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CIVIL LAW

NAGKAKAISANG MARALITA NG SITIO MASIGASIG V. MILITARY SHRINE SERVICES

G.R. NO. 187587

JUNE 5, 2013

CJ. SERENO

REQUIREMENT OF PUBLICATION INDISPENSABLE

FACTS:

On 12 July 1957, by virtue of Proclamation No. 423, President Garcia reserved parcels of land in the Municipalities of Pasig, Taguig, Parañaque, Province of Rizal and Pasay City for a military reservation. The military reservation, then known as Fort William McKinley, was later on renamed Fort Bonifacio.

On 28 May 1967, President Marcos issued Proclamation No. 208, amending Proclamation No. 423, which excluded a certain area of Fort Bonifacio and reserved it for a national shrine. The excluded area is now known as Libingan ng mga Bayani, which is under the administration of herein respondent.

On 7 January 1986, President Marcos issued Proclamation No. 2476, further amending Proclamation No. 423, which excluded barangays Lower Bicutan, Upper Bicutan and Signal Village from the operation of Proclamation No. 423 and declared it open for disposition. At the bottom of Proclamation No. 2476, President Marcos made a handwritten addendum, which reads:

―P.S. – This includes Western Bicutan

(SGD.) Ferdinand E. Marcos.

On 16 October 1987, President Aquino issued Proclamation No. 172 which substantially reiterated Proclamation No. 2476, as published, but this time excluded Lots 1 and 2 of Western Bicutan from the operation of Proclamation No. 423 and declared the said lots open for disposition under the provisions of R.A. 274 and 730.

Members of petitioner NMSMI filed a Petition with the Commission on Settlement of Land Problems (COSLAP),and prayed for the following: (1) the reclassification of the areas they occupied, covering Lot 3 of SWO-13-000-298 of Western Bicutan, from public land to alienable and disposable land pursuant to Proclamation No. 2476; (2) the subdivision of the subject lot by the Director of Lands; and (3) the Land Management Bureau‘s facilitation of the distribution and sale of the subject lot to its bona fide occupants. COSLAP granted the Petition and declared the portions of land in question alienable and disposable.

The COSLAP ruled that the handwritten addendum of President Marcos was an integral part of Proclamation No. 2476, and was therefore, controlling. Respondent filed a petition with the CA, seeking to reverse the COSLAP resolution. The CA granted the petition.

ISSUE:

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

HELD:

No. ART. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided. This Code shall take effect one year after such publication. Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-day period shall be shortened or extended.

All statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or directly conferred by the Constitution.

Applying the foregoing ruling to the instant case, this Court cannot rely on a handwritten note that was not part of Proclamation No. 2476 as published. Without publication, the note never had any legal force and effect.

LAVADIA V. HEIRS OF LUNA

G.R. NO. 171914

JULY 23, 2014

J. BERSAMIN

NATIONALITY PRINCIPLE; CO-OWNERSHIP

FACTS:

Atty. Luna was a name partner in a prestigious law firm. He was living with his first wife, Eugenia whom he initially married in a civil ceremony on September 10, 1947 and later solemnized in a church ceremony on September 12, 1948. In Atty. Luna‘s marriage to Eugenia, they begot 7 children. After almost 2 decades of marriage, they eventually agreed to live apart from each other. They entered into a written agreement entitled ―AGREEMENT FOR SEPARATION AND PROPERTY SETTLEMENT‖ dated November 12, 1975, whereby they agreed to live separately and to dissolve and liquidate their conjugal partnership of property.

On January 12, 1976, Atty. Luna obtained a divorce decree of his marriage with Eugenia from the Court of First Instance of Sto. Domingo, Dominican Republic. Also in Sto. Domingo, Dominican Republic, on the same date, he contracted another marriage with Soledad.

Sometime in 1977, Atty. Luna organized a new law firm named LUPSICON where Atty. Luna was the managing partner. LUPSICON through Atty. Luna purchased a condominium unit to be used as law office of LUPSICON. Sometime in 1992, LUPSICON was dissolved and the condominium unit was partitioned by the partners. Atty. Luna thereafter established and headed another law firm with Atty. Renato G. De la Cruz and used a portion of the office condominium unit as their office. LUPSICON lasted until the death of Atty. Luna on July 12, 1997.

The 25/100 pro-indiviso share of Atty. Luna in the condominium unit as well as the law books, office furniture and equipment became the subject of the complaint filed by Soledad against the heirs of Atty. Luna with the RTC. The complaint alleged that the subject properties were acquired during the existence of the marriage between Atty. Luna and Soledad through their joint efforts that since they had no children, Soledad became co-owner of the said properties upon the death of Atty. Luna to the extent of ¾ pro-indiviso share consisting of her ½ share in the said properties plus her ½ share in the net estate of ATTY. LUNA which was bequeathed to her in the latter‘s last will and testament.

ISSUE:

(1) Whether the divorce between Atty. Luna and Eugenia Zaballero-Luna had validly dissolved the first marriage.

(2) Whether the agreement for separation and property settlement was valid.

(3) What rules govern the second marriage.

HELD:

(1) No. From the time of the celebration of the first marriage on September 10, 1947 until the present, absolute divorce between Filipino spouses has not been recognized in the Philippines. The non-recognition of absolute divorce between Filipinos has remained even under the Family Code, even if either or both of the spouses are residing abroad.

It is true that on January 12, 1976, the Court of First Instance of Sto. Domingo in the Dominican Republic issued the Divorce Decree dissolving the first marriage of Atty. Luna and Eugenia. Conformably with the nationality rule, however, the divorce, even if voluntarily obtained abroad, did not dissolve the marriage between Atty. Luna and Eugenia, which subsisted up to the time of his death on July 12, 1997. This finding conforms to the Constitution, which characterizes marriage as an inviolable social institution, and regards it as a special contract of permanent union between a man and a woman for the establishment of a conjugal and family life.

(2) No. The mere execution of the Agreement by Atty. Luna and Eugenia did not per se dissolve and liquidate their conjugal partnership of gains. The approval of the Agreement by a competent court was still required under Article 190 and Article 191 of the Civil Code, as follows:

Article 190. In the absence of an express declaration in the marriage settlements, the separation of property between spouses during the marriage shall not take place save in virtue of a judicial order.

Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed when the spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction, or has been declared absent, or when legal separation has been granted. x x x x

The husband and the wife may agree upon the dissolution of the conjugal partnership during the marriage, subject to judicial approval. x x x

The approval of the Agreement by the CFA of Sto. Domingo in the Dominican Republic was not sufficient. With the divorce not being itself valid and enforceable under Philippine law for being contrary to Philippine public policy and public law, the approval of the Agreement was not also legally valid and enforceable under Philippine law. Consequently, the conjugal partnership of gains of Atty. Luna and Eugenia subsisted in the lifetime of their marriage.

(3) Article 144. When a man and a woman live together as husband and wife, but they are not married, or their marriage is void from the beginning, the property acquired by either or both of them through their work or industry or their wages and salaries shall be governed by the rules on co-ownership.

Atty. Luna‘s subsequent marriage to Soledad on January 12, 1976 was void for being bigamous. Due to the second marriage between Atty. Luna and the petitioner being void ab initio by virtue of its being bigamous, the properties acquired during the bigamous marriage were governed by the rules on co-ownership, conformably with Article 144 of the Civil Code.

CALIFORNIA CLOTHING V. SHIRLEY G. QUIÑONES

G.R. NO. 175822

OCTOBER 13, 2013

J. PERALTA

ABUSE OF RIGHTS

FACTS:

On July 25, 2001, Quiñones, a Reservation Ticketing Agent of Cebu Pacific Air in Lapu Lapu City, went inside the Guess at Robinson‘s Cebu. She fitted four items. While she was walking through the skywalk where she was heading next, a Guess employee approached and informed her that she failed to pay the item she got. She insisted that she paid and showed the employee the receipt. She then suggested that they talk about it at the Cebu Pacific Office located at the basement of the mall.

When she arrived at the Office, the Guess employees allegedly subjected her to humiliation in front of the clients of Cebu Pacific and repeatedly demanded payment for the black jeans. On the same day, the Guess employees allegedly gave a letter to the Director of Cebu Pacific Air narrating the incident, but the latter refused to receive it. Another letter was allegedly prepared and was supposed to be sent to the Cebu Pacific Office in Robinson‘s, but the latter again refused to receive it. Respondent also claimed that the HR Department of Robinson‘s was furnished said letter and the latter in fact conducted an investigation for purposes of canceling respondent‘s Robinson‘s credit card. Respondent further claimed that she was not given a copy of said damaging letter.

She thus filed the Complaint for Damages before the RTC against petitioners California Clothing, Villagonzalo, Hawayon and Ybañez.

Petitioners and the other defendants admitted the issuance of the receipt of payment. They claimed, however, that instead of the cashier (Hawayon) issuing the official receipt, it was the invoicer (Villagonzalo) who did it manually. They explained that there was miscommunication between the employees at that time because prior to the issuance of the receipt, Villagonzalo asked Hawayon ―Ok na?,‖ and the latter replied ―Ok na,‖ which the former believed to mean that the item has already been paid. Realizing the mistake, Villagonzalo rushed outside to look for respondent and when he saw the latter, he invited her to go back to the shop to make clarifications as to whether or not payment was indeed made. They emphasized that they were gentle and polite in talking to respondent and it was the latter who was arrogant in answering their questions.

The RTC rendered a Decision dismissing both the complaint and counterclaim of the parties. The CA reversed and set aside the RTC decision.

ISSUE:

Whether or not the CA erred in finding that the letter sent to Cebu Pacific Office was made to subject respondent to ridicule, humiliation and similar injury.

HELD:

No. The elements of abuse of rights are as follows: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.

Initially, there was nothing wrong with petitioners asking respondent whether she paid or not. The Guess employees were able to talk to respondent at the Cebu Pacific Office. The confrontation started well, but it eventually turned sour when voices were raised by both parties. As aptly held by both the RTC and the CA, such was the natural consequence of two parties with conflicting views insisting on their respective beliefs. Considering, however, that respondent was in possession of the item purchased from the shop, together with the official receipt of payment issued by petitioners, the latter cannot insist that no such payment was made on the basis of a mere speculation. Their claim should have been proven by substantial evidence in the proper forum. It can be inferred from the foregoing that in sending the demand letter to respondent‘s employer, petitioners intended not only to ask for assistance in collecting the disputed amount but to tarnish respondent‘s reputation in the eyes of her employer. The exercise of a right must be in accordance with the purpose for which it was established and must not be excessive or unduly harsh. In this case, petitioners obviously abused their rights.

VIVARES V. ST. THERESA’S COLLEGE

G.R. NO. 202666

SEPTEMBER 29, 2014

J. VELASCO

RIGHT TO PRIVACY

FACTS:

Julia and Julienne, both minors, were, graduating high school students at STC Cebu City. Sometime in January 2012, while changing into their swimsuits for a beach party they were about to attend, Julia and Julienne, along with several others, took digital pictures of themselves clad only in their undergarments. These pictures were then uploaded by Angela on her Facebook profile.

Back at the school, Escudero, a computer teacher at STC‘s high school department, learned from her students that some seniors at STC posted the said pictures online. Her students readily identified Julia, Julienne, and Chloe, among others.

Using STC‘s computers, Escudero‘s students logged in to their respective personal Facebook accounts and showed her photos of the identified students, which include: (a) Julia and Julienne drinking hard liquor and smoking cigarettes inside a bar; and (b) Julia and Julienne along the streets of Cebu wearing articles of clothing that show virtually the entirety of their black brassieres. What is more, Escudero‘s students claimed that there were times when access to or the availability of the identified students‘ photos was not confined to the girls‘ Facebook friends, but were, in fact, viewable by any Facebook user.

Despite the issuance of the TRO, STC, nevertheless, barred the sanctioned students from participating in the graduation rites. To petitioners, the interplay of the foregoing constitutes an invasion of their children‘s privacy.

ISSUE:

Whether STC violated the children‘s right to privacy.

HELD:

No. There are three strands of the right to privacy, viz: (1) locational or situational privacy; (2) informational privacy; and (3) decisional privacy. Of the three, what is relevant to the case at bar is the right to informational privacy––usually defined as the right of individuals to control information about themselves.

Before one can have an expectation of privacy in his or her Online Social Network (OSN) activity, it is first necessary that said user, in this case the children of petitioners, manifest the intention to keep certain posts private, through the employment of measures to prevent access thereto or to limit its visibility. And this intention can materialize in cyberspace through the utilization of the OSN‘s privacy tools. In other words, utilization of these privacy tools is the manifestation, in cyber world, of the user‘s invocation of his or her right to informational privacy.

Considering that the default setting for Facebook posts is ―Public,‖ it can be surmised that the photographs in question were viewable to everyone on Facebook, absent any proof that petitioners‘ children positively limited the disclosure of the photograph. If such were the case, they cannot invoke the protection attached to the right to informational privacy. That the photos are viewable by ―friends only‖ does not necessarily bolster the petitioners‘ contention. In this regard, the cyber community is agreed that the digital images under this setting still remain to be outside the confines of the zones of privacy.

SPOUSES HING V. CHOACHUY

G.R. NO. 179736

JUNE 26, 2013

J. DEL CASTILO

RIGHT TO PRIVACY

FACTS:

Petitioners are the registered owners of a parcel of land in Cebu. Respondents are the owners of Aldo Development adjacent to the property of petitioners. Respondents constructed an auto-repair shop building (Aldo Goodyear Servitec). Aldo filed a case against petitioners for Injunction and Damages with Writ of Preliminary Injunction/TRO and claimed that petitioners were constructing a fence without a valid permit and that the said construction would destroy the wall of its building, which is adjacent to petitioners‘ property. In order to get evidence to support the said case, respondents

illegally set-up and installed on the building of Aldo Goodyear Servitec two video surveillance cameras facing petitioners‘ property. Respondents, through their employees and without the consent of petitioners, also took pictures of petitioners‘ on-going construction. Thus, petitioners prayed that respondents be ordered to remove the video surveillance cameras and enjoined from conducting illegal surveillance.

The RTC granted the application for a TRO. Aggrieved, respondents filed with the CA a Petition for Certiorari with application for a TRO and/or Writ of Preliminary Injunction. The CA explained that the right to privacy of residence under Article 26(1) of the Civil Code was not violated since the property subject of the controversy is not used as a residence.

ISSUE:

Whether there was a violation of petitioners‘ right to privacy.

HELD:

Yes. Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of another‘s residence.

This provision recognizes that a man‘s house is his castle, where his right to privacy cannot be denied or even restricted by others. It includes ―any act of intrusion into, peeping or peering inquisitively into the residence of another without the consent of the latter.‖ The phrase ―prying into the privacy of another‘s residence,‖ however, does not mean that only the residence is entitled to privacy. Thus, an individual‘s right to privacy under Article 26(1) of the Civil Code should not be confined to his house or residence as it may extend to places where he has the right to exclude the public or deny them access.

CONTINENTAL STEEL MANUFACTURING V. HON. ACCREDITED VOLUNTARY ARBITRATOR MONTANO G.R. NO. 182836 OCTOBER 13, 2009

J. CHICO-NAZARIO

CIVIL PERSONALITY

FACTS:

Hortillano, an employee of petitioner Continental Steel and a member of respondent Union filed a claim for Paternity Leave, Bereavement Leave and Death and Accident Insurance for dependent, pursuant to the CBA concluded between Continental and the Union.

Section 2. BEREAVEMENT LEAVE--The Company agrees to grant a bereavement leave with pay to any employee in case of death of the employee's legitimate dependent (parents, spouse, children, brothers and sisters) based on the following: x x x

Section 4. DEATH AND ACCIDENT INSURANCE--The Company shall grant death and accidental

insurance

to

the

employee

or

his

family

in

the

following manner:

x

x

x

x

4.3 DEPENDENTS--Eleven Thousand Five Hundred Fifty Pesos (Php11,550.00) in case of death of the employees legitimate dependents (parents, spouse, and children). In case the employee is single, this benefit covers the legitimate parents, brothers and sisters only with proper legal document to be presented (e.g. death certificate).

The claim was based on the death of Hortillano's unborn child. Hortillano's wife had a premature delivery while she was in the 38 th week of pregnancy.

Continental Steel immediately granted Hortillano's claim for paternity leave but denied his claims for bereavement leave and other death benefits, consisting of the death and accident insurance.

Upon grievance, the VA ruled that Hortillano was entitled to bereavement leave with pay and death benefits. The VA found that there was no dispute that the death of an employee's legitimate dependent occurred. The fetus had the right to be supported by the parents from the very moment he/she was conceived. The fetus had to rely on another for support; he/she could not have existed or sustained himself/herself without the power or aid of someone else, specifically, his/her mother. Therefore, the fetus was already a dependent, although he/she died during the labor or delivery.

Continental Steel claimed that the death of a fetus, at whatever stage of pregnancy, was excluded from the coverage of the CBA since what was contemplated by the CBA was the death of a legal person, and not that of a fetus, which did not acquire any juridical personality.

ISSUE:

Whether Hortillano was entitled to bereavement leave and other death benefits.

HELD:

Yes. Life is not synonymous with civil personality. The reliance of Continental Steel on Articles 40, 41 and 42 of the Civil Code for the legal definition of death is misplaced. The issue of civil personality is not relevant herein. Articles 40, 41 and 42 of the Civil Code on natural persons, must be applied in relation to Article 37 of the same Code.

Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every natural person and is lost only through death. Capacity to act, which is the power to do acts with legal effect, is acquired and may be lost.

We need not establish civil personality of the unborn child herein since his/her juridical capacity and capacity to act as a person are not in issue. It is not a question before us whether the unborn child acquired any rights or incurred any obligations prior to his/her death that were passed on to or assumed by the child's parents. The rights to bereavement leave and other death benefits in the instant case pertain directly to the parents of the unborn child upon the latter's death.

Moreover, while the Civil Code expressly provides that civil personality may be extinguished by death, it does not explicitly state that only those who have acquired juridical personality could die.

DE BELEN VDA. DE CABALU V. SPS. TALAVERA

G.R. NO. 188417

SEPTEMBER 24, 2012

 

J. MENDOZA

CONTRACT

ENTERED

INTO

UPON

FUTURE

INHERITANCE

IS

VOID;

DEATH

TERMINATES

CONTRACTUAL CAPACITY

FACTS:

On December 8, 1941, Faustina died without any children. She left a holographic will, dated July 27, 1939, assigning and distributing her property to her nephews and nieces. The said holographic will, however, was not probated. One of the heirs was the father of Domingo, Benjamin Laxamana, who died in 1960. On March 5, 1975, Domingo allegedly executed a Deed of Sale of Undivided Parcel of Land disposing of his 9,000 square meter share of the land to Laureano Cabalu.

On August 1, 1994, to give effect to the holographic will, the forced and legitimate heirs of Faustina executed a Deed of Extra-Judicial Succession with Partition. The said deed imparted 9,000 square meters of the land to Domingo. On December 14, 1995, Domingo sold 4,500 square meters to his nephew, Eleazar Tabamo. On May 7, 1996, the remaining 4,500 square meters of Domingo‘s share in the partition was registered under his name (TCT No. 281353). On August 4, 1996, Domingo passed away.

On October 8, 1996, Domingo purportedly executed a Deed of Absolute Sale of TCT No. 281353 in favor of respondent Tabu. Subsequently, Tabu and his wife, Dolores Laxamana subdivided the said lot into two which resulted into TCT Nos. 291338 and 291339.

On January 15, 1999, the heirs of Domingo, filed an unlawful detainer action against petitioners and all persons claiming rights under them. The case was ruled in favor of Domingo‘s heirs. Petitioners the filed a case for Declaration of Nullity of Deed of Absolute Sale, Joint Affidavit of Nullity of Transfer Certificate of Title Nos. 291338 and 291339, Quieting of Title, Reconveyance, Application for Restraining Order, Injunction and Damages against respondent spouses before the RTC. Petitioners claimied that they were the lawful owners of the subject property because it was sold to their father, Laureano Cabalu, by Domingo, through a Deed of Absolute Sale, dated March 5, 1975. Hence, being the rightful owners by way of succession, they could not be ejected from the subject property.

ISSUE:

Whether the Deed of Sale of Undivided Parcel of Land covering the 9,000 square meter property executed by Domingo in favor of Laureano Cabalu on March 5, 1975, is valid.

HELD:

No. 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.

In this case, at the time the deed was executed, Faustina‘s will was not yet probated; the object of the contract, the 9,000 square meter property, still formed part of the inheritance of his father from the estate of Faustina; and Domingo had a mere inchoate hereditary right therein. Domingo became the owner of the said property only on August 1, 1994, the time of execution of the Deed of Extrajudicial Succession with Partition by the heirs of Faustina, when the 9,000 square meter lot was adjudicated to him.

ISSUE:

Whether the Deed of Sale, dated October 8, 1996, covering the 4,500 square meter portion of the 9,000 square meter property, executed by Domingo in favor of Renato Tabu, is null and void.

HELD:

Yes. 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.

The deed of sale covering the remaining 4,500 square meters of the subject property executed in favor of Renato Tabu, it

is evidently null and void. The document itself, the Deed of Absolute Sale, dated October 8, 1996, readily shows that it

was executed on August 4, 1996 more than two months after the death of Domingo. Consequently, TCT No. 286484 issued to Tabu by virtue of the October 8, 1996 Deed of Sale, as well as its derivative titles, TCT Nos. 291338 and 291339, both registered in the name of Renato Tabu, married to Dolores Laxamana, are likewise void.

LAZANAS V. PEOPLE

G.R. NO. 159031

JUNE 23, 2014

J. BERSAMIN

JUDICIAL DECLARATION OF NULLITY

FACTS:

On February 16, 1968, Judge Salazar solemnized the marriage of accused Noel Lasanas and Socorro Patingo without the benefit of a marriage license. The records show that Lasanas and Patingo had not executed any affidavit of cohabitation to excuse the lack of the marriage license. On August 27, 1980, Lasanas and Patingo reaffirmed their marriage vows in a religious ceremony. They submitted no marriage license or affidavit of cohabitation for that purpose. Both ceremonies were evidenced by the corresponding marriage certificates. In 1982, Lasanas and Patingo separated de facto because of irreconcilable differences.

On December 27, 1993, the accused contracted marriage with Josefa Eslaban. Their marriage certificate reflected the civil status of the accused as single. On July 26, 1996, the accused filed a complaint for annulment of marriage and damages against Socorro. In October 1998, Socorro charged the accused with bigamy. The complaint for annulment of marriage was dismissed. Accused was convicted of bigamy. The accused contended that because he had not been legally married to Socorro, the first element of bigamy was not established.

ISSUE:

Whether the accused was wrongfully convicted of bigamy.

HELD:

No. The first and second elements of bigamy were present in view of the absence of a judicial declaration of nullity of marriage between the accused and Socorro. The requirement of securing a judicial declaration of nullity of marriage prior to contracting a subsequent marriage is found in Article 40 of the Family Code.

Article 40. The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void.

The crime of bigamy was consummated from the moment he contracted the second marriage without his marriage to Socorro being first judicially declared null and void, because at the time of the celebration of the second marriage, his marriage to Socorro was still deemed valid and subsisting due to such marriage not being yet declared null and void by a court of competent jurisdiction.

ROBERT MALLILIN V. LUZ JAMESOLAMIN

G.R. NO. 192718

FEBRUARY 18, 2015

J. MENDOZA

NULLITY OF MARRIAGE; PSYCHOLOGICAL INCAPACITY

FACTS:

Robert and Luz were married on September 6, 1972. They begot three children. Robert filed a complaint for declaration of nullity of marriage before the RTC. Luz filed her Answer with Counterclaim contesting the complaint. She averred that it was Robert who manifested psychological incapacity in their marriage.

When Robert testified, he disclosed that Luz was already living in California, USA, and had married an American. He

also revealed that when they were still engaged, Luz continued seeing and dating another boyfriend

Luz had been remiss in her duties both as a wife and as a mother as shown by the following circumstances: (1) it was he who did the cleaning of the room because Luz did not know how to keep order; (2) it was her mother who prepared their meal while her sister was the one who washed their clothes because she did not want her polished nails destroyed; (3) it was also her sister who took care of their children while she spent her time sleeping and looking at the mirror; (4) when she resumed her schooling, she dated different men; (5) he received anonymous letters reporting her loitering with male students; (6) when he was not home, she would receive male visitors; (7) a certain Romy Padua slept in their house when he was away; and (6) she would contract loans without his knowledge.

He also claimed that

Robert argues that the series of sexual indiscretion of Luz were external manifestations of the psychological defect that she was suffering within her person, which could be considered as nymphomania or ―excessive sex hunger.‖

In addition, Robert presented the testimony of Myrna Delos Reyes Villanueva, Guidance Psychologist II of Northern Mindanao Medical Center. While the case was pending before the trial court, Robert filed a petition for marriage annulment with the Metropolitan Tribunal of First Instance for the Archdiocese of Manila.

Metropolitan Tribunal handed down a decision declaring their marriage invalid ab initio on the ground of grave lack of due discretion on the part of both parties as contemplated by the second paragraph of Canon1095. The RTC had rendered a decision declaring the marriage null and void on the ground of psychological incapacity on the part of Luz. The CA reversed the RTC decision.

ISSUE:

Whether the totality of the evidence adduced proves that Luz was psychologically incapacitated to comply with the essential obligations of marriage warranting the annulment of their marriage under Article 36 of the Family Code.

HELD:

No. Psychological incapacity as required by Article 36 must be characterized by (a) gravity, (b) juridical antecedence and (c) incurability. The incapacity must be grave or serious such that the party would be incapable of carrying out the ordinary duties required in marriage. It must be rooted in the history of the party antedating the marriage, although the overt manifestations may only emerge after the marriage. It must be incurable or, even if it were otherwise, the cure would be beyond the means of the party involved.

First, the testimony of Robert failed to overcome the burden of proof to show the nullity of the marriage. He presented no other witnesses to corroborate his allegations on her behavior. Thus, his testimony was self-serving and had no serious value as evidence. Second, the root cause of the alleged psychological incapacity of Luz was not medically or clinically identified, and sufficiently proven during the trial. Sexual infidelity or perversion and abandonment do not, by themselves, constitute grounds for declaring a marriage void based on psychological incapacity. Third, the psychological report of the Guidance Psychologist was insufficient to prove the psychological incapacity of Luz. There was nothing in the records that would indicate that Luz had either been interviewed or was subjected to a psycholPogical examination. Fourth, the decision of the Metropolitan Tribunal is insufficient to prove the psychological incapacity of Luz. Interpretations given by the NAMT of the Catholic Church in the Philippines, while not controlling or decisive, should be given great respect by our courts, still it is subject to the law on evidence.

Robert‘s reliance on the NAMT decision is misplaced. To repeat, the decision of the NAMT was based on the second paragraph of Canon 1095 which refers to those who suffer from a grave lack of discretion of judgment concerning essential matrimonial rights and obligations to be mutually given and accepted, a cause not of psychological nature under Article 36 of the Family Code. A cause of psychological nature similar to Article 36 is covered by the third paragraph of Canon 1095 of the Code of Canon Law which reads: those who, because of causes of a psychological nature, are unable to assume the essential obligations of marriage.

To consider church annulments as additional grounds for annulment under Article 36 would be legislating from the bench. To hold that annulment of marriages decreed by the NAMT under the second paragraph of Canon 1095 should also be covered would be to expand what the lawmakers did not intend to include.

GLENN VINAS V. MARY GRACE PAREL VINAS

G.R. NO. 208790

JANUARY 21, 2015

J. REYES

NULLITY OF MARRIAGE; PSYCHOLOGICAL INCAPACITY

FACTS:

Glenn and Mary Grace were married on April 26, 1999 as the latter was already pregnant then. The infant, however, died at birth due to weakness and malnourishment. Sometime in March 2006, Mary Grace left Glenn and went to work in Dubai.

On February 18, 2009, Glenn filed a petition for the declaration of nullity of his marriage with Mary Grace. To ease their marital problems, Glenn sought professional guidance and submitted himself to psychological evaluation by Dr. Nedy Tayag. Dr. Tayag found him as ―amply aware of his marital roles‖ and ―capable of maintaining a mature and healthy heterosexual relationship.‖ Based on the data gathered from Glenn and his cousin Rodelito, who knew Mary Grace back in college, Dr. Tayag assessed Mary Grace‘s personality. Mary Grace was diagnosed to be suffering from a Narcissistic Personality Disorder with anti-social traits and concluded that their relationship was not founded on mutual love, trust, respect, commitment and fidelity to each other. Dr. Tayag recommended the propriety of declaring the nullity of the couple‘s marriage.

Dr. Tayag explained that the root cause of Mary Grace‘s personality aberration can be said to have emanated from the various forms of unfavorable factors as early as her childhood years. She came from a dysfunctional family with lenient and tolerating parents who never imposed any restrictions. She sees to it that she is the one always followed with regards to making decisions and always mandates people to submit to her wishes. Moral values were not instilled in her young mind.

During trial, the testimonies of Glenn, Dr. Tayag and Rodelito were offered as evidence. Glenn and Rodelito described Mary Grace as outgoing carefree and irresponsible. The RTC declared the marriage null and void on account of the latter‘s psychological incapacity. From the testimony of Glenn, it was established that Mary Grace failed to comply with the basic marital obligations. The RTC had no reason to doubt Dr. Tayag‘s authority to speak on the subject of psychological incapacity.

ISSUE:

Whether or not sufficient evidence exist justifying the RTC‘s declaration of nullity of his marriage with Mary Grace.

HELD:

No. Article 36 contemplates downright incapacity or inability to take cognizance of and to assume basic marital obligations. Mere ―difficulty,‖ ―refusal‖ or ―neglect‖ in the performance of marital obligations or ―ill will‖ on the part of the spouse is different from ―incapacity‖ rooted on some debilitating psychological condition or illness. Indeed, irreconcilable differences, sexual infidelity or perversion, emotional immaturity and irresponsibility, and the like, do not by themselves warrant a finding of psychological incapacity under Article 36, as the same may only be due to a person‘s refusal or unwillingness to assume the essential obligations of marriage and not due to some psychological illness that is contemplated by said rule.

Here, the cumulative testimonies of Glenn, Dr. Tayag and Rodelito and the documentary evidence offered do not sufficiently prove the root cause, gravity and incurability of Mary Grace‘s condition. The evidence merely shows that Mary Grace is outgoing, strong-willed and not inclined to perform household chores.

Dr. Tayag‘s conclusions about the respondent‘s psychological incapacity were based on the information fed to her by only one side. She merely summarized the petitioner‘s narrations and on this basis characterized respondent to be self-centered, egocentric and unremorseful. Her testimony failed to establish the fact that at the time the parties were married, respondent was already suffering from a psychological defect that deprived him of the ability to assume the essential duties and responsibilities of marriage. Neither did she adequately explain how she came to the conclusion that respondent‘s condition was grave and incurable.

EDILBERTO VENTURA V. SPOUSS ABUDA

G.R. NO. 202932

OCTOBER 23, 2013

J. CARPIO

PROPERTY RELATIONS: ARTICLE 148

FACTS:

Socorro and Esteban were married on 9 June 1980. Although Socorro and Esteban never had common children, both of them had children from prior marriages: Esteban had a daughter named Evangeline Abuda and Socorro had a son, who was the father of petitioner Edilberto Ventura, Jr. (Edilberto).

Evidence shows that Socorro had a prior subsisting marriage to Crispin Roxas when she married Esteban. Socorro married Crispin on 18 April 1952. This marriage was not annulled, and Crispin was alive at the time of Socorro‘s marriage to Esteban.

According to Edilberto, sometime in 1968, Esteban purchased a portion of the Vitas property. The remaining portion was thereafter purchased by Evangeline on her father‘s behalf sometime in 1970. The Vitas property was covered by Transfer Certificate of Title No. 141782 issued to ―Esteban Abletes, of legal age, Filipino, married to Socorro Torres.‖ Edilberto also claimed that starting 1978, Evangeline and Esteban operated small business establishments known as the Delpan property.

On 6 September 1997, Esteban sold the Vitas and Delpan properties to Evangeline and her husband, Paulino Abuda. Esteban passed away on 11 September 1997, while Socorro passed away on 31 July 1999. Sometime in 2000, Leonora Urquila, mother of Edilberto, discovered the sale. Thus, Edilberto, represented by Leonora, filed a Petition for Annulment of Deeds of Sale before the RTC-Manila.

The RTC-Manila dismissed the petition for lack of merit. According to the RTC-Manila, the Vitas and Delpan properties are not conjugal. The RTC-Manila concluded that Socorro did not contribute any funds for the acquisition of the properties. Hence, she cannot be considered a co- owner, and her heirs cannot claim any rights over the Vitas and Delpan properties. The CA sustained the decision of the RTC-Manila. The CA applied Article 148 and found that Edilberto failed to prove that Socorro contributed to the purchase of the Vitas and Delpan properties.

ISSUE:

Whether or not the CA erred in sustaining the decision of the RTC.

HELD:

No. Art 148. In cases of cohabitation wherein the parties are incapacitated to marry each other, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions

and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidences of credit.

If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding Article. The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.

Applying the foregoing provision, the Vitas and Delpan properties can be considered common property if: (1) these were acquired during the cohabitation of Esteban and Socorro; and (2) there is evidence that the properties were acquired through the parties‘ actual joint contribution of money, property, or industry. The title itself shows that the Vitas property is owned by Esteban alone. The phrase ―married to Socorro Torres‖ is merely descriptive of his civil status, and does not show that Socorro co-owned the property. Registration under the Torrens title system merely confirms, and does not vest title.

We cannot sustain Edilberto's claim that Esteban and Socorro jointly contributed to the acquisition of the Delpan property. Both the RTC-Manila and the CA found that the Delpan property was acquired prior to the marriage of Esteban and Socorro. Furthermore, even if payment of the purchase price of the Delpan property was made by Evangeline, such payment was made on behalf of her father.

PNB V. GARCIA G.R. NO. 182839

JUNE 2, 2014

J. BRION

CONJUGAL PARTNERSHIP; CO-OWNERSHIP

FACTS:

The subject of the present case is a parcel of residential land with all its improvements in Isabela under the name of Jose Garcia Sr. (Jose Sr.) who acquired the subject property during his marriage with Ligaya Garcia. Ligaya died on January 21, 1987. The marriage of Jose Sr. and Ligaya produced the following children: Nora, Jose Jr., Bobby and Jimmy, all surnamed Garcia, who are the respondents in the present case.

Sometime in 1989, the spouses Rogelio and Celedonia Garcia obtained a loan facility from the petitioner PNB, initially for P150,000.00. The loan was secured by a Real Estate Mortgage. The spouses Garcia increased their loan to P220,000.00 and eventually to P600,000.00. As security for the increased loan, they offered their property covered by TCT No. 75324 and the subject property covered by TCT No. T-44422.

Jose Sr. agreed to accommodate the spouses Garcia by offering the subject property as additional collateral security for the latter‘s increased loan. For this purpose, Jose Sr. executed SPAs expressly authorizing the Spouses Garcia to apply for, borrow, or secure any loan from the petitioner bank, and to convey and transfer the subject property by way of mortgage. Jose Sr. also executed an Amendment of Real Estate Mortgage in favor of the petitioner bank. All of these transactions, however, were without the knowledge and consent of Jose Sr.‘s children. The spouses Garcia failed to pay their loan to the petitioner bank despite repeated demands.

They claimed that the Amendment of Real Estate Mortgage was null and void as to respondents Nora, Jose Jr., Bobby and Jimmy as they were not parties to the contract. The respondents alleged that the subject property was a conjugal property of Jose Sr. and his deceased spouse, Ligaya, as they acquired the subject property during their marriage; that upon Ligaya‘s death, Jose Sr., together with his children became owners pro indiviso of the subject property. Respondents filed before the RTC a Complaint for Nullity of the Amendment of Real Estate Mortgage, Damages with Preliminary Injunction against the spouses Garcia and the petitioner bank.

ISSUE:

Whether Jose Sr. had the right to constitute the mortgage over the entire subject property after the death of Ligaya.

HELD:

No. Upon the death of Ligaya on January 21, 1987, the conjugal partnership was automatically dissolved and terminated. Consequently, the conjugal partnership was converted into an implied ordinary co-ownership between the surviving spouse, on the one hand, and the heirs of the deceased, on the other. This resulting ordinary co-ownership among the heirs is governed by Article 493 of the Civil Code which reads:

Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation of the mortgage, with respect to the co-owners shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.”

In the present case, Jose Sr. constituted the mortgage over the entire subject property after the death of Ligaya, but before the liquidation of the conjugal partnership. While under Article 493 of the Civil Code, even if he had the right to freely mortgage or even sell his undivided interest in the disputed property, he could not dispose of or mortgage the entire property without his children‘s consent. Jose Sr.‘s right in the subject property is limited only to his share in the conjugal partnership as well as his share as an heir on the other half of the estate which is his deceased spouse’s share. The mortgage contract is void insofar as it extends to the undivided shares of his children because they did not give their consent to the transaction.

Accordingly, the Amendment of Real Estate Mortgage constituted by Jose Sr. over the entire property without his co- owners‘ consent is not necessarily void in its entirety. The right of the petitioner bank as mortgagee is limited though only to the portion which may be allotted to Jose Sr. in the event of a division and liquidation of the subject property.

MARIETTA BARRIDO V. LERONARDO NONATO

G.R. NO. 176492

OCTOBER 20, 2014

J. PERALTA

EFFECT OF VOID MARRIAGES IN PROPERTY RELATIONS

FACTS:

In the course of the marriage of respondent Nonato and petitioner Barrido, they were able to acquire a property situated in Bacolod City. On March 15, 1996, their marriage was declared void on the ground of psychological incapacity. Since there was no more reason to maintain their co-ownership over the property, Nonato asked Barrido for partition, but the latter refused. Thus, filed a Complaint for partition before the MTCC of Bacolod City.

Barrido claimed, by way of affirmative defense, that the subject property had already been sold to their children, Joseph Raymund and Joseph Leo.

The MTCC rendered a Decision applying Article 129 of the Family Code Judgment was rendered adjudicating to Barrido, the spouse with whom the majority of the common children choose to remain, the property. Nonato appealed before the RTC. The RTC reversed the ruling of the MTCC. Upon appeal, the CA affirmed the RTC Decision. Also, although the RTC erred in relying on Article 129 of the Family Code, instead of Article 147, the dispositive portion of its decision still correctly ordered the equitable partition of the property.

ISSUE:

Whether or not the subject property should be divided in accordance with the rules on co-ownership.

HELD:

Yes. The records reveal that Nonato and Barrido‘s marriage had been declared void for psychological incapacity under Article 36 . During their marriage, however, the conjugal partnership regime governed their property relations. Although Article 129 provides for the procedure in case of dissolution of the conjugal partnership regime, Article 147 specifically covers the effects of void marriages on the spouses‘ property relations.

For Article 147 to operate, the man and the woman: (1) must be capacitated to marry each other; (2) live exclusively with each other as husband and wife; and (3) their union is without the benefit of marriage or their marriage is void. Here, all these elements are present. The term "capacitated" in the first paragraph of the provision pertains to the legal capacity of a party to contract marriage. Any impediment to marry has not been shown to have existed on the part of either Nonato or Barrido. They lived exclusively with each other as husband and wife. However, their marriage was found to be void on the ground of psychological incapacity.

Under this property regime, property acquired by both spouses through their work and industry shall be governed by the rules on equal co-ownership. Any property acquired during the union is prima facie presumed to have been obtained through their joint efforts. A party who did not participate in the acquisition of the property shall be considered as having contributed to the same jointly if said party's efforts consisted in the care and maintenance of the family household. Efforts in the care and maintenance of the family and household are regarded as contributions to the acquisition of common property by one who has no salary or income or work or industry. The subject property remains to be owned in common by Nonato and Barrido, which should be divided in accordance with the rules on co-ownership.

VALINO V. ADRIANO

G.R. NO. 182894

APRIL 22, 2014

J. MENDOZA

QUASI-PROPERTY RIGHTS

FACTS:

Atty. Adriano married respondent Rosario on November 15, 1955. The couple had two (2) sons, Florante and Ruben Adriano; three (3) daughters, Rosario, Victoria and Maria Teresa; and one (1) adopted daughter, Leah Antonette. The marriage of Atty. Adriano and Rosario, turned sour and they were eventually separated-in-fact. Years later, Atty. Adriano courted Valino, one of his clients, until they decided to live together as husband and wife. Despite such arrangement, he continued to provide financial support to Rosario and their children (respondents).

In 1992, Atty. Adriano died. At that time, Rosario was in the United States spending Christmas with her children. As none of the family members was around, Valino took it upon herself to shoulder the funeral and burial expenses for Atty. Adriano. When Rosario learned about the death of her husband, she immediately called Valino and requested that she delay the interment for a few days but her request was not heeded. The remains of Atty. Adriano were then interred at the mausoleum of the family of Valino at the Manila Memorial Park. Respondents were not able to attend the interment.

Respondents commenced suit against Valino praying that they be indemnified for actual, moral and exemplary damages and attorney‘s fees and that the remains of Atty. Adriano be exhumed and transferred to the family plot at the Holy Cross Memorial Cemetery in Quezon City. Valino insists that the expressed wishes of the deceased should nevertheless prevail pursuant to Article 307 of the Civil Code.

The RTC dismissed the complaint of respondents for lack of merit as well as the counterclaim of Valino after it found them to have not been sufficiently proven. The RTC opined that because Valino lived with Atty. Adriano for a very long time, she knew very well that it was his wish to be buried at the Manila Memorial Park. Taking into consideration the fact that Rosario left for the United States at the time that he was fighting his illness, the trial court concluded that Rosario did not show love and care for him. On appeal, the CA reversed and set aside the RTC decision and directed Valino to have the remains of Atty. Adriano exhumed at the expense of respondents.

ISSUE:

Who between Rosario and Valino is entitled to the remains of Atty. Adriano.

HELD:

Rosario is entitled to the remains of Atty. Adriano. The law recognizes that a certain right of possession over the corpse exists, for the purpose of a decent burial, and for the exclusion of the intrusion by third persons who have no legitimate interest in it. This quasi-property right, arising out of the duty of those obligated by law to bury their dead, also authorizes them to take possession of the dead body for purposes of burial to have it remain in its final resting place, or to even transfer it to a proper place where the memory of the dead may receive the respect of the living. This is a family right. There can be no doubt that persons having this right may recover the corpse from third persons.

Moreover, it cannot be surmised that just because Rosario was unavailable to bury her husband when she died, she had already renounced her right to do so. Even assuming, ex gratia argumenti, that Atty. Adriano truly wished to be buried in the Valino family plot at the Manila Memorial Park, the result remains the same. Article 307 of the Civil Code provides:

Art. 307. The funeral shall be in accordance with the expressed wishes of the deceased. In the absence of such expression, his religious beliefs or affiliation shall determine the funeral rites. In case of doubt, the form of the funeral shall be decided upon by the person obliged to make arrangements for the same, after consulting the other members of the family. It is apparent that Article 307 simply seeks to prescribe the “form of the funeral rites” that should govern in the burial of the deceased. The right and duty to make funeral arrangements reside in the persons specified in Article 305 in relation to Article 199 of the Family Code.

Art. 305. The duty and the right to make arrangements for the funeral of a relative shall be in accordance with the order established for support, under Article 199. In case of descendants of the same degree, or of brothers and sisters, the oldest shall be preferred. In case of ascendants, the paternal shall have a better right.

Art. 199. Whenever two or more persons are obliged to give support, the liability shall devolve upon the following persons in the order herein provided: (1) The spouse; (2) The descendants in the nearest degree; (3) The ascendants in the nearest degree; and (4) The brothers and sisters.

GRANDE V. ANTONIO

G.R. NO. 206248

FEBRUARY 18, 2014

J. VELASCO

USE OF SURNAME

FACTS:

Grande and respondent Antonio for a period of time lived together as husband and wife, although Antonio was at that time already married to someone else. Out of this illicit relationship, two sons were born: Andre Lewis and Jerard Patrick, The children were not expressly recognized by respondent as his own in the Record of Births of the children in the Civil Registry. The parties‘ relationship turned sour, and Grande left for the United States with her two children. This prompted respondent Antonio to file a Petition for Judicial Approval of Recognition with Prayer to take Parental Authority, Parental Physical Custody, Correction/Change of Surname of Minors and for the Issuance of Writ of Preliminary Injunction before the RTC appending a notarized Deed of Voluntary Recognition of Paternity of the children.

The Implementing Rules and Regulations (IRR) of RA 9255 states:

7.1.1 The illegitimate child shall use the surname of the father if a public document is executed by the father, either at the back of the Certificate of Live Birth or in a separate document.

The RTC rendered a Decision in favor of Antonio. Aggrieved, petitioner Grande moved for reconsideration. However, her motion was denied by the trial court. Grande then filed an appeal with the CA attributing grave error on the part of the RTC for allegedly ruling contrary to the law and jurisprudence respecting the grant of sole custody to the mother over her illegitimate children.

The appellate court maintained that the legal consequence of the recognition made by respondent Antonio that he is the father of the minors, taken in conjunction with the universally protected "best-interest-of-the-child" clause, compels the use by the children of the surname "ANTONIO‖.

ISSUE:

Is there a legal basis for the court a quo to order the change of the surname to that of respondent?

HELD:

None. Art. 176. Illegitimate children shall use the surname and shall be under the parental authority of their mother, and shall be entitled to support in conformity with this Code. However, illegitimate children may use the surname of their father if their filiation has been expressly recognized by their father through the record of birth appearing in the civil register, or when an admission in a public document or private handwritten instrument is made by the father. Provided, the father has the right to institute an action before the regular courts to prove non-filiation during his lifetime. The legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate child.

The Supreme Court, pursuant to Section 5, Article VIII of the 1987 Constitution, declared void the above-quoted provision of the IRR insofar as it provides the mandatory use by illegitimate children of their father‘s surname upon the latter‘s recognition of his paternity.

Art. 176 gives illegitimate children the right to decide if they want to use the surname of their father or not. It is not the father (herein respondent) or the mother (herein petitioner) who is granted by law the right to dictate the surname of their illegitimate children.

On its face, Art. 176, as amended, is free from ambiguity. And where there is no ambiguity, one must abide by its words. The use of the word ―may‖ in the provision readily shows that an acknowledged illegitimate child is under no compulsion to use the surname of his illegitimate father. The word ―may‖ is permissive and operates to confer discretion upon the illegitimate children.

REPUBLIC V. CANTOR

G.R. NO. 184621

DECEMBER 10, 2013

J. BRION

DECLARATION OF PRESUMPTIVE DEATH

FACTS:

Respondent and Jerry were married on September 20, 1997. They lived together as husband and wife in their conjugal dwelling. Sometime in January 1998, the couple had a violent quarrel brought about by: (1) the respondent‘s inability to reach ―sexual climax‖ whenever she and Jerry would have intimate moments; and (2) Jerry‘s expression of animosity toward the respondent‘s father.

After their quarrel, Jerry left their conjugal dwelling and this was the last time that the respondent ever saw him. Since then, she had not seen, communicated nor heard anything from Jerry or about his whereabouts.

On May 21, 2002, or more than four years from the time of Jerry‘s disappearance, the respondent filed before the RTC a petition for her husband‘s declaration of presumptive death. She claimed that she had a well-founded belief that Jerry was

already dead. She alleged that she had inquired from her mother-in-law, her brothers-in-law, her sisters-in-law, as well as her neighbors and friends, but to no avail. In the hopes of finding Jerry, she also allegedly made it a point to check the patients‘ directory whenever she went to a hospital. All these earnest efforts, the respondent claimed, proved futile, prompting her to file the petition in court.

The RTC issued an order granting the respondent‘s petition and declaring Jerry presumptively dead.

ISSUE:

Whether or not petitioner had a well-founded belief to justify the declaration of her husband‘s presumptive death.

HELD:

No. Before a judicial declaration of presumptive death can be obtained, it must be shown that the prior spouse had been absent for four consecutive years and the present spouse had a well-founded belief that the prior spouse was already dead. Under Article 41 of the Family Code, there are four (4) essential requisites for the declaration of presumptive death:

1. That the absent spouse has been missing for four consecutive years, or two consecutive years if the disappearance occurred where there is danger of death under the circumstances laid down in Article 391, Civil Code;

2. That the present spouse wishes to remarry;

3. That the present spouse has a well-founded belief that the absentee is dead; and

4. That the present spouse files a summary proceeding for the declaration of presumptive death of the absentee.

Respondent‘s efforts fell short of the stringent standard and degree of diligence required by jurisprudence for the following reasons: First, the respondent did not actively look for her missing husband. Second, she did not report Jerry‘s absence to the police nor did she seek the aid of the authorities to look for him. Third, she did not present as witnesses Jerry‘s relatives or their neighbors and friends, who can corroborate her efforts to locate Jerry. Lastly, there was no other corroborative evidence to support the respondent‘s claim that she conducted a diligent search.

BALTAZAR V. LAXA G.R. NO. 174489

APRIL 7, 2012

J. DEL CASTILLO

FORMALITIES OF A WILL; TESTAMENTARY CAPACITY

FACTS:

Paciencia was a 78 year old spinster when she made her last will and testament entitled ―Tauli Nang Bilin o Testamento Miss Paciencia Regala‖ in the Pampango dialect on September 13, 1981. The Will, executed in the house of retired Judge Limpin, was read to Paciencia twice. After which, Paciencia expressed in the presence of the instrumental witnesses that the document is her last will and testament. She thereafter affixed her signature at the end of the said document on page 3 and then on the left margin of pages 1, 2 and 4 thereof.

The witnesses to the Will were Dra. Limpin, Francisco Garcia and Faustino R. Mercado. The three attested to the Will‘s due execution by affixing their signatures below its attestation clause and on the left margin of pages 1, 2 and 4 thereof, in the presence of Paciencia and of one another and of Judge Limpin who acted as notary public.

Childless and without any brothers or sisters, Paciencia bequeathed all her properties to respondent Lorenzo and his wife Corazon Laxa and their children. More than four years after the death of Paciencia, Lorenzo filed a petition with the for

the probate of the Will of Paciencia and for the issuance of Letters of Administration in his favor. There being no opposition to the petition after its due publication, the RTC allowed Lorenzo to present evidence on June 22, 2000. The following day petitioner Antonio Baltazar filed an opposition to Lorenzo‘s petition. Antonio averred that the properties subject of Paciencia‘s Will belong to Nicomeda Regala Mangalindan, his predecessor-in-interest; hence, Paciencia had no right to bequeath them to Lorenzo.

For petitioners, Rosie testified that her mother and Paciencia were first cousins. She claimed to have helped in the household chores in the house of Paciencia thereby allowing her to stay therein from morning until evening and that during the period of her service in the said household, Lorenzo‘s wife and his children were staying in the same house. Rosie claimed that she saw Faustino bring ―something‖ for Paciencia to sign at the latter‘s house. Rosie admitted, though, that she did not see what that ―something‖ was as same was placed inside an envelope. However, she remembered Paciencia instructing Faustino to first look for money before she signs them. On September 16, 1981, Paciencia went to the house of Antonio‘s mother and brought with her the said envelope. Upon going home, however, the envelope was no longer with Paciencia. Rosie further testified that Paciencia was referred to as ―magulyan‖ or ―forgetful‖ because she would sometimes leave her wallet in the kitchen then start looking for it moments later.

The trial court gave considerable weight to the testimony of Rosie and concluded that at the time Paciencia signed the Will, she was no longer possessed of sufficient reason or strength of mind to have testamentary capacity.

On appeal, the CA reversed the RTC Decision and granted the probate of the Will of Paciencia. The appellate court did not agree with the RTC‘s conclusion that Paciencia was of unsound mind when she executed the Will. It ratiocinated that ―the state of being ‗magulyan‘ does not make a person mentally unsound so as to render Paciencia unfit for executing a Will.‖

ISSUE:

Whether the authenticity and due execution of the notarial Will was sufficiently established to warrant its allowance for probate.

HELD:

Yes. Courts are tasked to determine nothing more than the extrinsic validity of a Will in probate proceedings. Due execution of the will or its extrinsic validity pertains to whether the testator, being of sound mind, freely executed the will in accordance with the formalities prescribed by law. These formalities are enshrined in Articles 805 and 806 of the New Civil Code.

Here, a careful examination of the face of the Will shows faithful compliance with the formalities laid down by law. The signatures of the testatrix, Paciencia, her instrumental witnesses and the notary public, are all present and evident on the Will. Further, the attestation clause explicitly states the critical requirement that the testatrix and her instrumental witnesses signed the Will in the presence of one another and that the witnesses attested and subscribed to the Will in the presence of the testator and of one another. In fact, even the petitioners acceded that the signature of Paciencia in the Will may be authentic although they question her state of mind when she signed the same as well as the voluntary nature of said act.

ISSUE:

Whether Paciencia is unfit to execute a will.

HELD:

No. Art. 799. 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.

Art. 800. The law presumes that every person is of sound mind, in the absence of proof to the contrary. The burden of proof that the testator was not of sound mind at the time of making his dispositions is on the person who opposes the

probate of the will; but if the testator, one month, or less, before making his will was publicly known to be insane, the person who maintains the validity of the will must prove that the testator made it during a lucid interval.

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.

In this case, apart from the testimony of Rosie pertaining to Paciencia‘s forgetfulness, there is no substantial evidence, medical or otherwise, that would show that Paciencia was of unsound mind at the time of the execution of the Will. Here, there was no showing that Paciencia was publicly known to be insane one month or less before the making of the Will. Clearly, thus, the burden to prove that Paciencia was of unsound mind lies upon the shoulders of petitioners. However and as earlier mentioned, no substantial evidence was presented by them to prove the same, thereby warranting the CA‘s finding that petitioners failed to discharge such burden.

MENDOZA V. POLICARPIO

G.R. NO. 176422

MARCH 20, 2013

J. REYES

RESERVA TRONCAL

FACTS:

The properties subject in the instant case are three parcels of land located in Bulacan: (1) Lot 1681-B, (2) Lot 1684, and (3) Lot No. 1646-B.

Lot Nos. 1681-B and 1684 are presently in the name of respondent Julia Delos Santos . Lot No. 1646-B, on the other hand, is also in the name of respondent but co-owned by Victoria Pantaleon, who bought one-half of the property from petitioner Maria Mendoza and her siblings.

Petitioners are grandchildren of Placido Mendoza and Dominga Mendoza. Placido and Dominga had four children:

Antonio, Exequiel, married to Leonor, Apolonio and Valentin. Petitioners Maria, Deogracias, Dionisia, Adoracion, Marcela and Ricardo are the children of Antonio. Petitioners Juliana, Fely, Mercedes, Elvira and Fortunato, on the other hand, are Valentin‘s children. Petitioners alleged that the properties were part of Placido and Dominga‘s properties that were subject of an oral partition and subsequently adjudicated to Exequiel. After Exequiel‘s death, it passed on to his spouse Leonor and only daughter, Gregoria. After Leonor‘s death, her share went to Gregoria. In 1992, Gregoria died intestate and without issue. They claimed that after Gregoria‘s death, respondent, who is Leonor‘s sister, adjudicated unto herself all these properties as the sole surviving heir of Leonor and Gregoria. Hence, petitioners claim that the properties should have been reserved by respondent in their behalf and must now revert back to them, applying Article 891 of the Civil Code on reserva troncal.

Respondent, however, denies any obligation to reserve the properties as these did not originate from petitioners‘ familial line and were not originally owned by Placido and Dominga. According to respondent, the properties were bought by Exequiel and Antonio from a certain Alfonso Ramos in 1931.

The RTC found merit in petitioners‘ claim and granted their action for Recovery of Possession by Reserva Troncal, Cancellation of TCT and Reconveyance. On appeal, the CA reversed and set aside the RTC decision and dismissed the complaint filed by petitioners.

ISSUE:

Whether the CA erred in holding that the petitioners Mendozas do not have a right to the subject properties by virtue of the law on reserva troncal.

HELD:

No. Following the order prescribed by law in legitimate succession, when there are relatives of the descendant within the third degree, the right of the nearest relative, called reservatario, over the property which the reservista (person holding it subject to reservation) should return to him, excludes that of the one more remote. The right of representation cannot be alleged when the one claiming same as a reservatario of the reservable property is not among the relatives within the third degree belong to the line from which such property came, inasmuch as the right granted by the Civil Code in Article 891 is in the highest degree personal and for the exclusive benefit of the designated persons who are the relatives, within the third degree, of the person from whom the reservable property came. Therefore, relatives of the fourth and the succeeding degrees can never be considered as reservatarios, since the law does not recognize them as such.

Petitioners cannot be considered reservees/reservatarios as they are not relatives within the third degree of Gregoria from whom the properties came. The person from whom the degree should be reckoned is the descendant/prepositusthe one at the end of the line from which the property came and upon whom the property last revolved by descent. It is Gregoria in this case. Petitioners are Gregoria‘s fourth degree relatives, being her first cousins. First cousins of the prepositus are fourth degree relatives and are not reservees or reservatarios.

While it may appear that the properties are reservable in character, petitioners cannot benefit from reserva troncal. First, because Julia, who now holds the properties in dispute, is not the other ascendant within the purview of Article 891 of the Civil Code and second, because petitioners are not Gregoria‘s relatives within the third degree.

HEIRS OF POLICRONIO URETA V. HEIRS OF LIBERATO URETA

G.R. NO. 165748

SEPTEMBER 14, 2011

J. MENDOZA

VOID

CONTRACT;

PARTITION

IS

NOT

AN

ACT

OF

STRICT

DOMINION,

NO

SPA

REQUIRED;

PRETERITION IS A CONCEPT OF TESTAMENTARY SUCCESSION

FACTS:

In his lifetime, Alfonso Ureta begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of Policronio (Heirs of Policronio), are opposed to the rest of Alfonso's children and their descendants (Heirs of Alfonso).

Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met at the house of Liberato. Francisco suggested that in order to reduce the inheritance taxes, their father should make it appear that he had sold some of his lands to his children. Accordingly, Alfonso executed four Deeds of Sale covering several parcels of land in favor of Policronio, Liberato, Prudencia, and his common-law wife, Valeriana Dela Cruz. The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered six parcels of land, which are the properties in dispute in this case. Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso continued to own, possess and enjoy the lands and their produce.

On April 19, 1989, Alfonso's heirs executed a Deed of Extra-Judicial Partition, which included all the lands that were covered by the four deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado, Policronio's eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-heirs. After their father's death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. They obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio.

Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts proving futile, the Heirs of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of Documents, Partition, and Damages against the Heirs of Alfonso before the RTC.

The RTC dismissed the Complaint of the Heirs of Policronio and ruled in favor of the Heirs of Alfonso in a decision. The Deed of Extra-Judicial Partition, on the other hand, was declared valid by the RTC. The CA annulled the Deed of Extra-

Judicial Partition under Article 1390 (1) of the Civil Code, holding that a special power of attorney was lacking as required under Article 1878 (5) and (15) of the Civil Code.

ISSUE:

Whether or not the deed of sale dated October 25, 1969 is null and void.

HELD:

Yes. Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.

Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable contract. Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. Similarly, in this case, Alfonso simulated a transfer to Policronio purely for taxation purposes, without intending to transfer ownership over the subject lands.

Policronio's failure to take exclusive possession of the subject properties or, in the alternative, to collect rentals, is contrary to the principle of ownership. Such failure is a clear badge of simulation that renders the whole transaction void. Since the Deed of Sale is void, the subject properties were properly included in the Deed of Extra-Judicial Partition of the estate of Alfonso.

ISSUE:

Whether the CA erred in annulling the deed of extra-judicial partition.

HELD:

following cases:

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (15) Any other act of strict dominion.

Yes. Art. 1878.Special

powers

of

attorney

are

necessary

in

the

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

ISSUE:

Whether the absence of the Hiers of Policronio in the partition or the lack of authority of their representative results in their preterition.

HELD:

No. Art. 854.The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation.

Preterition has been defined as the total omission of a compulsory heir from the inheritance. It consists in the silence of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will

in

the latter case. Preterition is thus a concept of testamentary succession and requires a will. In the case at bench, there is

no

will involved. Therefore, preterition cannot apply.

SEANGIO V. HON. REYES

G.R. NO. 140371-72

NOVEMBER 27, 2006

J. AZCUNA

DISINHERITANCE OF A DESCENDANT; HOLOGRAPHIC WILL

FACTS:

The document that petitioners refer to as Segundo's holographic will is quoted, as follows:

Kasulatan sa pag-aalis ng mana Tantunin ng sinuman

Ako si Segundo Seangio Filipino may asawa naninirahan sa 465-A Flores St., Ermita, Manila at nagtatalay ng maiwanag na pag-iisip at disposisyon ay tahasan at hayagang inaalisan ko ng lahat at anumang mana ang paganay kong anak na si Alfredo Seangio dahil siya ay naging lapastangan sa akin at isan beses siya ng sasalita ng masama harapan ko at mga kapatid niya na si Virginia Seangio labis kong kinasama ng loob ko at sasabe rin ni Alfredo sa akin na ako nasa ibabaw gayon gunit daratin ang araw na ako nasa ilalim siya at siya nasa ibabaw.

Labis kong ikinasama ng loob ko ang gamit ni Alfredo ng akin pagalan para makapagutang na kuarta siya at kanya asawa na si Merna de los Reyes sa China Bangking Corporation na millon pesos at hindi ng babayad at hindi ng babayad ito ay nagdulot sa aking ng malaking kahihiya sa mga may-ari at stockholders ng China Banking.

At ikinagalit ko pa rin ang pagkuha ni Alfredo at ng kanyang asawa na mga customer ng Travel Center of the Philippines na pinagasiwaan ko at ng anak ko si Virginia.

Dito ako nagalit din kaya gayon ayoko na bilanin si Alfredo ng anak ko at hayanan kong inaalisan ng lahat at anoman mana na si Alfredo at si Alfredo Seangio ay hindi ko siya anak at hindi siya makoha mana.

Nilagdaan ko ngayon ika 20 ng Setyembre 1995 sa longsod ng Manila sa harap ng tatlong saksi.

(signed) Segundo Seangio Nilagdaan sa harap namin (signed) Dy Yieng Seangio (signed) Unang Saksi ikalawang saksi

(signed)

ikatlong saksi

A petition for the probate of the holographic will of Segundo, docketed as SP. Proc. No. 99-93396, was filed by

petitioners before the RTC. Private respondents moved for the dismissal of the probate proceedings primarily on the

ground that the document purporting to be the holographic will of Segundo does not contain any disposition of the estate

of the deceased and thus does not meet the definition of a will under Article 783 of the Civil Code. According to private

respondents, the will only shows an alleged act of disinheritance by the decedent of his eldest son, Alfredo, and nothing else; that all other compulsory heirs were not named nor instituted as heir, devisee or legatee, hence, there is preterition which would result to intestacy.

The RTC dismissed SP. Proc. No. 99-93396 and reasoned that the document termed as "will" by oppositors/petitioners Dy Yieng Seangio, et al., clearly shows that there is preterition, as the only heirs mentioned thereat are Alfredo and Virginia.

ISSUE:

Whether the Kasulatan ng Pag-Aalis ng Mana may be considered as a holographic will.

HELD:

Yes. A holographic will, as provided under Article 810 of the Civil Code, must be entirely written, dated, and signed by the hand of the testator himself. It is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed.

Segundo's document, although it may initially come across as a mere disinheritance instrument, conforms to the formalities of a holographic will prescribed by law. It is written, dated and signed by the hand of Segundo himself. An intent to dispose mortis causa can be clearly deduced from the terms of the instrument, and while it does not make an affirmative disposition of the latter's property, the disinheritance of Alfredo, nonetheless, is an act of disposition in itself. In other words, the disinheritance results in the disposition of the property of the testator Segundo in favor of those who would succeed in the absence of Alfredo.

ISSUE:

Whether the disinheritance can be given effect.

HELD:

No. For disinheritance to be valid, Article 916 of the Civil Code requires that the same must be effected through a will wherein the legal cause therefor shall be specified. In this regard, the Court is convinced that the document, even if captioned as Kasulatan ng Pag-Aalis ng Mana, was intended by Segundo to be his last testamentary act and was executed by him in accordance with law in the form of a holographic will. With regard to the reasons for the disinheritance that were stated by Segundo in his document, the Court believes that the incidents, taken as a whole, can be considered a form of maltreatment of Segundo by his son, Alfredo, and that the matter presents a sufficient cause for the disinheritance of a child or descendant under Article 919 of the Civil Code. However, unless the will is probated, the disinheritance cannot be given effect.

RAMIREZ V. MANILA BANKING CORPORATION

G.R. NO. 198800

DECEMBER 11, 2013

J. VILLARAMA

CONTRACT IS THE LAW BETWEEN PARTIES

FACTS:

Petitioner Jose T. Ramirez mortgaged two parcels of land located at Bayanbayanan, Marikina City in favor of respondent The Manila Banking Corporation to secure his P265,000 loan. The real estate mortgage provides that all correspondence relative to the mortgage including notifications of extrajudicial actions shall be sent to petitioner Ramirez at his given address, to wit:

N) All correspondence relative to this MORTGAGE, including demand letters, summons, subpoenas or notifications of any judicial or extrajudicial actions shall be sent to the MORTGAGOR at the address given above or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE, and the mere act of sending any correspondence by mail or by personal delivery to the said address shall be valid and effective notice to the MORTGAGOR for all legal purposes and the fact that any communication is not actually received by the MORTGAGOR, or that it has been returned unclaimed to the MORTGAGEE, or that no person was found at the address given, or that the address is fictitious or cannot be located, shall not excuse or relieve the MORTGAGOR from the effects of such notice.

Respondent filed a request for extrajudicial foreclosure of real estate mortgage the ground that Ramirez failed to pay his loan despite demands. During the auction sale, respondent was the only bidder for the mortgaged properties. In 2000, respondent demanded that Ramirez vacate the properties.

Ramirez sued respondent for annulment of sale and prayed that the certificate of sale be annulled on the ground, among others, that paragraph N of the real estate mortgage was violated for he was not notified of the foreclosure and auction sale. The trial court ruled that the extrajudicial foreclosure proceedings were null and void and the certificate of sale is invalid. The CA reversed the trial court‘s decision and ruled that absence of personal notice of foreclosure to Ramirez as required by paragraph N of the real estate mortgage is not a ground to set aside the foreclosure sale.

ISSUE:

What is the legal effect of violating paragraph N of the deed of mortgage which requires personal notice to the petitioner- mortgagor by the respondent-mortgagee bank?

HELD:

The bank‘s violation of paragraph N of the real estate mortgage is sufficient to invalidate the extrajudicial foreclosure sale. Section 3, Act No. 3135 reads:

Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality and city.

The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation. Personal notice to the mortgagor is not necessary.

Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In this case, petitioner and respondent in entering into a contract of real estate mortgage, agreed inter alia: "all correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any judicial or extra-judicial action shall be sent to the MORTGAGOR.

When petitioner failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void.

SAN FERNANDO REGALA V. CARGILL PHILIPPINES

G.R. NO. 178042

OCTOBER 9, 2013

J. ABAD

BREACH OF CONTRACT

FACTS:

Cargill entered into Contract 5026 covering its sale to San Fernando of 4,000 metric tons of molasses. Cargill agreed to deliver the molasses within the months of ―April to May 1997‖ at the wharf of Union Ajinomoto. Shortly after, Cargill also entered into Contract 5047 covering another sale to San Fernando of 5,000 mt of molasses. The delivery period under this contract was within ―October-November-December 1996,‖ sooner than the delivery period under Contract 5026. San Fernando had a deal with Ajinomoto for the supply of these molasses.

Cargill alleged that it offered to deliver the 4,000 mt of molasses as required by Contract 5026 within the months of April and May 1997 but San Fernando accepted only 951 mt. Cargill further alleged that it earlier sought to deliver the molasses

covered by Contract 5047 at the Ajinomoto wharf in the months of October, November, and December 1996, but San Fernando failed or refused for unjustified reasons to accept the delivery.

In its Answer with counterclaim, San Fernando pointed out that, except for the 951 mt of molasses that Cargill delivered in March 1997, the latter made no further deliveries for Contract 5026. Cargill sent San Fernando a letter proposing a change in the delivery period for that contract from ―April to May 1997‖ to ―May to June 1997.‖ But San Fernando rejected the change since it had a contract to sell the molasses to Ajinomoto.

As for Contract 5047, Cargill admitted its inability to deliver the goods when it wrote San Fernando a letter proposing to move the delivery period from ―October-November-December 1996‖ to ―May-June-July 1997.‖ But San Fernando also rejected the change since it had already contracted to sell the subject molasses to Ajinomoto.

Cargill‘s filed a complaint for sum of money and damages against San Fernando before the RTC. The RTC dismissed Cargill‘s complaint for lack of merit and granted San Fernando‘s counterclaims. The CA ruled on appeal, however, that Cargill was not entirely in breach of Contract 5026. The CA, however, found Cargill guilty of breach of Contract 5047 which called for delivery of the molasses in ―October-November-December 1996.‖ Since San Fernando did not accede to Cargill‘s request to move the delivery period back, Cargill violated the contract when it did not deliver the goods during the previously agreed period.

ISSUE:

What are the liabilities of the parties under Contract 5026?

HELD:

It is not enough for a seller to show that he is capable of delivering the goods on the date he agreed to make the delivery. He has to bring his goods and deliver them at the place their agreement called for.

Contract 5026 required Cargill to deliver 4,000 mt of molasses during the period ―April to May 1997.‖ Thus, anything less than that quantity constitutes breach of the agreement. And since Cargill only delivered a total of 2,125 mt of molasses during the agreed period, Cargill should be regarded as having violated Contract 5026 with respect to the undelivered balance of 1,875 mt of molasses.

Since Cargill failed, however, to deliver the balance of 1,875 mt of molasses under Contract 5026, it must pay San Fernando the P2,531,250.00, representing the latter‘s unrealized profits had it been able to sell that 1,875 mt of molasses to Ajinomoto.

ISSUE:

What are the liabilities of the parties under Contract 5027?

HELD:

The CA correctly ruled that Cargill was in breach of Contract 5047 which provided for delivery of the molasses within the months of October, November, and December 1996.

In failing to make any delivery under Contract 5047, Cargill should pay San Fernando the profit that it lost because of such breach. Cargill of course points out that San Fernando never wrote a demand letter respecting its failure to make any delivery under that contract. But demand was not necessary since Cargill‘s obligation under the contract specified the date and place of delivery, i.e., ―October-November-December 1996,‖ at the Ajinomoto wharf in Pasig.

DE LA PAZ V. L& J DEVELOPMENT

G.R. NO. 183360

SEPTEMBER 8, 2014

J. DEL CASTILLO

WRITTEN STIPULATION TO PAY INTEREST

FACTS:

On December 27, 2000, Rolando lent P350,000.00 without any security to L&J, a property developer with Atty. Esteban Salonga as its President and General Manager. The loan, with no specified maturity date, carried a 6% monthly interest, i.e., P21,000.00. From December 2000 to August 2003, L&J paid Rolando a total of P576,000.00 representing interest charges.

As L&J failed to pay despite repeated demands, Rolando filed a Complaint for Collection of Sum of Money with Damages against L&J and Atty. Salonga in his personal capacity before the MeTc. Rolando alleged, that L&J‘s debt as of January 2005, inclusive of the monthly interest, stood at P772,000.00; that the 6% monthly interest was upon Atty. Salonga‘s suggestion; and, that the latter tricked him into parting with his money without the loan transaction being reduced into writing.

L&J and Atty. Salonga denied Rolando‘s allegations. While they acknowledged the loan as a corporate debt, they claimed that the failure to pay the same was due to a fortuitous event, that is, the financial difficulties brought about by the economic crisis. They further argued that Rolando cannot enforce the 6% monthly interest for being unconscionable and shocking to the morals. Hence, the payments already made should be applied to the P350,000.00 principal loan.

The MeTC upheld the 6% monthly interest. It ratiocinated that since L&J agreed thereto and voluntarily paid the interest at such rate from 2000 to 2003, it is already estopped from impugning the same. The RTC affirmed the MeTC Decision. The CA reversed and set aside the RTC Decision. The CA stressed that the parties failed to stipulate in writing the imposition of interest on the loan. Hence, no interest shall be due thereon pursuant to Article 1956 of the Civil Code.

ISSUE:

Whether or not the CA erred in holding that no interest is due.

HELD:

No. Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing. Jurisprudence on the matter also holds that for interest to be due and payable, two conditions must concur: a) express stipulation for the payment of interest; and b) the agreement to pay interest is reduced in writing.

Even if the payment of interest has been reduced in writing, it is unconscionable. Indeed at present, usury has been legally non-existent in view of the suspension of the Usury Law by Central Bank Circular No. 905 s. 1982. Even so, not all interest rates levied upon loans are permitted by the courts as they have the power to equitably reduce unreasonable interest rates. Time and again, it has been ruled in a plethora of cases that stipulated interest rates of 3% per month and higher, are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.

In the case at bench, there is no specified period as to the payment of the loan. Hence, levying 6% monthly or 72% interest per annum is ―definitely outrageous and inordinate.‖ No monetary interest is due Rolando pursuant to Article 1956. The CA thus correctly adjudged that the excess interest payments made by L&J should be applied to its principal loan. As computed by the CA, Rolando is bound to return the excess payment of P226,000.00 to L&J following the principle of solutio indebiti.

ECE REALTY V. RACHEL MANDAP

G.R. NO. 196182

SEPTEMBER 1, 2014

J. PERALTA

FRAUD IN VOIDABLE CONTRACTS; IMPLIED RATIFICATION

FACTS:

Petitioner started the construction of a condominium project called Central Park Condominium Building located along Pasay City. However, printed advertisements were made indicating therein that the said project was to be built in Makati City. In December 1995, respondent, agreed to buy a unit from the above project by paying a reservation fee and, thereafter, down payment and monthly instalments. On June 18, 1996, respondent and the representatives of petitioner executed a Contract to Sell. In the said Contract, it was indicated that the condominium project is located in Pasay City.

More than two years later, respondent demanded the return of the payments she made, on the ground that she subsequently discovered that the condominium project was being built in Pasay City and not in Makati City. Instead of answering respondent's letter, petitioner sent her a written communication informing her that her unit is ready for inspection and occupancy should she decide to move in.

Treating the letter as a form of denial of her demand for the return of the sum she had paid to petitioner, respondent filed a complaint with HLURB seeking the annulment of her contract with petitioner, the return of her payments, and damages.

ISSUE:

Whether petitioner was guilty of fraud and if so, whether such fraud is sufficient ground to nullify its contract with respondent.

HELD:

No. Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfil two conditions.

First, the fraud must be dolo causanteor it must be fraud in obtaining the consent of the party. This is referred to as causal fraud. 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. Second, the fraud must be proven by clear and convincing evidence and not merely by a preponderance thereof.

The misrepresentation made by petitioner in its advertisements does not constitute causal fraud which would have been a valid basis in annulling the Contract to Sell between petitioner and respondent. Respondent failed to show that "the essential and/or moving factor that led the respondent to give her consent and agree to buy the unit was precisely the project's advantageous or unique location in Makati to the exclusion of other places or city.

Even assuming that petitioner‘s misrepresentation consists of fraud which could be a ground for annulling their Contract to Sell, respondent's act of affixing her signature to the said Contract, after having acquired knowledge of the property's actual location, can be construed as an implied ratification.

RIVERA V. SPOUSES CHUA

G.R. NO. 184458

JANUARY 14, 2015

J. PEREZ

WHEN DEMAND NOT NECESSARY; LEGAL INTEREST

FACTS:

Rivera and the Salvador Chua are kumpadres as the former is the godfather of the Spouses Chua‘s son. On February 24, 1995, Rivera obtained a loan from the Spouses Chua.

PROMISSORY NOTE

120,000.00

FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA and VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine Currency (P120,000.00) on December 31, 1995.

It is agreed and understood that failure on my part to pay the amount of (P120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent to FIVE PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.

Should this note be referred to a lawyer for collection, I agree to pay the further sum equivalent to twenty percent (20%) of the total amount due and payable as and for attorney‘s fees which in no case shall be less than P5,000.00 and to pay in addition the cost of suit and other incidental litigation expense.

Any action which may arise in connection with this note shall be brought in the proper Court of the City of Manila.

Manila, February 24, 1995[.] (SGD.) RODRIGO RIVERA

Almost 3 years from the date of payment stipulated in the promissory note, Rivera issued two checks purportedly for partial payment of Rivera‘s loan. These checks however, were dishonoured for the reason ―account closed‖. As of May 31, 1999, the amount due was already P366,000.00 covering the principal plus interest from January 1, 1996 to May 31, 1999. Because of Rivera‘s refusal to pay, the Spouses Chua were constrained to file a suit on June 11, 1999.

Rivera countered that he never executed the promissory note. The MeTC ruled in favor of the Spouses Chua. On appeal, the RTC affirmed the decision of the MeTC but denied the award of attorney‘s fees. Both trial courts found the promissory note as authentic and validly bore the signature of Rivera. Rivera points out that the Spouses Chua never demanded payment for the loan nor interest thereof for almost 4 years at the time of the alleged default in payment after December 31, 1995.

ISSUE:

Whether or not demand was still necessary in order to charge him liable.

HELD:

No. There are four instances when demand is not necessary to constitute the debtor in default: (1) when there is an express stipulation to that effect; (2) where the law so provides; (3) when the period is the controlling motive or the principal inducement for the creation of the obligation; and (4) where demand would be useless. In the first two paragraphs, it is not sufficient that the law or obligation fixes a date for performance; it must further state expressly that after the period lapses, default will commence.

The date of default under the Promissory Note is 1 January 1996, the day following 31 December 1995, the due date of the obligation. On that date, Rivera became liable for the stipulated interest which the Promissory Note says is equivalent to 5% a month. In sum, until 31 December 1995, demand was not necessary before Rivera could be held liable for the principal amount of P120,000.00. Thereafter, on 1 January 1996, upon default, Rivera became liable to pay the Spouses Chua damages, in the form of stipulated interest.

ISSUE:

How much is the legal interest accruing from the promissory note from the date of default.

HELD:

At the time interest accrued from 1 January 1996, the date of default under the Promissory Note, the then prevailing rate of legal interest was 12% per annum under Central Bank (CB) Circular No. 416 in cases involving the loan or forbearance of money. Thus, the legal interest accruing from the Promissory Note is 12% per annum from the date of default on 1 January 1996.

However, the 12% per annum rate of legal interest is only applicable until 30 June 2013, before the advent and effectivity of BSP Circular No. 799, Series of 2013 reducing the rate of legal interest to 6% per annum. BSP Circular No. 799 is prospectively applied from 1 July 2013.

In short, the applicable rate of legal interest from 1 January 1996, the date when Rivera defaulted, to date when this Decision becomes final and executor is divided into two periods reflecting two rates of legal interest: (1) 12% per annum from 1 January 1996 to 30 June 2013; and (2) 6% per annum FROM 1 July 2013 to date when this Decision becomes final and executor.

ARCO PULP AND PAPER CO. V. LIM

G.R. NO. 206806

JUNE 25, 2014

J. LEONEN

ALTERNATIVE OBLIGATION; NOVATION

FACTS:

Dan T. Lim delivered scrap papers to Arco Pulp and Paper through its Chief Executive Officer and President, Candida A. Santos. The parties allegedly agreed that Arco Pulp and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their finished products of equivalent value.

Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a post-dated check as partial payment, with the assurance that the check would not bounce. When he deposited the check, it was dishonored for being drawn against a closed account.

On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of agreement where Arco Pulp and Paper bound themselves to deliver their finished products to Megapack Container Corporation, owned by Eric Sy, for his account. According to the memorandum, the raw materials would be supplied by Dan T. Lim, through his company, Quality Paper and Plastic Products.

Dan T. Lim filed a complaint for collection of sum of money with prayer for attachment with the RTC. The trial court rendered a judgment in favor of Arco Pulp and Paper and dismissed the complaint, holding that when Arco Pulp and Paper and Eric Sy entered into the memorandum of agreement, novation took place, which extinguished Arco Pulp and Paper‘s obligation to Dan T. Lim. The CA reversed the RTC decision and ruled that the facts and circumstances in this case clearly showed the existence of an alternative obligation.

ISSUE:

Whether the obligation between the parties was an alternative obligation

HELD:

Yes. In an alternative obligation, there is more than one object, and the fulfilment of one is sufficient, determined by the choice of the debtor who generally has the right of election. The right of election is extinguished when the party who may exercise that option categorically and unequivocally makes his or her choice known. The choice of the debtor must also be communicated to the creditor who must receive notice of it.

According to the factual findings of the trial court and the appellate court, the original contract between the parties was for respondent to deliver scrap papers to petitioner Arco Pulp and Paper. The payment for this delivery became petitioner

Arco Pulp and Paper‘s obligation. By agreement, petitioner Arco Pulp and Paper, as the debtor, had the option to either (1) pay the price or (2) deliver the finished products of equivalent value to respondent.

When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the scrap papers, they exercised their option to pay the price. Respondent‘s receipt of the check and his subsequent act of depositing it constituted his notice of petitioner Arco Pulp and Paper‘s option to pay.

ISSUE:

Whether the obligation between the parties was extinguished by novation

HELD:

No. Novation extinguishes an obligation between two parties when there is a substitution of objects or debtors or when there is subrogation of the creditor. It occurs only when the new contract declares so ―in unequivocal terms‖ or that ―the old and the new obligations be on every point incompatible with each other.‖

There is nothing in the memorandum of agreement that states that with its execution, the obligation of petitioner Arco Pulp and Paper to respondent would be extinguished. It also does not state that Eric Sy somehow substituted petitioner Arco Pulp and Paper as respondent‘s debtor. It merely shows that petitioner Arco Pulp and Paper opted to deliver the finished products to a third person instead. The consent of the creditor must also be secured for the novation to be valid. In this case, respondent was not privy to the memorandum of agreement, thus, his conformity to the contract need not be secured.

The trial court erroneously ruled that the execution of the memorandum of agreement constituted a novation of the contract between the parties. When petitioner Arco Pulp and Paper opted instead to deliver the finished products to a third person, it did not novate the original obligation between the parties. Since there was no novation, petitioner Arco Pulp and Paper‘s obligation to respondent remains valid and existing.

BPI V. DOMINGO G.R. NO. 169407

MARCH 25, 2015

J. DE CASTRO

NOVATION

FACTS:

On September 27, 1993, respondent Amador and Mercy Domingo executed a Promissory Note in favor of Makati Auto Center, Inc. in the sum of P629,856.00, payable in 48 successive monthly installments in the amount of P13,122.00 each. They simultaneously executed a Deed of Chattel Mortgage over a 1993 Mazda 323 to secure the payment of their Promissory Note. Makati Auto Center then assigned, ceded and transferred all its rights and interests over the said promissiory note and chattel mortgage to Far East Bank and Trust Company (FEBTC).

On April 7, 2000, BPI, the surviving corporation and FEBTC, the absorbed corporation, merged. Hence, all the assets and liabilities of the latter were transferred and absorbed by the former.

Respondents failed to pay 21 monthly instalments, Thus, BPI filed a complaint for replevin and damages against respondents. BPI included a John Doe as defendant as they were already aware that the subject vehicle was in possession of a third person though they did not yet know the identity of said person.

In their answer, the Spouses Domingo averred that the subject vehicle was later sold to Carmelita Gonzales with the bank‘s conformity and said buyer subsequently assumed payment of the balance of the mortgaged loan.

The MeTC ruled in favor of BPI and held that Amador‘s bare testimony is insufficient to prove that they had been expressly released from their obligations and that Carmelita assumed their place as the new debtor. The RTC reversed the MeTC decision. To the RTC, the following circumstances demonstrated the implied consent of BPI to the novation: (1) BPI had knowledge of the Deed of Sale and Assumption of Mortgage executed between Mercy and Carmelita, but did not interpose any objection to the same; and (2) BPI (through FEBTC) returned the personal checks of the spouses Domingo and accepted the payments made by Carmelita. The R TC also noted that BPI made a demand for payment upon the spouses Domingo only after 30 months from the time Carmelita assumed payments for the installments due. The R TC reasoned that if the spouses Domingo truly remained as debtors, BPI would not have wasted time m demanding payments from them. The CA affirmed the RTC ruling with modification only as to the award of damages.

ISSUE:

Whether or not there had been a novation of the loan obligation with chattel mortgage of the spouses Domingo to BPI so that the spouses Domingo were released from said obligation and Carmelita was substituted as debtor.

HELD:

No. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Under this provision, there are two forms of novation by substituting the person of the debtor, and they are: (1) expromision and (2) delegacion. In the former, the initiative for the change does not come from the debtor and may even be made without his knowledge, since it consists in a third person assuming the obligation. As such, it logically requires the consent of the third person and the creditor. In the latter, the debtor offers and the creditor accepts a third person who consents to the substitution and assumes the obligation, so that the intervention and the consent of these three persons are necessary. In these two modes of substitution, the consent of the creditor is an indispensable requirement.

Since novation implies a waiver of the right the creditor had before the novation, such waiver must be express. The burden of establishing a novation is on the party who asserts its existence. Contrary to the findings of the Court of Appeals and the RTC, Amador failed to discharge such burden as he was unable to present proof of the clear and unmistakable consent of BPI to the substitution of debtors.

First, that BPI (or FEB TC) had a copy of the Deed of Sale and Assumption of Mortgage executed between Mercy and Carmelita in its file does not mean that it had consented to the same. Second, the consent of BPI to the substitution of debtors cannot be deduced from its acceptance of payments from Carmelita, absent proof of its clear and unmistakable consent to release the spouses Domingo from their obligation. Since the spouses Domingo remained as debtors of BPI, together with Carmelita, the fact that BPI demanded payment from the spouses Domingo 30 months after accepting payment from Carmelita is insignificant. The acceptance by a creditor of payments from a third person, who has assumed the obligation, will result merely to the addition of debtors and not novation. And third, there is no sufficient or competent evidence to establish the return of the checks to the spouses Domingo and the assurance made by FEBTC that the spouses Domingo were already released from their obligation.

NATIONAL POWER CORPORATION V. IBRAHIM ET AL.

G.R. NO. 175863

FEBRUARY 18, 2015

J. PEREZ

WHEN OBLIGATION IS EXTINGUISHED; PAYMENT TO POSSESSOR OF CREDIT; SOLIDARY LIABILITY AND BAD FAITH

FACTS:

NAPOCOR took possession of a parcel of land in Marawi for the purpose of building a hydroelectric power plant. A portion of such land was registered under the name of Mangondato. Said property was occupied by NAPOCOR under the mistaken belief that the same was reserved for its use by the government.

When Mangondato discovered NAPOCOR‘s occupation of the subject land, he began demanding compensation from the latter. Ultimately, both parties failed to agree upon the amount of compensation. Thus, Mangondato filed a complaint for reconveyance against NAPOCOR. He asked for the recovery of the land and payment of monthly rental. This complaint was docketed as Civil Case No. 605-92. For its part, NAPOCOR filed an expropriation complaint before the RTC, docketed as Civil Case No. 610-92.

The two cases were consolidated. The RTC upheld NAPOCOR‘s right to expropriate the land and denied Mangondato‘s claim for reconveyance. Disagreeing upon the amount of compensation, NAPOCOR appealed before the CA.

During the pendency of such appeal, the Ibrahims and Maruhoms filed a complaint against Mangondato and NAPOCOR. The complaint was docketed as Civil Case No. 967-93. They disputed Mangondato‘s ownership over the subject land and claimed that they are the real owners thereof.

The CA denied NAPOCOR‘s appeal. NAPOCOR filed a petition for review before the SC but to no avail. Hence, the decision became final and executory. Mangondato filed a motion for execution of the decision in Civil Case no. 605-92 and Civil Case no. 610-92. The RTC then rendered a resolution ordering the issuance of a writ of execution in favor of Mangondato. In the same resolution, the trial court ordered the issuance of a notice of garnishment against several of NAPOCOR‘s bank accounts. Consequently, the amount garnished was paid to Mangondato in full satisfaction of NAPOCOR‘s debt in Civil Case no. 605-92 and Civil Case No. 610-92.

On the other hand, the RTC decided Civil Case No. 967-93 and held that the Ibrahims and Maruhoms, not Mangondato, are the true owners of the lands. The trial court then required payment of all rental fees and expropriation indemnity, to the Ibrahims and Maruhoms. The RTC further held that Mangondato and NAPOCOR‘s liability to the Ibrahims and Maruhoms as solidary.

Both the RTC and the CA found NAPOCOR liable to the Ibrahims and Maruhoms because its previous payment to Mangondato was tainted with bad faith.

ISSUE:

Whether or not NAPOCOR is liable in favor of the Ibrahims and Maruhoms for the rental fees and expropriation indemnity adjudged due for the subject land.

HELD:

No. There was no bad faith on the part of NAPOCOR. A finding of bad faith, thus, usually assumes the presence of two (2) elements: first, that the actor knew or should have known that a particular course of action is wrong or illegal, and second, that despite such actual or imputable knowledge, the actor, voluntarily, consciously and out of his own free will, proceeds with such course of action. Only with the concurrence of these two elements can we begin to consider that the wrong committed had been done deliberately and, thus, in bad faith.

The RTC and the CA erred in their finding of bad faith because they have overlooked the utter significance of one important fact: that petitioner’s payment to Mangondato of the rental fees and expropriation indemnity adjudged due for the subject land in Civil Case No. 605-92 and Civil Case No. 610-92, was required by the final and executory decision in the said two cases and was compelled thru a writ of garnishment issued by the court that rendered such decision. In other words, the payment to Mangondato was not a product of a deliberate choice on the part of the petitioner but was made only in compliance to the lawful orders of a court with jurisdiction.

Since petitioner was only acting under the lawful orders of a court in paying Mangondato, we find that no bad faith can be taken against it, even assuming that petitioner may have had prior knowledge about the claims of the Ibrahims and Maruhoms upon the subject land. Without the existence of bad faith, the ruling of the RTC and of the Court of Appeals apropos petitioner‘s remaining liability to the Ibrahims and Maruhoms becomes devoid of legal basis.

ISSUE:

What happens if Mangondato is the real owner? Is NAPOCOR liable?

HELD:

NO. If Mangondato is the real owner of the subject land, then the obligation by petitioner to pay for the rental fees and expropriation indemnity due the subject land is already deemed extinguished by the latter‘s previous payment under the final judgment in Civil Case No. 605-92 and Civil Case No. 610-92. This would be a simple case of an obligation being extinguished through payment by the debtor to its creditor. Under this scenario, the Ibrahims and Maruhoms would not even be entitled to receive anything from anyone for the subject land. Hence, petitioner cannot be held liable to the Ibrahims and Maruhoms.

ISSUE:

What happens if the Ibrahims and Maruhoms are the real owner? Is NAPOCOR liable?

HELD:

NO. Should the Ibrahims and Maruhoms turn out to be the real owners of the subject land, petitioner‘s previous payment to Mangondato pursuant to Civil Case No. 605-92 and Civil Case No. 610-92given the absence of bad faith on petitioner‘s part as previously discussed—may nonetheless be considered as akin to a payment made in “good faith” to a person in “possession of creditper Article 1242 of the Civil Code that, just the same, extinguishes its obligation to pay for the rental fees and expropriation indemnity due for the subject land. Article 1242 of the Civil Code reads: ―Payment made in good faith to any person in possession of the credit shall release the debtor.‖

Borrowing the principles behind Article 1242 of the Civil Code, we find that Mangondatobeing the judgment creditor in Civil Case No. 605-92 and Civil Case No. 610-92 as well as the registered owner of the subject land at the timemay be considered as a ―possessor of credit‖ with respect to the rental fees and expropriation indemnity adjudged due for the subject land in the two cases, if the Ibrahims and Maruhoms turn out to be the real owners of the subject land. Hence, petitioner‘s payment to Mangondato of the fees and indemnity due for the subject land as a consequence of the execution of Civil Case No. 605-92 and Civil Case No. 610-92 could still validly extinguish its obligation to pay for the same even as against the Ibrahims and Maruhoms.

METRO CONCAST STEEL CORPORATION V. ALLIED BANK

G.R. NO. 177921

DECEMBER 4, 2013

J. PERLAS BERNABE

WHEN OBLIGATION IS EXTINGUISHED; FORTUITOUS EVENTS

FACTS:

On various dates and for different amounts, Metro Concast, through its officers, herein individual petitioners, obtained several loans from Allied Bank. These loan transactions were covered by a promissory note and separate letters of credit/trust receipts,

Petitioners failed to settle their obligations under the promissory note and trust receipts, hence, Allied Bank sent them demand letters but to no avail. Thus, Allied Bank was prompted to file a complaint for collection of sum of money against petitioners before the RTC.

Petitioners also alleged that the economic reverses suffered by the Philippine economy as well as the devaluation of the peso against the US dollar contributed greatly to the downfall of the steel industry, directly affecting the business of Metro Concast. Allied Bank advised them to sell the equipment and apply the proceeds of the sale to their outstanding obligations. Accordingly, petitioners offered the equipment for sale, but since there were no takers, the equipment was reduced into ferro scrap or scrap metal over the years.

In 2002, Peakstar Oil Corporation expressed interest in buying the scrap metal. During the negotiations with Peakstar, petitioners claimed that Atty. Saw, a member of Allied Bank‘s legal department, acted as the latter‘s agent. Eventually, with the alleged conformity of Allied Bank, through Atty. Saw, a Memorandum of Agreement dated November 8, 2002 (MoA) was drawn between Metro Concast, represented by petitioner Jose Dychiao, and Peakstar under which Peakstar obligated itself to purchase the scrap metal for a total consideration ofP34,000,000.00, Unfortunately, Peakstar reneged on all its obligations under the MoA.

The RTC dismissed the subject complaint, holding that the causes of action sued upon had been paid or otherwise extinguished since Allied Bank was duly represented by its agent, Atty. Saw, in all the negotiations and transactions with Peakstar. The CA reversed and set aside the ruling of the RTC. Consequently, the CA granted the appeal and directed petitioners to solidarily pay Allied Bank their corresponding obligations under the aforementioned promissory note and trust receipts, plus interests, penalty charges and attorney‘s fees.

ISSUE:

Whether or not the loan obligations incurred by the petitioners under the subject promissory note and various trust receipts have already been extinguished.

HELD:

No. 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.

In the present case, petitioners essentially argue that their loan obligations to Allied Bank had already been extinguished due to Peakstar‘s failure to perform its own obligations to Metro Concast pursuant to the MoA. Petitioners classify Peakstar‘s default as a form of force majeure.

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 fulfil obligations in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury or loss.

While it may be argued that Peakstar‘s breach of the MoA was unforseen by petitioners, the same us clearly not "impossible" to foresee or even an event which is independent of human will." Neither has it been shown that said occurrence rendered it impossible for petitioners to pay their loan obligations to Allied Bank and thus, negates the former‘s force majeure theory altogether. In any case, as earlier stated, the performance or breach of the MoA bears no relation to the performance or breach of the subject loan transactions, they being separate and distinct sources of obligations. The fact of the matter is that petitioners‘ loan obligations to Allied Bank remain subsisting for the basic reason that the former has not been able to prove that the same had already been paid or, in any way, extinguished.

R TRANSPORT V. YU G.R. NO. 174161

JANUARY 21, 2015

J. PERALTA

SOLIDARY LIABILITY

FACTS:

Loreta Yu was hit by a bus driven by Antonio P. Gimena, who was then employed by petitioner R Transport Corporation. Loreta was immediately rushed to the hospital where she was pronounced dead on arrival.

The husband of the deceased, respondent Luisito G. Yu, filed a Complaint for damages before the RTC against R Transport, Antonio Gimena, and Metro Manila Transport Corporation (MMTC) for the death of his wife.

MMTC denied its liability reasoning that it is merely the registered owner of the bus involved in the incident, the actual owner, being R Transport. Since it was not actually operating the bus which killed respondent‘s wife, nor was it the employer of the driver thereof, MMTC alleged that the complaint against it should be dismissed. R Transport alleged that respondent had no cause of action against it for it had exercised due diligence in the selection and supervision of its employees and drivers and that its buses are in good condition. Meanwhile, the driver Antonio Gimena was declared in default for his failure to file an answer to the complaint.

The trial court rendered judgment in favor of Yu ruling that R Transport failed to prove that it exercised the diligence required of a good father of a family in the selection and supervision of its driver, who, by its negligence, ran over the deceased resulting in her death. It also held that MMTC should be held solidarily liable with R Transport because it would unduly prejudice a third person who is a victim of a tort to look beyond the certificate of registration and prove who the actual owner is in order to enforce a right of action.

The CA affirmed the Decision of the RTC with modification that defendant Antonio Gimena is made solidarily liable for the damages caused to respondent. R Transport insists that it should not be held solidarily liable with MMTC for it is not the registered owner of the bus which killed the deceased. R Transport relies in the ruling in Tamayo, where the responsibility of the registered owner and the actual operator of the truck which caused the death of the passenger is not solidary.

ISSUE:

Whether the CA erred in finding R Transport liable for the damages caused by the negligence of its employee.

HELD:

No. Under Article 2180 of the New Civil Code, employers are liable for the damages caused by their employees acting within the scope of their assigned tasks. Once negligence on the part of the employee is established, a presumption instantly arises that the employer was remiss in the selection and/or supervision of the negligent employee. To avoid liability for the quasi-delict committed by its employee, it is incumbent upon the employer to rebut this presumption by presenting adequate and convincing proof that it exercised the care and diligence of a good father of a family in the selection and supervision of its employees.

R Transport cannot rely on the Tamayo ruling as the case at hand does not involve a breach of contract of carriage, as in Tamayo, but a tort or quasi-delict under Article 2176. It cannot escape its solidary liability for the liability of the employer for the negligent conduct of its subordinate is direct and primary, subject only to the defense of due diligence in the selection and supervision of the employee.

RUKS KONSULT AND CONSTRUCTION V. ADWORLD SIGN AND ADVERTISING CORPORATION

G.R. NO. 204866

JANUARY 21, 2015

J. PERLAS BERNABE

SOLIDARY LIABILITY OF JOINT TORTFEASORS

FACTS:

Adworld filed a complaint for damages against Transworld and Comark before the RTC. Adworld alleged that it is the owner of a billboard in Edsa which was misaligned when the adjacent billboard structure owned by Transworld and used by Comark collapsed and crashed against it. Transworld admitted the damage caused but failed to pay the amount demanded by Adworld.

Transworld averred that the collapse of its billboard was due to extraordinarily strong winds. Transworld likewise filed a complaint against Ruks, the company which built the collapsed billboard structure and alleged that the structure constructed had a weak and poor foundation not suited for billboards. As such, Ruks should ultimately be held liable for the damages caused to Adworld‘s billboard structure.

Comark denied liability marinating that it does not have any interest on Transworld‘s collapsed billboard structure as it only contracted the use of the same.

Ruks admitted entering into a contract with Transworld for the construction of the billboard but denied liability for the damages caused by its collapse. It contended that when Transworld hired its services, there was already an existing foundation for the billboard and that it merely finished the structure according to the terms and conditions of the contract.

The RTC found both Transworld and Ruks negligent in the construction of the collapsed billboard as they know that the foundation supporting the same was weak. Agrrieved, both appealed before the CA but the appellate court merely affirmed the ruling of the RTC.

ISSUE:

Whether or not the CA correctly affirmed the ruling of the RTC declaring Ruks jointly and severally liable with Transworld for the damages sustained by Adworld.

HELD:

Yes. Jurisprudence defines negligence as 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. It is the failure to observe for the protection of the interest of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.

Under Article 2194 of the Civil Code, joint tortfeasors are solidarily liable for the resulting damage. In other words, joint tortfeasors are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves.

Both Transworld and Ruks were fully aware that the foundation for the former‘s billboard was weak; yet, neither of them took any positive step to reinforce the same. They merely relied on each other‘s word that repairs would be done to such foundation, butnone was done at all. Clearly, the foregoing circumstances show that both Transworld and Ruks are guilty of negligence in the construction of the former‘s billboard, and perforce, should be held liable for its collapse and the resulting damage to Adworld‘s billboard structure. As joint tortfeasors, therefore, they are solidarily liable to Adworld.

VIGILLA ET AL. V. PHILIPPINE COLLEGE OF CRIMINOLOGY

G.R. NO. 200094

JUNE 10, 2013

J. MENDOZA

SOLIDARY LIABILITY

FACTS:

PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the Maintenance Department of PCCr under the supervision and control of Atty. Seril, PCCr‘s Senior Vice President for

Administration. The petitioners were made to understand that they were under MBMSI, a corporation engaged in providing janitorial services to clients. Atty. Seril is also the President and General Manager of MBMSI.

Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been revoked as of July 2, 2003. On March 16, 2009, PCCr, through its President, respondent Gregory Bautista, citing the revocation, terminated the school‘s relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI.

In September, 2009, the dismissed employees, led by their supervisor, Vigilla, filed their respective complaints for illegal dismissal, reinstatement, back wages, separation pay, underpayment of salaries, overtime pay, holiday pay, service incentive leave, and 13th month pay against MBMSI, Atty. Seril, PCCr, and Bautista.

The LA held that (a) PCCr was the real principal employer of the complainants ; (b) MBMSI was a mere adjunct or alter ego/labor-only contractor. The CA affirmed the two Resolutions of the NLRC and pointed out that based on the principle of solidary liability and Article 1217 of the New Civil Code, petitioners‘ respective releases, waivers and quitclaims in favor of MBMSI and Atty. Seril redounded to the benefit of the respondents.

ISSUE:

Whether or not the releases, waivers and quitclaims executed by petitioners in favor of MBMSI redounded to the benefit of PCCr.

HELD:

Yes. The basis of the solidary liability of the principal with those engaged in labor-only contracting is the last paragraph of Article 106 of the Labor Code, which in part provides: ―In such cases [labor-only contracting], the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.‖

The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by petitioners in favor of MBMSI redounded to the benefit of PCCr pursuant to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily liable with the respondents for the valid claims of petitioners pursuant to Article 109 of the Labor Code.

Considering that MBMSI, as the labor-only contractor, is solidarily liable with the respondents, as the principal employer, then the NLRC and the CA correctly held that the respondents‘ solidary liability was already expunged by virtue of the releases, waivers and quitclaims executed by each of the petitioners in favor of MBMSI pursuant to Article 1217 of the Civil Code which provides that ―payment made by one of the solidary debtors extinguishes the obligation.‖

CESAR AND LOLITA AREZA V. EXPRESS SAVINGS BANK

G.R. NO. 176697

SEPTEMBER 10, 2014

J. PERALTA

LEGAL COMPENSATION

FACTS:

Petitioners have two bank deposits with respondent Express Savings Bank. They were engaged in the business of buy and sell of brand new and second-hand motor vehicles. On May 2, 2000, they received an order from Gerry Mambuay for the purchase of a second-hand Pajero and Honda CRV. Mambuay paid petitioners 9 checks payable to different payees and drawn against Philippine Veterans Bank. Each valued at P200,000.00 for a total of P1,800,000.00.

Petitioners deposited the checks in their savings account with Express. Express in turn deposited the checks with Equitable PCI Bank. Equitable PCI presented the checks to Philippine Veterans Bank which honored the checks. Potenciano, branch manager of Express, informed petitioners that the checks they deposited were honoured.

Sometime in July 2000, the checks were returned by Philippine Veterans Affairs Office to Philippine Veterans Bank on the ground that the amount on the face of the checks was altered. Philippine Veterans Bank returned the checks to Equitable PCI. Equitable PCI informed Express about the dishonoured checks. Equitable PCI initially filed a protest in the Philippine Clearing House. In February 2001, the Philippine Clearing house ruled in favor of Philippine Veterans. Thus, Equitable PCI debited the deposit account of the bank in the amount of P1,800,000.00.

On March 9, 2001, petitioners issued a check in the amount of P500,000.00 but the check was dishonoured by Express for the reason ―Deposit Under Hold‖. According to petitioners, Express unilaterally and unlawfully put their account on hold. Petitioners filed a complaint for sum of money with damages against Express and Potenciano.

ISSUE:

Whether or not the Express had the right to debit the amount of P1,800,000.00 from the appellants‘ accounts by reason of legal compensation

HELD:

No. There can be no legal compensation on this case. Under Article 1279, in order that compensation may be proper, it is necessary that (1) each of the obligors be bound principally, and that he be at the same time a principal creditor of each other; (2) 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) two debts are due; (4) they be liquidated and demandable; (5) over neither of them there can be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

While it well-settled that the relationship of the depositors and Express or a similar institution is that of creditor-debtor, Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions governing simple loans. The bank is the debtor and the depositor is the creditor.

However, petitioners are not liable for the deposit of the altered checks. Express, as the depositary and collecting bank, ultimately bears the loss. Thus, there being no indebtedness to Express on the part of petitioners, legal compensation cannot take place.

PLANTERS DEVELOPMENT BANK V. SPOUSES LOPEZ

G.R. NO. 186332

OCTOBER 23, 2013

J. BRION

CASUAL BREACH OF CONTRACT

FACTS:

Sometime in 1983, the spouses Ernesto and Florentina Lopez applied for and obtained a real estate loan in the amount of P3,000,000.00 from Planters Bank. The loan was intended to finance the construction of a four-story concrete dormitory building.

The loan agreement provided that the loan is payable for 14 years and shall bear a monetary interest at 21% per annum. To secure the payment of the loan, the spouses Lopez mortgaged a parcel of land.

The parties signed an amendment to the loan agreement. The interest rate was increased to 23% and the term of the loan was shortened to three years. The parties executed a second amendment to the loan agreement. The interest rate was further increased to twenty-five percent (25%) p.a. The contract also provided that releases on the loan shall be subject to Planters Bank‘s availability of funds.

The price of the materials and the cost of labor escalated. Eager to finish the project, the spouses Lopez obtained an additional loan in the amount of P1,200,000.00 from Planters Bank. They entered into a third amendment to the loan agreement. The amount of the loan and the interest rate were increased to P4,200,000.00 and 27% p.a., respectively. Furthermore, the term of the loan was shortened to one year.

The spouses Lopez failed to avail the full amount of the loan because Planters Bank refused to release the remaining amount of P700,000.00. The spouses Lopez filed against Planters Bank a complaint for rescission of the loan agreements and for damages with the RTC. On November 16, 1984, Planters Bank foreclosed the mortgaged properties in favor of third parties after the spouses Lopez defaulted on their loan.

ISSUE:

Whether Planters Bank substantially breached the loan agreement.

HELD:

No. The well-settled rule is that rescission will not be permitted for a slight or casual breach of the contract. The question of whether a breach of contract is substantial depends upon the attending circumstances.

Planters Bank indeed incurred in delay by not complying with its obligation to make further loan releases. Its refusal to release the remaining balance, however, was merely a slight or casual breach.

The factual circumstances of this case lead us to the conclusion that Planters Bank substantially complied with its obligation. To reiterate, Planters Bank released P3,500,000.00 of the P4,200,000.00 loan. Only the amount of P700,000.00 was not released. This constitutes 16.66% of the entire loan. Moreover, the progress report dated May 30, 1984 states that 85% of the six-story building was already completed by the spouses Lopez. It is also erroneous to solely impute the non- completion of the building to Planters Bank. Planters Bank is not an insurer of the building’s construction. External factors, such as the steep price of the materials and the cost of labor, affected the erection of the building. More importantly, the spouses Lopez took the risk that the project would not be finished when they constructed a six-story building instead of four-story structure.

ISSUE:

Whether the Spouses Lopez are entitled to rescission under Article 1191.

HELD:

No. Even assuming that Planters Bank substantially breached its obligation, the fourth paragraph of Article 1191 of the Civil Code expressly provides that rescission is without prejudice to the rights of third persons who have acquired the thing, in accordance with Article 1385 of the Civil Code. In turn, Article 1385 states that rescission cannot take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.

In the present case, the mortgaged properties had already been foreclosed. They were already sold to the highest bidder at a public auction. The spouses Lopez did not cause the annotation of notice of lis pendens at the back of the title of the mortgaged lot. Moreover, the respondents did not adduce any evidence that would show that the buyers bought the property with actual knowledge of the pendency of the present case.

Furthermore, the spouses Lopez‘s failure to pay the overdue loan made them parties in default, not entitled to rescission under Article 1191 of the Civil Code.

SWIRE DEVELOPMENT CORPORATION V. YU

G.R. NO. 207133

MARCH 9, 2015

J. PERALTA

RESCISSION UNDER ART. 1191

FACTS:

Respondent Jayne Yu and petitioner Swire Realty Development Corporation entered into a Contract to Sell on July 25,

1995 covering one residential condominium unit. The total contract price of P7,519,371.80, payable in equal monthly

installments until September 24, 1997. Respondent likewise purchased a parking slot for P600,000.00.

On September 24, 1997, respondent paid the full purchase price for the unit while making a down payment for the parking lot. However, notwithstanding full payment of the contract price, petitioner failed to complete and deliver the subject unit on time. This prompted respondent to file a Complaint for Rescission of Contract with Damages before the HLURB ENCRFO.

The HLURB ENCRFO dismissed respondent‘s complaint and ruled that rescission is not permitted for slight or casual breach. Upon appeal to the HLURB Board of Commissioners, it reversed the decision of the HLURB ENCFRO. The report on the ocular inspection conducted on the subject condominium project and subject unit shows that the amenities under the approved plan have not yet been provided as of May 3, 2002, and that the subject unit has not been delivered as of August 28, 2002, which is beyond the period of development of December 1999 under the license to sell. The delay in the completion of the project as well as of the delay in the delivery of the unit are breaches of statutory and contractual obligations which entitles respondent to rescind the contract, demand a refund and payment of damages.

ISSUE:

Whether rescission of the contract is proper in the instant case.

HELD:

Yes. Basic is the rule that the right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the said provision is the obligor‘s failure to comply with an existing obligation. When the obligor cannot comply with what is incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission.

In the instant case, the CA aptly found that the completion date of the condominium unit was November 1998 pursuant to License No. 97-12-3202 dated November 2, 1997 but was extended to December 1999 as per License to Sell No. 99-05-

3401 dated May 8, 1999. However, at the time of the ocular inspection conducted by the HLURB ENCRFO, the unit was

not yet completely finished as the kitchen cabinets and fixtures were not yet installed and the agreed amenities were not yet available.

Incontrovertibly, petitioner had incurred delay in the performance of its obligation amounting to breach of contract as it failed to finish and deliver the unit to respondent within the stipulated period. The delay in the completion of the project as well as of the delay in the delivery of the unit are breaches of statutory and contractual obligations which entitle respondent to rescind the contract, demand a refund and payment of damages.

GOLDEN VALLEY EXPLORATION V. PINKIAN MINING COMPANY

G.R. NO. 190080

JUNE 11, 2014

J. PERLAS PERNABE

RESCISSION UNDER ART. 1191

FACTS:

PMC is the owner of 81 mining claims, 15 of which were covered by Mining Lease Contract (MLC) No. MRD-56, while the remaining 66 had pending applications for lease. On October 30, 1987, PMC entered into an Operating Agreement (OA) with GVEI, granting the latter ―full, exclusive and irrevocable possession, use, occupancy, and control over the mining claims and every matter pertaining to the examination, exploration, development and mining and the processing and marketing of the products for a period of 25 years.

PMC extra-judicially rescinded the OA upon GVEI‘s violation of Section 5.01, Article V thereof.

ARTICLE V

ROYALTIES

5.01 Should the PROPERTIES be placed in commercial production the PINKIAN shall be entitled to a Royalty computed as follows:

(a) For gold 3.0 percent of net realizable value of gold

(b) For copper and others 2.0 percent of net realizable value

―Net REALIZABLE Value‖ is gross value less the sum of the following: (1) marketing expenses including freight and insurance; (2) all smelter charges and deductions; (3) royalty payments to the government; (4) ad valorem and export taxes, if any, paid to the government. The aforesaid royalties shall be paid to PINKIAN within five (5) days after receipt of the smelter or refinery returns.

ARTICLE VIII CANCELLATION/TERMINATION OF AGREEMENT

8.01 This Agreement may be cancelled or terminated prior to the expiration of the period, original or renewal mentioned in the next preceding Section only in either of the following ways:

a. By written advance notice of sixty (60) days from OPERATOR to PINKIAN with or without cause by

registered

PINKIAN.

mail

or

personal

delivery

of

the

notice

to

b. By written notice from PINKIAN by registered or personal deliver of the notice to OPERATOR based

on the failure to OPERATOR to make any payments determined to be due PINKIAN under Section

that

OPERATOR shall have a grace period of ninety (90) days from receipt of such written demand within which to make the said payments to PINKIAN.

5.01

hereof

after

written

demand

for

payment

has

been

made

on

OPERATOR:

Provided

GVEI contested PMC‘s extra-judicial rescission of the OA. PMC no longer responded to GVEI‘s letter. Instead, it entered into a Memorandum of Agreement with CVI, whereby the latter was granted the right to ―enter, possess, occupy and control the mining claims‖ and ―to explore and develop the mining claims, mine or extract the ores, mill, process and beneficiate and/or dispose the mineral products in any method or process,‖ among others, for a period of 25 years.

Thus, GVEI filed a Complaint for Specific Performance, Annulment of Contract and Damages against PMC and CVI before the RTC.

The RTC rendered a Decision in favor of GVEI, holding that since the mining claims have not been placed in commercial production, there is no demandable obligation yet for GVEI to pay royalties to PMC. The CA reversed the RTC ruling, finding that while the OA gives PMC the right to rescind only on the ground of (GVEI‘s) failure to pay the stipulated royalties, Article 1191 of the Civil Code allows PMC the right to rescind the agreement based on a breach of any of its provisions.

ISSUE:

Whether or not there was a valid rescission of the OA.

HELD:

Yes. In reciprocal obligations, either party may rescind the contract upon the other‘s substantial breach of the obligation/s he had assumed thereunder. As a general rule, the power to rescind an obligation must be invoked judicially and cannot be exercised solely on a party‘s own judgment that the other has committed a breach of the obligation. As a well-established exception, however, an injured party need not resort to court action in order to rescind a contract when the contract itself provides that it may be revoked or cancelled upon violation of its terms and conditions.

The Court therefore affirms the correctness of the CA‘s Decision upholding PMC‘s unilateral rescission of the OA due to GVEI‘s non-payment of royalties considering the parties‘ express stipulation in the OA that said agreement may be cancelled on such ground. This is found in Section 8.01, Article VIII in relation to Section 5.01, Article V of the OA.

By expressly stipulating in the OA that GVEI‘s non-payment of royalties would give PMC sufficient cause to cancel or rescind the OA, the parties clearly had considered such violation to be a substantial breach of their agreement.

EDS MANUFACTURING V. HEALTHCHECK INTERNATIONAL

G.R. NO. 162802

OCTOBER 9, 2013

J. PERALTA

RESCISSION UNDER ART. 1191

FACTS:

Healthcheck Inc. provides prepaid health and medical insurance coverage to its clients. it maintains a network of accredited hospitals and medical clinics, one of which is the De La Salle University Medical Center. Being within the access of this medical facility, the defendant Eds Manufacturing Inc. with about 5,000 employees saw fit in to obtain insurance coverage from it. They entered into a one-year contract from May 1, 1998 to April 30, 1999 in which HCI was to provide the 4,191 employees of EMI and their 4,592 dependents as host of medical services and benefits. Attached to the Agreement was a Service Program which listed the services that HCI would provide and the responsibilities that EMI would undertake in order to avail of the services. EMI paid the full premium for the coverage in the staggering amount of

P8,826,307.50.

On July 17, HCI notified EMI that its accreditation with DLSUMC was suspended and advised it to avail of the services of nearby accredited institutions. Complaints from EMI employees and workers were pouring in that their HMO cards were not being honored by the DLSUMC and other hospitals and physicians.

On September 3, EMI formally notified HCI that it was rescinding their April 1998 Agreement on account of HCI‘s serious and repeated breach of its undertaking including but not limited to the unjustified non-availability of services. It demanded a return of premium for the unused period after September 3.

HCI instituted an action against EMI for unlawful pretermination of the contract and failure of EMI to submit to a joint reconciliation of accounts and deliver such assets as properly belonged to HCI. The court ruled in favor of HCI and found that EMI‘s rescission of the Agreement on September 3, 1998 was not done through court action or by a notarial act and was based on casual or slight breaches of the contract. On appeal, the CA reversed the decision of the RTC.

ISSUE:

Whether or not there was a valid rescission of the Agreement between the parties.

HELD:

No. The general rule is that rescission (more appropriately, resolution) of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. In the absence of a stipulation, a party cannot unilaterally and extrajudicially rescind a contract. A judicial or notarial act is necessary before a valid rescission (or resolution) can take place. The right cannot be exercised solely on a party‘s own judgment that the other committed a breach of the obligation. The operative act which produces the resolution of the contract is the decree of the court and not the mere act of the vendor.

In the present case, it is apparent that HCI violated its contract with EMI to provide medical service to its employees in a substantial way. However, although a ground exists to validly rescind the contract between the parties, it appears that EMI failed to judicially rescind the same.

YULIM INTERNATIONAL V. INTERNATIONAL EXCHANGE BANK

G.R. NO. 203133

FEBRUARY 18, 2015

J. REYES

SURETYSHI; PAYMENT BY CESSION

FACTS:

On June 2, 2000, iBank, a commercial bank, granted Yulim, a domestic partnership, a credit facility in the form of an Omnibus Loan Line for P5,000,000.00, as evidenced by a Credit Agreement which was secured by a Chattel Mortgage over Yulim‘s inventories in its merchandise. As further guarantee, the partners, namely, James, Jonathan and Almerick, executed a Continuing Surety Agreement in favor of iBank.

When Yulim defaulted, iBank sent demand letters to Yulim but without success. iBank then filed a complaint for sum of money with replevin against Yulim and its sureties. Petitioners moved to dismiss the complaint and insisted that their loan had been fully paid after they assigned to iBank their condominium unit. Petitioner invoked Article 1255 of the Civil

Code which provides that, the debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws.

Section 2.01 of the Deed of Assignment expressly acknowledges that it is a mere ―interim security for the repayment of any loan granted and those that may be granted in the future by the BANK to the ASSIGNOR and/or the BORROWER, for compliance with the terms and conditions of the relevant credit and/or loan documents thereof.

Section 2.02 of the Deed of Assignment provides that as soon as title to the condominium unit is issued in its name, Yulim shall “immediately execute the necessary Deed of Real Estate Mortgage in favor of the BANK to secure the loan obligations of the ASSIGNOR and/or the BORROWER.

The RTC ordered Yulim alone to pay iBank and dismissed the complaint against petitioners James, Jonathan and Almerick, stating that there was no iota of evidence that the loan proceeds benefitted their families.

Upon appeal to the CA, the appellate court ruled that petitioners failed to prove that they have already paid Yulim‘s consolidated loan obligations. Nothing in the deed of assignment signified that iBank had accepted the condominium unit as full payment of petitioner‘s loan. Considering the solidary liability of petitioners, the CA disagreed with the RTC‘s ruling that it must be shown that the proceeds of the loan redounded to the benefit of the family of the individual petitioners before they can be held liable.

ISSUE:

(1) Whether the CA erred in ordering petitioners James, Jonathan and Almerick jointly and severally liable with Yulim. (2) Whether the deed of assignment over the condominium unit is considered as the full and final payment of petitioners‘ obligation.

HELD:

(1) No. Art. 2047. 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.

In a contract of suretyship, one lends his credit by joining in the principal debtor‘s obligation so as to render himself directly and primarily responsible with him without reference to the solvency of the principal.

The individual petitioners do not deny that they executed the Continuing Surety Agreement, wherein they “jointly and severally with the PRINCIPAL [Yulim], hereby unconditionally and irrevocably guarantee full and complete payment when due, whether at stated maturity, by acceleration, or otherwise, of any and all credit accommodations that have been granted” to Yulim by iBank, including interest, fees, penalty and other charges.

(2) No. The condominium unit is a mere temporary security, not a payment to settle their promissory notes. Section 2.02 of the deed of assignment is a plain and direct acknowledgement that the parties really intended to merely constitute a real mortgage property over the property. The assignment being in its essence a mortgage, it was but a security and not a satisfaction of the petitioners‘ indebtedness.

Article 1255 of the Civil Code invoked by the petitioners contemplates the existence of two or more creditors and involves the assignment of the entire debtor‘s property, not a dacion en pago. Under Article 1245 of the Civil Code, ―dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on sales.‖ Nowhere in the Deed of Assignment can it be remotely said that a sale of the condominium unit was contemplated by the parties, the consideration for which would consist of the amount of outstanding loan due to iBank from the petitioners.

GILAT SATELLITE V. UNITED COCONUT PLANTERS BANK GENERAL INSURANCE

G.R. NO. 189563

APRIL 7, 2014

CJ. SERENO

SURETYSHIP; LEGAL INTEREST

FACTS:

One Virtual placed with Gilat a purchase order for various telecommunications equipment. To ensure prompt payment, it obtained from UCPB General Insurance a surety bond in favor of Gilat.

On 24 April 2002, Gilat filed a Complaint against respondent UCPB General Insurance, to recover the amounts supposedly covered by the surety bond, plus interests and expenses. The RTC ordered defendant surety to pay the plaintiff the amount of US$1,200,000.00 representing the principal debt under the Surety Bond, with legal interest thereon at the rate of 12% per annum computed from the time the judgment becomes final and executory until the obligation is fully settled USD44,004.04 representing attorney‘s fees and litigation expenses.

The RTC reasoned that Gilat delivered all the equipments. Even with the delivery and installation made, One Virtual failed to pay any of the payments agreed upon. Considering that its liability was indeed that of a surety, as ―spelled out in the Surety Bond executed by and between One Virtual as Principal, UCPB as Surety and GILAT as Creditor/Bond Obligee,‖ respondent agreed and bound itself to pay.

Insofar as the interests were concerned, the RTC denied petitioner‘s claim on the premise that while a surety can be held liable for interest even if it becomes more onerous than the principal obligation, the surety shall only accrue when the delay or refusal to pay the principal obligation is without any justifiable cause. Here, respondent failed to pay its surety obligation because of the advice of its principal (One Virtual) not to pay.

Respondent appealed to the CA but it was dismissed for lack of jurisdiction. The CA ruled that in ―enforcing a surety contract, the ‗complementary-contracts-construed-together‘ doctrine finds application.‖ According to this doctrine, the accessory contract must be construed with the principal agreement. In this case, the CA considered the Purchase Agreement entered into between petitioner and One Virtual as the principal contract, whose stipulations are also binding on the parties to the suretyship. Bearing in mind the arbitration clause contained in the Purchase Agreement and pursuant to the policy of the courts to encourage alternative dispute resolution methods, the RTC‘s Decision was vacated; petitioner and One Virtual were ordered to proceed to arbitration.

ISSUE:

Whether or not the CA erred in dismissing the case and ordering petitioner and One Virtual to arbitrate.

HELD:

Yes. Petitioner alleges that arbitration laws mandate that no court can compel arbitration, unless a party entitled to it applies for this relief. This referral, however, can only be demanded by one who is a party to the arbitration agreement. Considering that neither petitioner nor One Virtual has asked for a referral, there is no basis for the CA‘s order to arbitrate. Articles 1216 and 2047 of the Civil Code clearly provide that the creditor may proceed against the surety without having first sued the principal debtor. Thus, petitioner should not be ordered to make a separate claim against One Virtual (via arbitration) before proceeding against respondent. We agree.

Consequently, we cannot sustain respondent‘s claim that the Purchase Agreement, being the principal contract to which the Suretyship Agreement is accessory, must take precedence over arbitration as the preferred mode of settling disputes.

In other words, the acceptance of a surety agreement does not give the surety the right to intervene in the principal contract. The surety‘s role arises only upon the debtor‘s default, at which time, it can be directly held liable by the creditor for payment as a solidary obligor.‖ Hence, the surety remains a stranger to the Purchase Agreement.

ISSUE:

Whether or not petitioner is entitled to legal interest due to the delay in the fulfilment by respondent of its obligation under the Suretyship Agreement.

HELD:

Yes. Article 2209 of the Civil Code is clear: ―if an obligation consists in the payment of a sum of money, and the debtor incurs a 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.‖

However, for delay to merit interest, it must be inexcusable in nature. We agree with petitioner that records are bereft of proof to show that respondent‘s delay was indeed justified by the circumstances – that is, One Virtual‘s advice regarding petitioner‘s alleged breach of obligations. Assuming arguendo that the commissioning work was not completed, respondent has no one to blame but its principal, One Virtual; if only it had paid its obligation on time, petitioner would not have been forced to stop operations.

Considering that respondent failed to pay its obligation on 30 May 2000 in accordance with the Purchase Agreement, and that the extrajudicial demand of petitioner was sent on 5 June 2000, we agree with the latter that interest must start to run from the time petitioner sent its first demand letter (5 June 2000), because the obligation was already due and demandable at that time.

SPOUSES GUEVERRA V. THE COMMONER LENDING CORPORATION

G.R. NO. 204672

FEBRUARY 18, 2015

J. PEREZ

RIGHT OF REPURCHASE; CONSIGNATION OF REDEMPTION PRICE

FACTS:

On December 16, 1996, Sps. Guevarra obtained a P320,000.00 loan from TCLC, which was secured by a real estate mortgage over a 5,532-square meter parcel of land situated in Guimbal, Iloilo, covered by OCT No. F-31900 emanating from a free patent granted to Sps. Guevarra on February 25, 1986. The Sps. Guevarra defaulted in the payment of their loan, prompting TCLC to extra-judicially foreclose the mortgage on the subject Property in accordance with Act No. 3135. In the process, TCLC emerged as the highest bidder at the public auction sale held on June 15, 2000 for the bid amount of P150,000.00, and on August 25, 2000, the certificate of sale was registered with the Registry of Deeds of Iloilo. Eventually, Sps. Guevarra failed to redeem the subject property within the one-year reglementary period, which led to the cancellation of OCT No. F-31900 and the issuance of Transfer Certificate of Title No. T-16187 in the name of TCLC. Thereafter, TCLC demanded that Sps. Guevarra vacate the property, but to no avail.

TCLC applied for a writ of possession before the RTC which the Sps. Guevarra opposed. The Sps. Guevarra challenged the validity of the foreclosure proceedings due to the purported failure of TCLC to comply with the notice, posting and publication requirements and lack of authority, as a corporation, to acquire the subject property.

Subsequently, or on September 8, 2005, Sps. Guevarra filed before the RTC a petition for redemption, maintaining that the redemption period did not expire on August 25, 2001, or 1 year from the registration of the certificate of sale, but will still expire five years therefrom, or on August 25, 2006.

ISSUE:

Whether the Sps. Guevarra has the right to repurchase the property within 5 years from the expiration of the redemption period on August 25, 2001, or until August 25, 2006, in view of Section 119 of the Public Land Act.

HELD:

Yes. In an extra-judicial foreclosure of registered land acquired under a free patent, the mortgagor may redeem the property within two years from the date of foreclosure if the land is mortgaged to a rural bank under the Rural Banks Act, or within one year from the registration of the certificate of sale if the land is mortgaged to parties other than rural banks pursuant to Act No. 3135. If the mortgagor fails to exercise such right, he or his heirs may still repurchase the property within five years from the expiration of the aforementioned redemption period, pursuant to Section 119 of the Public Land Act, which states:

SEC. 119. Every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period of five years from the date of the conveyance.

In this case, the subject property was mortgaged to and foreclosed by TCLC, which is a lending or credit institution, and not a rural bank; hence, the redemption period is one year from the registration of the certificate of sale on August 25, 2000, or until August 25, 2001. Given that Sps. Guevarra failed to redeem the subject property within the aforestated redemption period, TCLC was entitled, as a matter of right, to consolidate its ownership and to possess the same. Nonetheless, such right should not negate Sps. Guevarra‘s right to repurchase said property within five years from the expiration of the redemption period on August 25, 2001, or until August 25, 2006, in view of Section 119 of the Public Land Act as above-cited.

ISSUE:

Whether the tender of repurchase price is necessary for the preservation of the right of repurchase.

HELD:

No. The tender of the repurchase price is not necessary for the preservation of the right of repurchase, because the filing of a judicial action for such purpose within the five-year period under Section 119 of the Public Land Act is already equivalent to a formal offer to redeem. On this premise, consignation of the redemption price is equally unnecessary.

SPOUSES SIERRA V. PAIC SAVINGS AND MORTGAGE BANK

G.R. NO. 197857

SEPTEMBER 10, 2014

J. PEREZ

MORTGAGE ACTION; PRESCRIPTION, LACHES

FACTS:

On May 31, 1983, GCI, represented by Zaldaga, obtained from Summa Bank, now respondent PSMB, a loan. As security therefore, GCI executed in favor of PSMB 6 promissory notes as well as a Deed of Real Estate Mortgage over a parcel of land. As additional security, petitioners Francisco Sierra, Rosario Sierra, and Spouses Felix Gatlabayan and Salome Sierra mortgaged four parcels of land in Antipolo City. Records show that after the signing of the mortgage deed, Zaldaga gave petitioner Francisco Sierra four manager‘s checks which were later successfully encashed, as well as several post-dated checks.

Eventually, GCI defaulted in the payment of its loan to PSMB, thereby prompting the latter to extrajudicially foreclose the mortgage on the subject properties in accordance with Act No. 3135 with due notice to petitioners. PSMB emerged as the highest bidder. Since petitioners failed to redeem the subject properties within the redemption period, their certificates of title were cancelled and new ones were issued in PSMB‘s name.

Petitioners filed a complaint for the declaration of nullity of the real estate mortgage and its extrajudicial foreclosure, and damages against PSMB and Summa Bank before the RTC. Petitioners averred that under pressing need of money, with very limited education and lacking proper instructions, they fell prey to a group who misrepresented to have connections with Summa Bank and, thus, could help them secure a loan.

The RTC declared the subject deed and the extrajudicial foreclosure proceedings null and void. While the RTC ruled that the loan transaction was a valid and binding agreement between Summa Bank and GCI, it held that the subject deed did not reflect the true intent and agreement between Summa Bank and petitioners who were made to believe that they were the principal obligors in the loan, thereby invalidating their consent to the mortgage.

The CA reversed and set aside the RTC Decision and dismissed petitioners‘ complaint for lack of merit. The CA likewise ruled that the action to annul the subject deed had already prescribed, since the same was brought more than four years from the discovery of the mistake or fraud, reckoned from the time the earliest checks issued to petitioners were dishonored, or on January 9, 1984, this being the time the consideration or price for the execution of the subject deed turned out to be false. The CA further held that petitioners were barred by laches from asserting any claim on the subject properties.

ISSUE:

Whether or not the applicable provision is the ten year prescriptive period of mortgage actions under Article 1142.

HELD:

No. Based on case law, a ―mortgage action‖ refers to an action to enforce a right necessarily arising from a mortgage. In the present case, petitioners are not ―enforcing‖ their rights under the mortgage but are, in fact, seeking to be relieved therefrom. The complaint filed by petitioners is, therefore, not a mortgage action as contemplated under Article 1142.

In any event, even assuming that petitioners have a valid cause of action, the four-year prescriptive period on voidable contracts shall apply. Since the complaint for annulment was anchored on a claim of mistake, i.e., that petitioners are the borrowers under the loan secured by the mortgage, the action should have been brought within four (4) years from its discovery.

The complaint, however, failed to disclose when petitioners learned that they were not the borrowers under the loan secured by the subject mortgage. Nonetheless, considering that petitioners admitted receipt on June 19, 1984 of PSMB‘s letter dated June 11, 1984 informing them of the scheduled foreclosure sale on June 27, 1984 due to GCI‘s breach of its loan obligation secured by the subject properties, the discovery of the averred mistake should appear to be reckoned from June 19, 1984, and not from the dishonor of the checks on January 9, 1984 as ruled by the CA.

ISSUE:

Whether or not the CA erred in dismissing the complaint on the ground of laches.

HELD:

No. Despite notice on June 19, 1984 of the scheduled foreclosure sale, petitioners, for unexplained reasons, failed to impugn the real estate mortgage and oppose the public auction sale for a period of more than seven (7) years from said notice. As such, petitioners‘ action is already barred by laches, which, as case law holds, operates not really to penalize neglect or sleeping on one‘s rights, but rather to avoid recognizing a right when to do so would result in a clearly inequitable situation. As mortgagors desiring to attack a mortgage as invalid, petitioners should act with reasonable promptness, else its unreasonable delay may amount to ratification. Verily, to allow petitioners to assert their right to the subject properties now after their unjustified failure to act within a reasonable time would be grossly unfair to PSMB, and perforce should not be sanctioned.

RURAL BANK OF CABADBARAN V. MELECIO-YAP

G.R. NO. 178451

JULY 30, 2014

J. PERLAS BERNABE

MORTGAGE AS AN ACCESSORY CONTRACT; MORTGAGEE IN GOOD FAITH

FACTS:

Erna and respondents are the children of the late spouses Isaac and Trinidad Melecio. They inherited a residential lot and two other structures erected thereon. The administration and management of the said properties were left to the care of Erna who was then residing in their ancestral home.

The Melecio Heirs purportedly executed a notarized SPA authorizing Erna to apply for a loan with petitioner RBCI and mortgage the subject properties. Armed with the said SPA, Erna applied for and was granted a commercial loan by RBCI The loan was secured by a Real Estate Mortgage over the subject properties.

Erna defaulted in the payment of her loan obligation causing RBCI to extra-judicially foreclose the mortgaged properties. RBCI emerged as the highest bidder. Since Erna failed to redeem the subject properties, new tax declarations in the name of RBCI were issued. RBCI informed Erna of its intent to take physical possession of the subject properties while the actual occupant thereof, a certain Jimmyrando C. Morales, was directed to pay rentals to RBCI.

Respondents claimed that the SPA submitted by Erna in support of her loan application was spurious, and that their signatures appearing thereon were falsified. As such, they demanded RBCI to release the subject properties from the coverage of Erna's loan obligation to the extent of their shares. In reply, RBCI maintained the validity of the SPA and its right to rely on it being a notarized document.

In view of respondents‘ refusal to vacate the premises, RBCI applied for and was issued a writ of possession. Consequently, respondents filed a complaint for declaration of nullity of documents, recovery of possession and ownership, and damages with prayer for the issuance of a writ of preliminary injunction against Spouses Erna and Bonifacio Mantala (Sps. Mantala), RBCI, the Office of the Provincial Sheriff, and Spouses Jimmyrando and Teresita Morales (Sps. Morales) before the RTC.

The RTC rendered a decision in favor of RBCI, declaring the real estate mortgage and the consequential foreclosure proceedings to be valid and binding against respondents, notwithstanding the allegation of forgery in the questioned documents. The CA reversed the RTC Decision, finding that Erna had no authority to mortgage the subject properties to RBCI since the SPA was actually a forgery, and, hence, null and void. Nevertheless, it held that a valid transaction was executed between RBCI and Erna to the extent of the latter‘s 1/6 share in the subject properties which portion respondents, as co-owners, may redeem.

ISSUE:

Whether the partial invalidity of the Real Estate Mortgage brought upon by the forged SPA resulted into the partial invalidation of the loan obligation principally entered into by RBCI and Sps. Mantala.

HELD:

No. A mortgage is merely an accessory agreement and does not affect the principal contract of loan. The mortgages, while void, however, can still be considered as instruments evidencing the indebtedness. The liability of on the principal contract of the loan however subsists notwithstanding the illegality of the mortgage. Indeed, where a mortgage is not valid, the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulation pertaining to it. Under the foregoing circumstances, what is lost is merely the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an ordinary action.

Based on the foregoing, the partial invalidity of the subject real estate mortgage brought about by the forged status of the subject SPA would not, therefore, result into the partial invalidation of the loan obligation principally entered into by RBCI and Sps. Mantala.

ISSUE:

Whether RBCI is a mortgagee in good faith for having conducted exhaustive investigations on the history of the mortgagor‘s title.

HELD:

No. The doctrine of mortgagee in good faith applies only to lands registered under the Torrens system and not to unregistered lands, as the properties in suit. The principle is inapplicable to banking institutions which are behooved to exercise greater care and prudence before entering into a mortgage contract. Hence, the ascertainment of the status or condition of properties offered as security for loans must be a standard and an indispensable part of its operations.

In this case, RBCI failed to observe the required level of caution in ascertaining the genuineness of the SPA considering that Erna owns only an aliquot part of the properties offered as security for the loan. It should not have simply relied on the face of the documents submitted since its undertaking to lend a considerable amount of money as a banking institution requires a greater degree of diligence. Hence, its rights as mortgagee and, now, as co-owner, should only be limited to Erna‘s share to the subject properties and not, absent the other co-owners‘ consent, to its entirety.

NFF INDUSTRIAL V. G & L ASSOCIATED BROKERAGE

G.R. NO. 178169

JANUARY 12, 2015

J. PERALTLA

VALID DELIVERY

FACTS:

NFF is engaged in the business of manufacturing bulk bags while G&L is one of its customers. Respondent Gerardo Trinidad is the general manager of G&L.

According to petitioner, respondent ordered a total of 2000 pieces of bulk bags from petitioner at 380 pesos each. In the purchase order, an instruction was made that the bulk bags were for immediate delivery to ―G&L Associated Brokerage Inc., c/o Hi-Cement Corporation‖. Accordingly, petitioner made deliveries as evidenced by delivery receipts and sales invoices. These deliveries were duly acknowledged by representatives of respondent company.

On the other hand, respondents alleged that the purchase order specifically provides that bulk bags were to be delivered at Hi-Cement Corporation to Mr. Raul Ambrosio, respondent company‘s checker and authorized representative. However, the bulk bags were not received by the authorized representative in conformity with the terms of the purchase order.

30 days elapsed from the time of the last alleged delivery was mad but no payment was made. As demands remained unheeded, petitioner filed a complaint for sum of money against respondents on December 19, 2001. The RTC ordered NFF to pay G&L. The CA reversed the RTC‘s decision.

ISSUE:

Whether or not there was a valid delivery on the part of petitioner which would give rise to an obligation to pay on the part of respondent for the value of the bulk bags.

HELD:

Yes. ARTICLE 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.

Indeed, the use by respondent of the bulk bags is an act of dominion, which is inconsistent with the ownership of petitioner. Having received the aforesaid billings, the corresponding delivery receipts and demand letters rendered by petitioner, respondents should have forthwith called the attention of petitioner, if indeed, its insinuation that the bulk bags themselves have not been delivered or misdelivered were true. In the ordinary course of business, in case of unwarranted claims of payment of a sum of money, one would immediately protest the same. But no such action was taken by respondents despite notice thereof.

Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur. It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it means transfer of possession. In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery contemplate "the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee."

Applying the foregoing criteria to the case at bar, We find that there were various occasions of delivery by petitioner to respondents, and the same was duly acknowledged by respondent Trinidad. Petitioner has actually delivered the bulk bags to respondent company, albeit the same was not delivered to the person named in the Purchase Order.

SKUNAC CORPORATION V. ROBERTO AND CAESAR SYLIANTENG

G.R. NO. 205879

APRIL 23, 2014

J. PERALTA

DOUBLE SALE

FACTS:

Roberto and Caesar base their claim of ownership over the subject lots on a deed of absolute sale executed in favor of their mother Emerenciana. They allege that Emerenciana acquired said lots from the late Luis Pujalte through a deed of sale dated June 20, 1958. By virtue of which, she was issued TCT No. 42369. She sold the lots to Roberto and Caesar and thus they were issued TCT No. 39488.

Skunac, on the other hand, claim that a certain Romeo Puljate was declared as the sole heir of Luis Puljate. Romeo sold the lots to Skunac and Enriquez in 1992. Thus, TCT No. 5888-R was issued in the name of Skunac while TCT No. 5889-

R was issues in the name of Enriquez.

The RTC rendered the decision in favor of petitioners Skunac and Enriquez. It declared TCT No. 42369 as null and void.

It further declared that petitioners were buyers in good faith and for value. The CA reversed the RTC Ddecision and

declared as void the TCTs issued in the name of Skunac and Enriquez.

ISSUE:

Whether or not the rule on double sale finds application to this case.

HELD:

No. Reliance by the trial and appellate courts on Article 1544 of the Civil Code is misplaced. The requisites that must concur for Article 1544 to apply are:

(a)

The two (or more sales) transactions must constitute valid sales;

(b)

The two (or more) sales transactions must pertain to exactly the same subject matter;

(c)

The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting

interests; and

(d) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the

very same seller.

Obviously, said provision has no application in cases where the sales involved were initiated not by just one but two vendors. In the present case, the subject lots were sold to petitioners and respondents by two different vendors Emerenciana and Romeo Pujalte (Romeo). Hence, Article 1544 of the Civil Code is not applicable.

JOSE JUAN TONG V. GO TIAT KUN

G.R. NO. 196023

APRIL 21, 2014

J. REYES

IMPLIED TRUST; PRESCRIPTION, ESTOPPEL AND LACHES

FACTS:

The petitioners are nine of the ten children of Spouses Juan Tong. Completing the ten children of Spouses Juan Tong is the deceased Luis Juan Tong, Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go Tiat Kun, and their children, Leon, Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being already dead, is survived by his wife, Roma Cokee Juan Tong (respondents).

Sometime in 1957, Juan Tong informed his children of his intention to purchase Lot 998 to be used for the family‘s lumber business. However, since he was a Chinese citizen and was disqualified from acquiring the said lot, the title to the

property will be registered in the name of his eldest son, Luis, Sr., who at that time was already of age and was the only Filipino citizen among his children. On December 8, 1978, the single proprietorship of Juan Tong Lumber was incorporated into a corporation known as the Juan Tong Lumber, Inc. However, Sy Un and Juan Tong both died intestate.

Luis, Sr. died and the respondents, being his surviving heirs, claimed ownership over Lot 998 by succession. Respondents executed a Deed of Extra-Judicial Settlement of Estate of Luis, Sr., adjudicating unto themselves Lot 998.

Luis, Jr. sold Lot 998-B to FRDC, which in turn sold the same to VGCC. It was only after the petitioners received a letter from VGCC, on August 31, 1995, that they discovered about the breach of the trust agreement committed by the respondents.

To protect their rights, the petitioners filed an action for Annulment of Sales, Titles, Reconveyance and Damages of Lot 998-B docketed as Civil Case No. 22730 against Luis, Jr., FRDC and VGCC. On March 6, 1997, the trial court ruled in favor of the petitioners which were later affirmed by the CA and this Court 7 on appeal.

On February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in favor of her children, resulting in the issuance of TCT No. T-134082 over Lot 998-A. Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of Titles, and Deeds of Extra-judicial Settlement and Sale and Damages claiming as owners of Lot 998-A.

After trial, the court a quo rendered its judgment in favor of the petitioners, ruling that there was an implied resulting trust between Juan Tong, Luis, Sr., the petitioners and the respondents, over Lot 998. On appeal, the CA rendered the herein assailed decision, which reversed and set aside the trial court‘s decision, and dismissed the complaint for lack of merit. The CA ruled that an express trust was created because there was a direct and positive act from Juan Tong to create a trust.

ISSUE:

(1) Was there an implied resulting trust constituted over Lot 998 when Juan Tong purchased the property and registered it in the name of Luis, Sr.? (2) May parol evidence be used as proof of the establishment of the trust? (3) Were the petitioners‘ action barred by prescription, estoppel and laches?

HELD:

(1) Yes. The principle of a resulting trust is based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another. On the other hand, a constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. Constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.

An implied resulting trust was created as provided under the first sentence of Article 1448 which is sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; and (b) such consideration must be furnished by the alleged beneficiary of a resulting trust. Here, the petitioners have shown that the two elements are present in the instant case. Luis, Sr. was merely a trustee of Juan Tong and the petitioners in relation to the subject property, and it was Juan Tong who provided the money for the purchase of Lot 998 but the corresponding transfer certificate of title was placed in the name of Luis, Sr.

(2) Yes. Because an implied trust is neither dependent upon an express agreement nor required to be evidenced by writing, Article 1457 of our Civil Code authorizes the admission of parol evidence to prove their existence. Parol evidence that is required to establish the existence of an implied trust necessarily has to be trustworthy and it cannot rest on loose, equivocal or indefinite declarations.

(3) No. As a rule, implied resulting trusts do not prescribe except when the trustee repudiates the trust. Further, the action to reconvey does not prescribe so long as the property stands in the name of the trustee. To allow prescription would be tantamount to allowing a trustee to acquire title against his principal and true owner. It should be noted that the title of Lot 998 was still registered in the name of Luis Sr. even when he predeceased Juan Tong. Considering that the implied trust has been repudiated through such death, Lot 998 cannot be included in his estate except only insofar as his undivided share thereof is concerned.

The doctrine of laches is not strictly applied between near relatives, and the fact that the parties are connected by ties of blood or marriage tends to excuse an otherwise unreasonable delay.

EXTRAORDINARY DEVELOPMENT CORPORATION V. SAMSON-BICO

G.R. NO. 191090

OCTOBER 13, 2014

J. PEREZ

CO-OWNERSHIP

FACTS:

Apolonio and Maria were husband and wife. They begot two children, namely, Juan, who married Leonarda and Irenea, who married Santiago. Juan and Leonarda begot six children, namely, Leonardo, Marcelina, Lydia, Cresencia, Lourdes, and Juan Jr., while Irenea and Santiago begot two children, namely, Herminia and Merlita Samson Flestado, who married Ely. Herminia and Ely are the respondents in this case.

During his lifetime, Apolonio owned a parcel of land consisting of 29,748 square meters situated Rizal. When Apolonio and Maria died, the property was inherited by Juan and Irenea. When the latter died, the heirs of Juan and Irenea became co-owners of the property.

The heirs of Juan, without the consent of respondents, the heirs of Irenea executed in favor of petitioner EDC a Deed of Absolute Sale covering the subject property. EDC was able to cause the registration of the Deed of Absolute Sale and transfer the tax declaration over the subject property in its name. This prompted respondents to file the Complaint for Annulment of Contract and Tax Declaration and Reconveyance of Possession with Damages.

The RTC ruled in favor of respondents. The trial court found that respondents and the heirs of Juan are co-owners of the subject property; that at the time of sale, the heirs of Juan did not have the right to sell the one half share of the heirs of Irenea and that EDC was not a buyer in good faith because it knew that respondents were co-owners of the subject property because Herminia informed EDC of such fact through a letter.

The heirs of Juan and respondents failed to file their brief so the Court of Appeals submitted the case for resolution. The Court of Appeals partially granted the appeal and ruled that respondents were able to establish their co-ownership over one-half of the subject property. The appellate court pointed out that the heirs of Juan categorically admitted in their Answer, as well as during the hearing the existence of co-ownership. The appellate court agreed with the trial court‘s finding that the heirs of Juan, as co-owners, could only alienate or convey to EDC their one-half portion of the subject property which may be allotted to them in the division upon the termination of the co-ownership. Thus, the sale will affect only their share but not those of the other co-owners who did not consent to the sale. However, the appellate court reversed the ruling of the trial court that the Deed of Absolute Sale is null and void. According to the appellate court, the same is valid with respect to the transfer of the rights of the co-owners sellers heirs of Juan over the one-half portion or 14,874 square meters of the subject property, thereby making EDC a co-owner thereof.

ISSUE:

Whether the Court of Appeals erred in sustaining the validity of the Deed of Sale with respect to the rights of the heirs of Juan over ½ of the property.

HELD:

No. Article 493 of the Civil Code recognizes the absolute right of a co-owner to freely dispose of his pro in diviso share as well as the fruits and other benefits arising from that share, independently of the other co-owners, thus:

Art. 493. Each co-owner shall have the full ownership of his part of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.

The execution by appellants Ballesteros of the Deed of Absolute Sale over the subject property which they do not exclusively own but is admittedly co-owned by them together with the [respondents], was valid only to the extent of the former‘s undivided one-half share thereof, as they had no title or interest to transfer the other one-half portion which pertains to the [respondents] without the latter‘s consent. It is an established principle that no one can give what one does not have nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally. Thus, since appellant EDC‘s rights over the subject property originated from sellers-appellants Ballesteros, said corporation merely stepped into the shoes of its sellers and cannot have a better right than what its sellers have.

The fact that the agreement in question purported to sell a concrete portion of the hacienda does not render the sale void, for it is a well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so. Since the co-owner/vendor‘s undivided interest could properly be the object of the contract of sale between the parties, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co-owner, in an ideal share equivalent to the consideration given under their transaction. In other words, the vendee steps into the shoes of the vendor as co-owner and acquires a proportionate abstract share in the property held in common.

PILAR DEVELOPMENT CORPORATION V. DUMADAG ET AL.

G.R. NO. 194336

MARCH 11, 2013

J. PERALTA

LEGAL EASEMENT; PUBLIC DOMAIN

FACTS:

On July 1, 2002, petitioner filed a Complaint for accion publiciana with damages against respondents for allegedly building their shanties, without its knowledge and consent, in its 5,613-square-meter property in Las Piñas City. It claims that said parcel of land, which is duly registered in its name and was designated as an open space of Pilar Village Subdivision intended for village recreational facilities and amenities for subdivision residents. Respondents denied the material allegations of the Complaint and briefly asserted that it is the local government, not petitioner, which has jurisdiction and authority over them.

On May 30, 2007, the trial court dismissed petitioner‘s complaint, finding that the land being occupied by respondents are situated on the sloping area going down and leading towards the Mahabang Ilog Creek, and within the three-meter legal easement; thus, considered as public property and part of public dominion under Article 502 of the New Civil Code, which could not be owned by petitioner.

The trial court opined that respondents have a better right to possess the occupied lot, since they are in an area reserved for public easement purposes and that only the local government of Las Piñas City could institute an action for recovery of possession or ownership.

Referring to Section 2 of Administrative Order No. 99-21 of the DENR, the appellate court ruled that the 3-meter area being disputed is located along the creek which, in turn, is a form of a stream; therefore, belonging to the public dominion. Unlike the trial court, however, the CA noted that the proper party entitled to seek recovery of possession of the contested portion is not the City of Las Piñas, but the Republic of the Philippines, through the OSG.

ISSUE:

Whether or not petitioner retains ownership over the property.

HELD:

No. While Article 630 of the Code provides for the general rule that ―the owner of the servient estate retains the ownership of the portion on which the easement is established, and may use the same in such a manner as not to affect the exercise of the easement,‖ Article 635 thereof is specific in saying that “all matters concerning easements established for public or communal use shall be governed by the special laws and regulations relating thereto, and, in the absence thereof, by the provisions of this Title [Title VII on Easements or Servitudes].‖

Certainly, in the case of residential subdivisions, the allocation of the 3-meter strip along the banks of a stream, like the Mahabang Ilog Creek in this case, is required and shall be considered as forming part of the open space requirement pursuant to P.D. 1216 dated October 14, 1977. Said law is explicit: open spaces are ―for public use and are, therefore, beyond the commerce of men‖ and that ―the areas reserved for parks, playgrounds and recreational use shall be non- alienable public lands, and non-buildable.‖

Petitioner‘s right of ownership and possession has been limited by law with respect to the 3-meter strip/zone along the banks of Mahabang Ilog Creek. Despite this, the Court cannot agree with the trial court‘s opinion, as to which the CA did not pass upon, that respondents have a better right to possess the subject portion of the land because they are occupying an area reserved for public easement purposes. Similar to petitioner, respondents have no right or title over it precisely because it is public land.

RANA V. LEE WONG

G.R. NO. 192861

JUNE 30, 2014

J. PERLAS BERNABE

ABATEMENT OF NUISANCE

FACTS:

Wong and Spouse Ong are co-owners pro-indiviso of a residential land situated in Peace Valley Subdivision, Lahug, Cebu City, abutting a 10-meter wide subdivision road (subject road). On the opposite side of the subject road, across the Wong- Ong property, are the adjacent lots of Spouses Uy and Spouses Rana. The said lots follow a rolling terrain with the Rana property standing about two (2) meters higher than and overlooking the Uy property, while the Wong-Ong property is at the same level with the subject road.

Sps. Rana elevated and cemented a portion of the subject road that runs between the Rana and Wong-Ong properties in order to level the said portion with their gate. Sps. Rana likewise backfilled a portion of the perimeter fence separating the Rana and Uy properties without erecting a retaining wall that would hold the weight of the added filling materials. The matter was referred to the Office of the Barangay Captain of Lahug as well as the Office of the Building Official of Cebu City (OBO), but to no avail.

On September 19, 1997, Wong, Sps. Ong, and Sps. Uy filed a Complaint for Abatement of Nuisance with Damages against Sps. Rana before the RTC seeking to: (a) declare the subject portion as a nuisance which affected the ingress and egress of Wong and Sps. Ong to their lot "in the usual and normal manner, such, that they now have to practically jump from the elevated road to gain access to their lot and scale the same elevation in order to get out"; (b) declare the subject backfilling as a nuisance considering that it poses a clear and present danger to the life and limb of the Uy family arising from the premature weakening of Sps. Uy's perimeter fence due to the seeping of rain water from the Rana property that could cause its sudden collapse; (c) compel Sps. Rana to restore the subject portion to its original condition; (d) compel Sps. Rana to remove the backfilling materials along Sps. Uy's perimeter fence and repair the damage to the fence; and (e) pay moral and exemplar/ damages, attorney's fees, litigation expenses, and costs of suit.

ISSUE:

Whether or not the subject portion may be summarily abated.

HELD:

No. It is a standing jurisprudential rule that unless a nuisance is a nuisance per se, it may not be summarily abated. A nuisance "may either be: (a) a nuisance per se (or one which "affects the immediate safety of persons and property and may be summarily abated under the undefined law of necessity"); or (b) a nuisance per accidens (or that which "depends upon certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due hearing thereon in a tribunal authorized to decide whether such a thing does in law constitute a nuisance.").

With respect to the elevated and cemented subject portion, the Court finds that the same 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 facilitate the ingress and egress of Sps. Rana from their house which was admittedly located on a higher elevation than the subject road and the adjoining Uy, and Wong-Ong properties. Since the subject portion is not a nuisance per se (but actually a nuisance per accidens) it cannot be summarily abated.

HEIRS OF FRANCISCO NARVASA V. EMILIANA IMBORNAL ET. AL.

G.R. NO. 182908

AUGUST 6, 2014

J. PERLAS BERNABE

PRESCRIPTION; IMPLIED TRUST; ACCRETION

FACTS:

Basilia Imbornal+ had four children, namely, Alejandra, Balbina, Catalina, and Pablo. Francisco I. Narvasa, Sr and Pedro Ferrer were the children of Alejandra, while petitioner Petra was the daughter of Balbina. Petitioners are the heirs and successors-in-interest of Francisco, Pedro, and Petra (Francisco, et al.). On the other hand, respondents Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria, and Eduardo, all surnamed Imbornal, are the descendants of Pablo.

During her lifetime, Basilia owned a parcel of land (Sabangan property), situated in Pangasinan with an area of 4,144 sq. m., which she conveyed to her three daughters Balbina, Alejandra, and Catalina (Imbornal sisters) sometime in 1920.

Meanwhile, Catalina‘s husband, Ciriaco, applied for and was granted a homestead patent over a 31,367-sq. m. riparian land (Motherland) adjacent to the Cayanga River in San Fabian, Pangasinan. He was eventually awarded Homestead and OCT No. 1462 was issued in his name. OCT No. 1462 was eventually cancelled, and TCT No. 101495 was issued in the name of Ciriaco‘s heirs. Ciriaco and his heirs had since occupied the northern portion of the Motherland, while respondents occupied the southern portion.

Sometime in 1949, the First Accretion, approximately 59,772 sq. m. in area, adjoined the southern portion of the Motherland. On August 15, 1952, OCT No. P-318 was issued in the name of respondent Victoriano, married to Esperanza Narvarte, covering the First Accretion. In 1971, the Second Accretion, which had an area of 32,307 sq. m.,

abutted the First Accretion on its southern portion . On November 10, 1978, OCT No. 21481 was issued in the names of all the respondents covering the Second Accretion.

Claiming rights over the entire Motherland, Francisco, et al., as the children of Alejandra and Balbina, filed an Amended Complaint for reconveyance, partition, and/or damages against respondents. They anchored their claim on the allegation that Ciriaco, with the help of his wife Catalina,urged Balbina and Alejandra to sell the Sabangan property, and that Ciriaco used the proceeds therefrom to fund his then-pending homestead patent application over the Motherland. In return, Ciriaco agreed that once his homestead patent is approved, he will be deemed to be holding the Motherland which now included both accretions in trust for the Imbornal sisters.

Likewise, Francisco, et al. alleged that through deceit, fraud, falsehood, and misrepresentation, respondent Victoriano, with respect to the First Accretion, and the respondents collectively, with regard to the Second Accretion, had illegally registered the said accretions in their names, notwithstanding the fact that they were not the riparian owners.

The RTC rendered a Decision in favor of Francisco, et al. The RTC found that the factual circumstances surrounding the present case showed that an implied trust existed between Ciriaco and the Imbornal sisters with respect to the Motherland. With respect to the accretions that formed adjacent to the Motherland, the RTC ruled that the owner of the Motherland is likewise the owner of the said accretions. Considering that the Imbornal sisters have become proportionate owners of the Motherland by virtue of the implied trust created between them and Ciriaco, they (Imbornal sisters) and their heirs are also entitled to the ownership of said accretions despite the fact that respondents were able to register them in their names.

The CA rendered a Decision reversing and setting aside the RTC Decision and entering a new one declaring: (a) the descendants of Ciriaco as the exclusive owners of the Motherland; (b) the descendants of respondent Victoriano as the exclusive owners of the First Accretion; and (c) the descendants of Pablo as the exclusive owners of the Second Accretion.

ISSUE:

(1)

Whether or not the causes of action pertaining to the Motherland, First Accretion and Second Accretion are barred by prescription.

(2)

Whether petitioners can assert ownership pver the 1 st and 2 nd accretion.

(3)

Whether or not there was an implied trust created between the Imbornal sisters and Ciriaco with respect to the Motherland.

HELD:

(1) The causes of action pertaining to the Motherland and the First Accretion are barred by prescription, but the reconveyance action with respect to the Second Accretion has been seasonably filed.

An action for reconveyance based on an implied trust prescribes in 10 years. The reference point of the 10-year prescriptive period is the date of registration of the deed or the issuance of the title. The prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. However, if the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.

Based on the foregoing, Francisco, et al. had then a period of ten years from the registration of the respective titles covering the disputed properties within which to file their action for reconveyance, taking into account the fact that they were never in possession of the said properties. Hence, with respect to the Motherland covered by OCT No. 1462 issued on December 5, 1933 in the name of Ciriaco, an action for reconveyance therefor should have been filed until December 5,1943; with respect to the First Accretion covered by OCT No. P-318 issued on August 15, 1952 in the name of respondent Victoriano, an action of the same nature should have been filed until August 15, 1962; and, finally, with respect to the Second Accretion covered by OCT No. 21481 issued on November 10, 1978 in the name of the respondents, a suit for reconveyance therefor should have been filed until November 10, 1988.

All three disputed properties was filed only on February 27, 1984. As such, it was filed way beyond the 10-year reglementary period within which to seek the reconveyance of two of these properties, namely, the Motherland and the First Accretion, with only the reconveyance action with respect to the Second Accretion having been seasonably filed.

(2) No. Article 457 of the Civil Code states the rule on accretion as follows: to the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters. Accordingly, therefore, alluvial deposits along the banks of a creek or a river do not form part of the public domain as the alluvial property automatically belongs to the owner of the estate to which it may have been added. The only restriction provided for by law is that the owner of the adjoining property must register the same under the Torrens system; otherwise, the alluvial property may be subject to acquisition through prescription by third persons.

In this case, Francisco, et al. and, now, their heirs, i.e., herein petitioners, are not the riparian owners of the Motherland to which the First Accretion had attached, hence, they cannot assert ownership over the First Accretion. Consequently, as the Second Accretion had merely attached to the First Accretion, they also have no right over the Second Accretion. Neither were they able to show that they acquired these properties through prescription as it was not established that they were in possession of any of them. Therefore, whether through accretion or, independently, through prescription, the discernible conclusion is that Francisco et al. and/or petitioners‘ claim of title over the First and Second Accretions had not been substantiated, and, as a result, said properties cannot be reconveyed in their favor.

(3) No. An implied trust arises, not from any presumed intention of the parties, but by operation of law in order to satisfy the demands of justice and equity and to protect against unfair dealing or downright fraud. The burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be proven by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.

The main thrust of Francisco, et al.’s Amended Complaint is that an implied trust had arisen between the Imbornal sisters,

on the one hand, and Ciriaco, on the other, with respect to the Motherland. In this case, it cannot be said, merely on the

basis of the oral evidence offered by Francisco, et al., that the Motherland had been either mistakenly or fraudulently

registered in favor of Ciriaco. Accordingly, it cannot be said either that he was merely a trustee of an implied trust holding

the Motherland for the benefit of the Imbornal sisters or their heirs.

A homestead patent award requires proof that the applicant meets the stringent conditionswhich includes actual

possession, cultivation, and improvement of the homestead. It must be presumed, therefore, that Ciriaco underwent the rigid process and duly satisfied the strict conditions necessary for the grant of his homestead patent application. Hence, when OCT No. 1462 covering the Motherland was issued in his name pursuant to Homestead Patent No. 24991 on December 15, 1933, Ciriaco‘s title to the Motherland had become indefeasible.

HORTIZUELA V. TAGUFA

G.R. NO. 205867

FEBRUARY 23, 2015

J. MENDOZA

ACTION FOR RECONVEYANCE

FACTS:

The property involved in this case is a parcel of land located at District IV, Tumauini, Isabela containing an area of 539 square meters, more or less, and covered by OCT No. P- 84609 of the Registry of Deeds of Isabela.

Before it was titled in the name of Defendant Tagufa, said property was originally owned by plaintiff‘s parents, Spouses Epifanio Tagufa and Godofreda Jimenez. Although untitled, the spouses mortgaged the property with the DBP. For failure to redeem the property, DBP foreclosed the same and sold it to Atty. Romulo Marquez who, in turn, sold it back to Runsted Tagufa, husband of defendant Gregoria Tagufa, on April 4, 2002 using the fund sent by plaintiff Hortizuela who was in America and with the agreement that Runsted will reconvey the said property to her sister when demanded.

However, plaintiff discovered that the same unregistered property was titled in the name of Gregoria Tagufa under OCT No. P-84609 of the Registry of Deeds of Isabela. Thus, a petitioner filed a complaint for reconveyance and recovery of possession with damages with the MCTC against respondents Tagufa. The MCTC dismissed the complaint for lack of merit and reasoned that plaintiffs had resorted to a wrong cause of action.

The RTC reversed the MCTC ruling. Aggrieved, respondents filed a petition for review before the CA. According to the CA, although Hortizuela filed with the MCTC a complaint for reconveyance and recovery of possession of the subject lot, she was also questioning the validity of the Torrens title, Original Certificate of Title (OCT) No. P-846609. The CA pointed out that this was in contravention with Section 48 of PD 1529 which provides that a certificate of title shall not be subject to collateral attack.

ISSUE:

Whether or not an action for reconveyance and recovery of possession constitutes an indirect or collateral attack on the validity of the subject certificate of title which is proscribed by law.

HELD:

No. Contrary to the pronouncements of the MCTC and the CA, the complaint of Hortizuela was not a collateral attack on the title warranting dismissal.

The Court is not unmindful of the principle of indefeasibility of a Torrens title and Section 48 of P.D. No. 1528 where it is provided that a certificate of title shall not be subject to collateral attack. When the Court says direct attack, it means that the object of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as an incident thereof.

The MCTC and the CA, failed to take into account that in a complaint for reconveyance, the decree of registration is respected as incontrovertible and is not being questioned. An action for reconveyance is a recognized remedy, an action in personam, available to a person whose property has been wrongfully registered under the Torrens system in another‘s name. In an action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the decree but, respecting it as incontrovertible and no longer open to review, seeks to transfer or reconvey the land from the registered owner to the rightful owner. Reconveyance is always available as long as the property has not passed to an innocent third person for value.

ISSUE:

Whether or not the RTC erred in upholding the right of Hotizuela to ask for reconveyance of the subject property.

HELD:

No. The Court is not unaware of the rule that a fraudulently acquired free patent may only be assailed by the government in an action for reversion pursuant to Section 101 of the Public Land Act. The foregoing rule is, however, not without exception. A recognized exception is that situation where plaintiff-claimant seeks direct reconveyance from defendant of public land unlawfully and in breach of trust titled by him, on the principle of enforcement of a constructive trust.

In this case, in filing the complaint for reconveyance and recovery of possession, Hortizuela was not seeking a reconsideration of the granting of the patent or the decree issued in the registration proceedings. What she was seeking

was the reconveyance of the subject property on account of the fraud committed by respondent Gregoria. An action for reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to him. To hold otherwise would be to make the Torrens system a shield for the commission of fraud.

HEIRS OF THE LATE FELIX BUCTON V. SPOUSES GO

G.R. NO. 188395

NOVEMBER 20, 2013

J. PEREZ

PURCHASER IN GOOD FAITH AND FOR VALUE; PRESCRIPTION

FACTS:

Felix received a phone call from Gonzalo informing him that he has bought the subject property thru a certain Belisario who represented himself as the attorney-in-fact of Felix. Said certificate of title fell into the hands of Belisario, Pacardo and Cabili, who allegedly conspired with each other to unlawfully deprive Felix of his ownership of the above-mentioned property.

As shown in the annotation at the back of the title, the Spouses Bucton purportedly authorized Belisario to sell the subject property to third persons, as evidenced by an SPA allegedly signed by the Spouses Bucton. On the strength of the said SPA, Belisario, on 2 March 1981, executed a Deed of Absolute Sale in favor of the Spouses Go.

Claiming that the signatures of the Spouses Bucton on the SPA were forged, the Heirs of Felix filed against the Spouses Go a complaint for Annulment of the SPA, Deed of Absolute Sale and TCT No. T-34210, Recovery of Ownership and Possession, Damages, with Prayer for Writ of Preliminary Injunction or Temporary Restraining Order before the RTC. The Heirs of Felix mainly alleged that since the SPA was spurious, no valid title was conveyed to the Spouses Go.

The RTC held that the complaint filed by the Heirs of Felix is already barred by laches and prescription. From the time the alleged fraudulent transaction was discovered in 1981 up to 1996 the complainants failed to take any legal step to assail the title of the Spouses Go.

The Court of Appeals found that the evidence adduced by the Heirs of Felix failed to preponderantly establish that the questioned SPA was a forgery. The appellate court further declared that the Spouses Go were innocent purchasers for value who acquired the property without any knowledge that the right of Belisario as attorney-in-fact was merely simulated.

ISSUE:

Whether or not the CA erred in finding that the Spouses Go are innocent purchasers for value.

HELD:

No. As a general rule, every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore and the law will no way oblige him to go beyond the certificate to determine the condition of the property. However, this principle admits exceptions: a person dealing with registered land has a 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 or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. 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 the certificate.

An ordinary prudent man in this situation would have first inquired with the registered owner if he is indeed selling his property and if he authorized the purported agent to negotiate and to sell the said property on his behalf.

It was only after the sale was consummated that Gonzalo called Felix to inform him that he already bought the subject property from Belisario who was surprised to learn about the transaction. As buyers of the property dealing with an agent, the Spouses Go are chargeable with knowledge of agent‘s authority or the lack thereof, and their failure to ascertain the genuineness and authenticity of the latter‘s authority do not entitle them to invoke the protection the law accords to purchasers in good faith and for value. They cannot close their eyes to facts that should put a reasonable man on his guard and still claim that he acted in good faith.

ISSUE:

Whether or not the instant case is barred by laches or prescription.

HELD:

No. Ownership and real rights over real property are acquired by ordinary prescription through possession of ten years, provided that the occupant is in good faith and with just title. As pointed out earlier, the Spouses Go miserably failed to meet the requirements of good faith and just title, thus, the ten-year prescriptive period is a defense unavailable to them. It must be stressed that possession by virtue of a spurious title cannot be considered constructive possession for the purpose of reckoning the ten-year prescriptive period.

And, extraordinary acquisitive prescription cannot, similarly, vest ownership over the property upon the Spouses Go since the law requires 30 years of uninterrupted adverse possession without need of title or of good faith before real rights over immovable prescribes. The Spouses Go purportedly took possession of the subject property since March 1981 but such possession was effectively interrupted with the filing of the instant case before the RTC on 19 February 1996. This period is 15 years short of the thirty-year requirement mandated by Article 1137.

OSCAR CONSTANTINO V. HEIRS OF CONSTANTINO

G.R. NO. 181508

OCTOBER 2, 2013

J. PEREZ

IN PARI DELICTO

FACTS:

Pedro Constantino, Sr., ancestors of the petitioners and respondents, owned several parcels of land, one of which is an unregistered parcel of land consisting of 240 square meters in Bulacan. Pedro, Sr. was survived by his six children, namely: 1) Pedro Jr., the grandfather of the respondents; 2) Antonia 3) Clara, 4) Bruno, survived by his 6 children including petitioner Casimira Constantino-Maturingan; 5) Eduardo, survived by his daughter Maura; and 6) Santiago, survived by his five children which includes petitioner Oscar Constantino.

On 17 June 1999, respondents Asuncion and Josefina, great grandchildren of Pedro Sr., in representation of Pedro, Jr. filed a complaint against petitioners Oscar Constantino, Maxima Constantino and Casimira Maturingan, grandchildren of Pedro Sr., for the nullification of a document denominated as ―Pagmamana sa Labas ng Hukuman‖ dated 10 August 1992, Tax Declaration Nos. 96-10022 (02653) and 96-10022 (02655) and reinstatement of Tax Declaration No. 20814 in the name of Pedro Sr.

In the said complaint, respondents alleged that sometime in October 1998, petitioners asserted their claim of ownership over the whole parcel of land owned by the late Pedro Sr., to the exclusion of respondents who are occupying a portion thereof.

The petitioners claimed that the document ―Pagmamana sa Labas ng Hukuman‖ pertaining to the 240 sq m lot was perfectly valid and legal. Further, petitioners alleged that the respondents have no cause of action against them considering that the respondents‘ lawful share over the estate of Pedro Sr., had already been transferred to them as evidenced by the Deed of Extrajudicial Settlement with Waiver executed by Angelo Constantino, Maria Constantino (mother of respondent Asuncion), Arcadio Constantino and Mercedes Constantino, all heirs of Pedro Jr.

The RTC ruled that both respondents and petitioners are in pari delicto and dismissed the complaint filed by respondents. Respondents appealed raising, among others, the erroneous application by the trial court of the doctrine of ―in pari delicto‖ in declaring the validity of the document ―Pagmamana sa Labas ng Hukuman.‖

The CA ruled in favor of the respondents heirs of Pedro, Jr., declaring that the ―Extrajudicial Settlement with Waiver‖ dated 5 December 1968 they executed covering the 192 sq m lot actually belongs to Pedro Jr., hence, not part of the estate of Pedro Sr.

ISSUE:

Whether or not the doctrine of in pari delicto applies in this case.

HELD:

No. As a doctrine in civil law, the rule on pari delicto is principally governed by Articles 1411 and 1412 of the Civil Code, which state that:

Article 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the

act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each

other,

prosecuted.

and

both

shall

be

Article 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal

offense,

observed:

the

following

rules

shall

be

1. When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other‘s undertaking;

The petition at bench does not speak of an illegal cause of contract constituting a criminal offense under Article 1411. Neither can it be said that Article 1412 finds application although such provision which is part of Title II, Book IV of the Civil Code speaks of contracts in general, as well as contracts which are null and void ab initio pursuant to Article 1409 of the Civil Code such as the subject contracts, which as claimed, are violative of the mandatory provision of the law on legitimes.

Article 1412 of the Civil Code that breathes life to the doctrine speaks of the rights and obligations of the parties to the contract with an illegal cause or object which does not constitute a criminal offense. It applies to contracts which are void for illegality of subject matter and not to contracts rendered void for being simulated, or those in which the parties do not really intend to be bound thereby. Specifically, in pari delicto situations involve the parties in one contract who are both at fault, such that neither can recover nor have any action against each other.

In this case, there are two Deeds of extrajudicial assignments unto the signatories of the portions of the estate of an ancestor common to them and another set of signatories likewise assigning unto themselves portions of the same estate. The separate Deeds came into being out of an identical intention of the signatories in both to exclude their co-heirs of their rightful share in the entire estate of Pedro Sr. It was, in reality, an assignment of specific portions of the estate of Pedro Sr., without resorting to a lawful partition of estate as both sets of heirs intended to exclude the other heirs.

Clearly, the principle of in pari delicto cannot be applied. The inapplicability is dictated not only by the fact that two deeds, not one contract, are involved, but because of the more important reason that such an application would result in the validation of both deeds instead of their nullification as necessitated by their illegality. It must be emphasized that the underlying agreement resulting in the execution of the deeds is nothing but a void agreement.

Corollarily, given the character and nature of the deeds as being void and inexistent, it has, as a consequence, of no force and effect from the beginning, as if it had never been entered into and which cannot be validated either by time or ratification. That said, we cannot give credence to the contention of respondents that no fault can be attributed to them or that they are free from the effects of violation of any laws arising from the supposed unlawful agreement entered into by their predecessor-in-interest and the other heirs including petitioners herein.

NEW WORLD DEVELOPERS V. AMA COMPUTER LEARNING CENTER

G.R. NO. 187930

FEBRUARY 23, 2015

CJ. SERENO

LIQUIDATED, EXEMPLARY DAMAGES

FACTS:

AMA leased the entire second floor of the building owned by New World. They entered into a contract of lease covering the 8-year period from June 15, 1998 to March 14, 2006. Item No. 14 of the Contract of Lease states:

That AMA may pre-terminate this Contract of Lease by notice in writing to New World at least six months before the intended date of pretermination, provided, however, that in such case, AMA shall be liable to New World for an amount equivalent to six months current rental as liquidated damages.

In compliance with the contract, AMA paid New World the amount of P450,000 as advance rental and another P450,000 as security deposit.

For the first three years, AMA paid the monthly rent as stipulated in the contract, with the required adjustment in accordance with the escalation rate for the second and the third years. However, on March 18, 2002, AMA requested the deferment of the annual increase in the monthly rent by citing financial constraints brought about by a decrease in its enrollment. New World agreed to reduce the escalation rate. The following year, AMA again requested the adjustment of the monthly rent and New World obliged. For this purpose, the parties entered into an Addendum to the Contract of Lease.

On July 6, 2004, AMA removed all of its office equipment and furniture from the leased premised. AMA sent a letter to New World stating that it decided to pre-terminate the contract on the ground of business losses. AMA also demanded the refund of its advance rental and security deposit.

New World replied in a letter to which was attached a Statement of Account12 indicating the following amounts to be paid by AMA: 1) unpaid two months‘ rent in the amount of P466,620; 2) 3% monthly interest for the unpaid rent in the amount of P67,426.59; 3) liquidated damages equivalent to six months of the prevailing rent in the amount of P1,399,860; and 4) damage to the leased premises amounting to P15,580. The deduction of the advance rental and security deposit paid by AMA still left an unpaid balance in the amount of P1,049,486.59. For failure to arrive at a settlement, New World filed a complaint for sum of money and damages against AMA before the RTC. The RTC ordered AMA to pay New World P466,620 as unpaid rentals plus 3% monthly penalty interest until payment, P1,399,869 as liquidated damages equivalent to 6 months‘ rent, with the advance rental and security deposit paid by AMA to be deducted therefrom, P15,580 for the damage to the leased premises; P100,000 as attorney‘s fees and cost of suit.

Upon appeal, the CA reduced the amount of liquidated damages to P933,240 which is equivalent to 4 months‘ rent with the advance rental and security deposit paid by AMA to be deducted therefrom. The CA ruled that the RTC‘s imposition of liquidated damages equivalent to 6 months was iniquitous. The CA also deleted the 3% monthly penalty interest on the unpaid rent because there was no stipulation in the contract of lease or in the addendum to the contract of lease.

ISSUE:

(1) Whether the CA erred when it reduced the amount of liquidated damages. (2) Whether New World is entitled to exemplary damages.

HELD:

(1) Yes. Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The law does not relieve a party from the consequences of a contract it entered into with all the required formalities. Courts have no power to ease the burden of obligations voluntarily assumed by parties, just because things did not turn out as expected at the inception of the contract.

Item No. 14 of the Contract of lease expressly states that in case of pre-termination, AMA shall be liable for an amount equivalent to 6 months current rental as liquidated damages. The resolution of the question of whether a penalty is reasonable, or iniquitous or unconscionable would depend on factors including but not limited to the type, extent and purpose of the penalty; the nature of the obligation; the mode of the breach and its consequences; the supervening realities; and the standing and relationship of the parties. The appreciation of these factors is essentially addressed to the sound discretion of the court.

Under the terms of the contract, and in light of the failure of AMA to show that it is deserving of this Court‘s indulgence, the payment of liquidated damages in an amount equivalent to six months‘ rent is proper.

(1) Yes. Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages.

In this case, it is quite clear that New World sustained losses as a result of the unwarranted acts of AMA. Further, were it not for the stipulation in the contract regarding the payment of liquidated damages, we would be awarding compensatory damages to New World.

SNOW MOUNTAIN DAIRY V. GMA VETERANS FORCE

G.R. NO. 192446

NOVEMBER 19, 2014

J. PERALTA

ACTUAL, TEMPERATE DAMAGES

FACTS:

Petitioner and respondent GMA Veterans Force, Inc. entered into a security service agreement. On April 13, 2005, petitioner informed GMA of the former's decision to replace the security personnel effective April 15, 2005; and that all monies due respondent as provided in the contract shall be settled.

On even date, respondent reiterated that their service agreement was good for one year, which could only be terminated for a just cause and a 30-day prior notice; that the termination of the security contract even in the absence of just cause and the lack of due notice may only be accepted provided that petitioner would pay the remaining contract period of 8-1/2 months equivalent to P952,833.00.

Respondent, represented by De Guzman, filed with the RTC a complaint for damages against petitioner. the RTC rendered its Decision in favor of respondent and ordered petitioner to pay the former compensatory damages representing

the unserved portion of the contract covering the period April 15, 2005 to January 3, 2006 in the amount of P952,833.50 and 100,000.00 for attorney's fees and appearances, and the cost of the litigation.

Petitioner appealed the RTC decision to the CA. The CA deleted the award of attorney‘s fees.

ISSUE:

Whether or not the CA erred when it failed to delete or modify the award of compensatory damages.

HELD:

Yes. Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Notably, the amount awarded was based on the contracted amount of P16,014.00 per security guard per month, multiplied by 7 security guards and multiplied by the unserved portion of the contract. However, the contracted amount of P16,014,00 per guard would not totally pertain to respondent as the same would cover the wage of the security guard and only the remaining portion of the contracted amount, i.e., after deducting the guard's salary, would go to respondent. In this case, respondent had not shown that the security guards were not assigned to another employer, and that it was compelled to pay the guards despite the pre-termination of the security agreement to be entitled to the amount of PI6,014.00 per month. Indeed, no evidence was presented by respondent establishing the actual amount of loss suffered by reason of the pre-termination. It is elementary that to recover damages, there must be pleading and proof of actual damages suffered.

Undeniably, however, respondent suffered pecuniary loss because of the pre-termination of its services without any valid cause. But since there was no proof capable of ascertaining the actual loss, we refer to Article 2224 of the Civil Code. 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. We then affirmed the CA's award of temperate damages in the amount of P200,000.00 in lieu of actual damages awarded by the RTC since there was no proof capable of ascertaining the actual loss.

CALANASAN V. DOLORITO

G.R. NO. 171937

NOVEMBER 25, 2013

J. BRION

DONATION

FACTS:

Petitioner Cerila Calanasan took care of her orphan niece, respondent Evelyn C. Dolorito. In 1982, when Evelyn was already married to respondent Virgilio Dolorito, the petitioner donated to Evelyn a parcel of land which had earlier been mortgaged for P15,000.00. The donation was conditional: Evelyn must redeem the land and the petitioner was entitled to possess and enjoy the property as long as she lived. Evelyn signified her acceptance of the donation. Evelyn redeemed the property, had the title of the land transferred to her name, and granted the petitioner usufructuary rights over the donated land.

On August 15, 2002, the petitioner, assisted by her sister Teodora Calanasan, complained with the RTC that Evelyn had committed acts of ingratitude against her. She prayed that her donation in favor of her niece be revoked. The petitioner died while the case was pending with the RTC. Her sisters, Teodora and Dolores, substituted for her. Respondents filed a demurrer to evidence. According to them, the petitioner failed to prove that it was Evelyn who committed acts of ingratitude against the petitioner; thus, Article 765 of the New Civil Code found no application in the case.

The RTC dismissed the complaint and held that Article 765 of the New Civil Code did not apply because the ungrateful acts were committed against Teodora, the donor‘s sister, and not against the donor, the petitioner. The perpetrator of the ungrateful acts was not Evelyn, but her husband Virgilio.

The CA affirmed the RTC ruling but on a different legal ground. The CA found that the donation was inter vivos and onerous. Therefore, the deed of donation must be treated as an ordinary contract and Article 765 of the New Civil Code finds no relevance.

ISSUE:

Whether or not the CA erred in holding that the donation was inter vivos and onerous.

HELD:

No. Article 733. Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory donations

by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed.

A pure/simple donation is the truest form of donation as it is based on pure gratuity. The remuneratory/compensatory

type has for its purpose the rewarding of the donee for past services, which services do not amount to a demandable debt.

A conditional/modal donation, on the other hand, is a consideration for future services; it also occurs where the donor

imposes certain conditions, limitations or charges upon the donee, whose value is inferior to the donation given. Lastly, an onerous donation imposes upon the donee a reciprocal obligation; this is made for a valuable consideration whose cost is equal to or more than the thing donated.

Since the donation imposed on the donee the burden of redeeming the property for P15,000.00, the donation was onerous. As an endowment for a valuable consideration, it partakes of the nature of an ordinary contract; hence, the rules of contract will govern and Article 765 of the New Civil Code finds no application with respect to the onerous portion of the donation.

DR. ALANO V. MAGUD-LOGMAO

G.R. NO. 175540

APRIL 14, 2014

J. PERALTA

NEGLIGENCE

FACTS:

Magud-Logmao is the mother of deceased Arnelito Logmao. Defendant-appellant Dr. Filoteo Alano is the Executive Director of the National Kidney Institute (NKI).

Arnelito Logmao, was brought to the East Avenue Medical Center (EAMC) in Quezon City. At the NKI, the name Angelito [Logmao] was recorded as Angelito Lugmoso. Lugmoso was immediately attended to and given the necessary medical treatment. As Lugmoso had no relatives around, Jennifer B. Misa, Transplant Coordinator, was asked to locate his family by enlisting police and media assistance.

Dr. Enrique T. Ona requested the Laboratory Section to conduct a tissue typing and tissue cross-matching examination. Dr. Ona was informed that Lugmoso had been pronounced brain dead. Upon learning that Lugmoso was a suitable organ donor and that some NKI patients awaiting organ donation had blood and tissue types compatible with Lugmoso.

Dr. Alano issued to Dr. Ona a Memorandum to retrieve and remove the kidneys, pancreas, liver and heart of the said deceased patient and to transplant the said organs to any compatible patient who maybe in need of said organs to live and survive upon making sure that efforts to locate the relatives have been fully exerted.

Plaintiff filed with the court a quo a complaint for damages in connection with the death of her son. Plaintiff alleged that defendants conspired to remove the organs of Arnelito while the latter was still alive and that they concealed his true identity. Only Dr. Alano was held liable for damages.

After finding petitioner liable for a quasi-delict, the RTC ordered petitioner to pay respondent P188,740.90 as actual damages; P500,000.00 as moral damages; P500,000.00 as exemplary damages; P300,000.00 as attorney's fees; and costs of suit. Petitioner appealed to the CA. The CA deleted the award of actual damages and reduced the award of moral damages to P250,000.00, exemplary damages to P200,000.00 and attorney‘s fees to P100,000.00.

ISSUE:

Whether respondent's sufferings were brought about by petitioner's alleged negligence in granting authorization for the removal or retrieval of the internal organs of respondent's son who had been declared brain dead, thus, making petitioner liable for damages.

HELD:

No. A careful reading of the above shows that petitioner instructed his subordinates to ―make certain‖ that ―all reasonable efforts‖ are exerted to locate the patient's next of kin, even enumerating ways in which to ensure that notices of the death of the patient would reach said relatives. It also clearly stated that permission or authorization to retrieve and remove the internal organs of the deceased was being given ONLY IF the provisions of the applicable law had been complied with. Such instructions reveal that petitioner acted prudently by directing his subordinates to exhaust all reasonable means of locating the relatives of the deceased.

There can be no cavil that petitioner employed reasonable means to disseminate notifications intended to reach the relatives of the deceased. It should be emphasized that the internal organs of the deceased were removed only after he had been declared brain dead; thus, the emotional pain suffered by respondent due to the death of her son cannot in any way be attributed to petitioner. Neither can the Court find evidence on record to show that respondent's emotional suffering at the sight of the pitiful state in which she found her son's lifeless body be categorically attributed to petitioner's conduct.

UNKNOWN OWNER OF THE VESSEL M/V CHINA JOY V. ASIAN TERMINALS INC.

G.R. NO. 195661

MARCH 11, 2015

J. REYES

RES IPSA LOQUITUR

FACTS:

On 25 January 1997, the cargo ship M/V ―China Joy‖ arrived at the Mariveles Grain Terminal Wharf, operated by Asian Terminals Inc. (ATI). The Vessel carried soybean meal that had been shipped by ContiQuincyBunge (CQB) an exporter of soybean meal and related products, in favor of several consignees in the Philippines.

Under the Charter Party Agreement over M/V ―China Joy,‖ CQB represented itself as the Charterer of the Vessel, with San Miguel Foods, Inc. as Co-Charterer, and defendant Samsun represented itself as the Agent of the Shipowners but since Samsun is a foreign corporation not licensed to do business in the Philippines, it transacted its business through Inter-Asia.

ATI used its Siwertell Unloader No. 2 to unload the soybean meal from the Vessel‘s Hold No. 2. The Siwertell Unloader is a pneumatic vacubator that uses compressed gas to vertically move heavy bulk grain from within the hatch of the ship in order to unload it off the ship. The unloading operations were suddenly halted when the head of Unloader No. 2 hit a flat low-carbon or ―mild‖ steel bar that was in the middle of the mass of soybean meal.

ATI sent a Note of Protest