil Code. Under Article 2176 of the Civil Code, in relation with the
fifth paragraph of Article 2180, an action predicated on an employees act or omission may be instituted against
the employer who is held liable for the negligent act or omission committed by his employee.The rationale for
these graduated levels of analyses is that it is essentially the wrongful or negligent act or omission itself which
creates the vinculum juris in extra-contractual obligations. Dra. Leila A. Dela Llana v. Rebecca Biong, doing
business under the name and style of Pongkay Trading, G.R. No. 182356, December 4, 2013.
Sales; car plan benefit; contributions as installment payments distinguished from rental payments. From the
evidence on record, it is seen that the Mekeni car plan offered to petitioner was subject to no other term or
condition than that Mekeni shall cover one-half of its value, and petitioner shall in turn pay the other half through
deductions from his monthly salary. Mekeni has not shown, by documentary evidence or otherwise, that there are
other terms and conditions governing its car plan agreement with petitioner. There is no evidence to suggest that
if petitioner failed to completely cover one-half of the cost of the vehicle, then all the deductions from his salary
going to the cost of the vehicle will be treated as rentals for his use thereof while working with Mekeni, and shall
not be refunded. Indeed, there is no such stipulation or arrangement between them. Thus, the CAs reliance
on Elisco Tool is without basis, and its conclusions arrived at in the questioned decision are manifestly mistaken.
To repeat what was said in Elisco Tool, [P]etitioner does not deny that private respondent Rolando Lantan
acquired the vehicle in question under a car plan for executives of the Elizalde group of companies. Under a
typical car plan, the company advances the purchase price of a car to be paid back by the employee through
monthly deductions from his salary. The company retains ownership of the motor vehicle until it shall have been
fully paid for. However, retention of registration of the car in the companys name is only a form of a lien on the
vehicle in the event that the employee would abscond before he has fully paid for it. There are also stipulations in
car plan agreements to the effect that should the employment of the employee concerned be terminated before
all installments are fully paid, the vehicle will be taken by the employer and all installments paid shall be
considered rentals per agreement.
It was made clear in this pronouncement that installments made on the car plan may be treated as rentals only
when there is an express stipulation in the car plan agreement to such effect. It was therefore patent error for
the appellate court to assume that, even in the absence of express stipulation, petitioners payments. Antonio
Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9, 2013.
Sales; contract of sale; elements; distinguished from contract to sell. Corollary thereto, a contract of sale is
classified as a consensual contract, which means that the sale is perfected by mere consent. No particular form is
required for its validity. Upon perfection of the contract, the parties may reciprocally demand performance, i.e.,
the vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee
to pay the thing sold.
In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the
property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e., the full payment
of the purchase price. A contract to sell may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon
the happening of a contingent event which may or may not occur. ACE Foods, Inc. v. Micro Pacific Technologies
Co., Ltd., G.R. No. 200602, December 11, 2013.
Sales; contract to sell; concept of.Verily, in a contract to sell, the prospective seller binds himself to sell the
property subject of the agreement exclusively to the prospective buyer upon fulfillment of the condition agreed
upon which is the full payment of the purchase price but reserving to himself the ownership of the subject
property despite delivery thereof to the prospective buyer.The full payment of the purchase price in a contract to
sell is a suspensive condition, the non-fulfillment of which prevents the prospective sellers obligation to convey
title from becoming effective, as in this case. Optimum Development Bank v. Spouses Benigno v. Jovellanos and
Lourdes R. Jovellanos, G.R. No. 189145, December 4, 2013.
Sales; contract to sell; real property in installments; covered by Realty Installment Buyer Protection Act. Further,
it is significant to note that given that the Contract to Sell in this case is one which has for its object real property
to be sold on an installment basis, the said contract is especially governed by and thus, must be examined
under the provisions of RA 6552, or the Realty Installment Buyer Protection Act, which provides for the rights
of the buyer in case of his default in the payment of succeeding installments. Optimum Development Bank v.
Spouses Benigno v. Jovellanos and Lourdes R. Jovellanos, G.R. No. 189145, December 4, 2013.
SPECIAL LAWS
Property Registration Decree; alienable lands of public domain; proof of; to prove that the land subject of an
application for registration is alienable, an applicant must establish the existence of a positive act of the
Government. The burden of proof in overcoming the presumption of State ownership of lands of the public
domain is on the person applying for registration, or in this case, for homestead patent. The applicant must show
that the land subject of the application is alienable or disposable. It must be stressed that incontrovertible
evidence must be presented to establish that the land subject of the application is alienable or disposable.
As the court pronounced in Republic of the Phils. v. Tri-Plus Corporation, to prove that the land subject of an
application for registration is alienable, an applicant must establish the existence of a positive act of the
Government such as a presidential proclamation or an executive order, an administrative action, investigation
reports of Bureau of Lands investigators, and a legislative act or statute. The applicant may also secure a
certification from the Government that the lands applied for are alienable and disposable. Republic of the
Philippines-Bureau of Forest Development v. Vicente Roxas, et al./Provident Tree Farms, Inc. v. Vicente Roxas, et
al., G.R. Nos. 157988/160640, December 11, 2013.
Property Registration Decree; estoppel; the principle of estoppel does not operate against the Government for the
act of its agents. Neither can respondent Roxas successfully invoke the doctrine of estoppel against petitioner
Republic. While it is true that respondent Roxas was granted Homestead Patent No. 111598 and OCT No. P-5885
only after undergoing appropriate administrative proceedings, the Government is not now estopped from
questioning the validity of said homestead patent and certificate of title. It is, after all, hornbook law that the
principle of estoppel does not operate against the Government for the act of its agents. And while there may be
circumstances when equitable estoppel was applied against public authorities, i.e., when the Government did not
undertake any act to contest the title for an unreasonable length of time and the lot was already alienated to
innocent buyers for value, such are not present in this case. More importantly, we cannot use the equitable
principle of estoppel to defeat the law. Republic of the Philippines-Bureau of Forest Development v. Vicente
Roxas, et al./Provident Tree Farms, Inc. v. Vicente Roxas, et al., G.R. Nos. 157988/160640, December 11, 2013.
Property Registration Decree; homestead patent; once registered, the certificate of title issued by virtue of said
patent has the force and effect of a Torrens title issued under said registration laws; provided that the land
covered by said certificate is a disposable public land within the contemplation of the Public Land Law.It is true
that once a homestead patent granted in accordance with the Public Land Act is registered pursuant to Act 496,
otherwise known as The Land Registration Act, or Presidential Decree No. 1529, otherwise known as The
Property Registration Decree, the certificate of title issued by virtue of said patent has the force and effect of a
Torrens title issued under said registration laws.We expounded in Ybaez v. Intermediate Appellate Court that:
The certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose
name appears therein. After the expiration of the one (1) year period from the issuance of the decree of
registration upon which it is based, it becomes incontrovertible. The settled rule is that a decree of registration
and the certificate of title issued pursuant thereto may be attacked on the ground of actual fraud within one (1)
year from the date of its entry and such an attack must be direct and not by a collateral proceeding. The validity
of the certificate of title in this regard can be threshed out only in an action expressly filed for the purpose.
It must be emphasized that a certificate of title issued under an administrative proceeding pursuant to a
homestead patent, as in the instant case, is as indefeasible as a certificate of title issued under a judicial
registration proceeding, provided the land covered by said certificate is a disposable public land within the
contemplation of the Public Land Law. Republic of the Philippines-Bureau of Forest Development v. Vicente
Roxas, et al./Provident Tree Farms, Inc. v. Vicente Roxas, et al.,G.R. Nos. 157988/160640, December 11, 2013.
Property Registration Decree; reversion; nature of; grounds. We do not find evidence indicating that respondent
Roxas committed fraud when he applied for homestead patent over the subject property. It does not appear that
he knowingly and intentionally misrepresented in his application that the subject property was alienable and
disposable agricultural land. Nonetheless, we recognized in Republic of the Phils. v. Mangotara that there are
instances when we granted reversion for reasons other than fraud:
Reversion is an action where the ultimate relief sought is to revert the land back to the government under the
Regalian doctrine. Considering that the land subject of the action originated from a grant by the government, its
cancellation is a matter between the grantor and the grantee. In Estate of the Late Jesus S. Yujuico v. Republic
(Yujuico case), reversion was defined as an action which seeks to restore public land fraudulently awarded and
disposed of to private individuals or corporations to the mass of public domain. It bears to point out, though, that
the Court also allowed the resort by the Government to actions for reversion to cancel titles that were void for
reasons other than fraud, i.e., violation by the grantee of a patent of the conditions imposed by law; and lack of
jurisdiction of the Director of Lands to grant a patent covering inalienable forest land or portion of a river, even
when such grant was made through mere oversight. In Republic v. Guerrero, the Court gave a more general
statement that the remedy of reversion can be availed of only in cases of fraudulent or unlawful inclusion of the
land in patents or certificates of title.Republic of the Philippines-Bureau of Forest Development v. Vicente Roxas,
et al./Provident Tree Farms, Inc. v. Vicente Roxas, et al., G.R. Nos. 157988/160640, December 11, 2013.
Property Registration Decree; Torrens certificate of title is not conclusive proof of ownership. It is an established
rule that a Torrens certificate of title is not conclusive proof of ownership. Verily, a party may seek its annulment
on the basis of fraud or misrepresentation. However, such action must be seasonably filed, else the same would
be barred. Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo and the Register of Deeds of
Sorsogon, G.R. No. 200265, December 2, 2013.
Property Registration Decree; Torrens certificate of title is not conclusive proof of ownership becomes
incontrovertible and indefeasible after one (1) year from the date of its entry. In this relation, Section 32 of PD
1529 provides that the period to contest a decree of registration shall be one (1) year from the date of its entry
and that, after the lapse of the said period, the Torrens certificate of title issued thereon becomes incontrovertible
and indefeasible, viz.:
Sec. 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be
reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby,
nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person,
including the government and the branches thereof, deprived of land or of any estate or interest therein by such
adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition
for reopening and review of the decree of registration not later than one year from and after the date of the entry
of such decree of registration, but in no case shall such petition be entertained by the court where an innocent
purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the
phrase innocent purchaser for value or an equivalent phrase occurs in this Decree, it shall be deemed to include
an innocent lessee, mortgagee, or other encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall
become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy
by action for damages against the applicant or any other persons responsible for the fraud. (Emphases and
underscoring supplied) Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo and the Register of
Deeds of Sorsogon, G.R. No. 200265, December 2, 2013.

January 2014 Philippine Supreme Court Decisions on Civil Law
Civil Code
Bad faith cannot be presumed; it is a question of fact that must be proven by clear and convincing evidence. It is
worth stressing at this point that bad faith cannot be presumed. It is a question of fact that must be proven by
clear and convincing evidence. [T]he burden of proving bad faith rests on the one alleging it. Sadly, spouses
Vilbar failed to adduce the necessary evidence. Thus, this Court finds no error on the part of the CA when it did
not find bad faith on the part of Gorospe, Sr. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No.
176043. January 15, 2014.
Banks; exercise the highest degree of diligence, as well as to observe the high standards of integrity and
performance in all its transactions because its business was imbued with public interest. Being a banking
institution, DBP owed it to Guaria Corporation to exercise the highest degree of diligence, as well as to observe
the high standards of integrity and performance in all its transactions because its business was imbued with
public interest. The high standards were also necessary to ensure public confidence in the banking system, for,
according to Philippine National Bank v. Pike: The stability of banks largely depends on the confidence of the
people in the honesty and efficiency of banks. Development Bank of the Philippines (DBP) v. Guaria Agricultural
and Realty Development Corporation, G.R. No. 160758. January 15, 2014
Common carrier; cargoes while being unloaded generally remain under the custody of the carrier. It is settled in
maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier.
As hereinbefore found by the RTC and affirmed by the CA based on the evidence presented, the goods were
damaged even before they were turned over to ATI. Such damage was even compounded by the negligent acts
of petitioner and ATI which both mishandled the goods during the discharging operations. Eastern Shipping Lines,
Inc. v. BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.
Common carrier; extraordinary diligence.Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible
for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them. Owing to this high degree of diligence required of them, common
carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden
of proving that they observed such high level of diligence.Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp.,
and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.
Contracts; breach of contract; petitioner is guilty of breach of contract when it unjustifiably refused to release
respondents deposit despite demand; liable for damages. In cases of breach of contract, moral damages may be
recovered only if the defendant acted fraudulently or in bad faith, or is guilty of gross negligence amounting to
bad faith, or in wanton disregard of his contractual obligations.
In this case, a review of the circumstances surrounding the issuance of the Hold Out order reveals that
petitioner issued the Hold Out order in bad faith. First of all, the order was issued without any legal basis.
Second, petitioner did not inform respondents of the reason for the Hold Out. Third, the order was issued prior
to the filing of the criminal complaint. Records show that the Hold Out order was issued on July 31, 2003, while
the criminal complaint was filed only on September 3, 2003. All these taken together lead us to conclude that
petitioner acted in bad faith when it breached its contract with respondents. As we see it then, respondents are
entitled to moral damages. Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To, G.R. No.
183204, January 13, 2014.
Contracts; buyer in good faith. It is settled that a party dealing with a registered land does not have to inquire
beyond the Certificate of Title in determining the true owner thereof, and in guarding or protecting his interest,
for all that he has to look into and rely on are the entries in the Certificate of Title.
Inarguably, Opinion acted in good faith in dealing with the registered owners of the properties. He relied on the
titles presented to him, which were confirmed by the Registry of Deeds to be authentic, issued in accordance with
the law, and without any liens or encumbrances. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R.
No. 176043. January 15, 2014.
Contracts; Doctrine of in pari delicto; exception. According to Article 1412 (1) of the Civil Code, the guilty parties
to an illegal contract cannot recover from one another and are not entitled to an affirmative relief because they
are in pari delicto or in equal fault. The doctrine of in pari delicto is a universal doctrine that holds that no action
arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to
recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation;
and where the parties arein pari delicto, no affirmative relief of any kind will be given to one against the other.
Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted exception arises
when its application contravenes well-established public policy. In this jurisdiction, public policy has been defined
as that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be
injurious to the public or against the public good. Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600,
January 15, 2014.
Contracts; Hold-out clause; applies only if there is a valid and existing obligation arising from any of the sources
of obligation enumerated in Article 1157. Considering that respondent Rosales is not liable under any of the five
sources of obligation, there was no legal basis for petitioner to issue the Hold Out order.
The Hold Out clause applies only if there is a valid and existing obligation arising from any of the sources of
obligation enumerated in Article 1157 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-
delict. In this case, petitioner failed to show that respondents have an obligation to it under any law, contract,
quasi-contract, delict, or quasi-delict. And although a criminal case was filed by petitioner against respondent
Rosales, this is not enough reason for petitioner to issue a Hold Out order as the case is still pending and no
final judgment of conviction has been rendered against respondent Rosales. In fact, it is significant to note that at
the time petitioner issued the Hold Out order, the criminal complaint had not yet been filed. Thus, considering
that respondent Rosales is not liable under any of the five sources of obligation, there was no legal basis for
petitioner to issue the Hold Out order. Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk
To, G.R. No. 183204, January 13, 2014.
Contracts; Mortgage; nature of mortgage. It is true that loans are often secured by a mortgage constituted on
real or personal property to protect the creditors interest in case of the default of the debtor. By its nature,
however, a mortgage remains an accessory contract dependent on the principal obligation, such that
enforcement of the mortgage contract will depend on whether or not there has been a violation of the principal
obligation. While a creditor and a debtor could regulate the order in which they should comply with their
reciprocal obligations, it is presupposed that in a loan the lender should perform its obligation the release of the
full loan amount before it could demand that the borrower repay the loaned amount. Development Bank of the
Philippines (DBP) v. Guaria Agricultural and Realty Development Corporation, G.R. No. 160758. January 15,
2014.
Contracts; mortgagee in good faith. Assuming arguendo that the Gorospes titles to the subject properties
happened to be fraudulent, public policy considers Opinion to still have acquired legal title as a mortgagee in
good faith. As held in Cavite Development Bank v. Spouses Lim:
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the mortgaged
property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given
effect by reason of public policy. This is the doctrine of the mortgagee in good faith based on 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. The public interest in upholding the indefeasibility of a
certificate of title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a
buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.
Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.
Sales; proof capacity of seller; difference when there is a special power of attorney and when there is none.The
strength of the buyers inquiry on the sellers capacity or legal authority to sell depends on the proof of capacity
of the seller. If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the
face of such public document already constitutes sufficient inquiry. If no such special power of attorney is
provided or there is one but there appears to be flaws in its notarial acknowledgment, mere inspection of the
document will not do; the buyer must show that his investigation went beyond the document and into the
circumstances of its execution.The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa,
represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.
Contracts; Principle of quantum merit; when allowed. Case law instructs that under this principle (quantum
meruit), a contractor is allowed to recover the reasonable value of the thing or services rendered despite the lack
of a written contract, in order to avoid unjust enrichment. Quantum meruit means that, in an action for work and
labor, payment shall be made in such amount as the plaintiff reasonably deserves. The measure of recovery
should relate to the reasonable value of the services performed because the principle aims to prevent undue
enrichment based on the equitable postulate that it is unjust for a person to retain any benefit without paying for
it. Rivelisa Realty, Inc., represented by Ricardo P. Venturina v. First Sta. Clara Builders Corporation, represented
by Ramon A. Pangilinan, as President, G.R. No. 189618. January 15, 2014.
Contracts; rescission; proper when there is non-performance of obligation. Article 1191. The power to rescind
obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with
payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria
Victoria Ronquillo, G.R. No. 185798, January 13, 2014.
Contracts; void contract; effects. Under Article 1409 (1) of the Civil Code, a contract whose cause, object or
purpose is contrary to law is a void or inexistent contract. As such, a void contract cannot produce a valid one. To
the same effect is Article 1422 of the Civil Code, which declares that a contract, which is the direct result of a
previous illegal contract, is also void and inexistent.Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600,
January 15, 2014.
Damages; moral damages; when awarded.[S]uffice it to say that the dispute over the subject property had
caused respondent serious anxiety, mental anguish and sleepless nights, thereby justifying the aforesaid award.
Likewise, since respondent was constrained to engage the services of counsel to file this suit and defend his
interests, the awards of attorneys fees and litigation expenses are also sustained. The Heirs of Victorino Sarili,
namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios
Mojica, G.R. No. 193517, January 15, 2014.
Damages; moral damages; when awarded. Every person is entitled to the physical integrity of his body. Although
we have long advocated the view that any physical injury, like the loss or diminution of the use of any part of
ones body, is not equatable to a pecuniary loss, and is not susceptible of exact monetary estimation, civil
damages should be assessed once that integrity has been violated. The assessment is but an imperfect
estimation of the true value of ones body. The usual practice is to award moral damages for the physical injuries
sustained. Dr. Encarnacion C. Lumantas v. Hanz Calapiz, represented by his parents, Hilario Calapiz, Jr. and Helita
Calapiz, G.R. No. 163753. January 15, 2014.
Foreclosure; premature foreclosure; order of restoration of possession and payment of reasonable rentals. Having
found and pronounced that the extrajudicial foreclosure by DBP was premature, and that the ensuing foreclosure
sale was void and ineffectual, the Court affirms the order for the restoration of possession to Guarifia Corporation
and the payment of reasonable rentals for the use of the resort. The CA properly held that the premature and
invalid foreclosure had unjustly dispossessed Guarifia Corporation of its properties. Consequently, the restoration
of possession and the payment of reasonable rentals were in accordance with Article 561 of the Civil Code, which
expressly states that one who recovers, according to law, possession unjustly lost shall be deemed for all
purposes which may redound to his benefit to have enjoyed it without interruption.Development Bank of the
Philippines (DBP) v. Guaria Agricultural and Realty Development Corporation,G.R. No. 160758. January 15,
2014.
Foreclosure; purchaser in foreclosure sale may take possession of the property even before the expiration of the
redemption period. A writ of possession is a writ of execution employed to enforce a judgment to recover the
possession of land. It commands the sheriff to enter the land and give possession of it to the person entitled
under the judgment. It may be issued in case of an extrajudicial foreclosure of a real estate mortgage under
Section 7 of Act No. 3135, as amended by Act No. 4118.
Under said provision, the writ of possession may be issued to the purchaser in a foreclosure sale either within the
one-year redemption period upon the filing of a bond, or after the lapse of the redemption period, without need
of a bond.
We have consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ
issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No
discretion is left to the trial court. Any question regarding the regularity and validity of the sale, as well as the
consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of
Act No. 3135. Such question cannot be raised to oppose the issuance of the writ, since the proceeding is ex
parte. The recourse is available even before the expiration of the redemption period provided by law and the
Rules of Court. LZK Holdings and Development Corporation v. Planters Development Bank, G.R. No. 187973,
January 20, 2014.
Interest; legal interest; interest rate pegged at 6% regardless of the source of obligation. The resulting
modification of the award of legal interest is, also, in line with our recent ruling in Nacar v. Gallery Frames,
embodying the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No.
799 which pegged the interest rate at 6% regardless of the source of obligation. Fil-Estate Properties, Inc. and
Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.
Interest; legal interest; proper rate. In Eastern Shipping, it was observed that the commencement of when the
legal interest should start to run varies depending on the factual circumstances obtaining in each case. As a rule
of thumb, it was suggested that where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained).
During the pendency of this case, however, the Monetary Board issued Resolution No. 796 dated May 16, 2013,
stating that in the absence of express stipulation between the parties, the rate of interest in loan or forbearance
of any money, goods or credits and the rate allowed in judgments shall be 6% per annum. Said Resolution is
embodied in Bangko Sentral ng Pilipinas Circular No. 799, Series of2013, which took effect on July 1, 2013.
Hence, the 12% annual interest mentioned above shall apply only up to June 30, 2013. Thereafter, or starting
July 1, 2013, the applicable rate of interest for both the debited amount and undocumented withdrawals shall be
6% per annum compounded annually, until fully paid. Land Bank of the Philippines v. Emmanuel C. Oate, G.R.
No. 192371, January 15, 2014.
Interest; legal interest; rate. The legal interest rate to be imposed from February 11, 1993, the time of the
extrajudicial demand by respondent, should be 6% per annum in the absence of any stipulation in writing in
accordance with Article 2209 of the Civil Code, which provides:
Article 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed
upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. First United
Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15, 2014.
Interest; legal interest; when awarded. Many years have gone by since Hanz suffered the injury. Interest of 6%
per annum should then be imposed on the award as a sincere means of adjusting the value of the award to a
level that is not only reasonable but just and commensurate. Unless we make the adjustment in the permissible
manner by prescribing legal interest on the award, his sufferings would be unduly compounded. For that purpose,
the reckoning of interest should be from the filing of the criminal information on April 1 7, 1997, the making of
the judicial demand for the liability of the petitioner. Dr. Encarnacion C. Lumantas v. Hanz Calapiz, represented
by his parents, Hilario Calapiz, Jr. and Helita Calapiz, G.R. No. 163753. January 15, 2014.
Obligations; default; borrower would not be in default without demand to pay. Considering that it had yet to
release the entire proceeds of the loan, DBP could not yet make an effective demand for payment upon Guaria
Corporation to perform its obligation under the loan. According toDevelopment Bank of the Philippines v.
Licuanan, it would only be when a demand to pay had been made and was subsequently refused that a borrower
could be considered in default, and the lender could obtain the right to collect the debt or to foreclose the
mortgage. Development Bank of the Philippines (DBP) v. Guaria Agricultural and Realty Development
Corporation, G.R. No. 160758. January 15, 2014.
Obligations; extinguishment of obligations; compensation; requisites. Compensation is defined as a mode of
extinguishing obligations whereby two persons in their capacity as principals are mutual debtors and creditors of
each other with respect to equally liquidated and demandable obligations to which no retention or controversy
has been timely commenced and communicated by third parties.
53
The requisites therefor are provided under
Article 1279 of the Civil Code which reads as follows:
Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that [w]hen all the
requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes
both debts to the concurrent amount, even though the creditors and debtors are not aware of the
compensation. Union Bank of the Philippines v. Development Bank of the Philippines, G.R. No. 191555, January
20, 2014.
Obligations; legal compensation; requisites. Legal compensation takes place when the requirements set forth in
Article 1278 and Article 1279 of the Civil Code are present, to wit:
Article 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of
each other.
Article 1279. In order that compensation may be proper, it is necessary:
(1) That each of the obligors be bound principally, and that he be at the same time a principal creditor of the
other;
(2) That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15,
2014.
Property; builder in good faith; concept of. To be deemed a builder in good faith, it is essential that a person
asserts title to the land on which he builds, i.e. , that he be a possessor in concept of owner, and that he be
unaware that there exists in his title or mode of acquisition any flaw which invalidates it. Good faith is an
intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among
other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an
unconscionable advantage. It implies honesty of intention, and freedom from knowledge of circumstances which
ought to put the holder upon inquiry. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F.
Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15,
2014.
Property; ownership; accession; accessory follows the principal; exception. While it is a hornbook doctrine that
the accessory follows the principal, that is, the ownership of the property gives the right by accession to
everything which is produced thereby, or which is incorporated or attached thereto, either naturally or
artificially, such rule is not without exception. In cases where there is a clear and convincing evidence to prove
that the principal and the accessory are not owned by one and the same person or entity, the presumption shall
not be applied and the actual ownership shall be upheld. In a number of cases, we recognized the separate
ownership of the land from the building and brushed aside the rule that accessory follows the
principal. Magdalena T. Villasi v. Filomena Garcia, substituted by his heirs, namely, Ermelinda H. Garcia, et
al., G.R. No. 190106, January 15, 2014.
Quasi-contracts; Unjust enrichment. Unjust enrichment exists, according to Hulst v. PR Builders, Inc., when a
person unjustly retains a benefit at the loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good conscience. The prevention of unjust enrichment
is a recognized public policy of the State, for Article 22 of the Civil Code explicitly provides that [e]very person
who through an act of performance by another, or any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall return the same to him. Domingo
Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15, 2014.
Sales; Article 1599 of the Civil Code; recoupment; definition of; when entitled. Recoupment (reconvencion) is the
act of rebating or recouping a part of a claim upon which one is sued by means of a legal or equitable right
resulting from a counterclaim arising out of the same transaction. It is the setting up of a demand arising from
the same transaction as the plaintiffs claim, to abate or reduce that claim.
The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil Code, viz:
Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in
diminution or extinction of the price;
x x x x
First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No. 164985, January 15,
2014.
Sales; sale of a piece of land or any interest therein is through an agent; authority of the agent shall be in
writing; otherwise, the sale shall be void. The due execution and authenticity of the subject SPA are of great
significance in determining the validity of the sale entered into by Victorino and Ramon since the latter only
claims to be the agent of the purported seller (i.e., respondent). Article 1874 of the Civil Code provides that
[w]hen a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. In other words, if the subject SPA was not proven to be duly executed
and authentic, then it cannot be said that the foregoing requirement had been complied with; hence, the sale
would be void. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this
act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.
SPECIAL LAWS
Section 23 of Presidential Decree No. 957; non-forfeiture of payments. Section 23 of Presidential Decree No. 957,
the rule governing the sale of condominiums, which provides: No installment payment made by a buyer in a
subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner
or developer when the buyer, after due notice to the owner or developer, desists from further payment due to
the failure of the owner or developer to develop the subdivision or condominium project according to the
approved plans and within the time limit for complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization interests but excluding delinquency interests, with
interest thereon at the legal rate. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and
Maria Victoria Ronquillo, G.R. No. 185798, January 13, 2014.
Section 6 of Presidential Decree No. 1594; right of assignment and subcontract. There is no question that every
contractor is prohibited from subcontracting with or assigning to another person any contract or project that he
has with the DPWH unless the DPWH Secretary has approved the subcontracting or assignment. This is pursuant
to Section 6 of Presidential Decree No. 1594, which provides that [T]he contractor shall not assign, transfer,
pledge, subcontract or make any other disposition of the contract or any part or interest therein except with the
approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or
the Minister of Energy, as the case may be. Approval of the subcontract shall not relieve the main contractor from
any liability or obligation under his contract with the Government nor shall it create any contractual relation
between the subcontractor and the Government. Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600,
January 15, 2014.
Family law; conjugal property; all property of the marriage is presumed to be conjugal, unless it is shown that it
is owned exclusively by the husband or the wife. There is a presumption that all property of the marriage is
conjugal, unless it is shown that it is owned exclusively by the husband or the wife; this presumption is not
overcome by the fact that the property is registered in the name of the husband or the wife alone; and the
consent of both spouses is required before a conjugal property may be mortgaged. However, we find it iniquitous
to apply the foregoing presumption especially since the nature of the mortgaged property was never raised as an
issue before the RTC, the CA, and even before this Court. In fact, petitioner never alleged in his Complaint that
the said property was conjugal in nature. Hence, respondent had no opportunity to rebut the said
presumption. Francisco Lim v. Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918.
January 15, 2014.
Family law; exclusive property of spouse; when the property is registered in the name of a spouse only and there
is no showing as to when the property was acquired by said spouse, this is an indication that the property
belongs exclusively to said spouse. Article 160 of the Civil Code provides as follows: All property of the marriage
is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband
or to the wife.
The presumption applies to property acquired during the lifetime of the husband and wife. In this case, it appears
on the face of the title that the properties were acquired by Donata Montemayor when she was already a widow.
When the property is registered in the name of a spouse only and there is no showing as to when the property
was acquired by said spouse, this is an indication that the property belongs exclusively to said spouse. And this
presumption under Article 160 of the Civil Code cannot prevail when the title is in the name of only one spouse
and the rights of innocent third parties are involved. Francisco Lim v. Equitable PCI Bank, now known as Banco
De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.
Torrens system; certificate of title; a certificate of title serves as evidence of an indefeasible and incontrovertible
title to the property in favor of the person whose name appears therein. [A] certificate of title serves as evidence
of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein.
Having no certificate of title issued in their names, spouses Vilbar have no indefeasible and incontrovertible title
over Lot 20 to support their claim. Further, it is an established rule that registration is the operative act which
gives validity to the transfer or creates a lien upon the land. Any buyer or mortgagee of realty covered by a
Torrens certificate of title x x x is charged with notice only of such burdens and claims as are annotated on the
title. Failing to annotate the deed for the eventual transfer of title over Lot 20 in their names, the spouses Vilbar
cannot claim a greater right over Opinion, who acquired the property with clean title in good faith and registered
the same in his name by going through the legally required procedure. Sps. Bernadette and Rodulfo Vilbar v.
Angelito L. Opinion, G.R. No. 176043. January 15, 2014.
Torrens system; Torrens title; a person dealing with a registered land has a right to rely upon the face of the
Torrens certificate of title; exceptions. The well-known rule in this jurisdiction is that a person dealing with a
registered land has a right to rely upon the face of the torrens certificate of title and to dispense with the need of
inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry.
A torrens title concludes all controversy over ownership of the land covered by a final decree of registration. Once
the title is registered the owner may rest assured without the necessity of stepping into the portals of the court or
sitting in the mirador de su casa to avoid the possibility of losing his land. Francisco Lim v. Equitable PCI Bank,
now known as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.
Torrens title; a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of
title; exception in the case of a person who buys from a person who is not the registered owner.The general rule
is that every person dealing with registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of
the property. Where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens
Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his
right thereto.
However, a higher degree of prudence is required from one who buys from a person who is not the registered
owner, although the land object of the transaction is registered. In such a case, the buyer is expected to examine
not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws
in the title of the transferor. The buyer also has the duty to ascertain the identity of the person with whom he is
dealing with and the latters legal authority to convey the property. The Heirs of Victorino Sarili, namely, Isabel A.
Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No.
193517, January 15, 2014.
Torrens system;even if the procurement of a certificate of title was tainted with fraud and misrepresentation,
such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser
for value. It is well-settled that even if the procurement of a certificate of title was tainted with fraud and
misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an
innocent purchaser for value. Where innocent third persons, relying on the correctness of the certificate of title
thus issued, acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate. The effect of such an outright cancellation would be to impair public confidence in
the certificate of title, for everyone dealing with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the evident
purpose of the law. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented
in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.
Torrens system; levy on attachment, duly registered, takes preference over a prior unregistered sale.[T]he
settled rule that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result
is a necessary consequence of the fact that the [properties] involved [were] duly covered by the Torrens system
which works under the fundamental principle that registration is the operative act which gives validity to the
transfer or creates a lien upon the land.Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No.
176043. January 15, 2014.

February 2014 Philippine Supreme Court Decisions on Civil Law
Contract law; principle of relativity. The basic principle of relativity of contracts is that contracts can only bind the
parties who entered into it, and cannot favor or prejudice a third person, even if he is aware of such contract and
has acted with knowledge thereof Where there is no privity of contract, there is likewise no obligation or liability
to speak about. Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.
Contract of sale; obligations of the parties; there is nothing in the decision of the HLURB, as affirmed by the OP
and the CA, which shows that the petitioner is being ordered to assume the obligation of any of the
respondents.In a contract of sale, the parties obligations are plain and simple. The law obliges the vendor to
transfer the ownership of and to deliver the thing that is the object of sale. On the other hand, the principal
obligation of a vendee is to pay the full purchase price at the agreed time. Philippine National Bank v. Teresita
Tan Dee, et al., G.R. No. 182128, February 19, 2014.
Contract to sell; ownership; right to mortgage the property by the owner. Note that at the time PEPI mortgaged
the property to the petitioner, the prevailing contract between respondents PEPI and Dee was still the Contract to
Sell, as Dee was yet to fully pay the purchase price of the property. On this point, PEPI was acting fully well
within its right when it mortgaged the property to the petitioner, for in a contract to sell, ownership is retained by
the seller and is not to pass until full payment of the purchase price. In other words, at the time of the mortgage,
PEPI was still the owner of the property. Thus, in China Banking Corporation v. Spouses Lozada the Court
affirmed the right of the owner/developer to mortgage the property subject of development, to wit: [P.D.] No.
957 cannot totally prevent the owner or developer from mortgaging the subdivision lot or condominium unit when
the title thereto still resides in the owner or developer awaiting the full payment of the purchase price by the
installment buyer. Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.
Dacion en pago; concept of.Dacion en pago or dation in payment is the delivery and transmission of ownership of
a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a mode
of extinguishing an existing obligation and partakes the nature of sale as the creditor is really buying the thing or
property of the debtor, the payment for which is to be charged against the debtors debt. Dation in payment
extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties
or as may be proved, unless the parties by agreement express or implied, or by their silence consider the
thing as equivalent to the obligation, in which case the obligation is totally extinguished.Philippine National Bank
v. Teresita Tan Dee, et al., G.R. No. 182128, February 19, 2014.
Co-ownership; when present.Art. 484. There is co-ownership whenever the ownership of an undivided thing or
right belongs to different persons. Art. 1078. When there are two or more heirs, the whole estate of the decedent
is, before its partition, owned in common by such heirs, subject to the payment of debts of the
deceased. Teodoro S. Teodoro, et al. v. Danilo Espino, et al., G.R. No. 189248, February 5, 2014.
Co-ownership; right of possession.Certainly, and as found by the trial courts, the whole of Lot No. 2476 including
the portion now litigated is, owing to the fact that it has remained registered in the name of Genaro who is the
common ancestor of both parties herein, co-owned property. All, or both Teodoro Teodoro and respondents are
entitled to exercise the right of possession as co-owners. Neither party can exclude the other from possession.
Although the property remains unpartitioned, the respondents in fact possess specific areas. Teodoro Teodoro
can likewise point to a specific area, which is that which was possessed by Petra. Teodoro Teodoro cannot be
dispossessed of such area, not only by virtue of Petras bequeathal in his favor but also because of his own right
of possession that comes from his co-ownership of the property. Teodoro S. Teodoro, et al. v. Danilo Espino, et
al., G.R. No. 189248, February 5, 2014.
Alienable and disposable land; to prove that the land subject of an application for registration is alienable, an
applicant must establish the existence of a positive act of the government; annotation in the survey plan is not
sufficient. However, Cortez reliance on the foregoing annotation in the survey plan is amiss; it does not
constitute incontrovertible evidence to overcome the presumption that the subject property remains part of the
inalienable public domain. In Republic of the Philippines v. Tri-Plus Corporation, the Court clarified that, the
applicant must at the very least submit a certification from the proper government agency stating that the parcel
of land subject of the application for registration is indeed alienable and disposable, viz: It must be stressed that
incontrovertible evidence must be presented to establish that the land subject of the application is alienable or
disposable. In the present case, the only evidence to prove the character of the subject lands as required by law
is the notation appearing in the Advance Plan stating in effect that the said properties are alienable and
disposable. However, this is hardly the kind of proof required by law. To prove that the land subject of an
application for registration is alienable, anapplicant must establish the existence of a positive act of the
government such as a presidential proclamation or an executive order, an administrative action, investigation
reports of Bureau of Lands investigators, and a legislative act or statute. The applicant may also secure a
certification from the Government that the lands applied for are alienable and disposable. Republic of the
Philippines v. Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.
Patrimonial property; susceptible to acquisitive prescription; start of the running of the prescriptive period.The
Civil Code makes it clear that patrimonial property of the State may be acquired by private persons through
prescription. This is brought about by Article 1113, which states that [a]ll things which are within the commerce
of man are susceptible to prescription, and that [p]roperty of the State or any of its subdivisions not patrimonial
in character shall not be the object of prescription.Nonetheless, Article 422 of the Civil Code states that
[p]roperty of public dominion, when no longer intended for public use or for public service, shall form part of the
patrimonial property of the State. It is this provision that controls how public dominion property may be
converted into patrimonial property susceptible to acquisition by prescription. After all, Article 420(2) makes clear
that those property which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth are public dominion property. For as long as the property
belongs to the State, although already classified as alienable or disposable, it remains property of the public
dominion if when it is intended for some public service or for the development of the national wealth.
Accordingly, there must be an express declaration by the State that the public dominion property is no longer
intended for public service or the development of the national wealth or that the property has been converted
into patrimonial. Without such express declaration, the property, even if classified as alienable or disposable,
remains property of the public dominion, pursuant to Article 420(2), and thus incapable of acquisition by
prescription. It is only when such alienable and disposable lands are expressly declared by the State to be no
longer intended for public service or for the development of the national wealth that the period of acquisitive
prescription can begin to run. Such declaration shall be in the form of a law duly enacted by Congress or a
Presidential Proclamation in cases where the President is duly authorized by law. Republic of the Philippines v.
Emmanuel C. Cortez,G.R. No. 186639. February 5, 2014.
Sale; warranties of sellers.Indeed, this Court is convinced from an examination of the evidence and by the
concurring opinions of the courts below that Bignay purchased the property without knowledge of the pending
Civil Case No. Q-52702. Union Bank is therefore answerable for its express undertaking under the December 20,
1989 deed of sale to defend its title to the Parcel/s of Land with improvement thereon against the claims of any
person whatsoever. By this warranty, Union Bank represented to Bignay that it had title to the property, and by
assuming the obligation to defend such title, it promised to do so at least in good faith and with sufficient
prudence, if not to the best of its abilities. Bignay EX-IM Philippines, Inc. v. Union Bank of the Philippines / Union
Bank of the Philippines v. Bignay EX-IM Philippines, Inc., G.R. No. 171590 & G.R. No. 171598, February 12, 2014.
Breach of contract; gross negligence.The record reveals, however, that Union Bank was grossly negligent in the
handling and prosecution of Civil Case No. Q-52702. Its appeal of the December 12, 1991 Decision in said case
was dismissed by the CA for failure to file the required appellants brief. Next, the ensuing Petition for Review on
Certiorari filed with this Court was likewise denied due to late filing and payment of legal fees. Finally, the bank
sought the annulment of the December 12, 1991 judgment, yet again, the CA dismissed the petition for its failure
to comply with Supreme Court Circular No. 28-91. As a result, the December 12, 1991 Decision became final and
executory, and Bignay was evicted from the property. Such negligence in the handling of the case is far from
coincidental; it is decidedly glaring, and amounts to bad faith. [N]egligence may be occasionally so gross as to
amount tomalice [or bad faith]. Indeed, in culpa contractual or breach of contract, gross negligence of a party
amounting to bad faith is a ground for the recovery of Damages by the injured party.Bignay EX-IM Philippines,
Inc. v. Union Bank of the Philippines / Union Bank of the Philippines v. Bignay EX-IM Philippines, Inc., G.R. No.
171590 & G.R. No. 171598, February 12, 2014.
Unenforceable contract; entering into a contract without or beyond authority; sale of property despite objection
of laymens committee.The Court finds it erroneous for the CA to ignore the fact that the laymens committee
objected to the sale of the lot in question. The Canons require that ALL the church entities listed in Article IV (a)
thereof should give its approval to the transaction. Thus, when the Supreme Bishop executed the contract of sale
of petitioners lot despite the opposition made by the laymens committee, he acted beyond his powers. This case
clearly falls under the category of unenforceable contracts mentioned in Article 1403, paragraph (1) of the Civil
Code, which provides, thus: Art. 1403. The following contracts are unenforceable, unless they are ratified: (1)
Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers; In Mercado v. Allied Banking Corporation, the Court
explained that: x x x Unenforceable contracts are those which cannot be enforced by a proper action in court,
unless they are ratified, because either they are entered into without or in excess of authority or they do not
comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity. x x
x. Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.
Unenforceable contract; analogous cases. Closely analogous cases of unenforceable contracts are those where a
person signs a deed of extrajudicial partition in behalf of co-heirs without the latters authority; where a mother
as judicial guardian of her minor children, executes a deed of extrajudicial partition wherein she favors one child
by giving him more than his share of the estate to the prejudice of her other children; and where a person,
holding a special power of attorney, sells a property of his principal that is not included in said special power of
attorney. Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.
Article 1456, Civil Code; implied trust; acquiring property through mistake. In the present case, however,
respondents predecessor-in-interest, Bernardino Taeza, had already obtained a transfer certificate of title in his
name over the property in question. Since the person supposedly transferring ownership was not authorized to
do so, the property had evidently been acquired by mistake. In Vda. de Esconde v. Court ofAppeals, the Court
affirmed the trial courts ruling that the applicable provision of law in such cases is Article 1456 of the Civil Code
which states that [i]f property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes. Iglesia
Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.
Constructive trust; concept of. A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense
for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who
is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que
trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While
in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive
trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts
any trust nor intends holding the property for the beneficiary. Iglesia Felipina Independiente v. Heirs of
Bernardino Taeza,G.R. No. 179597, February 3, 2014.
Constructive trust; prescriptive period.A constructive trust having been constituted by law between respondents
as trustees and petitioner as beneficiary of the subject property, may respondents acquire ownership over the
said property? The Court held in the same case of Aznar, that unlike in express trusts and resulting implied trusts
where a trustee cannot acquire by prescription any property entrusted to him unless he repudiates the trust, in
constructive implied trusts, the trustee may acquire the property through prescription even if he does not
repudiate the relationship. It is then incumbent upon the beneficiary to bring an action for reconveyance before
prescription bars the same.An action for reconveyance based on an implied or constructive trust must perforce
prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or
constructive trust prescribes in ten years from the issuance of the Torrens title over the property. It has also been
ruled that the ten-year prescriptive period begins to run from the date of registration of the deed or the date of
the issuance of the certificate of title over the property, Iglesia Felipina Independiente v. Heirs of Bernardino
Taeza, G.R. No. 179597, February 3, 2014.
Surety; concept of. A surety is considered in law as being the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. Although
the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor is
direct, primary and absolute; he becomes liable for the debt and duty of another although he possesses no direct
or personal interest over the obligations nor does he receive any benefit therefrom. Trade and Investment
Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation)
v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.
Surety; solidary debtor. The fundamental reason therefor is that a contract of suretyship effectively binds the
surety as a solidary debtor. This is provided under Article 2047 of the Civil Code which states: By guaranty a
person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case
the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship. Thus,
since the surety is a solidary debtor, it is not necessary that the original debtor first failed to pay before the
surety could be made liable; it is enough that a demand for payment is made by the creditor for the suretys
liability to attach. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export
and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.
Surety; distinguished from guarantor. Comparing a suretys obligations with that of a guarantor, the Court, in the
case of Palmares v. CA, illumined that a surety is responsible for the debts payment at once if the principal
debtor makes default, whereas a guarantor pays only if the principal debtor is unable to pay, viz. : A surety is an
insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an
undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a
surety promises to pay the principals debt if the principal will not pay, while a guarantor agrees that the creditor,
after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. A
surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on
the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a
surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default,
while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal
debtor. Trade and Investment Development Corporation of the Philippines (Formerly Philippine Export and
Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.
Surety; extension given to debtor without consent of guarantor; effect of. Despite these distinctions, the Court in
Cochingyan, Jr. v. R&B Surety & Insurance Co., Inc., and later in the case of Security Bank, held that Article 2079
of the Civil Code, which pertinently provides that [a]n extension granted to the debtor by the creditor without
the consent of the guarantor extinguishes the guaranty, equally applies to bothcontracts of guaranty and
suretyship. The rationale therefor was explained by the Court as follows: The theory behind Article 2079 is that
an extension of time given to the principal debtor by the creditor without the suretys consent would deprive the
surety of his right to pay the creditor and to be immediately subrogated to the creditors remedies against the
principal debtor upon the maturity date. The surety is said to be entitled to protect himself against the
contingency of the principal debtor or the indemnitors becoming insolvent during the extended period. Trade and
Investment Development Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee
Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.
Surety; extension given to debtor without consent of guarantor; the payment extensions granted by Banque
Indosuez and PCI Capital to TIDCORP under the Restructuring Agreement did not have the effect of extinguishing
the bonding companies obligations to TIDCORP under the Surety Bonds, notwithstanding the fact that said
extensions were made without their consent. This is because Article 2079 of the Civil Code refers to a payment
extension granted by the creditor to the principal debtor without the consent of the guarantor or surety. In this
case, the Surety Bonds are suretyship contracts which secure the debt of ASPAC, the principal debtor, under the
Deeds of Undertaking to pay TIDCORP, the creditor, the damages and liabilities it may incur under the Letters of
Guarantee, within the bounds of the bonds respective coverage periods and amounts. No payment extension
was, however, granted by TIDCORP in favor of ASPAC in this regard; hence, Article 2079 of the Civil Code should
not be applied with respect to the bonding companies liabilities to TIDCORP under the Surety Bonds.
The payment extensions granted by Banque Indosuez and PCI Capital pertain to TIDCORPs own debt under the
Letters of Guarantee wherein it (TIDCORP) irrevocably and unconditionally guaranteed full payment of ASPACs
loan obligations to the banks in the event of its (ASPAC) default. In other words, the Letters of Guarantee
secured ASPACs loan agreements to the banks. Under this arrangement, TIDCORP therefore acted as a
guarantor, with ASPAC as the principal debtor, and the banks as creditors. Trade and Investment Development
Corporation of the Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces
Corporation, et al., G.R. No. 187403. February 12, 2014.
Deed of mortgage; effect when the authorized agent failed to indicate in the mortgage that she was acting for
and on behalf of her principal. Similarly, in this case, the authorized agent failed to indicate in the mortgage that
she was acting for and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it
was signed by Concepcion in her own name and in her own personal capacity. In fact, there is nothing in the
document to show that she was acting or signing as an agent of petitioner. Thus, consistent with the law on
agency and established jurisprudence, petitioner cannot be bound by the acts of Concepcion. Nicanora G. v. Rural
Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24, 2014.
Bank; negligence of. At this point, we find it significant to mention that respondent bank has no one to blame but
itself. Not only did it act with undue haste when it granted and released the loan in less than three days, it also
acted negligently in preparing the Real Estate Mortgage as it failed to indicate that Concepcion was signing it for
and on behalf of petitioner. We need not belabor that the words as attorney-in-fact of, as agent of, or for
and on behalf of, are vital in order for the principal to be bound by the acts of his agent. Without these words,
any mortgage, although signed by the agent, cannot bind the principal as it is considered to have been signed by
the agent in his personal capacity. Nicanora G. v. Rural Bank of El Salvador, Inc. et al., G.R. No. 179625.
February 24, 2014.
Agent; liability when deed of mortgage is signed in personal capacity. Concepcion, on the other hand, is liable to
pay respondent bank her unpaid obligation under the Promissory Note dated June 11, 1982, with interest. As we
have said, Concepcion signed the Promissory Note in her own personal capacity; thus, she cannot escape liability.
She is also liable to reimburse respondent bank for all damages, attorneys fees, and costs the latter is adjudged
to pay petitioner in this case.Nicanora G. v. Rural Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24,
2014.
Article 1308 of the Civil Code; principle of mutuality of contracts. The credit agreement executed succinctly
stipulated that the loan would be subjected to interest at a rate determined by the Bank to be its prime rate plus
applicable spread, prevailing at the current month. This stipulation was carried over to or adopted by the
subsequent renewals of the credit agreement. PNB thereby arrogated unto itself the sole prerogative to
determine and increase the interest rates imposed on the Spouses Manalo. Such a unilateral determination of the
interest rates contravened the principle of mutuality of contracts embodied in Article 1308 of the Civil
Code.Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February
24, 2014.
Contracts; a contract where there is no mutuality between the parties partakes of the nature of a contract of
adhesion. The Court has declared that a contract where there is no mutuality between the parties partakes of the
nature of a contract of adhesion, and any obscurity will be construed against the party who prepared the
contract, the latter being presumed the stronger party to the agreement, and who caused the obscurity. PNB
should then suffer the consequences of its failure to specifically indicate the rates of interest in the credit
agreement. We spoke clearly on this in Philippine Savings Bank v. Castillo, to wit: The unilateral determination
and imposition of the increased rates is violative of the principle of mutuality of contracts under Article 1308 of
the Civil Code, which provides that [t]he contract must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them. A perusal of the Promissory Note will readily show that the increase or
decrease of interest rates hinges solely on the discretion of petitioner. It does not require the conformity of the
maker before a new interest rate could be enforced. Any contract which appears to be heavily weighed in favor of
one of the parties so as to lead to an unconscionable result, thus partaking of the nature of a contract of
adhesion, is void. Any stipulation regarding the validity or compliance of the contract left solely to the will of one
of the parties is likewise invalid. Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al.,G.R.
No. 174433, February 24, 2014.
Interest; interest should be computed from the time of the judicial or extrajudicial demand; rule when there is no
demand. Indeed, the Court said in Eastern Shipping Lines, Inc. v. Court of Appeals that interest should be
computed from the time of the judicial or extrajudicial demand. However, this case presents a peculiar situation,
the peculiarity being that the Spouses Manalo did not demand interest either judicially or extrajudicially. In the
RTC, they specifically sought as the main reliefs the nullification of the foreclosure proceedings brought by PNB,
accounting of the payments they had made to PNB, and the conversion of their loan into a long term one. In its
judgment, the RTC even upheld the validity of the interest rates imposed by PNB. In their appellants brief, the
Spouses Manalo again sought the nullification of the foreclosure proceedings as the main relief. It is evident,
therefore, that the Spouses Manalo made no judicial or extrajudicial demand from which to reckon the interest on
any amount to be refunded to them. Such demand could only be reckoned from the promulgation of the CAs
decision because it was there that the right to the refund was first judicially recognized. Nevertheless, pursuant to
Eastern Shipping Lines, Inc. v. Court of Appeals, the amount to be refunded and the interest thereon should earn
interest to be computed from the finality of the judgment until the full refund has been made.Philippine National
Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.
Interest; Monetary Board Circular No. 799 reduced the interest rates from 12% per annum to 6% per
annum. Anent the correct rates of interest to be applied on the amount to be refunded by PNB, the Court, in
Nacar v. Gallery Frames and S.C. Megaworld Construction v. Parada, already applied Monetary Board Circular No.
799 by reducing the interest rates allowed in judgments from 12% per annum to 6% per annum. Philippine
National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al.,G.R. No. 174433, February 24, 2014.
Interest; prospective application of Monetary Board Circular No. 799. According to Nacar v. Gallery Frames, MB
Circular No. 799 is applied prospectively, and judgments that became final and executory prior to its effectivity on
July 1, 2013 are not to be disturbed but continue to be implemented applying the old legal rate of 12% per
annum. Hence, the old legal rate of 12% per annum applied to judgments becoming final and executory prior to
July 1, 2013, but the new rate of 6% per annum applies to judgments becoming final and executory after said
date. Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433, February 24,
2014.
Mortgagee in good faith; doctrine of. In Bank of Commerce v. San Pablo, Jr., the doctrine of mortgagee in good
faith was explained:There is, however, a situation where, despite the fact that the mortgagor is not the owner of
the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising there
from are given effect by reason of public policy. This is the doctrine of the mortgagee in good faith based on
the rule that all persons dealing with property covered by the Torrens Certificates of Title, as buyers or
mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding
indefeasibility of a certificate of title, as evidence of lawful ownership of the land or of any encumbrance thereon,
protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of
title. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias,
et al., G.R. No. 189477. February 26, 2014.
Mortgagee in good faith; HSLB, as a mortgagee, had a right to rely in good faith on Delgados title, and in the
absence of any sign that might arouse suspicion, HSLB had no obligation to undertake further investigation.When
the property was mortgaged to HSLB, the registered owner of the subject property was Delgado who had in her
name TCT No. 44848. Thus, HSLB cannot be faulted in relying on the face of Delgados title. The records indicate
that Delgado was at the time of the mortgage in possession of the subject property and Delgados title did not
contain any annotation that would arouse HSLBs suspicion. HSLB, as a mortgagee, had a right to rely in good
faith on Delgados title, and in the absence of any sign that might arouse suspicion, HSLB had no obligation to
undertake further investigation. As held by this Court in Cebu International Finance Corp. v. CA: The prevailing
jurisprudence is that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of
the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to
undertake further investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have a
valid title to, the mortgaged property, the mortgagee or transferee in good faith is nonetheless entitled to
protection. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel
Frias, et al., G.R. No. 189477. February 26, 2014.
Purchaser in good faith; doctrine of; duty of a prospective buyer. purchaser in good faith is defined as one who
buys a property without notice that some other person has a right to, or interest in, the property and pays full
and fair price at the time of purchase or before he has notice of the claim or interest of other persons in the
property.When a prospective buyer is faced with facts and circumstances as to arouse his suspicion, he must take
precautionary steps to qualify as a purchaser in good faith. In Spouses Mathay v. CA, we determined the duty of
a prospective buyer: Although it is a recognized principle that a person dealing on a registered land need not go
beyond its certificate of title, it is also a firmly settled rule that where there are circumstances which would put a
party on guard and prompt him to investigate or inspect the property being sold to him, such as the presence of
occupants/tenants thereon, it is of course, expected from the purchaser of a valued piece of land to inquire first
into the status or nature of possession of the occupants, i.e., whether or not the occupants possess the land en
concepto de dueo, in the concept of the owner. As is the common practice in the real estate industry, an ocular
inspection of the premises involved is a safeguard a cautious a nd prudent purchaser usually takes. Should he
find out that the land he intends to buy is occupied by anybody else other than the seller who, as in this case, is
not in actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupants
possessory rights. The failure of a prospective buyer to take such precautionary steps would mean negligence on
his part and would thereby preclude him from claiming or invoking the rights of a purchaser in good
faith. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias,
et al., G.R. No. 189477. February 26, 2014.
Notice of lis pendens; definition of; purpose of. Lis pendens is a Latin term which literally means, a pending suit
or a pending litigation while a notice of lis pendens is an announcement to the whole world that a real property
is in litigation, serving as a warning that anyone who acquires an interest over the property does so at his/her
own risk, or that he/she gambles on the result of the litigation over the property. It is a warning to prospective
buyers to take precautions and investigate the pending litigation.
The purpose of a notice of lis pendens is to protect the rights of the registrant while the case is pending
resolution or decision. With the notice of lis pendens duly recorded and remaining uncancelled, the registrant
could rest secure that he/she will not lose the property or any part thereof during litigation. Homeowners Savings
and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477.
February 26, 2014.
Notice of lis pendens; effect of actual knowledge of the annotated Notice of Lis Pendens. Indeed, at the time
HSLB bought the subject property, HSLB had actual knowledge of the annotated Notice of Lis Pendens. Instead of
heeding the same, HSLB continued with the purchase knowing the legal repercussions a notice of lis pendens
entails. HSLB took upon itself the risk that the Notice of Lis Pendens leads to. As correctly found by the CA, the
notice of lis pendens was annotated on 14 September 1995, whereas the foreclosure sale, where the appellant
was declared as the highest bidder, took place sometime in 1997. There is no doubt that at the time appellant
purchased the subject property, it was aware of the pending litigation concerning the same property and thus,
the title issued in its favor was subject to the outcome of said litigation. Homeowners Savings and Loan Bank v.
Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014.
Mortgage; mortgagor must be absolute owner of the thing mortgaged. That the mortgagor be the absolute
owner of the thing mortgaged is an essential requisite of a contract of mortgage. Article 2085 (2) of the Civil
Code specifically says so: Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage: x x x x (2) That the pledgor or mortagagor be the absolute owner of the thing pledged or mortgaged.
Succinctly, for a valid mortgage to exist, ownership of the property is an essential requisite. Reyes v. De Leon
cited the case of Philippine National Bank v. Rocha where it was pronounced that a mortgage of real property
executed by one who is not an owner thereof at the time of the execution of the mortgage is without legal
existence. Such that, according to DBP v. Prudential Bank, there being no valid mortgage, there could also be no
valid foreclosure or valid auction sale. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C.
De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014.
SPECIAL LAWS
P.D. No. 957; subdivision lots; a bank dealing with a property that is already subject of a contract to sell and is
protected by the provisions of P.D. No. 957, is bound by the contract to sell.Thus, in Luzon Development Bank v.
Enriquez, the Court reiterated the rule that a bank dealing with a property that is already subject of a contract to
sell and is protected by the provisions of P.D. No. 957, is bound by the contract to sell. However, the transferee
BANK is bound by the Contract to Sell and has to respect Enriquezs rights thereunder. This is because the
Contract to Sell, involving a subdivision lot, is covered and protected by PD 957. x x x. x x x x x x x Under these
circumstances, the BANK knew or should have known of the possibility and risk that the assigned properties were
already covered by existing contracts to sell in favor of subdivision lot buyers. As observed by the Court in
another case involving a bank regarding a subdivision lot that was already subject of a contract to sell with a third
party:[The Bank] should have considered that it was dealing with a property subject of a real estate
development project. A reasonable person, particularly a financial institution x x x, should have been aware that,
to finance the project, funds other than those obtained from the loan could have been used to serve the purpose,
albeit partially. Hence, there was a need to verify whether any part of the property was already intended to be
the subject of any other contract involving buyers or potential buyers. In granting the loan, [the Bank] should not
have been content merely with a clean title, considering the presence of circumstances indicating the need for a
thorough investigation of the existence of buyers x x x. Wanting in care and prudence, the [Bank] cannot be
deemed to be an innocent mortgagee. x x x Philippine National Bank v. Teresita Tan Dee, et al., G.R. No.
182128, February 19, 2014.
Section 14 of P.D. No. 1529; original registration of title to land; who may apply. Applicants for original
registration of title to land must establish compliance with the provisions of Section 14 of P.D. No. 1529, which
pertinently provides that: Sec.14. Who may apply. The following persons may file in the proper Court of First
Instance an application for registration of title to land, whether personally or through their duly authorized
representatives:(1) Those who by themselves or through their predecessors-in interest have been in open,
continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public
domain under a bona fide claim of ownership since June 12, 1945, or earlier. (2) Those who have acquired
ownership of private lands by prescription under the provision of existing laws.Republic of the Philippines v.
Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.
Section 14 of P.D. No. 1529; original registration of title to land; requisites.Section 14(1) of P.D. No. 1529 refers
to the judicial confirmation of imperfect or incomplete titles to public land acquired under Section 48(b)of
C.A. No.141, as amended by P.D. No. 1073. Under Section 14(1) [of P.D. No. 1529], applicants for registration
of title must sufficiently establish first, that the subject land forms part of the disposable and alienable lands of
the public domain; second, that the applicant and his predecessors-in-interest have been in open, continuous,
exclusive, and notorious possession and occupation of the same; and third, that it is under a bona fide claim of
ownership since June 12, 1945, or earlier. Republic of the Philippines v. Emmanuel C. Cortez, G.R. No. 186639.
February 5, 2014.
Psychological incapacity; concept of; characterizations. Psychological incapacity, as a ground to nullify a
marriage under Article 36 of the Family Code, should refer to no less than a mental not merely physical
incapacity that causes a party to be truly incognitive of the basic marital covenants that concomitantly must be
assumed and discharged by the parties to the marriage which, as so expressed in Article 68 of the Family Code,
among others, include their mutual obligations to live together, observe love, respect and fidelity and render help
and support.There is hardly any doubt that the intendment of the law has been to confine the meaning of
psychological incapacity to the most serious cases of personality disorders clearly demonstrative of an utter
insensitivity or inability to give meaning and significance to the marriage. Republic of the Philippines v. Rodolfo O.
De Gracia, G.R. No. 171557. February 12, 2014.
Psychological incapacity; emotional immaturity, irresponsibility, or even sexual promiscuity, cannot be equated
with psychological incapacity.Keeping with these principles, the Court, in Dedel v. CA, held that therein
respondents emotional immaturity and irresponsibility could not be equated with psychological incapacity as it
was not shown that these acts are manifestations of a disordered personality which make her completely unable
to discharge the essential marital obligations of the marital state, not merely due to her youth, immaturity or
sexual promiscuity. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12, 2014.
Psychological incapacity; although expert opinions furnished by psychologists regarding the psychological
temperament of parties are usually given considerable weight by the courts, the existence of psychological
incapacity must still be proven by independent evidence. Verily, although expert opinions furnished by
psychologists regarding the psychological temperament of parties are usually given considerable weight by the
courts, the existence of psychological incapacity must still be proven by independent evidence. Republic of the
Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12, 2014.
Psychological incapacity; refusal to live with Rodolfo and to assume her duties as wife and mother as well as her
emotional immaturity, irresponsibility and infidelity do not rise to the level of psychological incapacity that would
justify the nullification of the parties marriage. To the Courts mind, Natividads refusal to live with Rodolfo and to
assume her duties as wife and mother as well as her emotional immaturity, irresponsibility and infidelity do not
rise to the level of psychological incapacity that would justify the nullification of the parties marriage. Indeed, to
be declared clinically or medically incurable is one thing; to refuse or be reluctant to perform ones duties is
another. To hark back to what has been earlier discussed, psychological incapacity refers only to the most serious
cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and
significance to the marriage. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12,
2014.
Section 14 (1), Presidential Decree No. 1529; judicial confirmation of imperfect or incomplete titles to public land;
requisites. Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or incomplete titles to
public land acquired under Section 48(b) of Commonwealth Act (C.A.) No. 141, or the Public Land Act, as
amended by P.D. No. 1073. Under Section 14(1) of P.D. No. 1529, applicants for registration of title must
sufficiently establish: first, that the subject land forms part of the disposable and alienable lands of the public
domain; second, that the applicant and his predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupation of the same; and third, that it is under a bona fide claim of ownership
since June 12, 1945, or earlier. Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P.
Inocencio, G.R. No. 199310. February 19, 2014.
Proof that land is alienable and disposable; certifications insufficient. However, the said certifications presented
by the respondent are insufficient to prove that the subject properties are alienable and disposable. In Republic
of the Philippines v. T.A.N. Properties, Inc., the Court clarified that, in addition to the certification issued by the
proper government agency that a parcel of land is alienable and disposable, applicants for land registration must
prove that the DENR Secretary had approved the land classification and released the land of public domain as
alienable and disposable. They must present a copy of the original classification approved by the DENR Secretary
and certified as true copy by the legal custodian of the records. Republic of the Philippines v. Remman
Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014.
Possession and occupation; proof of specific acts of ownership must be presented to substantiate the claim of
open, continuous, exclusive, and notorious possession and occupation of the land subject of the application. For
purposes of land registration under Section 14(1) of P.D. No. 1529, proof of specific acts of ownership must be
presented to substantiate the claim of open, continuous, exclusive, and notorious possession and occupation of
the land subject of the application. Applicants for land registration cannot just offer general statements which are
mere conclusions of law rather than factual evidence of possession. Actual possession consists in the
manifestation of acts of dominion over it of such a nature as a party would actually exercise over his own
property. Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No.
199310. February 19, 2014.
Possession and occupation; mere casual cultivation of portions of the land by the claimant does not constitute
possession under claim of ownership. Although Cerquena testified that the respondent and its predecessors-in-
interest cultivated the subject properties, by planting different crops thereon, his testimony is bereft of any
specificity as to the nature of such cultivation as to warrant the conclusion that they have been indeed in
possession and occupation of the subject properties in the manner required by law. There was no showing as to
the number of crops that are planted in the subject properties or to the volume of the produce harvested from
the crops supposedly planted thereon. Further, assuming ex gratia argumenti that the respondent and its
predecessors-in-interest have indeed planted crops on the subject properties, it does not necessarily follow that
the subject properties have been possessed and occupied by them in the manner contemplated by law. The
supposed planting of crops in the subject properties may only have amounted to mere casual cultivation, which is
not the possession and occupation required by law. A mere casual cultivation of portions of the land by the
claimant does not constitute possession under claim of ownership. For him, possession is not exclusive and
notorious so as to give rise to a presumptive grant from the state. The possession of public land, however long
the period thereof may have extended, never confers title thereto upon the possessor because the statute of
limitations with regard to public land does not operate against the state, unless the occupant can prove
possession and occupation of the same under claim of ownership for the required number of years. Republic of
the Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19,
2014.

March 2014 Philippine Supreme Court Decisions on Civil Law
Action for quieting of title; trial court had no jurisdiction to determine who among the parties have better right
over the disputed property which is admittedly still part of the public domain. Having established that the
disputed property is public land, the trial court was therefore correct in dismissing the complaint to quiet title for
lack of jurisdiction. The trial court had no jurisdiction to determine who among the parties have better right over
the disputed property which is admittedly still part of the public domain. As held in Dajunos v. Tandayag (G.R.
Nos. L-32651-52, 31 August 1971, 40 SCRA 449):
x x x The Tarucs action was for quieting of title and necessitated determination of the respective rights of the
litigants, both claimants to a free patent title, over a piece of property, admittedly public land. The law,
administration, disposition and alienation of public lands with the Director of Lands subject, of course, to the
control of the Secretary of Agriculture and Natural Resources.
In sum, the decision rendered in Civil Case No. 1218 on October 28, 1968 is a patent nullity. The lower court did
not have power to determine who (the Firmalos or the Tarucs) were entitled to an award of free patent title over
that piece of property that yet belonged to the public domain. Neither did it have power to adjudge the Tarucs as
entitled to the true equitable ownership thereof, the latters effect being the same: the exclusion of the Firmalos
in favor of the Tarucs. Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146, March
19, 2014.
Action for quieting of title. In an action for quieting of title, the complainant is seeking for an adjudication that a
claim of title or interest in property adverse to the claimant is invalid, to free him from the danger of hostile
claim, and to remove a cloud upon or quiet title to land where stale or unenforceable claims or demands
exist. Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146, March 19, 2014.
Action for quieting of title; two indispensable requisites. Under Articles 476 and 477 of the Civil Code, the two
indispensable requisites in an action to quiet title are: (1) that the plaintiff has a legal or equitable title to or
interest in the real property subject of the action; and (2) that there is a cloud on his title by reason of any
instrument, record, deed, claim, encumbrance or proceeding, which must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity. Heirs of Pacifico Pocido, et al. v. Arsenia Avila and
Emelinda Chua, G.R. No. 199146, March 19, 2014.
Co-ownership; Article 493 of the Civil Code; rights of a co-owner of a certain property; each one of the co-owners
with full ownership of their parts can sell their fully owned part. Article 493 of the Code defines the ownership of
the co-owner, clearly establishing that each co-owner shall have full ownership of his part and of its fruits and
benefits. Pertinent to this case, Article 493 dictates that each one of the parties herein as co-owners with full
ownership of their parts can sell their fully owned part. The sale by the petitioners of their parts shall not affect
the full ownership by the respondents of the part that belongs to them. Their part which petitioners will sell shall
be that which may be apportioned to them in the division upon the termination of the co-ownership. With the full
ownership of the respondents remaining unaffected by petitioners sale of their parts, the nature of the property,
as co-owned, likewise stays. In lieu of the petitioners, their vendees shall be co-owners with the respondents.
The text of Article 493 says so. Raul V. Arambulo and Teresita Dela Cruz v. Genaro Nolasco and Jeremy Spencer
Nolasco, G.R. No. 189420, March 26, 2014.
Co-ownership; Article 494 of the Civil Code; partition. Article 494 of the Civil Code provides that no co-owner shall
be obliged to remain in the co-ownership, and that each co-owner may demand at any time partition of the thing
owned in common insofar as his share is concerned. Raul V. Arambulo and Teresita Dela Cruz v. Genaro Nolasco
and Jeremy Spencer Nolasco, G.R. No. 189420, March 26, 2014.
Co-ownership; Article 498 of the Civil Code; when this may be resorted to. Article 498 of the Civil Code states that
whenever the thing is essentially indivisible and the co-owners cannot agree that it be allotted to one of them
who shall indemnify the others, it shall be sold and its proceeds accordingly distributed. This is resorted to (a)
when the right to partition the property is invoked by any of the co-owners but
because of the nature of the property, it cannot be subdivided or its subdivision would prejudice the
interests of the co-owners, and (b) the co-owners are not in agreement as to who among them shall be allotted
or assigned the entire property upon proper reimbursement of the co-owners. Raul V. Arambulo and Teresita
Dela Cruz v. Genaro Nolasco and Jeremy Spencer Nolasco, G.R. No. 189420, March 26, 2014.
Damages; actual or compensatory damages. Article 2199 of the Civil Code states that [e]xcept as provided by
law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him a
he has duly proved. Such compensation is referred to as actual or compensatory damages. Actual damages are
compensation for an injury that will put the injured party in the position where it was before the injury. They
pertain to such injuries or losses that are actually sustained and susceptible of measurement. Except as provided
by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary loss as is duly
proven. Basic is the rule that to recover actual damages, not only must the amount of loss be capable of proof; it
must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best
evidence obtainable. International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March
26, 2014.
Damages; Attorneys fees; when allowed. Article 2208 of the Civil Code does not prohibit recovery of attorneys
fees if there is a stipulation in the contract for payment of the same. Thus, in Asian Construction and
Development Corporation v. Cathay Pacific SteelCorporation (CAPASCO), the Court, citing Titan
ConstructionCorporation v. Uni-Field Enterprises, Inc., noted that the law allows a party to recover attorneys fees
under a written agreement. In Barons Marketing Corporation v. Court of Appeals, the Court ruled that attorneys
fees are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause. It has
been said that so long as such stipulation does not contravene law, morals, or public order, it is strictly binding
upon defendant. The attorneys fees so provided areawarded in favor of the litigant, not his counsel.On the other
hand, the law also allows parties to a contract tostipulate on liquidated damages to be paid in case of breach. A
stipulationon liquidated damages is a penalty clause where the obligor assumes agreater liability in case of breach
of an obligation. The obligor is bound topay the stipulated amount without need for proof on the existence and
onthe measure of damages caused by the breach. However, even if such attorneys fees are allowed by law, the
courts still have the power to reduce the same if it is unreasonable. Mariano Lim v. Security Bank
Corporation,G.R. No. 188539, March 12, 2014.
Damages; Attorneys fees; when proper. An award of attorneys fees has always been the exception rather than
the rule and there must be some compelling legal reason to bring the case within the exception and justify the
award. In this case, none of the exceptions applies. Attorneys fees are not awarded every time a party prevails
in a suit. The policy of the Court is that no premium should be placed on the right to litigate. Even when a
claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still, attorneys fees
may not be awarded where no sufficient showing of bad faith could be reflected in a partys persistence in a case
other than an erroneous conviction of the righteousness of his cause. International Container Terminal Services,
Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.
Damages; moral damages. Certainly, an award of moral damages must be anchored on a clear
showing that the party claiming the same actually experienced mental
anguish, besmirched reputation, sleepless nights, wounded feelings, or similar injury. In the case herein
under consideration, the records are bereft of any proof that respondent in fact suffered moral damages as
contemplated in the afore-quoted provision of the Civil Code. The ruling of the trial court provides simply that:
[Petitioners] outright denial and unjust refusal to heed [respondents] claim for payment of the value of her
lost/damaged shipment caus[ed] the latter to suffer serious anxiety, mental anguish and wounded feelings
warranting the award of moral damages x x x. The testimony of respondent, on the other hand, merely states
that when she failed to recover damages from petitioner, she was saddened, had sleepless nights and anxiety
without providing specific details of the suffering she allegedly went through. Since an award of moral damages
is predicated on a categorical showing by the claimant that she actually experienced emotional and mental
sufferings, it must be disallowed absent any evidence thereon. International Container Terminal Services, Inc. v.
Celeste M. Chua, G.R. No. 195031, March 26, 2014.
Damages; Nominal damages; when awarded; Network Bank did not violate any of Barics rights.Nominal damages
are recoverable where a legal right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be shown.
Under Article 2221 of the Civil Code, nominal damages may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying
the plaintiff for any loss suffered. Nominal damages are not for indemnification of loss suffered but for the
vindication or recognition of a right violated or invaded.
Network Bank did not violate any of Barics rights; it was merely a purchaser or transferee of the property. Surely,
it is not prohibited from acquiring the property even while the forcible entry case was pending, because as the
registered owner of the subject property, Palado may transfer his title at any time and the lease merely follows
the property as a lien or encumbrance. Any invasion or violation of Barics rights as lessee was committed solely
by Palado, and Network Bank may not be implicated or found guilty unless it actually took part in the commission
of illegal acts, which does not appear to be so from the evidence on record. On the contrary, it appears that Barie
was ousted through Palados acts even before Network Bank acquired the subject property or came into the
picture. Thus, it was error to hold the bank liable for nominal damages. One Network Rural Bank, Inc. v. Danilo
G. Baric,G.R. No. 193684, March 5, 2014.
Damages; Temperate damages. In the absence of competent proof on the amount of actual damages suffered, a
party is entitled to receive temperate damages. Article 2224 of the New Civil Code provides that: Temperate or
moderate damages, which are more than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty. The amount thereof is usually left to the sound discretion of the
courts but the same should be reasonable, bearing in mind that temperate damages should be more than
nominal but less than compensatory. International Container Terminal Services, Inc. v. Celeste M. Chua, G.R.
No. 195031, March 26, 2014.
Fraud; concept of; Article 1338 of the Civil Code. According to Article 1338 of the Civil Code, there is fraud when
one of the contracting parties, through insidious words or machinations, induces the other to enter into the
contract that, without the inducement, he would not have agreed to. Yet, fraud, to vitiate consent, must be the
causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract.
In Samson v. Court of Appeals (G.R. No. 108245, November 25, 1994, 238 SCRA 397), causal fraud is defined as
a deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the
other.
Fraud cannot be presumed but must be proved by clear and convincing evidence. Whoever alleges fraud affecting
a transaction must substantiate his allegation, because a person is always presumed to take ordinary care of his
concerns, and private transactions are similarly presumed to have been fair and regular. To be remembered is
that mere allegation is definitely not evidence; hence, it must be proved by sufficient evidence. Metropolitan
Fabrics, Inc., et al. v. Prosperity Credit Resources, Inc. et al., G.R. No. 154390, March 17, 2014.
Fraud; Article 1390, in relation to Article 1391 of the Civil Code; consent obtained through fraud; action for
annulment; prescriptive period. Article 1390, in relation to Article 1391 of the Civil Code, provides that if the
consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be
annulled within four years from the time of the discovery of the fraud. Metropolitan Fabrics, Inc., et al. v.
Prosperity Credit Resources, Inc. et al., G.R. No. 154390, March 17, 2014.
Mortgage; a higher degree of prudence must be exercised by the mortgagee in cases where he does not directly
deal with the registered owner of real property. In Bank of Commerce v. Spouses San Pablo, Jr. (550 Phil. 805,
821 (2007)), the court declared that a mortgagee has a right to rely in good faith on the certificate of title of the
mortgagor of the property offered as security, and in the absence of any sign that might arouse suspicion, the
mortgagee has no obligation to undertake further investigation.
However, in Bank of Commerce v. Spouses San Pablo, Jr. (550 Phil. 805, 821 (2007)), the court also ruled that
[i]n cases where the mortgagee does not directly deal with the registered owner of real property, the law
requires that a higher degree of prudence be exercised by the mortgagee. Specifically, the court cited Abad v.
Sps. Guimba (503 Phil. 321, 331-332 (2005)), where it held,
x x x While one who buys from the registered owner does not need to look behind the certificate of title, one
who buys from one who is not the registered owner is expected to examine not only the certificate of title but all
factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in
[the] capacity to transfer the land.
Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law
itself includes a mortgagee in the term purchaser.
Thus, where the mortgagor is not the registered owner of the property but is merely an attorney-in-fact of the
same, it is incumbent upon the mortgagee to exercise greater care and a higher degree of prudence in dealing
with such mortgagor. Macaria Arguelles and the Heirs of the Deceased Petronio Arguelles v. Malarayat Rural
Bank, Inc., G.R. No. 200468, March 19, 2014.
Mortgage; banks are enjoined to exert a higher degree of diligence, care, and prudence than individuals in
handling real estate transactions; it cannot rely merely on the certificate of title. InUrsal v. Court of Appeals (509
Phil. 628, 642 (2005)), the court held that where the mortgagee is a bank, it cannot rely merely on the certificate
of title offered by the mortgagor in ascertaining the status of mortgaged properties. Since its business is
impressed with public interest, the mortgagee-bank is duty-bound to be more cautious even in dealing with
registered lands. Indeed, the rule that person dealing with registered lands can rely solely on the certificate of
title does not apply to banks. Thus, before approving a loan application, it is a standard operating practice for
these institutions to conduct an ocular inspection of the property offered for mortgage and to verify the
genuineness of the title to determine the real owners thereof. The apparent purpose of an ocular inspection is to
protect the true owner of the property as well as innocent third parties with a right, interest or claim thereon
from a usurper who may have acquired a fraudulent certificate of title thereto. Macaria Arguelles and the Heirs of
the Deceased Petronio Arguelles v. Malarayat Rural Bank, Inc., G.R. No. 200468, March 19, 2014.
1. Negligence, the Court said in Layugan v. Intermediate Appellate Court (G.R. No. L-73998, November 14,
1988), is the omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent
and reasonable man would not do, or as Judge Cooley defines it, (t)he failure to observe for the
protection of the interests of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury. In order that a party may be
held liable for damages for any injury brought about by the negligence of another, the claimant must
prove that the negligence was the immediate and proximate cause of the injury. BJDC Construction,
represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E. Lanuzo, et al., G.R. No. 161151,
March 24, 2014.
Negligence; Medical negligence; four elements the plaintiff must prove by competent evidence. An action upon
medical negligence whether criminal, civil or administrative calls for the plaintiff to prove by competent
evidence each of the following four elements, namely: (a) the duty owed by the physician to the patient, as
created by the physician-patient relationship, to act in accordance with the specific norms or standards
established by his profession; (b) the breach of the duty by the physicians failing to act in accordance with the
applicable standard of care; (3) the causation, i.e., there must be a reasonably close and causal connection
between the negligent act or omission and the resulting injury; and (4) the damages suffered by thepatient. Dr.
Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.
Negligence; Medical Negligence; standard of care of the medical profession; standard of care observed by other
members of the profession in good standing under similar circumstances. Negligence is defined as the failure to
observe for the protection of the interests of another person that degree of care, precaution, and vigilance that
the circumstances justly demand, whereby such other person suffers injury. Reckless imprudence, on the other
hand, consists of voluntarily doing or failing to do, without malice, an act from which material damage results by
reason of an inexcusable lack of precaution on the part of the person performing or failing to perform such act.
The Court aptly explained in Cruz v. Court of Appeals that: Whether or not a physician has committed an
inexcusable lack of precaution in the treatment of his patient is to be determined according to the standard of
care observed by other members of the profession in good standing under similar circumstances bearing in mind
the advanced state of the profession at the time of treatment or the present state of medical science. In the
recent case of Leonila Garcia-Rueda v. Wilfred L. Pacasio,et. al., this Court stated that in accepting a case, a
doctor in effect represents that, having the needed training and skill possessed by physicians and surgeons
practicing in the same field, he will employ such training, care and skill in the treatment of his patients. He
therefore has a duty to use at least the same level of care that any other reasonably competent doctor would use
to treat a condition under the same circumstances. It is in this aspect of medical malpractice that expert
testimony is essential to establish not only the standard of care of the profession but also that the physicians
conduct in the treatment and care falls below such standard. Further, inasmuch as the causes of the injuries
involved in malpractice actions are determinable only in the light of scientific knowledge, it has been recognized
that expert testimony is usually necessary to support the conclusion as to causation. Dr. Fernando P. Solidum v.
People of the Philippines,G.R. No. 192123, March 10, 2014.
Negligence; Medical negligence; standard of care; an objective standard by which the conduct of a physician sued
for negligence or malpractice may be measured.In the medical profession, specific norms or standards to protect
the patient against unreasonable risk, commonly referred to asstandards of care, set the duty of the physician to
act in respect of the patient. Unfortunately, no clear definition of the duty of a particular physician in a particular
case exists. Because most medical malpractice cases are highly technical, witnesses with special medical
qualifications must provide guidance by giving the knowledge necessary to render a fair and just verdict. As a
result, the standard of medical care of a prudent physician must be determined from expert testimony in most
cases; and in the case of a specialist (like an anesthesiologist), the standard of care by which the specialist is
judged is the care and skill commonly possessed and exercised by similar specialists under similar circumstances.
The specialty standard ofcare may be higher than that required of the general practitioner. Dr. Fernando P.
Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.
Negligence, test to determine its existence. The test by which the existence of negligence in a particular case is
determined is aptly stated in the leading case of Picart v. Smith (G.R. No. 12219, March 15, 1918).
According to this case, the test by which to determine the existence of negligence in a particular case may be
stated as follows:
Did the defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law
here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet
paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers what would be reckless,
blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of course be
always determined in the light of human experience and in view of the facts involved in the particular case.
Abstract speculation cannot here be of much value but this much can
be profitably said: Reasonable men govern their conduct by the circumstances which are before them or
known to them. They are not, and are not supposed to be, omniscient of the future. Hence they can be expected
to take care only when there is something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the
duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed
by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to
exist. Stated in these terms, the proper criterion for determining the existence of negligence in a given case is
this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen
that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding
against its consequences. BJDC Construction, represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena
E. Lanuzo, et al.,G.R. No. 161151, March 24, 2014.
Property; Recovery of possession of real property; three kinds of actions available. In Sps. Bonifacio R. Valdez, Jr.
et al. vs. Hon. Court of Appeals, et al. (523 Phil. 39 (2006)), the Court is instructive anent the three kinds of
actions available to recover possession of real property, viz: (a) accion interdictal; (b) accion publiciana; and
(c) accion reivindicatoria.
Accion interdictal comprises two distinct causes of action, namely, forcible entry (detentacion) and unlawful
detainer (desahuico) [sic]. In forcible entry, one is deprived of physical possession of real property by means of
force, intimidation, strategy, threats, or stealth whereas in unlawful detainer, one illegally withholds possession
after the expiration or termination of his right to hold possession under any contract, express or implied. The two
are distinguished from each other in that in forcible entry, the possession of the defendant is illegal from the
beginning, and that the issue is which party has prior de facto possession while in unlawful detainer, possession
of the defendant is originally legal but became illegal due to the expiration or termination of the right to possess.
The jurisdiction of these two actions, which are summary in nature, lies in the proper municipal trial court or
metropolitan trial court. Both actions must be brought within one year from the date of actual entry on the land,
in case of forcible entry, and from the date of last demand, in case of unlawful detainer. The issue in said cases is
the right to physical possession.
Accion publiciana is the plenary action to recover the right of possession which should be brought in the proper
regional trial court when dispossession has lasted for more than one year. It is an ordinary civil proceeding to
determine the better right of possession of realty independently of title. In other words, if at the time of the filing
of the complaint more than one year had elapsed since defendant had turned plaintiff out of possession or
defendants possession had become illegal, the action will be, not one of the forcible entry or illegal detainer, but
an accion publiciana. On the other hand, accion reivindicatoria is an action to recover ownership also brought in
the proper regional trial court in an ordinary civil proceeding. Carmencita Suarez v. Mr. and Mrs. Felix E. Emboy,
Jr. and Marilou P. Emboy-Delantar, G.R. No. 187944, March 12, 2014.
Res ipsa loquitor; a mode of proof or a mere procedural convenience.In Jarcia, Jr. v. People, the court has
underscored that the doctrine is not a rule of substantive law, but merely a mode of proof or a mere procedural
convenience. The doctrine, when applicable to the facts and circumstances of a given case, is not meant to and
does not dispense with the requirement of proof of culpable negligence against the party charged. It merely
determines and regulates what shall be prima facieevidence thereof, and helps the plaintiff in proving a breach of
the duty. The doctrine can be invoked when and only when, under the circumstances involved, direct evidence is
absent and not readily available. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10,
2014.
Res ipsa loquitor; applicability in medical negligence cases. The applicability of the doctrine of res ipsa loquitur in
medical negligence cases was significantly and exhaustively explained in Ramos v. Court of Appeals, where the
Court saidMedical malpractice cases do not escape the application of this doctrine. Thus, res ipsa loquitur has
been applied when the circumstances attendant upon the harm are themselves of such a character as to justify
an inference of negligence as the cause of that harm. The application of resipsa loquitur in medical negligence
cases presents a question of law since it is a judicial function to determine whether a certain set of circumstances
does, as a matter of law, permit a given inference. Although generally, expert medical testimony is relied upon in
malpractice suits to prove that a physician has done a negligent act or that he has deviated from the standard
medical procedure, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical
testimony is dispensed with because the injury itself provides the proof of negligence. The reason is that the
general rule on the necessity of expert testimony applies only to such matters clearly within the domain of
medical science, and not to matters that are within the common knowledge of mankind which may be testified to
by anyone familiar with the facts. Ordinarily, only physicians and surgeons of skill and experience are competent
to testify as to whether a patient has been treated or operated upon with a reasonable degree of skill and care.
However, testimony as to the statements and acts of physicians and surgeons, external appearances, and
manifest conditions which are observable by any one may be given by non-expert witnesses. Hence, in cases
where the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon proper proof of
injury to the patient, without the aid of expert testimony, where the court from its fund of common knowledge
can determine the proper standard of care. Where common knowledge and experience teach that a resulting
injury would not have occurred to the patient if due care had been exercised, an inference of negligence may be
drawn giving rise to an application of the doctrine of res ipsa loquitur without medical evidence, which is
ordinarily required to show not only what occurred but how and why it occurred. When the doctrine is
appropriate, all that the patient must do is prove a nexus between the particular act or omission complained of
and the injury sustained while under the custody and management of the defendant without need to produce
expert medical testimony to establish the standard of care. Resort to res ipsa loquitur is allowed because there is
no other way, under usual and ordinary conditions, by which the patient can obtain redress for injury suffered by
him. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.
Res ipsa loquitur; applied in conjunction with the doctrine of common knowledge.It is simply a recognition of the
postulate that, as a matter of common knowledge and experience, the very nature of certain types of
occurrences may justify an inference of negligence on the part of the person who controls the instrumentality
causing the injury in the absence of some explanation by the defendant who is charged with negligence. It is
grounded in the superior logic of ordinary human experience and on the basis of such experience or common
knowledge, negligence may be deduced from the mere occurrence of the accident itself. Hence, res ipsa
loquitur is applied in conjunction with the doctrine ofcommon knowledge. Dr. Fernando P. Solidum v. People of
the Philippines,G.R. No. 192123, March 10, 2014.
Res ipsa loquitor. Res ipsa loquitur is literally translated as the thing or the transaction speaks for itself. The
doctrine res ipsa loquitur means that where the thing which causes injury is shown to be under the management
of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have
the management use proper care, it affords reasonable evidence, in the absence of an explanation by the
defendant, thatthe accident arose from want of care. Dr. Fernando P. Solidum v. People of the Philippines,G.R.
No. 192123, March 10, 2014.
Res ipsa loquitur. The doctrine of res ipsa loquitur is based on the theory that the defendant either knows the
cause of the accident or has the best opportunity
of ascertaining it and the plaintiff, having no knowledge thereof, is compelled to allege negligence in
general terms. In such instance, the plaintiff relies on proof of the happening of the accident alone to establish
negligence. The principle, furthermore, provides a means by which a plaintiff can hold liable a defendant who, if
innocent, should be able to prove that he exercised due care to prevent the accident complained of from
happening. It is, consequently, the defendants responsibility to show that there was no negligence on his
part. International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26, 2014.
Res ipsa loquitur; concept of; requirements for the doctrine to apply. In Tan v. JAM Transit, Inc. (G.R. No.
183198, November 25, 2009), the Court noted that res ipsa loquitur is a Latin phrase that literally means the
thing or the transaction speaks for itself. It is a maxim for the rule that the fact of the occurrence of an injury,
taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or
make out a plaintiffs prima facie case, and present a question of fact for defendant to meet with an
explanation. Where the thing that caused the injury complained of is shown to be under the management of
the defendant or his servants; and the accident, in the ordinary course of things, would not
happen if those who had management or control used proper care, it affords reasonable evidencein the
absence of a sufficient, reasonable and logical explanation by defendantthat the accident arose from or was
caused by the defendants want of care. This rule is grounded on the superior logic of ordinary human
experience, and it is on the basis of such experience or common knowledge that negligence may be deduced
from the mere occurrence of the accident itself. Hence, the rule is applied in conjunction with the doctrine of
common knowledge.
For the doctrine to apply, the following requirements must be shown to exist, namely: (a) the accident is of a
kind that ordinarily does not occur in the absence of someones negligence; (b) it is caused by an
instrumentality within the exclusive control of the defendant or defendants; and (c) the possibility of contributing
conduct that would make the plaintiff responsible is eliminated. BJDC Construction, represented by its
Manager/Proprieto Janet S. Dela Cruz v. Nena E. Lanuzo, et al., G.R. No. 161151, March 24, 2014.
Res ipsa loquitor; doctrine does not automatically apply to all cases of medical negligence as to mechanically shift
the burden of proof to the defendant.Despite the fact that the scope of res ipsa loquitur has been measurably
enlarged, it does not automatically apply to all cases of medical negligence as to mechanically shift the burden of
proof to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid or
ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon the circumstances
of each case. It is generally restricted to situations in malpractice cases where a layman is able to say, as a
matter of common knowledge and observation, that the consequences of professional care were not as such as
would ordinarily have followed if due care had been exercised. A distinction must be made between the failure to
secure results, and the occurrence of something more unusual and not ordinarily found if the service or treatment
rendered followed the usual procedure of those skilled in that particular practice. It must be conceded that the
doctrine of res ipsa loquitur can have no application in a suit against a physician or surgeon which involves the
merits of a diagnosis or of a scientific treatment. The physician or surgeon is not required at his peril to explain
why any particular diagnosis was not correct, or why any particular scientific treatment did not produce the
desired result. Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is that the desired
result of an operation or treatment was not accomplished. The real question, therefore, is whether or not in the
process of the operation any extraordinary incident or unusual event outside of the routine performance occurred
which is beyond the regular scope of customary professional activity in such operations, which, if unexplained
would themselves reasonably speak to the average man as the negligent cause or causes of the untoward
consequence. If there was such extraneous intervention, the doctrine of res ipsa loquitur may be utilized and the
defendant is calledupon to explain the matter, by evidence of exculpation, if he could. Dr. Fernando P. Solidum v.
People of the Philippines,G.R. No. 192123, March 10, 2014.
Res ipsa loquitor; essential requisites.In order to allow resort to the doctrine, therefore, the following essential
requisites must first be satisfied, to wit: (1) the accident was of a kind that does not ordinarily occur unless
someone is negligent; (2) the instrumentality or agency that caused the injury was under the exclusive control of
the person charged; and (3) the injury suffered must not have been due to any voluntary action or contribution
of the person injured. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.
Res ipsa loquitur; when may be invoked. The doctrine can be
invoked when and only when, under the circumstances involved, direct evidence is absent and not readily
available. Here, there was no evidence as to how or why the fire in the container yard of petitioner started;
hence, it was up to petitioner to satisfactorily prove that it exercised the diligence required to prevent the fire
from happening. International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26,
2014.
Suretyship; Continuing suretyship; nature of; example of.A Continuing Suretyship, which the Court described
in Saludo, Jr. v. Security Bank Corporation as follows:
The essence of a continuing surety has been highlighted in the case of Totanes v. China Banking Corporation in
this wise: Comprehensive or continuing surety agreements are, in fact, quite commonplace in present day
financial and commercial practice. A bank or financing companywhich anticipates entering into a series of credit
transactions with a particular company, normallyrequires the projected principal debtor to execute acontinuing
surety agreement along with its sureties. Byexecuting such an agreement, the principal places itselfin a position
to enter into the projected series oftransactions with its creditor; with such suretyshipagreement, there would be
no need to execute a separatesurety contract or bond for each financing or creditaccommodation extended to the
principal debtor.
The terms of the Continuing Suretyship executed by petitioner are very clear. It states that petitioner, as surety,
shall, without need for any notice, demand or any other act or deed, immediately become liable and shall pay all
credit accommodations extended by the Bank to the Debtor, including increases, renewals, roll-overs,
extensions, restructurings, amendments or novations thereof, as well as (i) all obligations of theDebtor
presently or hereafter owing to the Bank, as appears in the accounts, books and records of the
Bank, whether direct or indirect, and (ii) any and all expenses which the Bank may incur in enforcing any of
its rights, powers and remedies under the Credit Instruments as defined hereinbelow. Mariano Lim v. Security
Bank Corporation,G.R. No. 188539, March 12, 2014.
Suretyship. A contract of suretyship is an agreement whereby a party, called the surety, guarantees the
performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another
party, called the obligee. Although the contract of a surety is secondary only to a valid principal obligation, the
surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom. This was explained in the case of Stronghold Insurance
Company, Inc. v. Republic-Asahi Glass Corporation, where it was written: The suretys obligation is not an original
and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted
by the principal. Nevertheless, although the contract of a suretyis in essence secondary only to a valid
principalobligation, his liability to the creditor or promisee of theprincipal is said to be direct,
primary and absolute; inother words, he is directly and equally bound with theprincipal.
Thus, suretyship arises upon the solidary binding of a person deemed the surety with the principal debtor for the
purpose of fulfilling an obligation. A surety is considered in law as being the same party asthe debtor in
relation to whatever is adjudged touching the obligationof the latter, and their liabilities are
interwoven as to be inseparable. Mariano Lim v. Security Bank Corporation,G.R. No. 188539, March 12, 2014.
SPECIAL LAWS
Comprehensive Agrarian Reform Law (CARL); Section 65 of R.A. 6657; DAR is empowered to
authorize, under certain conditions, the reclassification or conversion of agricultural lands. Under Section 65
of R.A. No. 6657, the DAR is empowered to authorize, under certain conditions, the reclassification or conversion
of agricultural lands. Pursuant to this authority and in the exercise of its rulemaking power under Section 49 of
R.A. No. 6657, the DAR issued Administrative Order No. 12, series of 1994 (DAR A.O. 12-94) (the then prevailing
administrative order), providing the rules and procedure governing agricultural land conversion. Item VII of DAR
A.O. 12-94 enumerates the documentary requirements for approval of an application for
land conversion.35Notably, Item VI-E provides that no application for conversion shall be given due course if: (1)
the DAR has issued a Notice of Acquisition under the compulsory acquisition process; (2) a Voluntary Offer to Sell
covering the subject property has been received by the DAR; or (3) there is already a perfected agreement
between the landowner and the beneficiaries under Voluntary Land Transfer.Heirs of Teresita Montoya, et al. v.
National Housing Authority, et al., G.R. No. 181055, March 19, 2014.
Comprehensive Agrarian Reform Law (CARL); Section 6 of R.A. 6657; retention limits. Section 6 of R.A. No. 6657
specifically governs retention limits. Under its last paragraph, any sale, disposition, lease, management, contract
or transfer of possession of private lands executed by the original landowner in violation of [R.A. No. 6657] is
considered null and void. A plain reading of the last paragraph appears to imply that the CARL absolutely
prohibits sales or dispositions of private agricultural lands. The interpretation or construction of this prohibitory
clause, however, should be made within the context of Section 6, following the basic rule in statutory
construction that every part of the statute be interpreted with reference to the context, i.e., that every part of
the statute must be considered together with the other parts, and kept subservient to the general intent of the
whole enactment. Notably, nothing in this paragraph, when read with the entire section, discloses any legislative
intention to absolutely prohibit the sale or other transfer agreements of private agricultural lands after the
effectivity of the Act.
In other words, therefore, the sale, disposition, etc. of private lands that Section 6 of R.A. No. 6657 contextually
prohibits and considers as null and void are those which the original owner executes in violation of this provision,
i.e., sales or dispositions executed with the intention of circumventing the retention limits set by R.A. No. 6657.
Consistent with this interpretation, the proscription in Section 6 on sales or dispositions of private agricultural
lands does not apply to those that do not violate or were not intended to circumvent the CARLs retention
limits. Heirs of Teresita Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19, 2014.
Emancipation of Tenants; P.D. 27; CLT; legal effects of issuance; tenant-farmer does not acquire full ownership
of the covered landholding simply by the issuance of a CLT. A CLT is a document that the government issues to a
tenant-farmer of an agricultural land primarily devoted to rice and corn production placed under the coverage of
the governments OLT program pursuant to P.D. No. 27. It serves as the tenant-farmers (grantee of the
certificate) proof of inchoate right over the land covered thereby.
A CLT does not automatically grant a tenant-farmer absolute ownership of the covered landholding. Under PD No.
27, land transfer is effected in two stages: (1) issuance of the CLT to the tenant-farmer in recognition that said
person is a deemed owner; and (2) issuance of an Emancipation Patent (EP) as proof of full ownership upon
the tenant-farmers full payment of the annual amortizations or lease rentals.
As a preliminary step, therefore, the issuance of a CLT merely evinces that the grantee thereof is qualified to avail
of the statutory mechanism for the acquisition of ownership of the land tilled by him, as provided under P.D. No.
27. The CLT is not a muniment of title that vests in the tenant-farmer absolute ownership of his tillage. It is only
after compliance with the conditions which entitle the tenant-farmer to an EP that the tenant-farmer acquires the
vested right of absolute ownership in the landholding. Stated otherwise, the tenant-farmer does not acquire full
ownership of the covered landholding simply by the issuance of a CLT. The tenant-farmer must first comply with
the prescribed conditions and procedures for acquiring full ownership but until then, the title remains with the
landowner. Heirs of Teresita Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19,
2014.
Land registration; Classification of land; evidence of a positive act from the government reclassifying the lot as
alienable and disposable agricultural land of the public domain. Accordingly, jurisprudence has required that an
applicant for registration of title acquired through a public land grant must present incontrovertible evidence that
the land subject of the application is alienable or disposable by establishing the existence of a positive act of the
government, such as a presidential proclamation or an executive order; an administrative action; investigation
reports of Bureau of Lands investigators; and a legislative act or a statute. Sps. Antonio Fortuna and Erlinda
Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.
Land registration; Classification of land; Executive prerogative.Under Section 6 of the Public Land Act, the
classification and the reclassification of public lands are the prerogative of the Executive Department. The
President, through a presidential proclamation or executive order, can classify or reclassify a land to be included
or excluded from the public domain. The Department of Environment and Natural Resources Secretary is likewise
empowered by law to approve a land classification and declare such land as alienable and disposable. Sps.
Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.
Land registration; it is essential for any applicant for registration of title to land derived through a public grant to
establish foremost the alienable and disposable nature of the land. The Constitution declares that all lands of the
public domain are owned by the State. Of the four classes of public land, i.e., agricultural lands, forest or timber
lands, mineral lands, and national parks, only agricultural lands may be alienated. Public land that has not been
classified as alienable agricultural land remains part of the inalienable public domain. Thus, it is essential for
any applicant for registration of title toland derived through a public grant to establish foremost the
alienableand disposable nature of the land. The Public Land Act provisions on the grant and disposition of
alienable public lands, specifically, Sections 11 and 48(b), will find application only from the time that a public
land has been classified as agricultural and declared as alienable and disposable. Sps. Antonio Fortuna and
Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.
Land registration; Judicial confirmation of imperfect or incomplete title; cut-off date for applications. As
mentioned, the Public Land Act is the law that governs the grant and disposition of alienable agricultural lands.
Under Section 11 of the PLA, alienable lands of the public domain may be disposed of, among others, by judicial
confirmation of imperfect or incomplete title. This mode of acquisition of title is governed by Section 48(b)
of the PLA, the original version of which states:
Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to
own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to
the Court of First Instance of the province where the land is located for confirmation of their claims and the
issuance of a certificate of title therefor, under the Land Registration Act, to wit:
x x x x
(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition or ownership, except as against the Government,since July twenty-sixth, eighteen hundred and
ninety-four, except when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a government grant and shall be entitled to a certificate of title under
the provisions of this chapter. [emphasis supplied]
On June 22, 1957, the cut-off date of July 26, 1894 was replaced by a 30-year period of possession under RA No.
1942. Section 48(b) of the PLA, as amended by RA No. 1942, read:
(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive
and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition of ownership, for at least thirty years immediately preceding the filing of the application for
confirmation of title, except when prevented by war or force majeure.
On January 25, 1977, PD No. 1073 replaced the 30-year period of possession by requiring possession since June
12, 1945. Section 4 of PD No. 1073 reads:
SEC. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public Land Act are hereby
amended in the sense that these provisions shall apply only to alienable and disposable lands of the public
domain which have been in open, continuous, exclusive and notorious possession and occupation by the applicant
himself or thru his predecessor-in-interest, under a bona fide claim of acquisition of ownership, since June 12,
1945.
Under the P.D. No. 1073 amendment, possession of at least 32 years from 1945 up to its enactment in 1977
is required. This effectively impairs the vested rights of applicants who had complied with the 30-year possession
required under the RA No. 1942 amendment, but whose possession commenced only after the cut-off date of
June 12, 1945 was established by the PD No. 1073 amendment. To remedy this, the Court ruled in Abejaron v.
Nabasa that Filipino citizens who by themselves or their predecessors-in-interest have been, prior to the
effectivity of P.D. 1073on January 25, 1977, in open, continuous, exclusive and notorious possession and
occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at
least 30 years, or atleast since January 24, 1947 may apply for judicial confirmation of their imperfect or
incomplete title under Sec. 48(b) of the [PLA]. January 24,1947 was considered as the cut off date as
this was exactly 30 yearscounted backward from January 25, 1977 the effectivity date of PDNo.
1073.
It appears, however, that January 25, 1977 was the date PD No. 1073 was enacted; based on the
certification from the National PrintingOffice, PD No. 1073 was published in Vol. 73, No. 19 of the Official
Gazette, months later than its enactment or on May 9, 1977. Thisuncontroverted fact materially affects the
cut-off date for applications forjudicial confirmation of incomplete title under Section 48(b) of the PLA.Although
Section 6 of PD No. 1073 states that [the] Decree shalltake effect upon its promulgation, the Court has declared
in Taada, et al.v. Hon. Tuvera, etc., et al. that the publication of laws is an indispensablerequirement for its
effectivity. [A]ll statutes, including those of localapplication and private laws, shall be published as a condition
for theireffectivity, which shall begin fifteen days after publication unless a differenteffectivity date is fixed by the
legislature. Accordingly, Section 6 of PDNo. 1073 should be understood to mean that the decree took effect
onlyupon its publication, or on May 9, 1977. This, therefore, moves the cut-off date for applications for
judicial confirmation of imperfect or incomplete title under Section 48(b) of the PLA to May 8,
1947. In otherwords, applicants must prove that they have been in open, continuous,exclusive and
notorious possession and occupation of agricultural lands ofthe public domain, under a bona fide
claim of acquisition of ownership,for at least 30 years, or at least since May 8, 1947.Sps. Antonio
Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.
Land registration; Possession; as a requirement for the application for registration of title.Notably, Section 48(b)
of the PLA speaks of possession and occupation. Since these words are separated by the conjunction and, the
clear intention of the law is not to make one synonymous with the other. Possession is broader than occupation
because it includes constructive possession. When, therefore, the law adds the word occupation, it seeks to
delimit the all-encompassing effect of constructive possession. Taken together with the words open, continuous,
exclusive and notorious, the word occupation serves to highlight the fact that for an applicant to qualify, his
possession must not be a mere fiction. Nothing in Tax Declaration No. 8366 shows that Pastora exercised acts of
possession and occupation such as cultivation of or fencing off the land. Indeed, the lot was described as
cogonal. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5,
2014.
Public Land Act; Sec 48(b), as amended by P.D. 1073; requirements for judicial confirmation of title.The
requirements for judicial confirmation of imperfect title are found in Section 48(b) of the Public Land Act, as
amended by Presidential Decree No. 1073, as follows:
Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to
own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to
the Court of First Instance of the province where the land is located for confirmation of their claims and the
issuance of a certificate of title therefor, under the Land Registration Act, to wit:
x x x x
(b) Those who by themselves or through their predecessors in interest have been in the open, continuous,
exclusive, and notorious possession and occupation of alienable and disposable lands of the public domain, under
a bona fide claim of acquisition or ownership, since June 12, 1945, or earlier, immediately preceding the filing of
the application for confirmation of title except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled
to a certificate of title under the provisions of this chapter.
Republic of the Philippines represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade,
in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S.
Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S.
Vita,G.R. No. 157485, March 26, 2014.
Regalian Doctrine; all lands of the public domain belong to the State and that lands not appearing to be clearly
within private ownership are presumed to belong to the State. As this Court held in the fairly recent case of
Valiao v. Republic (G.R. No. 170757, November 28, 2011,): Under the Regalian doctrine, which is embodied in
our Constitution, all lands of the public domain belong to the State, which is the source of any asserted right to
any ownership of land. All lands not appearing to be clearly within private ownership are presumed to belong to
the State. Accordingly, public lands not shown to have been reclassified or released as alienable agricultural land
or alienated to a private person by the State remain part of the inalienable public domain. Unless public land is
shown to have been reclassified as alienable or disposable to a private person by the State, it remains part of the
inalienable public domain. Property of the public domain is beyond the commerce of man and not susceptible of
private appropriation and acquisitive prescription. Occupation thereof in the concept of owner no matter how long
cannot ripen into ownership and be registered as a title. The burden of proof in overcoming the presumption of
State ownership of the lands of the public domain is on the person applying for registration (or claiming
ownership), who must prove that the land subject of the application is alienable or disposable. To overcome this
presumption, incontrovertible evidence must be established that the land subject of the application (or claim) is
alienable or disposable. Republic of the Philippines represented by Aklan National Colleges of Fisheries (ANCF)
and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely:
Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin,
Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March 26, 2014.
Public Land Act; two requisites for judicial confirmation of title. The two requisites for judicial confirmation of
imperfect or incomplete title under CA No. 141, namely: (1) open, continuous, exclusive, and notorious
possession and occupation of the subject land by himself or through his predecessors-in-interest under a bona
fide claim of ownership since time immemorial or from June 12, 1945; and (2) the classification of the land as
alienable and disposable land of the public domain. Republic of the Philippines represented by Aklan National
Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of
Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L.
Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March 26, 2014.
Regalian Doctrine; failure of Republic to show competent evidence that the subject land was declared a
timberland before its formal classification as such in 1960 does not lead to the presumption that said land was
alienable and disposable prior to said date. Accordingly, in the case at bar, the failure of petitioner Republic to
show competent evidence that the subject land was declared a timberland
before its formal classification as such in 1960 does not lead to the presumption that said land was
alienable and disposable prior to said date. On the contrary, the presumption is that unclassified lands are
inalienable public lands. It is therefore the respondents which have the burden to identify a positive act of the
government, such as an official proclamation, declassifying inalienable public land into disposable land for
agricultural or other purposes. Since respondents failed to do so, the alleged possession by them and by their
predecessors-in-interest is inconsequential and could never ripen into ownership. Republic of the Philippines
represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF
Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin,
Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March
26, 2014.