G.R. No. 165413 February 22, 2012 PHILAM INSURANCE COMPANY, INC.

and AMERICAN HOME

INSURANCE CO. Petitioners - versus COURT OF APPEALS, and D.M. CONSUNJI INC., Respondents. SERENO, J.: Facts: Four gensets from the United States of America were ordered by Citibank, N.A. (Citibank). Petitioner AHIC insured these gensets under Certificate No. 60221 for USD 851,500 covering various risks. The insurance policy provided that the claim may be paid in the Philippines by Philam Insurance Co., Inc, AHICs local settling agent. Citibanks broker-forwarder, Melicia International Services (MIS), transported the gensets in separate container vans. It was instructed by Citibank to deliver and haul one genset to Makati City, where the latters office was being constructed by the building contractor, DMCI. MIS was further instructed to place the 13-ton genset at the top of Citibanks building. The broker-forwarder declined, since it had no power cranes. Thus, Citibank assigned the job to private respondent DMCI, which accepted the task. On 16 October 1993, DMCI lifted the genset with a crane (Unic-K-2000) that had a hydraulic telescopic boom and a loading capacity of 20 tons. During the lifting process, both the cranes boom and the genset fell and got damaged. After two days, DMCIs surveyor, Manila Adjusters & Surveyors Co. (MASC) assessed the condition of the crane and the genset. According to its Survey Certificate, the genset was already deformed. Citibank demanded from DMCI the full value of the damaged genset, including the cost, insurance and freight amounting to USD 212,850. Private respondent refused to pay, asserting that the damage was caused by an accident. Thereafter, Citibank filed an insurance claim with Philam, AHICs local settling agent, for the value of the genset. Philam paid the claim for PhP 5,866,146.

Claiming the right of subrogation, Philam demanded the reimbursement of the gensets value from DMCI, which denied liability. Thus, on 19 April 1994, Philam filed a Complaint with the RTC to recover the value of the insured genset

The trial court ruled that the loss or damage to the genset was due to the negligent operation of the crane hence, DMCI appealed to the CA, which reversed and set aside the RTCs Decision. Issue: Whether petitioners have sufficiently established the negligence of DMCI for the former to recover the value of the damaged genset. Held: No. 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. G.R. No. 168499 November 26, 2012 SPOUSES EROSTO SANTIAGO and NELSIE SANTIAGO, Petitioners, vs. MANCER VILLAMOR, CARLOS VILLAMOR, JOHN VILLAMOR and DOMINGO VILLAMOR, JR., Respondents. BRION, J.:

Facts: In January 1982, the spouses Villamor, Sr., mortgaged their 4.5-hectare coconut land in Sta. Rosa, San Jacinto, Masbate, known as Lot No. 1814, to the Rural Bank of San Jacinto (Masbate), Inc. for a P10, 000.00 loan. For non-payment of the loan, the San Jacinto Bank extrajudicially foreclosed the mortgage, and, as the highest bidder at the public auction, bought the land. When the spouses Villamor, Sr. failed to redeem the property within the prescribed period, the San Jacinto Bank obtained a final deed of sale in its favor sometime in 1991. The San Jacinto Bank then offered the land for sale to any interested buyer. Since the respondents had been in possession and cultivation of the land, they decided, together with their sister Catalina Villamor Ranchez, to acquire the land from the San Jacinto Bank. The San Jacinto Bank agreed with the respondents and Catalina to a P65,000.00 sale, payable in instalments. They made four (4) instalment payments of P28,000.00, P5,500.00, P7,000.00 and P24,500.00 on November 4, 1991, November 23, 1992, April 26, 1993 and June 8, 1994, respectively. However, on July 19, 1994, the San Jacinto Bank issued a deed of sale in favor of Domingo, Sr. and on July 21, 1994, the spouses Villamor, Sr. sold the land to the petitioners for P150, 000.00. After the respondents refused to vacate the land, the petitioners filed on October 20, 1994 a complaint for quieting of title and recovery of possession against the respondents. The petitioners argue that the spouses Villamor, Sr.s execution of the July 21, 1994 deed of sale in the petitioners favor was equivalent to delivery of the land under Article 1498 of the Civil Code and that they are purchasers in good faith since they had no knowledge of the supposed transaction between the San Jacinto Bank and the respondents and Catalina and the respondents' possession of the land should not be construed against them since, by tradition and practice in San Jacinto, Masbate, the children use their parents property while the respondents submit that they hold legal title to the land since they perfected the sale with the San Jacinto Bank as early as November 4, 1991 and are in actual possession of the land, that the petitioners are not purchasers in good faith since they failed to ascertain why the respondents were in possession of the land.

Issue: 1. to delivery 2. had no

Whether or not the deed of sale in the petitioners favor was equivalent of the land Whether or not the petitioners are purchasers in good faith since they knowledge of the supposed transaction between respondents and Catalina

the San Jacinto Bank and the Held: 1.

No, execution of public instrument is 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. 2. No, The petitioners can hardly claim to be 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. In this case, the spouses Villamor, Sr. were not in possession of the land. The petitioners, as prospective vendees, carried the burden of investigating the rights of the respondents and respondent John who were then in actual possession of the land. The petitioners cannot take refuge behind the allegation that, by custom and tradition in San Jacinto, Masbate, the children use their parents' property, since they offered no proof supporting their bare allegation. The burden of proving the status of a purchaser in good faith lies upon the party asserting that status and cannot be discharged by reliance on the legal presumption of good faith.28 The petitioners failed to discharge this burden. G.R. No. 169055 February 22, 2012 SPOUSES JOSE and MILAGROS VILLACERAN and FAR EAST BANK & TRUST COMPANY, Petitioners, - versus JOSEPHINE DE GUZMAN, Respondent. VILLARAMA, JR., J.: Facts: Josephine De Guzman filed a Complaint with the RTC of Echague, Isabela against the spouses Jose and Milagros Villaceran and Far East Bank & Trust Company (FEBTC), Santiago City Branch, for declaration of nullity of sale, reconveyance, redemption of mortgage and damages with preliminary injunction. The complaint was later amended to include annulment of foreclosure and Sheriffs Certificate of Sale. In her Amended Complaint, De Guzman alleged that she is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-236168, located in Echague, Isabela, having an area of 971 square meters and described as Lot 8412-B of the Subdivision Plan Psd-93948. On April 17, 1995, she mortgaged the lot to the Philippine National Bank (PNB) of Santiago City to secure a loan of P600,000. In order to secure a bigger loan to finance a business venture, De Guzman asked Milagros Villaceran to obtain an additional loan on her behalf. She executed a Special Power of Attorney in favor of Milagros. Considering De Guzmans unsatisfactory loan record with the PNB, Milagros suggested that the

title of the property be transferred to her and Jose Villaceran and they would obtain a bigger loan as they have a credit line of up to P5,000,000 with the bank. On June 19, 1996, De Guzman executed a simulated Deed of Absolute Sale in favor of the spouses Villaceran. On the same day, they went to the PNB and paid the amount of P721,891.67 using the money of the spouses Villaceran. The spouses Villaceran registered the Deed of Sale and secured TCT No. T-257416 in their names. Thereafter, they mortgaged the property with FEBTC Santiago City to secure a loan of P1,485,000. However, the spouses Villaceran concealed the loan release from De Guzman. Later, when De Guzman learned of the loan release, she asked for the loan proceeds less the amount advanced by the spouses Villaceran to pay the PNB loan. However, the spouses Villaceran refused to give the money stating that they are already the registered owners of the property and that they would reconvey the property to De Guzman once she returns the P721,891.67 they paid to PNB. De Guzman offered to pay P350,000 provided that the spouses Villaceran would execute a deed of reconveyance of the property. In view of the simulated character of their transaction, the spouses Villaceran executed a Deed of Absolute Sale dated September 6, 1996 in favor of De Guzman. They also promised to pay their mortgage debt with FEBTC to avoid exposing the property to possible foreclosure and auction sale. However, the spouses Villaceran failed to settle the loan and subsequently the property was extrajudicially foreclosed. A Sheriffs Certificate of Sale was issued in favor of FEBTC for the amount of P3,594,000. De Guzman asserted that the spouses Villaceran should be compelled to redeem their mortgage so as not to prejudice her as the real owner of the property. On the other hand, the spouses Villaceran and FEBTC, in their Amended Answer, averred that in 1996 De Guzman was introduced to Milagros by a certain Digna Maranan. Not long afterwards, De Guzman requested Milagros to help her relative who had a loan obligation with the PNB in the amount of P300,000. As a consideration for the accommodation, De Guzman would convey her property located at Maligaya, Echague, Isabela which was then being held in trust by her cousin, Raul Sison. Because of this agreement, Milagros paid De Guzmans obligation with the PNB in the amount of P300,000.

When Milagros asked for the title of the lot, De Guzman explained that her cousin would not part with the property unless he is reimbursed the amount ofP200,000 representing the amount he spent tilling the land. Milagros advanced the amount of P200,000 but De Guzmans cousin still refused to reconvey the property. In order for De Guzman to settle her obligation, she offered to sell her house and lot in Echague, Isabela. At first, Milagros signified her non-interest in acquiring the same because she knew that it was mortgaged with the PNB Santiago for P600,000. De Guzman proposed that they will just secure a bigger loan from another bank using her house and lot as security. The additional amount will be used in settling De Guzmans obligation with PNB. Later, De Guzman proposed that she borrow an additional amount from Milagros which she will use to settle her loan with PNB. To this request, Milagros acceded. Hence, they went to the PNB and paid in full De Guzmans outstanding obligation with PNB which already reached P880,000. Since De Guzmans total obligation already reached P1,380,000, the spouses Villaceran requested her to execute a deed of absolute sale over the subject property in their favor. Thus, the Deed of Absolute Sale is supported by a valuable consideration, and the spouses Villaceran became the lawful owners of the property as evidenced by TCT No. 257416 issued by the Office of the Register of Deeds of Isabela. Later, they mortgaged the property to FEBTC for P1,485,000. The spouses Villaceran denied having executed a deed of conveyance in favor of De Guzman relative to the subject property and asserted that the signatures appearing on the September 6, 1996 Deed of Sale, which purported to sell the subject property back to De Guzman, are not genuine but mere forgeries. After due proceedings, the trial court rendered its decision on September 27, 2000. The RTC ruled that the Deed of Sale dated June 19, 1996 executed by De Guzman in favor of the spouses Villaceran covering the property located in Echague, Isabela was valid and binding on the parties. The RTC ruled that the said contract was a relatively simulated contract, simulated only as to the purchase price, but nonetheless binding upon the parties insofar as their true agreement is concerned.

Aggrieved, the spouses Villaceran appealed to the CA which in turn ruled that the RTC was correct in declaring that there was relative simulation of contract because the deeds of sale did not reflect the true intention of the parties. Issue: Whether the the Deed of Sale dated June 19, 1996 is a simulated contract and not a true sale of the subject property. Held: Yes, 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. G.R. No. 180705 November 27, 2012 EDUARDO M. COJUANGCO, JR., Petitioner, vs. REPUBLIC OF THE PHILIPPINES, Respondent. VELASCO, JR., J.:

Facts: In 1971, Republic Act No. ("R.A.") 6260 was enacted creating the Coconut Investment Company ("CIC") to administer the Coconut Investment Fund ("CIF"), which, under Section 8 thereof, was to be sourced a levy from the sale of copra. Part of which the copra seller was or ought to be issued COCOFUND receipts and an amount thereof was placed at the disposition of COCOFED, the national association of coconut producers declared by the Philippine Coconut Administration ("PHILCOA" now "PCA"). The declaration of martial law in September 1972 saw the issuance of several presidential decrees ("P.D.") purportedly designed to improve the coconut industry through the collection and use of the coconut levy fund. Charged with the duty of collecting and administering the Fund was PCA. Like COCOFED, the PCA, by statutory provisions scattered in different coco levy decrees, had its share of the coco levy. With the issuance of P.D. No. 755, provided under its Section 1 that the policy of the State is to provide readily available credit facilities to the coconut farmers at preferential rates; that this policy can be expeditiously and efficiently realized by the implementation of the "Agreement for the Acquisition of a Commercial Bank for the benefit of Coconut Farmers" executed by the PCA; and that the PCA is hereby authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers. Pursuant thereto, the PCA is authorized to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the CCSF levy collections in said bank interest free, the deposit withdrawable only when the bank has attained a certain level of sufficiency in its equity capital. Through the years, a part of the coconut levy funds went directly or indirectly to finance various projects and/or was converted into various assets or investments. Relevant is the acquisition of the First United Bank ("FUB"), which was subsequently renamed as United Coconut Planters Bank ("UCPB"). In connection with the intended acquisition of a commercial bank for the purpose stated earlier, it would appear that FUB was the bank of choice which Pedro Cojuangcos group (collectively, "Pedro Cojuangco") had control of. The plan, then, was for PCA to buy all of Pedro Cojuangcos shares in FUB. However, as later events unfolded, a simple direct sale from the seller (Pedro) to PCA did not ensue as it was

made to appear that Cojuangco had the exclusive option to acquire the formers FUB controlling interests. Emerging from this elaborate, circuitous arrangement were two deeds. The first one was simply denominated as Agreement, dated May 1975, entered into by and between Cojuangco for and in his behalf and in behalf of "certain other buyers", and Pedro Cojuangco in which the former was purportedly accorded the option to buy 72.2% of First United Banks (FUB) outstanding capital stock, or 137,866 shares (the "option shares,"), at PhP 200 per share. On its face, this agreement does not mention the word "option." The second but related contract, dated May 25, 1975, was denominated as Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines. It had PCA, for itself and for the benefit of the coconut farmers, purchase from Cojuangco the shares of stock subject of the First Agreement for PhP200.00 per share. As additional consideration for PCAs buy-out of what Cojuangco would later claim to be his exclusive and personal option, it was stipulated that, from PCA, Cojuangco shall receive equity in FUB amounting to 10%, or 7.22%, of the 72.2%, or fully paid shares. And so as not to dilute Cojuangcos equity position in FUB, later UCPB, the PCA agreed under paragraph 6 (b) of the second agreement to cede over to the former a number of fully paid FUB shares out of the shares it (PCA) undertakes to eventually subscribe. It was further stipulated that Cojuangco would act as bank president for an extendible period of 5 years. After the EDSA revolution, exclusive and original jurisdiction over ill-gotten wealth cases were conferred over the Sandiganbayan by virtue of EO 14 issued by then Pres. Corazon C. Aquino and pursuant to said issuance, the PCGG issued numerous orders of sequestration, among which were those handed out against shares of stock in UCPB purportedly owned by or registered in the names of (a) the more than a million coconut farmers, (b) the CIIF companies and (c) Cojuangco, Jr., including the SMC shares held by the CIIF companies. On July 31, 1987, the PCGG instituted before the Sandiganbayan a recovery suit docketed thereat as CC No. 0033.

Hence, the Sandiganbayan questioned the transfer of the shares of stock of FUB (later UCPB) by PCA to defendant Cojuangco or the so-called "Cojuangco UCPB shares" which cost the PCA more than Ten Million Pesos in CCSF in 1975 and further declare that the transfer of the following FUB/UCPB shares to defendant Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and therefore null and void

Issue: Whether or not the acquisition of the so-called Cojuangco, Jr. UCPB shares by petitioner Cojuangco not supported by valuable consideration is null and void

Held: No, 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. In the case at bar, the Court upheld the validity of the two agreements in question. G.R. No. 182769 February 1, 2012 BANK OF THE PHILIPPINE ISLANDS, AS SUCCESSOR-IN-INTEREST OF FAR EAST BANK & TRUST COMPANY, Petitioner, - versus CYNTHIA L. REYES, Respondent. LEONARDO-DE CASTRO, J.: Facts: This is an action for sum of money filed [b]y [p]laintiff Bank of the Philippine Islands, hereinafter referred to as BPI, as successor-in-interest of Far East Bank & Trust Company, referred hereto as Far East Bank, against defendant Cynthia L. Reyes, hereinafter referred to as defendant Reyes.

As alleged in the Complaint, defendant Reyes borrowed, renewed and received from Far East Bank the principal of Twenty Million Nine Hundred Thousand Pesos [sic] (P20,950,000.00). In support of such allegation, four promissory notes were presented during the course of the trial of the case. As security for the obligation, defendant Reyes executed Real Estate Mortgage Agreements involving twenty[-]two (22) parcels of land. When the debt became due and demandable, the defendant failed to settle her obligation and the plaintiff was constrained to foreclose the properties. As alleged, after due publication, the mortgaged properties were sold at public auction on December 20, 2001 by the Office of the Clerk of Court & Ex-Officio Sheriff of the Regional Trial Court of Malolos, Bulacan. At the public auction, the mortgaged properties were awarded to BPI in consideration of its highest bid price amounting to Nine Million Thirty Two Thousand Nine Hundred Sixty Pesos (P9,032,960.00). On said date, the obligation already reached Thirty Million Forty (sic) Hundred Twenty Thousand Forty[-]One & 67/100 Pesos (P30,420,041.67), inclusive of interest but excluding attorneys fees, publication and other charges. After applying the proceeds of the public auction to the outstanding obligation, there remains to be a deficiency and defendant Reyes is still indebted, as of January 20, 2003, to the plaintiff in the amount of P24,545,094.67 In the Answer, the defendant claims that based on the plaintiffs appraisal of the properties mortgaged to Far East Bank, the twenty[-]two properties fetched a total appraisal value ofP47,436,000.00 as of January 6, 1998. This appraisal value is evidenced by the Appraisal, which is attached as Annex 1 of the Answer. Considering the appraisal value and the outstanding obligation of the defendant, it appears that the mortgaged properties sold during the public auction are more than enough as payment to the outstanding obligation of the defendant. After due trial, the trial court rendered its Decision dated November 3, 2005 in favour of BPI

Respondent filed a motion for reconsideration but the same was denied and an appeal with the Court of Appeals was filed by respondent which resulted in a reversal of the trial courts judgment Issue: Whether or not petitioner is entitled to recover the unpaid balance or deficiency from respondent despite the fact that respondents property, which were appraised by petitioners predecessor-in-interest at P47,536,000.00, was sold and later bought by petitioner in an extrajudicial foreclosure sale for only P9,032,960.00 Held: Yes. 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. G.R. No. 183774 November 14, 2012 PHILIPPINE BANKING CORPORATION, Petitioner, vs. ARTURO DY, BERNARDO DY, JOSE DELGADO AND CIPRIANA DELGADO, Respondents. PERLAS-BERNABE, J.: Facts: Cipriana was the registered owner of a 58,129-square meter (sq.m.) lot, denominated as Lot No. 6966, situated in Barrio Tongkil, Minglanilla, Cebu, covered by TCT No. 18568. She and her husband, respondent Jose Delgado (Jose), entered into an agreement with a certain Cecilia Tan (buyer) for the sale of the said property for a consideration of P10.00/sq.m. It was agreed that the buyer shall make partial payments from time to time and pay the balance when Cipriana and Jose (Sps. Delgado) are ready to execute the deed of sale and transfer the title to her.

At the time of sale, the buyer was already occupying a portion of the property where she operates a noodle (bihon) factory while the rest was occupied by tenants which Sps. Delgado undertook to clear prior to full payment. After paying the total sum of P147,000.00 and being then ready to pay the balance, the buyer demanded the execution of the deed, which was refused. Eventually, the buyer learned of the sale of the property to the Dys and its subsequent mortgage to petitioner Philippine Banking Corporation (Philbank), prompting the filing of the Complaint for annulment of certificate of title, specific performance and/or reconveyance with damages against Sps. Delgado, the Dys and Philbank. In their Answer, Sps. Delgado, while admitting receipt of the partial payments made by the buyer, claimed that there was no perfected sale because the latter was not willing to pay their asking price of P17.00/sq.m. They also interposed a cross-claim against the Dys averring that the deeds of absolute sale in their favor dated June 28, 1982 and June 30, 1982 covering Lot No. 6966 and the adjoining Lot No. 4100-A (on which Sps. Delgado's house stands), were fictitious and merely intended to enable them (the Dys) to use the said properties as collateral for their loan application with Philbank and thereafter, pay the true consideration of P17.00/sq.m. for Lot No. 6966. However, after receiving the loan proceeds, the Dys reneged on their agreement, prompting Sps. Delgado to cause the annotation of an adverse claim on the Dys' titles and to inform Philbank of the simulation of the sale. Sps. Delgado, thus, prayed for the dismissal of the complaint, with a counterclaim for damages and a cross-claim against the Dys for the payment of the balance of the purchase price plus damages. For their part, the Dys denied knowledge of the alleged transaction between crossclaimants Sps. Delgado and buyer. They claimed to have validly acquired the subject property from Sps. Delgado and paid the full consideration therefor as the latter even withdrew their adverse claim and never demanded for the payment of any unpaid balance. On the other hand, Philbank filed its Answer asserting that it is an innocent mortgagee for value without notice of the defect in the title of the Dys. It filed a cross-claim against Sps. Delgado and the Dys for all the damages that may be

adjudged against it in the event they are declared seller and purchaser in bad faith, respectively. The RTC dismissed the cross-claims of Sps. Delgado against the Dys and Philbank and on appeal the CA set aside the RTC's decision and ordered the cancellation of the Dys' certificates of title and the reinstatement of Cipriana's title. It ruled that there were no perfected contracts of sale between Sps. Delgado and the Dys in view of the latter's admission that the deeds of sale were purposely executed to facilitate the latter's loan application with Philbank and that the prices indicated therein were not the true consideration. Being merely simulated, the contracts of sale were, thus, null and void, rendering the subsequent mortgage of the lots likewise void. The CA also declared Philbank not to be a mortgagee in good faith for its failure to ascertain how the Dys acquired the properties and to exercise greater care when it conducted an ocular inspection thereof. It thereby cancelled the mortgage over the two lots. In the present petition, Philbank insists that it is a mortgagee in good faith. It further contends that Sps. Delgado are estopped from denying the validity of the mortgage constituted over the two lots since they participated in inducing Philbank to grant a loan to the Dys. On the other hand, Sps. Delgado maintain that Philbank was not an innocent mortgagee for value for failure to exercise due diligence in transacting with the Dys and may not invoke the equitable doctrine of estoppel to conceal its own lack of diligence. For his part, Arturo Dy filed a Petition-in-Intervention 13 arguing that while the deeds of absolute sale over the two properties were admittedly simulated, the simulation was only a relative one involving a false statement of the price. Hence, the parties are still bound by their true agreement. Issue: Whether or not a banking institution can invoke the doctrine of mortgagee in good faith relying on the indefeasibility of a certificate title

Held: 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. In this case, while Philbank failed to exercise greater care in conducting the ocular inspection of the properties offered for mortgage, 24 its omission did not prejudice any innocent third parties. In particular, the buyer did not pursue her cause and abandoned her claim on the property. On the other hand, Sps. Delgado were parties to the simulated sale in favor of the Dys which was intended to mislead Philbank into granting the loan application. Thus, no amount of diligence in the conduct of the ocular inspection could have led to the discovery of the complicity between the ostensible mortgagors (the Dys) and the true owners (Sps. Delgado). In fine, Philbank can hardly be deemed negligent under the premises since the ultimate cause of the mortgagors' (the Dys') defective title was the simulated sale to which Sps. Delgado were privies. G.R. No. 184109 February 1, 2012 CELERINO E. MERCADO, Petitioner, - versus BELEN* ESPINOCILLA AND FERDINAND ESPINOCILLA, Respondents.

VILLARAMA, JR., J.: Facts: Doroteo Espinocilla owned a parcel of land, Lot No. 552, with an area of

570 sq. m., located at Magsaysay Avenue, Zone 5, Bulan, Sorsogon. After he died, his five children, Salvacion, Aspren, Isabel, Macario, and Dionisia divided Lot No. 552 equally among themselves. Later, Dionisia died without issue ahead of her four siblings, and Macario took possession of Dionisias share. In an affidavit of transfer of real property dated November 1, 1948, Macario claimed that Dionisia had donated her share to him in May 1945. Thereafter, on August 9, 1977, Macario and his daughters Betty Gullaba and Saida Gabelo sold 225 sq. m. to his son Roger Espinocilla, husband of respondent Belen Espinocilla and father of respondent Ferdinand Espinocilla. On March 8, 1985, Roger Espinocilla sold 114 sq. m. to Caridad Atienza. Per actual survey of Lot No. 552, respondent Belen Espinocilla occupies 109 sq. m., Caridad Atienza occupies 120 sq. m., Caroline Yu occupies 209 sq. m., and petitioner, Salvacion's son, occupies 132 sq. m. Petitioner sued the respondents to recover two portions: an area of 28.5 [8] sq. m. which he bought from Aspren and another 28.5 sq. m. which allegedly belonged to him but was occupied by Macarios house. His claim has since been modified to an alleged encroachment of only 39 sq. m. that he claims must be returned to him. He avers that he is entitled to own and possess 171 sq. m. of Lot No. 552, having inherited 142.5 sq. m. from his mother Salvacion and bought 28.5 sq. m. from his aunt Aspren. According to him, his mothers inheritance is 142.5 sq. m., that is, 114 sq. m. from Doroteo plus 28.5 sq. m. from Dionisia. Since the area he occupies is only 132 sq. m., he claims that respondents encroach on his share by 39 sq. m. Respondents agree that Doroteos five children each inherited 114 sq. m. of Lot No. 552. However, Macarios share increased when he received Dionisias share. Macarios increased share was then sold to his son Roger, respondents husband and father. Respondents claim that they rightfully possess the land they occupy by virtue of acquisitive prescription and that there is no basis for petitioners claim of encroachment.

On May 15, 2006, the Regional Trial Court (RTC) ruled in favor of petitioner and held that he is entitled to 171 sq. m. However, on appeal, the CA reversed the RTC decision and dismissed petitioners complaint on the ground that extraordinary acquisitive prescription has already set in in favor of respondents. Issue: Whether petitioners action to recover the subject portion is barred by prescription. Held: Yes. 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. In the case at bar, 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. G.R. No. 184556

February 22, 2012 CHINA BANKING CORPORATION, Petitioner - versus QBRO FISHING ENTERPRISES, INC., Respondent. VILLARAMA, JR., J.: Facts: In 1994, Trans-Filipinas Realty Corporation (TFRC) obtained a loan from petitioner China Banking Corporation in the amount of Seven Million Pesos (P7,000,000). The loan was secured by a real estate mortgage over two parcels of land covered by Transfer Certificate of Title (TCT) Nos. T-34226 and T-34227. The credit line of TFRC was later increased to P14,000,000. On May 10, 1996, the Board of Directors of respondent QBRO Fishing Enterprises, Inc. issued a resolution authorizing the mortgage of its properties to secure the obligations incurred or which may [t]hereafter be incurred by [TFRC] with [petitioner] irrespective of the amount including any renewals, extensions and/or roll-overs thereof. On June 3, 1996, respondent, represented by Armando Cesar A. Reyes and Concepcion R. Quintana, its president and treasurer, respectively, executed a real estate mortgage over nine parcels of land, covered by TCT Nos. T-38759 to T38767, inclusive, as collateral for TFRCs additional loan in the amount ofP34,500,000. The mortgage was annotated in the Registry of Deeds of General Santos City. TFRC, however, defaulted on the payment of its obligation and failed to settle its account despite having received several demand letters from petitioner. Thus, petitioner filed a petition for extrajudicial foreclosure of the real properties respondent and TFRC had mortgaged. During the public auction, petitioner emerged as the highest bidder and was issued a Certificate of Sale. Aggrieved, respondent filed a Complaint with the RTC to annul the real estate mortgage, foreclosure proceedings and auction sale. It alleged that petitioner

unlawfully treated the TFRC and respondents separate loan accounts, which were secured by two different and separate real estate mortgages, as a single, inseparable account. Furthermore, respondent claimed that the loan in the amount of P34,500,000 had unilaterally ballooned to an unconscionable amount of P72,208,673.19, thus preventing TFRC from settling its obligation. In its Answer, petitioner denied that there were two separate loan accounts. It maintained that the real estate mortgage over respondents properties was executed to serve as additional security to accommodate TFRCs request for an increase in its loan line. There being only one loan, petitioner asserted that the filing of a petition for extrajudicial foreclosure was proper. After trial on the merits, the RTC dismissed respondents complaint. Not satisfied with the above RTC Decision, respondent appealed to the CA and on June 27, 2008, the CA promulgated the decision declaring the foreclosure proceedings with respect to respondents properties null and void. Petitioner then filed a motion for reconsideration but was denied in a Resolution dated September 5, 2008. Issue: Whether the petition for extrajudicial foreclosure is valid with respect to the mortgaged properties of the third party mortgagor. Held: Yes. 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.

G.R. No. 187490 February 8, 2012 ANTONIA R. DELA PEA and ALVIN JOHN B. DELA PEA, Petitioners, - versus GEMMA REMILYN C. AVILA and FAR EAST BANK & TRUST CO., Respondents. PEREZ, J.: Facts: The suit concerns a 277 square meter parcel of residential land, together with the improvements thereon, situated in Marikina City and previously registered in the name of petitioner Antonia R. Dela Pea (Antonia), married to Antegono A. Dela Pea (Antegono) under Transfer Certificate of Title (TCT) No. N-32315 of the Registry of Deeds of Rizal. On 7 May 1996, Antonia obtained from A.C. Aguila & Sons, Co. (Aguila) a loan in the sum of P250,000.00 which, pursuant to the Promissory Note the former executed in favor of the latter, was payable on or before 7 July 1996, with interest pegged at 5% per month. On the very same day, Antonia also executed in favor of Aguila a notarized Deed of Real Estate Mortgage over the property, for the purpose of securing the payment of said loan obligation. On 4 November 1997, Antonia executed a notarized Deed of Absolute Sale over the property in favor of respondent Gemma Remilyn C. Avila (Gemma), for the stated consideration of P600,000.00. Utilizing the document, Gemma caused the cancellation of TCT No. N-32315 as well as the issuance of TCT No. 337834 of the Marikina City Registry of Deeds, naming her as the owner of the subject realty. On 26 November 1997, Gemma also constituted a real estate mortgage over said parcel in favor of respondent Far East Bank and Trust Company [now Bank of the Philippine Islands] (FEBTC-BPI), to secure a loan facility with a credit limit ofP1,200,000.00. As evidenced by the Promissory Notes she executed from 12 December 1997 to 10 March 1998, Gemma obtained the following loans from Visayas Avenue Branch of the FEBTC-BPI, in the aggregate sum of P1,200,000.00

On 3 March 1998, in the meantime, Antonia filed with the Register of Deeds of Marikina an Affidavit of Adverse Claim to the effect, among others, that she was the true and lawful owner of the property which had been titled in the name of Gemma under TCT No. 32315; and, that the Deed of Absolute Sale Gemma utilized in procuring her title was simulated. As a consequence, Antonias Affidavit of Adverse Claim was inscribed on TCT No. 337834 as Entry No. 501099 on 10 March 1998. In view of Gemmas failure to pay the principal as well as the accumulated interest and penalties on the loans she obtained, on the other hand, FEBTC-BPI caused the extrajudicial foreclosure of the real estate mortgage constituted over the property. As the highest bidder at the public auction conducted in the premises, FEBTC-BPI later consolidated its ownership over the realty and caused the same to be titled in its name under TCT No. 415392 of the Marikina registry. On 18 May 1998, Antonia and her son, petitioner Alvin, filed against Gemma the complaint for annulment of deed of sale docketed before Branch 272 of the Regional Trial Court (RTC) of Marikina City as Civil Case No. 98-445-MK. Claiming that the subject realty was conjugal property, the Dela Peas alleged, among other matters, that the 7 May 1996 Deed of Real Estate Mortgage Antonia executed in favor of Aguila was not consented to by Antegono who had, by then, already died; that despite its intended 1998 maturity date, the due date of the loan secured by the mortgage was shortened by Gemma who, taking advantage of her proximate relationship with Aguila, altered the same to 1997; and, that the 4 November 1997 Deed of Absolute Sale in favor of Gemma was executed by Antonia who was misled into believing that the transfer was necessary for the loan the former promised to procure on her behalf from FEBTC-BPI. In addition to the annulment of said Deed of Absolute Sale for being simulated and derogatory of Alvins successional rights, the Dela Peas sought the reconveyance of the property as well as the grant of their claims for moral and exemplary damages, attorneys fees and the costs. Served with summons, Gemma specifically denied the material allegations of the foregoing complaint in her 1 July 1998 answer. Maintaining that the realty was the exclusive property of Antonia who misrepresented that her husband was still alive, Gemma averred that the former failed to pay the P250,000.00 loan she obtained

from Aguila on its stipulated 7 July 1996 maturity; that approached to help prevent the extrajudicial foreclosure of the mortgage constituted on the property, she agreed to settle the outstanding obligation to Aguila and to extend Antonia a P50,000.00 loan, with interest pegged at 10% per month; that to pay back the foregoing accommodations, Antonia agreed to the use of the property as collateral for a loan to be obtained by her from FEBTC-BPI, hence, the execution of the impugned Deed of Absolute Sale; and, that conformably with the foregoing agreement, she obtained loans in the total sum of P1,200,000.00 from FEBTC-BPI and applied the proceeds thereof to the sums owed by Antonia. Together with the dismissal of the complaint, Gemma also prayed for the grant of her counterclaims for moral and exemplary damages, attorneys fees, litigation expenses and the costs. On 25 September 1999, the Dela Peas filed a supplemental complaint, impleading FEBTC-BPI as additional defendant. The Dela Peas alleged that FEBTC-BPI was in bad faith when it purchased the property at public auction on 15 March 1999. FEBTC-BPI, in turn, asserted that the property was already titled in Gemmas name when she executed the 26 November 1997 real estate mortgage thereon, to secure the payment of the loans she obtained in the sum of P1,200,000.00; and, that not being privy to Antonias transaction with Gemma and unaware of any adverse claim on the property, it was a mortgagee in good faith, entitled to foreclose the mortgage upon Gemmas failure to pay the loans she obtained. On 18 December 2007, the RTC went on to render a Decision finding that the subject property was conjugal in nature and that the 4 November 1997 Deed of Absolute Sale Antonia executed in favor of Gemma was void as a disposition without the liquidation required under Article 130 of the Family Code. Aggrieved, FEBTC-BPI appealed before the CA and on 31 March 2009 the CAs Second Division rendered the decision reversing the RTCs appealed decision Issue: 1. Whether or not the foreclosure of the real estate mortgage was valid notwithstanding the disputed deed of absolute sale 2. Whether or not the deed of absolute sale is valid

Held: 1. Yes. 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. 2. Yes. 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

G.R. No. 190375 February 8, 2012 TAN SHUY, Petitioner, - versus SPOUSES GUILLERMO MAULAWIN and PARING CARIO-MAULAWIN, Respondents.

SERENO, J.: Facts: Petitioner Tan Shuy is engaged in the business of buying copra and corn in the Fourth District of Quezon Province. According to Vicente Tan (Vicente), son of petitioner, whenever they would buy copra or corn from crop sellers, they would prepare and issue a pesada in their favor. A pesada is a document containing details of the transaction, including the date of sale, the weight of the crop delivered, the trucking cost, and the net price of the crop. He then explained that when a pesada contained the annotation pd on the total amount of the purchase price, it meant that the crop delivered had already been paid for by petitioner. Guillermo Maulawin (Guillermo), respondent in this case, is a farmer-businessman engaged in the buying and selling of copra and corn. On 10 July 1997, Tan Shuy extended a loan to Guillermo in the amount of 420,000. In consideration thereof, Guillermo obligated himself to pay the loan and to sell lucad or copra to petitioner. Most of the transactions involving Tan Shuy and Guillermo were coursed through Elena Tan, daughter of petitioner. She served as cashier in the business of Tan Shuy, who primarily prepared and issued the pesada. In case of her absence, Vicente would issue the pesada. He also helped his father in buying copra and granting loans to customers (copra sellers). According to Vicente, part of their agreement with Guillermo was that they would put the annotation sulong on the pesada when partial payment for the loan was made. Petitioner alleged that despite repeated demands, Guillermo remitted only 23,000 in August 1998 and 5,500 in October 1998, or a total of 28,500. He claimed that respondent had an outstanding balance of 391,500. Thus, convinced that Guillermo no longer had the intention to pay the loan, petitioner brought the controversy to the Lupon Tagapamayapa. When no settlement was reached, petitioner filed a Complaint before the Regional Trial Court (RTC). Respondent Guillermo countered that he had already paid the subject loan in full. According to him, he continuously delivered and sold copra to petitioner from April 1998 to April 1999. Respondent said they had an oral arrangement that the net proceeds thereof shall be applied as installment payments for the loan. He alleged that his deliveries amounted to 420,537.68 worth of copra. To bolster his claim, he

presented copies of pesadas issued by Elena and Vicente. He pointed out that thepesadas did not contain the notation pd, which meant that actual payment of the net proceeds from copra deliveries was not given to him, but was instead applied as loan payment. He averred that Tan Shuy filed a case against him, because petitioner got mad at him for selling copra to other copra buyers. On 27 July 2007, the trial court issued a Decision, ruling that the net proceeds from Guillermos copra deliveries represented in the pesadas, which did not bear the notation pd should be applied as installment payments for the loan. On 31 July 2009, the CA affirmed the finding of the trial court. Issue: Whether the delivery of copra amounted to installment payments for the loan obtained by respondents from petitioner. Held: Yes, 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. G.R. No. 192085 February 22, 2012

CARIDAD SEGARRA SAZON, Petitioner, - versus LETECIA VASQUEZ-MENANCIO, represented by attorney-in-fact EDGAR S. SEGARRA, Respondent. SERENO, J; Facts: Respondent is a resident of the United States of America. Sometime in 1979, she entrusted the management, administration, care and preservation of her properties to petitioner. Respondent avers that the lots are productive, and that petitioner as the administrator has collected and received all the fruits and income accruing therefrom. Petitioner, on the other hand, claims that several of the properties do not produce any fruit or generate any income at all, and that any supposed income derived from them is not sufficient to answer for all the expenses incurred to maintain them. According to respondent, petitioner never rendered a full accounting of the fruits and income derived from the properties, but has instead appropriated and in fact applied these for her own use and benefit. Denying this allegation, petitioner presented five lettersdated 21 January 1983, 12 March 1984, 15 September 1986, 2 December 1988, and one undatedwhich had been sent to respondent as proof of the accounting. Furthermore, petitioner denies receipt of any letter asking her to make an accounting or to remit the fruits collected from the properties. She further avers that, since the start of her agency agreement with respondent, the latter never answered any of the communications petitioner had sought to initiate. As a result of the foregoing, respondent revoked, in writing, all the powers and authority of administration granted to petitioner effective March 1997. Thereafter, the former demanded that petitioner return and/or turn over the possession and administration of the properties. Respondent claims that she made repeated verbal, and served written, demands upon petitioner, asking the latter to render an accounting and to remit the owners share of the fruits. Petitioner, however, continued to fail and to refuse to perform her obligation.

In fact, she continues to hold on to the properties and the management and administration thereof. Further, she continues to collect, receive, and keep all the income generated by the properties. Thus, on 30 October 1997, respondent filed her Complaint with Preliminary Injunction, praying that the RTC order petitioner to render an accounting and remit all the fruits and income the latter, as the administrator, received from the properties. On the other hand Petitioner claims that in the course of her administration of the properties, the letters she sent to respondent should be considered as a fulfilment of her obligation, as respondents agent, to render an accounting of her administration. Issue: 1. Whether or not an agent has the obligation to render accounts despite no demand from the principal lack of demand 2. Whether or not an agent is bound to deliver the fruits of the property to the principal despite Held:

Yes, 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 fulfil her duty to render an account of the relevant transactions she entered into as respondents agent. Yes, 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. G.R. No. 192108 November 21, 2012

SPOUSES SOCRATES SY AND CELY SY, Petitioner, vs. ANDOK'S LITSON CORPORATION, Respondent. PEREZ, J.: Facts: Petitioner Cely Sy (Sy) is the registered owner of a 316 square-meter lot located at 1940 Felix Huertas Street, Sta. Cruz, Manila. Respondent Andoks Litson Corporation (Andoks) is engaged in the business of selling grilled chicken and pork with outlets all over the Philippines. On 5 July 2005, Sy and Andoks entered into a 5-year lease contract covering the parcel of land owned by Sy. Monthly rental was fixed at P60,000.00, exclusive of taxes, for the first 2 years and P66,000.00 for the third, fourth and fifth year with 10% escalation every year beginning on the fourth year. Per contract, the lessee shall, upon signing the contract, pay four (4) months of advance deposit amounting to P240,000.00 and a security deposit equivalent to four (4) months of rental in the amount of P240,000.00. Accordingly, Andoks issued a check to Sy for P480,000.00. Andoks alleged that while in the process of applying for electrical connection on the improvements to be constructed on Sys land, it was discovered that Sy has an unpaid Manila Electric Company (MERALCO) bill amounting to P400,000.00. Andoks presented a system-generated statement from MERALCO. 4 Andoks further complained that construction for the improvement it intended for the leased premises could not proceed because another tenant, Mediapool, Inc. incurred delay in the construction of a billboard structure also within the leased premises. In its letter dated 25 August 2005, Andoks first informed Sy about the delay in the construction of the billboard structure on a portion of its leased property. Three more letters of the same tenor were sent to Sy but the demands fell on deaf ears. Consequently, Andoks suffered damages in the total amount of P627,000.00 which comprises the advance rental and deposit, cost of money, mobilization cost for the construction of improvement over leased premises, and unrealized income. The complaint for rescission was filed on 13 February 2008, three years after continued inaction on the request to have the billboard construction expedited.

In her Answer, Sy stated that she has faithfully complied with all the terms and conditions of the lease contract and denied incurring an outstanding electricity bill. On 24 July 2008, the trial court rendered a decision favoring Andoks and on appeal, Sy decried deprivation of her right to present evidence resulting in a default judgment against her. Sy denied that there was a breach on the lease contract. On 20 January 2010, the Court of Appeals dismissed the appeal and affirmed the ruling of the RTC. Issue: Whether or not the remedy of rescission is valid in a lease contract Held: Yes, 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. G.R. No. 192486 November 21, 2012 RUPERTA CANO VDA. DE VIRAY and JESUS CARLO GERARD VIRAY, Petitioners, vs. SPOUSES JOSE USI and AMELITA USI, Respondents. VELASCO, JR., J.: Facts: The present controversy arose from several parcels of land which form part of what was then one lot registered in the name of Ellen P. Mendoza with an area of

9,137 square meters, more or less, Lot 733 is located in Brgy. Bebe Anac, Masantol, Pampanga. On April 28, 1986, Geodetic Engineer Abdon G. Fajardo prepared a subdivision plan (Fajardo Plan, for short), in which the lot was divided into six (6) smaller parcels designated as: Lot 733-A, Lot 733-B, Lot 733-C, Lot 733-D, Lot 733-E, and Lot 733-F. The following day, Mendoza executed two separate deeds of absolute sale, the first, transferring Lot 733-F to Jesus Carlo Gerard Viray and the second deed conveying Lot 733-A to spouses Avelino Viray and Margarita Masangcay (Sps. Viray). The names McDwight Mendoza, Mendozas son, and one Ernesto Bustos appear in both notarized deeds as instrumental witnesses. As of that time, the Fajardo Plan has not been officially approved by the Land Management Bureau (LMB). And at no time in the course of the controversy did the spouses Viray and Jesus Viray, as purchasers cause the annotations of the conveying deeds of sale. The aforementioned conveyances notwithstanding, Mendoza, Emerenciana M. Vda. de Mallari (Vda. de Mallari) and respondent spouses Jose Usi and Amelita T. Usi (Sps. Usi or the Usis), as purported co-owners of Lot 733, executed on August 20, 1990 a Subdivision Agreement. Pursuant to this agreement which adopted, as base of reference, the LMB-approved subdivision plan prepared by Geodetic Engineer Alfeo S. Galang (Galang Plan), Lot 733 was subdivided into three lots, i.e., Lots A to C, with the following area coverage: Lots 733-A, 465 square meters, 733-B, 494 square meters, and 733-C, 6,838 square meters. Hence, the foregoing overlapping transactions involving the same property or portions thereof spawned several suits and counter- suits. In sum, of the six (6) cases filed, the first four (4) have been terminated and only two cases revolving around Lot 733 remained unresolved. In Civil Case No. 011118(M), the RTC held that the Sps. Usi failed to establish by preponderance of evidence to support their claim of title, possession and ownership over the lots subject of their petition while on July 24, 2009 on appeal, the CA rendered the assailed decision, reversing and setting aside the appealed June 21, 2007 RTC decision. Vda. de Viray sought but was denied reconsideration, hence, this petition.

Issue:

1.

Whether the two (2) subdivision agreements partake of a bona

fide and legally binding partition contracts or arrangements among co-owners that validly effectuated the transfer of the subject lots to respondent spouses Usi. 2. Whether or not the deeds of absolute sale were valid

Held: 1. No, Partition, in general, is the separation, division, and assignment of a thing held in common by those to whom it may belong and 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 of pro-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. 2. Yes, The earlier sale of Lot 733-A and Lot 733-F (Fajardo Plan) on April 29, 1986 was valid and effective conveyances of said portions of Lot 733. The subsequent transfers to the Sps. Usi of substantially the same portions of Lot 733 accomplished through the subdivision agreements constitute in effect double sales of those portions. G.R. No. 194320 February 1, 2012 MALAYAN INSURANCE CO., INC., Petitioner, - versus RODELIO ALBERTO and ENRICO ALBERTO REYES, Respondents. VELASCO, JR., J.:

Facts: At around 5 oclock in the morning of December 17, 1995, an accident occurred at the corner of EDSA and Ayala Avenue, Makati City, involving four (4) vehicles, to wit: (1) a Nissan Bus operated by Aladdin Transit with plate number NYS 381; (2) an Isuzu Tanker with plate number PLR 684; (3) a Fuzo Cargo Truck with plate number PDL 297; and (4) a Mitsubishi Galant with plate number TLM 732. Based on the Police Report issued by the on-the-spot investigator, SPO1 Dungga, the Isuzu Tanker was in front of the Mitsubishi Galant with the Nissan Bus on their right side shortly before the vehicular incident. All three (3) vehicles were at a halt along EDSA facing the south direction when the Fuzo Cargo Truck simultaneously bumped the rear portion of the Mitsubishi Galant and the rear left portion of the Nissan Bus. Due to the strong impact, these two vehicles were shoved forward and the front left portion of the Mitsubishi Galant rammed into the rear right portion of the Isuzu Tanker. Previously, particularly on December 15, 1994, Malayan Insurance issued Car Insurance Policy No. PV-025-00220 in favor of First Malayan Leasing and Finance Corporation (the assured), insuring the aforementioned Mitsubishi Galant against third party liability, own damage and theft, among others. Having insured the vehicle against such risks, Malayan Insurance claimed in its Complaint dated October 18, 1999 that it paid the damages sustained by the assured amounting to PhP 700,000. Maintaining that it has been subrogated to the rights and interests of the assured by operation of law upon its payment to the latter, Malayan Insurance sent several demand letters to respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes), the registered owner and the driver, respectively, of the Fuzo Cargo Truck, requiring them to pay the amount it had paid to the assured. When respondents refused to settle their liability, Malayan Insurance was constrained to file a complaint for damages for gross negligence against respondents. In their Answer, respondents asserted that they cannot be held liable for the vehicular accident, since its proximate cause was the reckless driving of the Nissan Bus driver. They alleged that the speeding bus, coming from the service road of

EDSA, maneuvered its way towards the middle lane without due regard to Reyes right of way. When the Nissan Bus abruptly stopped, Reyes stepped hard on the brakes but the braking action could not cope with the inertia and failed to gain sufficient traction. As a consequence, the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which, in turn, hit the rear end of the vehicle in front of it. The Nissan Bus, on the other hand, sideswiped the Fuzo Cargo Truck, causing damage to the latter in the amount of PhP 20,000. Respondents also controverted the results of the Police Report, asserting that it was based solely on the biased narration of the Nissan Bus driver. In its Decision dated February 2, 2009, the trial court, in Civil Case No. 99-95885, ruled in favor of Malayan Insurance and declared respondents liable for damages. Dissatisfied, respondents filed an appeal with the CA which reversed and set aside the Decision of the trial court and ruled in favor of respondents Subsequently, Malayan Insurance filed its Motion for Reconsideration, arguing that a police report is a prima facie evidence of the facts stated in it. And inasmuch as they never questioned the presentation of the report in evidence, respondents are deemed to have waived their right to question its authenticity and due execution and in its Resolution dated October 29, 2010, the CA denied the motion for reconsideration. Issue: Whether or not it is proper that Malayan Insurance be subrogated to the rights of the assured. Held: Yes, 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.

Bearing in mind that the claim check voucher and the Release of Claim and Subrogation Receipt presented by Malayan Insurance are already part of the evidence on record, and since it is not disputed that the insurance company, indeed, paid PhP 700,000 to the assured, then there is a valid subrogation in the case at bar. G.R. Nos. 180631-33 February 22, 2012 PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioner - versus CENTRAL COLLEGES OF THE PHILIPPINES and DYNAMIC PLANNERS AND CONSTRUCTION CORPORATION, Respondents. MENDOZA, J.: Facts: On May 16, 2000, Central Colleges of the Philippines (CCP), an educational institution, contracted the services of Dynamic Planners and Construction Corporation (DPCC) to be its general contractor for the construction of its five (5)storey school building at No. 39 Aurora Boulevard, Quezon City, with a total contract price of P248,000,000.00. As embodied in a Contract Agreement, the construction of the entire building would be done in two phases with each phase valued at P124,000,000.00. To guarantee the fulfillment of the obligation, DPCC posted three (3) bonds, all issued by the Philippine Charter Insurance Corporation (PCIC), namely: (1) Surety Bond No. PCIC-45542, dated June 25, 2003, amounting to P7,031,460.74; (2) Performance Bond No. PCIC-45541 in the amount of P2,929,775.31 which was subsequently increased to P6,199,999.99 through Bond Endorsement No. E2003/12527; and (3) Performance Bond No. PCIC-46172 for P692,890.74. All the bonds were callable on demand and set to expire on October 30, 2003.

The Phase 1 of the project was completed without issue. Thereafter, CCP paid DPCC P14,880,000.00 or 12% of the agreed price of P124,000,000.00 with a check dated March 14, 2002 as downpayment for the Phase 2 of the project. The Phase 2 of the project, however, encountered numerous delays. When CCP audited DPCC on July 25, 2003, only 47% of the work to be done was actually finished. Thus, in a letter dated October 29, 2003 addressed to DPCC and PCIC, CCP informed them of the breach in the contract and its plan to claim on the construction bonds. On November 6, 2003, CCP notified DPCC and PCIC that only 51% of the project was completed, which was way behind the construction schedule, prompting it to declare the occurrence of default against DPCC. It formally requested PCIC to remit the proceeds of the bonds. On November 14, 2003, DPCC wrote PCIC confirming the finding that Phase 2 was only 51% finished and, at the same time, requesting for the extension of its performance and surety bonds because the supposed revision of the plans would require more days. In a letter dated November 21, 2003, CCP notified PCIC that because of DPCCs inability to complete the project on time, it decided to terminate its contract with the latter and to continue the construction on its own. Meanwhile, on December 5, 2003, PCIC informed DPCC that it had approved its request for extension of the bonds. Eventually, negotiations to continue on with the construction between CCP and DPCC reached a dead end. CCP hired another contractor to work on the school site. On August 13, 2004, CCP sent a letter to PCIC of its final demand for the payment of P13,924,351.47 as indicated in the bonds but on August 20, 2004 was denied. Thus, on October 28, 2004, CCP filed a complaint with request for arbitration before the Construction Industry Arbitration Commission (CIAC) against DPCC and PCIC. In its complaint, CCP prayed that CIAC hold DPCC and PCIC, jointly and severally liable, against the bonds.

In their Answer, DPCC and PCIC denied any liability and proffered that CCP unlawfully withheld the materials, equipment, formworks and scaffoldings left at the premises amounting to P4,232,264.12. On June 3, 2005, the CIAC rendered a decision in favor of CCP and all the parties appealed the CIAC decision to the CA. On June 29, 2007, the CA modified CIACs earlier decision. The CA found that DPCC was already in delay for managing to complete only 51% of the construction work necessary to finish the Phase 2 of the project. It held that due to DPCCs inexcusable delay, CCP was legally within its rights to terminate the contract with it. It likewise did not give weight to PCICs defense that Bond No. 46172 was already released because the said issue was never raised before the CIAC and was raised for the first time on appeal. PCIC moved for the reconsideration of the said decision, but the CA disposed of it with a denial in its November 19, 2007 Resolution. Issue: 1. Whether or not CCP is entitled to the claims on the bond when it filed beyond the 10 day reglementary period after DPCC was already in default 2. Whether or not PCIC is liable to CCP under the performance bonds and the surety bond

Held: 1. Yes, 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. Thus, DPCC became in default on October 29, 2003 when CCP informed it in writing of the breach of the contract agreement and demanded the fulfillment of its obligation against the bonds.

2. Yes. 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 obligeeobligor 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.