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CASE NO. 1 G.R. No. 201988 October 11, 2017


SUBJECT: PERSONS AND CASE TOPIC: FIRST DIVISION
FAMILY RELATIONS PSYCHOLOGICAL INCAPACITY
PONENTE: DEL CASTILLO, J CASE: MARIA VICTORIA NATURE OF
SOCORRO LONTOC CRUZ VS. ACTION:PETITION FOR
NILO CRUZ REVIEW ON CERTIORARI

FACTS:

On October 21, 1986 Nilo and Marivi was Married to each other and produced two sons. On
July 7, 2005 Marivi filed with the RTC of Muntinlupa City a petition for declaration of nullity
of marriage based on psychological incapacity. She averred that it had been medically
ascertained that Nilo was suffering from "inadequate personality disorder related to
masculine strivings associated with unresolved oedipal complex," while she herself was
found to be suffering from a "personality disorder of the mixed type, histrionic, narcissistic
with immaturity. In his answer, Nilo claimed that he was madly in love with Marivi; that at
the start of their relationship, both he and Mari vi would exhibit negative personality traits
which they overlooked; that he believed that both he and Marivi were suffering from
psychological incapacity; and that he was not singularly responsible for the breakdown of
their marriage. He stressed that Marivi also contributed to the deterioration of their union.
In October 13, 2008 the RTC denied the petition. The RTC took a dim view of the expert
witnesses' attribution of a double psychological incapacity to Marivi's nature of being a
"father figure woman," and to Nilo's "oedipal complex."

The court noted that Marivi already disengaged herself from her father as her standard of an
ideal husband when she married Nilo, despite the latter's limitations and his then being
already very focused on his job. Marivi's need for assurance that she is loved, vis-a-vis her
looking up to her father as her standard, was not by itself sufficient to declare her
psychologically incapacitated.

As for Nilo, the RTC found no concrete evidence of "oedipal complex;" the RTC held that
prioritizing his work over the emotional needs of his family was not reflective of his
psychological incapacity because what he did was still for his family's benefit. Neither was
Nilo's lack of sexual interest in Marivi a case of psychological incapacity, for this was a result
of his being turned off by Marivi's unabated naggings and her revelations to her family of his
sexual inadequacies. CA Affirmed.

ISSUE:

WHETHER ARTICLE 36 OF THE FAMILY CODE IS APPLICABLE IN THIS CASE.

RULING:

No, Article 36 is not applicable in this case.

When is there a psychological incapacity? - We have laid down guidelines in interpreting


and applying this provision. In Republic v. De Gracia, we reiterated the doctrine in Santos v.
Court of Appeals, "that psychological incapacity must be characterized by: (a) gravity (i.e., it
must be grave and serious such that the party would be incapable of carrying out the
ordinary duties required in a marriage); (b) juridical antecedence (i.e., it must be rooted in
the history of the party antedating the marriage, although the overt manifestations may
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emerge only after the marriage); and (c) incurability (i.e., it must be incurable, or even if it
were otherwise, the cure would be beyond the means of the party involved)."

The showing of 'irreconcilable differences' and 'conflicting personalities in no wise


constitutes psychological incapacity. - The mere showing of 'irreconcilable differences' and
'conflicting personalities' [as in the present case,] in no wise constitutes psychological
incapacity." “Nor does failure of the parties to meet their responsibilities and duties as
married persons" amount to psychological incapacity. We further elucidated in Yambao v.
Republic that the psychological condition should render the subject totally unaware or
incognitive of the basic marital obligations:

Article 36 contemplates incapacity or inability to take cognizance of and to assume basic


marital obligations and not merely difficulty, refusal, or neglect in the performance of marital
obligations or ill will. This incapacity consists of the following: (a) a true inability to commit
oneself to the essentials of marriage; (b) this inability to commit oneself must refer to the
essential obligations of marriage: the conjugal act, the community of life and love, the
rendering of mutual help, the procreation and education of offspring; and (c) the inability
must be tantamount to a psychological abnormality. It is not enough to prove that a spouse
failed to meet his responsibility and duty as a married person; it is essential that he must be
shown to be incapable of doing so due to some psychological illness.

In Marcos v. Marcos, the actual medical examination of the one claimed to have
psychological incapacity is not a condition sine qua non, for what matters is the totality of
evidence to sustain a finding of such psychological incapacity. While it behooves this Court to
weigh the clinical findings of psychology experts as part of the evidence, the court's hands
are nonetheless free to make its own independent factual findings. "It bears repeating that
the trial courts, as in all the other cases they try, must always base their judgments not solely
on the expert opinions presented by the parties but on the totality of evidence adduced in
the course of the proceedings."

With specific reference to the case before us, even granting that both parties did suffer from
personality disorders as evaluated by the expert witnesses, we find that the conclusions
reached by these expert witnesses do not irresistibly point to the fact that the personality
disorders which plague the spouses antedated the marriage; that these personality disorders
are indeed grave or serious; or that these personality disorders are incurable or permanent
as to render the parties psychologically incapacitated to carry out and carry on their marital
duties. What can be inferred from the totality of evidence, at most, is a case of
incompatibility. For a personality disorder to be declared clinically or medically incurable or
permanent is one thing; for a spouse to refuse or to be reluctant to perform his/her marital
duties is another.

Indeed, we are loath to overturn the findings of the RTC and the CA. More than that, too, the
evidence on record do not square with the existence of psychological incapacity as
contemplated by law and jurisprudence. In the case of Nilo, what brought about the
breakdown of his relationship with Marivi was not necessarily attributable to his so-called
"psychological disorder" but can be imputed to his work and marital stress, and his ordinary
human failings.
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CASE NO. 2 G.R. No. 196419 October 4, 2017


SUBJECT: SALES CASE TOPIC: IMPLIED THIRD DIVISION
WARRANTY
PONENTE: MARITES, J CASE: PILIPINAS MAKRO, NATURE OF
INC. VS. COCO CHARCOAL ACTION:PETITION FOR
PHILIPPINES AND LIM KIM REVIEW ON CERTIORARI
SAN

FACTS:

On 26 November 1999, Makro and respondent Coco Charcoal Phils., Inc. executed a
notarized Deed of Absolute Sale wherein the respondent would sell its parcel of land, with a
total area of 1,000 square meters and covered by a TCT, for the amount of ₱8,500,000.00. On
the same date, Makro entered into another notarized Deed of Absolute Sale with respondent
Lim Kim San for the sale of the latter's land, with a total area of 1,000 square meters and
covered by a TCT, for the same consideration of ₱8,500,000.00.

Coco Charcoal and Lim's parcels of land are contiguous and parallel to each other. Aside from
the technical descriptions of the properties in question, both deeds of sale contained
identical provisions, similar terms, conditions, and warranties.

In December 1999, It was Discovered that 131 square meters of the lot purchased from coco
charcoals and 130 square meters of the lot purchased from kim, has been encroached by
DPWH for its road widening project. Makro informed the representatives of respondent in
order to collect a refund of the purchase price. However, Petitioner failed to collect. This
resulted to the filling of complaint against respondents for collection of refund. the RTC
granted Makro's complaint and ordered respondents to refund the amount corresponding to
the value of the encroached area.

the CA reversed the RTC decision, it ruled that Makro was not entitled to a refund. It
explained that the warranty expressed in Section 4(i)11 of the deeds of sale is similar to the
warranty against eviction set forth under Article 1548 of the Civil Code. As such, the CA
posited that only a buyer in good faith may sue to a breach of warranty against eviction. It
averred that Makro could not feign ignorance of the ongoing road widening project. The
appellate court noted Makro's actual knowledge of the encroachment before the execution
of the sale constitutes its recognition that Coco Charcoal and Lim's warranty against liens,
easements, and encumbrances does not include the respective 131 and 130 square meters
affected by the DPWH project, but covers only the remainder of the property.

ISSUE:

Whether Section 4(i) of the deeds of sale is akin to an implied warranty against eviction.

RULING:

No, the deed of sale is not akin to an implied warranty against eviction, due to non-
compliance with the requisites of implied warranty in order to be enforceable.

What is a warranty? - A warranty is a collateral undertaking in a sale of either real or


personal property, express or implied; that if the property sold does not possess certain
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incidents or qualities, the purchaser may either consider the sale void or claim damages for
breach of warranty. Thus, a warranty may either be express or implied.

Express vs. Implied Warranty - An express warranty pertains to any affirmation of fact or any
promise by the seller relating to the thing, the natural tendency of which is to induce the
buyer to purchase the same. It includes all warranties derived from the language of the
contract, so long as the language is express-it may take the form of an affirmation, a promise
or a representation. On the other hand, an implied warranty is one which the law derives by
application or inference from the nature of transaction or the relative situation or
circumstances of the parties, irrespective of any intention of the seller to create it. In other
words, an express warranty is different from an implied warranty in that the former is found
within the very language of the contract while the latter is by operation of law.

Thus, the CA erred in treating Section 4(i) of the deeds of sale as akin to an implied warranty
against eviction. First, the deeds of sale categorically state that the sellers assure that the
properties sold were free from any encumbrances which may prevent Makro from fully and
absolutely possessing the properties in question. Second, in order for the implied warranty
against eviction to be enforceable, the following requisites must concur: (a) there must be a
final judgment; (b) the purchaser has been deprived of the whole or part of the thing sold;
(c) said deprivation was by virtue of a prior right to the sale made by the vendor; and (d) the
vendor has been summoned and made co-defendant in the suit for eviction at the instance
of the vendee. Evidently, there was no final judgment and no opportunity for the vendors to
have been summoned precisely because no judicial action was instituted.

Further, even if Section 4(i) of the deeds of sale was to be deemed similar to an implied
warranty against eviction, the CA erred in concluding that Makro acted in bad faith. It is true
that the warranty against eviction cannot be enforced if the buyer knew of the risks or
danger of eviction and still assumed its consequences.
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CASE NO. 3 G.R. No. 192602 January 18, 2017


SUBJECT: AGENCY, CASE TOPIC: POWER TO THIRD DIVISION
PARTNERSHIP AND TRUST SUBSTITUTE OF AN AGENT
PONENTE: JARDELEZA, J CASE: SPOUSES MAY S. NATURE OF ACTION:
VILLALUZ and JOHNNY PETITION FOR REVIEW ON
VILLALUZ VS. LAND BANK OF CERTIORARI
THE PHILIPPINES and the
REGISTER OF DEEDS FOR
DAVAO CITY

FACTS:

On 1996, Paula Agbisit, mother of petitioner May S. Villaluz, requested the latter to provide
her with collateral for a loan. May convinced her husband, Johnny Villaluz, to allow Agbisit to
use their land, located in Calinan, Davao City, as collateral.

On March 25, 1996, the Spouses Villaluz executed a Special Power of Attorney in favor of
Agbisit authorizing her to, among others, "negotiate for the sale, mortgage, or other forms of
disposition a parcel of land" and "sign in our behalf all documents relating to the sale, loan or
mortgage, or other disposition of the aforementioned property." It neither specified the
conditions under which the special powers may be exercised nor stated the amounts for
which the subject land may be sold or mortgaged.

On June 19, 1996, Agbisit executed her own Special Power of Attorney, appointing Milflores
Cooperative as attorney-in-fact in obtaining a loan from and executing a real mortgage in
favor of Land Bank. On June 21, 1996, Milflores Cooperative, in a representative capacity,
executed a Real Estate Mortgage in favor of Land Bank in consideration of the P3,000,000
loan. Milflores failed to comply with its obligation to pay the loan.

Thus, Land Bank filed a petition for extra-judicial foreclosure sale with the Office of the Clerk
of Court of Davao City.

The Spouses Villaluz filed a complaint with the RTC of Davao City seeking the annulment of
the foreclosure sale. The question presented before the RTC was whether Agbisit could have
validly delegated her authority as attorney-in-fact to Milflores Cooperative.The RTC held that
the delegation was valid since the Special Power of Attorney executed by the Spouses Villaluz
had no specific prohibition against Agbisit appointing a substitute.
CA affirmed.

ISSUE:

WHETHER AN AGENT HAS THE POWER TO APPOINT A SUBSTITUTE.

RULING:

YES, The law creates a presumption that an agent has the power to appoint a substitute.

When can an agent appoint a substitute? - Articles 1892 and 1893 of the Civil Code provide
the rules regarding the appointment of a substitute by an agent:
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Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from
doing so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person
appointed was notoriously incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may
furthermore bring an action against the substitute with respect to the obligations which the
latter has contracted under the substitution.

The law creates a presumption that an agent has the power to appoint a substitute. - The
law creates a presumption that an agent has the power to appoint a substitute. The
consequence of the presumption is that, upon valid appointment of a substitute by the
agent, there ipso jure arises an agency relationship between the principal and the substitute,
i.e., the substitute becomes the agent of the principal. As a result, the principal is bound by
the acts of the substitute as if these acts had been performed by the principal's appointed
agent. Concomitantly, the substitute assumes an agent's obligations to act within the scope
of authority, to act in accordance with the principal's instructions, and to carry out the
agency, among others. In order to make the presumption inoperative and relieve himself
from its effects, it is incumbent upon the principal to prohibit the agent from appointing a
substitute.

Although the law presumes that the agent is authorized to appoint a substitute, it also
imposes an obligation upon the agent to exercise this power conscientiously. To protect the
principal, Article 1892 allocates responsibility to the agent for the acts of the substitute when
the agent was not expressly authorized by the principal to appoint a substitute; and, if so
authorized but a specific person is not designated, the agent appoints a substitute who is
notoriously incompetent or insolvent. In these instances, the principal has a right of action
against both the agent and the substitute if the latter commits acts prejudicial to the
principal.

The case of Escueta v. Lim illustrates the prevailing rule. In that case, the father, through a
special power of attorney, appointed his daughter as his attorney-in-fact for the purpose of
selling real properties. The daughter then appointed a substitute or sub-agent to sell the
properties. After the properties were sold, the father sought to nullify the sale effected by
the subagent on the ground that he did not authorize his daughter to appoint a subagent.
We refused to nullify the sale because it is clear from the special power of attorney executed
by the father that the daughter is not prohibited from appointing a substitute. Applying
Article 1892, we held that the daughter "merely acted within the limits of the authority given
by her father, but she will have to be 'responsible for the acts of the sub-agent,' among
which is precisely the sale of the subject properties in favor of respondent."

In the present case, the Special Power of Attorney executed by the Spouses Villaluz contains
no restrictive language indicative of an intention to prohibit Agbisit from appointing a
substitute or sub-agent. Thus, we agree with the findings of the CA and the RTC that Agbisit's
appointment of Milflores Cooperative was valid.
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CASE NO. 4 G.R. No. 212375 January 25, 2017


SUBJECT: TORTS AND CASE TOPIC: TEMPERATE SECOND DIVISION
DAMAGES DAMAGES
PONENTE: PERALTA, J CASE: KABISIG REAL WEALTH NATURE OF ACTION:
DEV., INC. and FERNANDO C. PETITION FOR REVIEW ON
TIO VS. YOUNG BUILDERS CERTIORARI
CORPORATION

FACTS:

On April 2001, Kabisig Real Wealth Dev., Inc., through Ferdinand Tio, contracted the services
of Young Builders Corporation to supply labor, tools, equipment, and materials for the
renovation of its building in Cebu City. Young Builders then finished the work in September
2001 and billed Kabisig. However, despite numerous demands, Kabisig failed to pay. It
contended that no written contract was ever entered into between the parties and it was
never informed of the estimated cost of the renovation. Thus, Young Builders filed an action
for Collection of Sum of Money against Kabisig.

On July 31, 2008, the RTC of Cebu City rendered a decision finding for Young Builders. The CA
affirmed the ruling of the RTC.

ISSUE:

Whether Kabisig is liable to Young Builders for damages.

RULING:

Yes, Young Builders is entitled to damages, in the form of temperate damages.

Actual or compensatory damages - the appellate court aptly reduced the amount of
damages awarded by the RTC. Under Article 2199 of the Civil Code, actual or compensatory
damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained.
They proceed from a sense of natural justice and are designed to repair the wrong that has
been done, to compensate for the injury inflicted. They either refer to the loss of what a
person already possesses (dano emergente ), or the failure to receive as a benefit that which
would have pertained to him (lucro cesante ), as in this case.

How can an injured party recover damages? - For an injured party to recover actual
damages, however, he is required to prove the actual amount of loss with reasonable degree
of certainty premised upon competent proof and on the best evidence available. The burden
of proof is on the party who would be defeated if no evidence would be presented on either
side. He must establish his case by a preponderance of evidence, which means that the
evidence adduced by one side is superior to that of the other. In other words, damages
cannot be presumed and courts, in making an award, must point out specific facts that could
afford a basis for measuring compensatory damages. A court cannot merely rely on
speculations, conjectures, or guesswork as to the fact and amount of damages as well as
hearsay or uncorroborated testimony whose truth is suspect. A party is entitled to adequate
compensation only for such pecuniary loss actually suffered and duly proved. Indeed, to
recover actual damages, the amount of loss must not only be capable of proof but must
actually be proven with a reasonable degree of certainty, premised upon competent proof or
best evidence obtainable of its actual amount.
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Here, the evidence reveals that Young Builders failed to submit any competent proof of the
specific amount of actual damages being claimed. The documents submitted by Young
Builders either do not bear the name of Kabisig or Tio, their conformity, or signature, or do
not indicate in any way that the amount reflected on its face actually refers to the renovation
project.

In the absence of competent proof on the amount of actual damages, the courts allow the
party to receive temperate damages. - Notwithstanding the absence of sufficient proof,
Young Builders still deserves to be recompensed for actually completing the work. In the
absence of competent proof on the amount of actual damages, the courts allow the party to
receive temperate damages. Temperate or moderate damages, which are more than nominal
but less than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case, be
proved with certainty.
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CASE NO. 5 G.R. No. 206037 March 13, 2017


SUBJECT: OBLIGATIONS AND CASE TOPIC: CONSIGNATION FIRST DIVISION
CONTRACTS
PONENTE: DEL CASTILLO, J CASE: PHILIPPINE NATIONAL NATURE OF ACTION:
BANK VS. LILIBETH CHAN PETITION FOR REVIEW ON
CERTIORARI

FACTS:

Respondent owns a three-story commercial building located in Paco, Manila. On May 10,
2000, she leased said commercial building to petitioner PNB for a period of five years. When
the lease expired, PNB continued to occupy the property on a month-to-month basis with a
monthly rental of ₱116,788.44. PNB vacated the premises on March 23, 2006. Respondent
obtained a ₱l,500,000.00 loan from PNB which was secured by a Real Estate Mortgage
constituted over the leased property.

The amount of the respondent's loan was subsequently increased to ₱7,500,000.00.


Consequently, PNB and the respondent executed an "Amendment to the Real Estate
Mortgage by Substitution of Collateral" on March 31, 2004, where the mortgage over the
leased property was released and substituted by a mortgage over a parcel of land located in
Paco, Manila.

On August 26, 2005, respondent filed a Complaint for Unlawful Detainer before the MeTC
Manila against PNB, alleging that the latter failed to pay its monthly rentals from October
2004 until August 2005.

The MeTC ordered PNB to pay respondent accrued rentals. The RTC affirmed the MeTC. The
CA pointed out that PNB' s entitlement to the rental proceeds in the amount of
₱1,348,643.92 is dependent on whether there is a deficiency in payment after the
foreclosure sale. It, however, found no sufficient evidence on record that the amount of
respondent's liability as of October 31, 2006 is indeed ₱18,016,300.71, as PNB claims. As
regards the payment of legal interest, the CA noted that PNB merely opened a non-drawing
savings account wherein it deposited the monthly rentals from January 16, 2005 to February
2006. Such deposit of the rentals in a savings account, however, is not the consignation
contemplated by law. Thus, the CA found PNB liable to pay the 6% legal interest rate
prescribed under Article 2209 of the Civil Code for having defaulted in the payment of its
monthly rentals to the respondent

ISSUE:

Whether there is delay in the payment of rentals to respondent, making it liable for legal
interest

RULING:

Yes, there is delay, since, PNB clearly defaulted in the payment of monthly rentals to the
respondent for the period January 16, 2005 up to March 23, 2006, when it finally vacated the
leased property.
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What is Consignation? - Consignation is the act of depositing the thing due with the court or
judicial authorities whenever the creditor cannot accept or refuses to accept payment. It
generally requires a prior tender of payment."

Under Article 1256 of the Civil Code, consignation alone is sufficient even without a prior
tender of payment a) when the creditor is absent or unknown or does not appear at the
place of payment; b) when he is incapacitated to receive the payment at the time it is due; c)
when, without just cause, he refuses to give a receipt; d) when two or more persons claim
the same right to collect; and e) when the title of the obligation has been lost.

Requirements for Consignation to be valid - For consignation to be valid, the debtor must
comply with the following requirements under the law:
1) there was a debt due;
2) valid prior tender of payment, unless the consignation was made because of some legal
cause provided in Article 1256;
3) previous notice of the consignation has been given to the persons interested in the
performance of the obligation;
4) the amount or thing due was placed at the disposal of the court; and,
5) after the consignation had been made, the persons interested were notified thereof:

"Failure in any of the requirements is enough ground to render a consignation ineffective."

In the present case, the records show that: first, PNB had the obligation to pay respondent a
monthly rental of ₱l16,788.44, amounting to ₱l,348,643.92, from January 16, 2005 to March
23, 2006; second, PNB had the option to pay the monthly rentals to respondent or to apply
the same as payment for respondent's loan with the bank, but PNB did neither; third, PNB
instead opened a non-drawing savings account at its Paco Branch under Account No. 202-
565327-3, where it deposited the subject monthly rentals, due to the claim of Chua of the
same right to collect the rent; and fourth, PNB consigned the amount of Pl,348,643.92 with
the Office of the Clerk of Court of the MeTC of Manila on May 31, 2006.

Note that PNB's deposit of the subject monthly rentals in a non-drawing savings account is
not the consignation contemplated by law, precisely because it does not place the same at
the disposal of the court. Consignation is necessarily judicial; it is not allowed in venues
other than the courts. Consequently, PNB's obligation to pay rent for the period of January
16, 2005 up to March 23, 2006 remained subsisting, as the deposit of the rentals cannot be
considered to have the effect of payment.

It is important to point out that PNB's obligation to pay the subject monthly rentals had
already fallen due and demandable before PNB consigned the rental proceeds with the
MeTC on May 31, 2006. Although it is true that consignment has a retroactive effect, such
payment is deemed to have been made only at the time of the deposit of the thing in court
or when it was placed at the disposal of the judicial authority. Based on these premises,
PNB's payment of the monthly rentals can only be considered to have been made not earlier
than May 31, 2006.

Given its belated consignment of the rental proceeds in court, PNB clearly defaulted in the
payment of monthly rentals to the respondent for the period January 16, 2005 up to March
23, 2006, when it finally vacated the leased property, As such, it is liable to pay interest in
accordance with Article 2209 of the Civil Code.
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CASE NO. 6 G.R. No. 211170 July 3, 2017


SUBJECT: PROPERTY CASE TOPIC: BUILDER IN SECOND DIVISION
GOOD FAITH
PONENTE: PERALTA, J CASE: SPOUSES MAXIMO NATURE OF ACTION:
ESPINOZA and WINIFREDA PETITION FOR REVIEW ON
DE VERA VS.SPOUSES CERTIORARI
ANTONIO MAYANDOC and
ERLINDA CAYABYAB
MAYANDOC

FACTS:

The parcel of land owned by decedent was divided among his heirs. Pastora Espinoza, one of
the heirs, executed a Deed of Sale conveying her share of the same property to respondents
and Leopoldo Espinoza. However, on that same date, a fictitious deed of sale was executed
by petitioner Maximo's father, Domingo Espinoza, conveying the three-fourth (3/4) share in
the estate in favor of respondent Erlinda Cayabyab Mayandoc's parents.On July 9, 1977, a
fictitious deed of sale was executed by Nemesio Cayabyab, Candida Cruz, petitioners-spouses
Maximo Espinoza and Winifreda De Vera and Leopoldo Espinoza over the land in favor of
respondents- spouses Antonio and Erlinda Mayandoc; thus, TCT No. 37403 was issued under
the names of the latter.

As a result of the foregoing, petitioners filed an action for annulment of document with
prayer for the nullification of TCT No. 37403 and, on August 16, 1999, the RTC, Branch 40,
Dagupan City rendered a Decision in favor of petitioners. Respondents appealed, but the CA,
in its Decision dated February 6, 2004, affirmed the RTC with modifications that the award of
attorney's fees and litigation expenses be deleted for lack of factual basis.

Thus, respondents filed a complaint for reimbursement for useful expenses, pursuant to
Articles 448 and 546 of the New Civil Code, alleging that the house in question was built on
the disputed land in good faith sometime in 1995 and was finished in 1996. According to
respondents, they then believed themselves to be the owners of the land with a claim of title
thereto and were never prevented by the petitioners in constructing the house. They added
that the new house was built after the old house belonging to respondent Erlinda
Mayandoc's father was torn down due to termite infestation and would not have
reconstructed the said house had they been aware of the defect in their title. As such, they
claimed that they are entitled to reimbursement of the construction cost of the house in the
amount of ₱800,000.00. They further asserted that at the time that their house was
constructed, they were possessors in good faith, having lived over the land in question for
many years and that petitioners questioned their ownership and possession only in 1997
when a complaint for nullity of documents was filed by the latter.

ISSUE:

Whether respondents are builders in good faith.

RULING:

Yes, The RTC, as affirmed by the CA, found respondents to be builders in good faith.
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When is a person a builder in good faith? - To be deemed a builder in good faith, it is


essential that a person asserts title to the land on which he builds, i.e., that he be a
possessor in the concept of owner, and that he be unaware that there exists in his title or
mode of acquisition any flaw which invalidates it. The RTC, as affirmed by the CA, found
respondents to be builders in good faith, thus:

The plaintiffs are builders in good faith. As asserted by plaintiffs and not rebutted by
defendants, the house of plaintiffs was built on the lot owned by defendants in 1995. The
complaint for nullity of documents and reconveyance was filed in 1997, about two years
after the subject conjugal house was constructed. Defendants-spouses believed that at the
time when they constructed their house on the lot of defendants, they have a claim of title.
Art. 526, New Civil Code, states that a possessor in good faith is one who has no knowledge
of any flaw or defect in his title or mode of acquisition. This determines whether the builder
acted in good faith or not. Surely, plaintiffs would not have constructed the subject house
which plaintiffs claim to have cost them ₱800,000.00 to build if they knew that there is a flaw
in their claim of title. Nonetheless, Art. 527, New Civil Code, states clearly that good faith is
always presumed, and upon him who alleges bad faith on the part of the possessor lies the
burden of proof. The records do not show that the burden of proof was successfully
discharged by the defendants.

Plaintiffs are in good faith in building their conjugal house in 1995 on the lot they believed to
be their own by purchase. They also have in their favor the legal presumption of good faith.
It is the defendants who had the burden to prove otherwise. They failed to discharge such
burden until the Regional Trial Court, Br. 40, Dagupan City, promulgated an adverse ruling in
Civil Case No. 97-0187-D. Thus, Art. 448 comes in to protect the plaintiffs-owners of their
improvement without causing injustice to the lot owner. Art. 448 comes in to protect the
plaintiff-owners of their improvement without causing injustice to the lot owner. Art. 448
provided a just resolution of the resulting "forced-ownership" by giving the defendants lot
owners the option to acquire the conjugal house after payment of the proper indemnity or
to oblige the builder plaintiffs to pay for the lot. It is the defendants-lot owners who are
authorized to exercise the option as their right is older, and under the principle of accession
where the accessory (house) follows the principal.

The settled rule is bad faith should be established by clear and convincing evidence since
the law always presumes good faith. - In this particular case, petitioners were not able to
prove that respondents were in bad faith in constructing the house on the subject land. Bad
faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong. It means breach of a known duty
through some motive, interest or ill will that partakes of the nature of fraud. For anyone who
claims that someone is in bad faith, the former has the duty to prove such. Hence,
petitioners err in their argument that respondents failed to prove that they are builders in
good faith in spite of the findings of the RTC and the CA that they are.
13

CASE NO. 7 G.R. No. 202088 March 8, 2017


SUBJECT: AGENCY CASE TOPIC: IMPLIED TRUST SECOND DIVISION
PARTNERSHIP AND TRUST
PONENTE: PERALTA, J CASE: MANUEL L. BAUTISTA NATURE OF ACTION:
VS. MARGARITO L. BAUTISTA PETITION FOR REVIEW ON
CERTIORARI

FACTS:

The Bautista siblings established a lending business through a common fund from the
proceeds of the sale of a parcel of coconut land they inherited from their mother. Through
the said lending business, the siblings acquired several real properties in San Pablo City.

On March 2, 1998, Amelia V. Mendoza (Amelia) obtained a loan in the amount of


P690,000.00 from Florencia bautista, and secured the same with a real estate mortgage over
a parcel of land she owned situated in San Pablo City.

On November 28, 2002, Amelia allegedly sold the subject property to Margarito through
a Kasulatan ng Bilihang Tuluyan for ₱500,000.00 and, likewise, cancelled the ₱l,085,000.00
loan through another "Cancellation and Discharge of Mortgage.

Florencia filed a petition for the issuance of a second owner's duplicate of TCT before the
RTC of San Pablo City, Branch, She alleged that she was the mortgagee of the subject
property, and that she could not locate, despite diligent search, the owner's duplicate title in
her possession, which she misplaced sometime in September 2002. Florencia also executed a
Special Power of Attorney in favor of Margarito to represent her in the proceedings. The RTC
granted the petition and TCT No. T-59882 was later issued in the name of Margarito. On
January 12, 2004, petitioners registered an Adverse Claim over the Sta. Monica property,
which was annotated on TCT No. T-59882. Petitioners subsequently instituted a complaint for
partition.

Petitioners averred that Margarito and the others refused to heed their oral and written
demands for the partition of the properties they co-owned, which included the Sta. Monica
property.

The RTC ruled in favor of the petitioners and declared, among other things, that the Sta.
Monica property was commonly owned by the siblings. The CA concluded that petitioners
failed to establish that they are coowners of the Sta. Monica property. It held that the TCT
under Margarito's name was an indefeasible and incontrovertible title to the property and
has more probative weight than the blank Kasulatan adduced by the petitioners.
Consequently, petitioners' action for partition and accounting cannot be acted upon because
they failed to prove that they are co-owners of the Sta. Monica property.

ISSUE:

Whether there is implied trust involved in TCT No. T-59882.

RULING:
14

Yes, there is implied trust and the principle that a trustee who puts a certificate of
registration in his name cannot repudiate the trust by relying on the registration is one of the
well-known limitations upon a title.

The principle that a trustee who puts a certificate of registration in his name cannot
repudiate the trust by relying on the registration is one of the well-known limitations upon
a title. - As for the TCT No. T-59882 in the name of Margarito, like in the case at bar, although
a certificate of title is the best proof of ownership of a piece of land, the mere issuance of
the same in the name of any person does not foreclose the possibility that the real property
may be under co-ownership with persons not named in the certificate or that the registrant
may only be a trustee or that other parties may have acquired interest subsequent to the
issuance of the certificate of title. The principle that a trustee who puts a certificate of
registration in his name cannot repudiate the trust by relying on the registration is one of the
well-known limitations upon a title.

When is there an implied trust? - There is an implied trust when a property is sold and the
legal estate is granted to one party but the price is paid by another for the purpose of having
the beneficial interest of the property. This 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.

A trust, which derives its strength from the confidence one reposes on another especially
between families, does not lose that character simply because of what appears in a legal
document. From the foregoing, this Court finds that an implied resulting trust existed among
the parties. The pieces of evidence presented demonstrate their intention to acquire the Sta.
Monica property in the course of their business, just like the other properties that were also
the subjects of the partition case and the compromise agreement they entered into.
Although the Sta. Monica property was titled under the name of Margarito, the surrounding
circumstances as to its acquisition speak of the intent that the equitable or beneficial
ownership of the property should belong to the Bautista siblings.

Inevitably, the RTC's Order of partition of the Sta. Monica property was erroneously set aside
by the CA and this Court is convinced that petitioners satisfactorily established that they are
co-owners of the property and are entitled to the reliefs prayed for.
15

CASE NO. 8 G.R. No. 194272 February 15, 2017


SUBJECT: OBLIGATIONS AND CASE TOPIC: SOLIDARY THIRD DIVISION
CONTRACTS OBLIGATION
PONENTE: JARDELEZA, J CASE: SPOUSES AMADO O. NATURE OF ACTION:
IBAÑEZ VS. JAMES HARPER PETITION FOR REVIEW ON
CERTIORARI

FACTS:

On October 1996, spouses Ibañez borrowed from Francisco, Consuelo and Muñoz, the
amount of P1,300,000, payable in three months, with interest at the rate of 3% a month.

On October 14, 1996, the spouses Ibañez issued a promissory note binding themselves
jointly and severally to pay Ma. Consuelo and Consuelo the loan amount with interest. As
security, on October 17, 1996, the spouses Ibañez executed a Deed of Real Estate
Mortgage in favor of Ma. Consuelo and Consuelo over a parcel of land and its improvements.

On September 23, 1997, alleging that the conditions of the mortgage have been violated
since November 17, 1996 and that all check payments were dishonored by the drawee, Ma.
Consuelo and Consuelo applied for foreclosure of the real estate mortgage.

On December 8, 1997, the spouses Ibañez filed in the RTC of Manila a complaint. The
Complaint alleged that there is no reason to proceed with the foreclosure because the real
estate mortgage was novated. They prayed that the public auction of the property be
enjoined and that Francisco, Ma. Consuelo and Consuelo be held liable for actual and
compensatory, moral and exemplary damages, as well as attorney's fees and costs of suit. On
December 12, 1997, the spouses Ibañez filed an Amended Complaint.

On July 31, 2006, the spouses Ibañez filed a Motion to Adopt/Consider the Judicial
Compromise Agreement dated June 17, 2002 Designated as "Hatol" as the Final and
Executory Decision. The motion prayed that since all the stipulations in the Amended
Compromise Agreement have been complied with to the entire satisfaction of all the
contending parties, the Compromise Agreement should be considered and adopted as the
trial court's decision on the merits. The motion was signed by Amado Ibañez with the
conformity of Consuelo, signing for herself and Ma. Consuelo, Atty. Anave and the Branch
Clerk of Court were notified of the hearing.

The RTC granted the motion. In its motion for reconsideration, Atty. Bermejo argued that the
trial court erred in holding that all the stipulations in the Hatol have been complied with to
the satisfaction of all the parties. According to James, the spouses Ibañez made it appear
that only Ma. Consuela and Consuela remained as parties after Francisco's death. Since
James, as Francisco's representative, was excluded from the Deed of Assignment, the
Amended Compromise Agreement could not have been completely complied with. However,
the RTC stood its ground.

ISSUE:

Whether there is a declaration or stipulation in the hatol and compromise agreement that
would show that created obligation is solidary.

RULING:
16

No, a solidary obligations cannot be inferred lightly. They must be positively and clearly
expressed.

When is there a Solidary obligation - As correctly identified by the CA, the Amended
Compromise Agreement clearly refers to the spouses Ibañez as plaintiffs and Francisco,
Consuelo and Ma. Consuelo as the defendants they covenanted to pay. There is nothing in
the Hatol, and the Amended Compromise Agreement it is based on, which shows a
declaration that the obligation created was solidary.

In any case, solidary obligations cannot be inferred lightly. They must be positively and
clearly expressed. Articles 1207 and 1208 of the Civil Code provide:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and
the same obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the prestations. There
is a solidary liability only when the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity.

Art. 1208. If from the law, or the nature or the wording of the obligations to which the
preceding article refers the contrary does not appear, the credit or debt shall be presumed to
be divided into as many equal shares as there are creditors or debtors, the credits or debts
being considered distinct from one another, subject to the Rules of Court governing the
multiplicity of suits.

In this case, given that solidarity could not be inferred from the agreement, the presumption
under the law applies-the obligation is joint.

What is a joint obligation? - As defined in Article 1208, a joint obligation is one where there
is a concurrence of several creditors, or of several debtors, or of several debtors, or of several
creditors and debtors, by virtue of which each of the creditors has a right to demand, and
each of the debtors is bound to render compliance with his proportionate part of the
prestation which constitutes the object of the obligation. Each debtor answers only for a part
of the whole liability and to each obligee belongs only a part of the correlative rights as it is
only in solidary obligations that payment made to any one of the solidary creditors
extinguishes the entire obligation. This means that Francisco, Ma. Consuelo and Consuelo are
each entitled to equal shares in the ₱3,000,000 agreed upon in the Amended Compromise
Agreement and that payment to Consuelo and Ma. Consuelo will not have the effect of
discharging the obligation with respect to Francisco.

CASE NO. 9 G.R. No. 212038 February 8, 2017


17

SUBJECT: TORTS AND CASE TOPIC: MORAL SECOND DIVISION


DAMAGES DAMAGES
PONENTE: PERALTA, J CASE: SPOUSES JESUS NATURE OF ACTION:
FERNANDO and ELIZABETH S. PETITION FOR REVIEW ON
FERNANDO VS. NORTHWEST CERTIORARI
AIRLINES, INC.

FACTS:

The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest
Airlines, Inc. and are holders of Elite Platinum World Perks Card, the highest category given
to frequent flyers of the carrier.

The Fernandos initiated the filing of the instant case which arose from two (2) separate
incidents: first, when Jesus Fernando arrived at Los Angeles (LA) Airport on December 20,
2001; second, when the Fernandos were to depart from the LA Airport on January 29, 2002.
On April 30, 2002, a complaint for damages was instituted by the Fernandos against
Northwest before the RTC, Branch 97, Quezon City.

Hence, this petition. In their petition, the Fernandos contended that it was the personal
misconduct, gross negligence and the rude and abusive attitude of Northwest employees
Linda Puntawongdaycha and Linda Tang which subjected them to indignities, humiliation and
embarrassment. The attitude of the aforesaid employees was wanton and malevolent
allegedly amounting to fraud and bad faith.

The wrong information given by Linda Puntawongdaycha aroused doubts and suspicions on
Jesus Fernando's travel plans. The latter was then subjected to two (2) hours of questioning
which allegedly humiliated him. He was even suspected of being an "illegal alien". The
negligence of Linda Puntawongdaycha was allegedly so gross and reckless amounting to
malice or bad faith.

As to the second incident, the Fernandos belied the accusation of Northwest that they did
not present any tickets. They presented their electronic tickets which were attached to their
boarding passes. If they had no tickets, the personnel at the check-in counter would have not
issued them their boarding passes and baggage claim stubs. That's why they could not
understand why the coupon-type ticket was still demanded by Northwest. The RTC ruled in
their favor. The CA affirmed the ruling.

ISSUE:

Whether northwest airlines is liable for moral damages.

RULING:

Yes, the social and financial standing of a claimant may be considered in claiming moral
damages.

What is moral damages? - Under Article 2220 of the Civil Code of the Philippines, an award
of moral damages, in breaches of contract, is in order upon a showing that the defendant
acted fraudulently or in bad faith. Clearly, in this case, the Fernandos are entitled to an
award of moral damages. The purpose of awarding moral damages is to enable the injured
18

party to obtain means, diversion or amusement that will serve to alleviate the moral
suffering he has undergone by reason of defendant's culpable action.

We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest,
the award of "some moral damages" was recognized. Both courts believed that considering
that the Fernandos are good clients of Northwest for almost ten (10) years being Elite
Platinum World Perks Card holders, and are known in their business circle, they should have
been given by Northwest the corresponding special treatment. They own hotels and a chain
of apartelles in the country, and a parking garage building in Indiana, USA. From this
perspective, We adopt the said view. We, thus, increase the award of moral damages to the
Fernandos in the amount of ₱3,000,000.00.

The social and financial standing of a claimant - As held in Kierulf v. Court of Appeals, the
social and financial standing of a claimant may be considered if he or she was subjected to
contemptuous conduct despite the offender's knowledge of his or her social and financial
standing.

In Trans World Airlines v. Court of Appeals, this Court considered the social standing of the
aggrieved passenger:

At the time of this unfortunate incident, the private respondent was a practicing lawyer, a
senior partner of a big law firm in Manila. He was a director of several companies and was
active in civic and social organizations in the Philippines. Considering the circumstances of
this case and the social standing of private respondent in the community, he is entitled to the
award of moral and exemplary damages. This award should be reasonably sufficient to
indemnify private respondent for the humiliation and embarrassment that he suffered and
to serve as an example to discourage the repetition of similar oppressive and discriminatory
acts.

CASE NO. 10 G.R. No. 193068 February 1, 2017


19

SUBJECT: OBLIGATIONS AND CASE TOPIC: NOVATION SECOND DIVISION


CONTRACTS
PONENTE: LEONEN, J CASE: DBP VS. STA. INES NATURE OF ACTION:
MELALE FOREST PRODUCTS PETITION FOR REVIEW ON
CORPORATION CERTIORARI

FACTS:

In 1977, Galleon, was organized to operate a liner service between the Philippines and its
trading partners." Galleon's major stockholders were respondents and the Philippine
National Construction Corporation (PNCC). Galleon experienced financial difficulties and had
to take out several loans from different sources such as foreign financial institutions, its
shareholders, and other entities "with whom it had ongoing commercial relationships."

DBP guaranteed Galleon's foreign loans. In return, Galleon and its stockholders executed a
Deed of Undertaking on October 10, 1979 and obligated themselves to guarantee DBP's
potential liabilities. To secure DBP's guarantee, Galleon undertook to secure a first mortgage
on its five new vessels and two second-hand vessels. However, despite the loans extended to
it, "[Galleon's] financial condition did not improve."

On August 10, 1981, pursuant to Letter of Instructions No. 1155, Galleon's stockholders,
represented by Cuenca, and NDC, through its then Chairman of the Board of Directors,
Roberto V. Ongpin (Ongpin) entered into a Memorandum of Agreement, where NDC and
Galleon undertook to prepare and sign a share purchase agreement covering 100% of
Galleon's equity. The purchase price was to be paid after five years from the execution of the
share purchase agreement.

The share purchase agreement also provided for the release of Sta. Ines, Cuenca, Tinio and
Construction Development Corporation of the Philippines from the personal counter-
guarantees they issued in DBP's favor under the Deed of Undertaking.

Acting as Galleon's guarantor, DBP paid off Galleon's debts to its foreign bank creditor and,
on January 25, 1982, pursuant to the Deed of Undertaking, Galleon executed a mortgage
contract over seven of its vessels in favor of DBP. NDC took over Galleon's operations "even
prior to the signing of a share purchase agreement.”

However, despite NDC's takeover, the share purchase agreement was never formally
executed. On February 10, 1982, or barely seven months from the issuance of Letter of
Instructions No. 1155, President Marcos issued Letter of Instructions No. 1195.

On September 16, 2003, the Regional Trial Court upheld the validity of Letter of Instructions
No. 1155 and the Memorandum of Agreement executed by NDC and Galleon's stockholders,
pursuant to Letter of Instructions No. 1155. As regards NDC's argument that Sta. Ines,
Cuenca, Tinio, Cuenca Investment, and Universal Holdings had no basis to compel it to pay
Galleon's shares of stocks because no share purchase agreement was executed, the Regional
Trial Court held that the NDC was in estoppel since it prevented the execution of the share
purchase agreement and had admitted to being Galleon's owner. The Regional Trial Court
also ruled that Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal Holdings' liability
to DBP under the Deed of Undertaking had been extinguished due to novation, with NDC
replacing them and PNCC as debtors.
20

ISSUE:

Whether the MOA novated the deed of undertaking executed between DBP and respondents

RULING:

No, there is no novation, since, there was no animus novandi between DBP and respondents.

What is Novation? - Novation is a mode of extinguishing an obligation by "changing its


object or principal conditions, substituting the person of the debtor or subrogating a third
person in the rights of the creditor." While 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, it must be with the consent of the creditor.

When does novation have legal effect? - Testate Estate of Mota v. Serra instructs that for
novation to have legal effect, the creditor must expressly consent to the substitution of the
new debtor:

It should be noted that in order to give novation its legal effect, the law requires that the
creditor should consent to the substitution of a new debtor. This consent must be given
expressly for the reason that, since novation extinguishes the personality of the first debtor
who is to be substituted by new one, it implies on the part of the creditor a waiver of the
right that he had before the novation, which waiver must be express under the principle that
renuntiatio non prcesumitur, recognized by the law in declaring that a waiver of right may
not be performed unless the will to waive is indisputably shown by him who holds the right.

The Court of Appeals erred when it ruled that DBP was privy to the Memorandum of
Agreement since Ongpin was concurrently Governor of DBP and chairman of NDC Board of
Directors at the time the Memorandum of Agreement was signed.

Novation is never presumed. - Aside from Ongpin being the concurrent head of DBP and
NDC at the time the Memorandum of Agreement was executed, there was no proof
presented that Ongpin was duly authorized by the DBP to give consent to the substitution by
NDC as a co-guarantor of Galleon's debts. Ongpin is not DBP, therefore, it is wrong to assume
that DBP impliedly gave its consent to the substitution simply by virtue of the personality of
its Governor.

Novation is never presumed. The animus novandi, whether partial or total, "must appear by
express agreement of the parties, or by their acts which are too clear and unequivocal to be
mistaken."

There was no such animus novandi in the case at bar between DBP and respondents, thus,
respondents have not been discharged as Galleon's co-guarantors under the Deed of
Undertaking and they remain liable to DBP.

CASE NO. 11 G.R. No. 211175 January 18, 2017


SUBJECT: SALES CASE TOPIC: IMPLIED SECOND DIVISION
WARRANTY
21

PONENTE: MENDOZA, J CASE: ATTY. REYES G. NATURE OF ACTION:


GEROMO, FLORENCIO PETITION FOR REVIEW ON
BUENTIPO VS. LA PAZ CERTIORARI
HOUSING AND
DEVELOPMENT
CORPORATION

FACTS:

Petitioners acquired individual housing units of Adelina 1-A Subdivision from La Paz, through
GSIS financing, After more than two (2) years of occupation, cracks started to appear on the
floor and walls of their houses. The petitioners, through the President of the Adelina 1-A
Homeowners Association, requested La Paz, being the owner/developer, to take remedial
action. The petitioners claimed that despite the retaining wall, the condition of their housing
units worsened as the years passed. When they asked La Paz to shoulder the repairs, it
denied their request, explaining that the structural defects could have been caused by the
1990 earthquake and the renovations/improvements introduced to the units that
overloaded the foundation of the original structures.

Geromo filed a complaint for breach of contract with damages against La Paz and GSIS before
the HLURB.

The HLURB Arbiter found La Paz liable for the structural damage on the petitioners' housing
units. The HLURB Board of Commissioners set aside the Arbiter's decision, explaining that
there was no concrete evidence presented to prove that the houses of the petitioners were
indeed damaged by the failure of La Paz to comply with the building standards or easement
requirements.

ISSUE:

whether La Paz should be held liable for the structural defects on its implied warranty against
hidden defects.

RULING:

YES, la paz is liable for the structural defects

Implied warranty on hidden defects - Under the Civil Code, the vendor shall be answerable
for warranty against hidden defects on the thing sold under the following circumstances:

Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the
thing sold may have, should they render it unfit for the use for which it is intended, or should
they diminish its fitness for such use to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have given a lower price for it; but said
vendor shall not be answerable for patent defects or those which may be visible, or for those
which are not visible if the vendee is an expert who, by reason of this trade or profession,
should have known them.

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the
thing sold, even though he was not aware thereof.
22

This provision shall not apply if the contrary has been stipulated and the vendor was not
aware of the hidden faults or defects in the thing sold.

When is implied warranty on hidden defects applicable? - For the implied warranty against
hidden defects to be applicable, the following conditions must be met:
a. Defect is Important or Serious
i. The thing sold is unfit for the use which it is intended
ii. Diminishes its fitness for such use or to such an extent that the buyer would not have
acquired it had he been aware thereof
b. Defect is Hidden
c. Defect Exists at the time of the sale
d. Buyer gives Notice of the defect to the seller within reasonable time

Here, the petitioners observed big cracks on the walls and floors of their dwellings within
two years from the time they purchased the units. The damage in their respective houses
was substantial and serious. They reported the condition of their houses to La Paz, but the
latter did not present a concrete plan of action to remedy their predicament. They also
brought up the issue of water seeping through their houses during heavy rainfall, but again
La Paz failed to properly address their concerns. The structural cracks and water seepage
were evident indications that the soil underneath the said structures could be unstable.
Verily, the condition of the soil would not be in the checklist that a potential buyer would
normally inquire about from the developer considering that it is the latter's prime obligation
to ensure suitability and stability of the ground.

Purpose of P.D. No. 957 - One of the purposes of P.D. No. 957, also known as The Subdivision
and Condominium Buyers' Protective Decree, is to discourage and prevent unscrupulous
owners, developers, agents, and sellers from reneging on their obligations and
representations to the detriment of innocent purchasers.

Considering the nature of the damage sustained by the structures, even without the findings
of the local governmental agency and the MGB-DENR, La Paz is still liable under the doctrine
of res ipsa loquitur.

CASE NO. 12 G.R. No. 219509 January 18, 2017


SUBJECT: LEASE CASE TOPIC: CONTRACT OF SECOND DIVISION
LEASE
23

PONENTE: MENDOZA, J CASE: ILOILO JAR NATURE OF ACTION:


CORPORATION VS. PETITION FOR REVIEW ON
COMGLASCO CORPORATION CERTIORARI
AGUILA GLASS

FACTS:

On August 16, 2000, petitioner, as lessor, and respondent Comglasco, as lessee, entered into
a lease contract over a portion of a warehouse building located on a parcel of land in La Paz
District, Iloilo City.

The term of the lease was for a period of three (3) years or until August 15, 2003. On
December 1, 2001, Comglasco requested for the pre-termination of the lease effective on
the same date. Iloilo Jar, however, rejected the request on the ground that the pre-
termination of the lease contract was not stipulated therein. Despite the denial of the
request for pre-termination, Comglasco still removed all its stock, merchandise and
equipment from the leased premises on January 15, 2002.

Iloilo Jar filed a civil action for breach of contract and damages before the RTC on October
10, 2003. Comglasco filed its Answer and raised an affirmative defense, arguing that by virtue
of Article 1267 of the Civil Code (Article 1267), it was released from its obligation from the
lease contract. It explained that the consideration thereof had become so difficult due to the
global and regional economic crisis that had plagued the economy.

The RTC ruled that Comglasco's answer admitted the material allegations of the complaint
and that its affirmative defense was unavailing because Article 1267 was inapplicable to
lease contracts. The CA reversed the RTC.

ISSUE:

Whether by virtue of article 1267, COMGLASCO is released from his obligation to the lease
contract.

RULING:

No, COMGLASCO is not released from its obligation.

Article 1267 of NCC is applicable to obligations to do and not to obligations to give - Thus,
in Philippine National Construction Corporation v. Court of Appeals, the Court expounded:

Petitioner cannot, however, successfully take refuge in the said article, since it is applicable
only to obligations "to do," and not to obligations "to give." An obligation "to do" includes all
kinds of work or service; while an obligation "to give" is a prestation which consists in the
delivery of a movable or an immovable thing in order to create a real right, or for the use of
the recipient, or for its simple possession, or in order to return it to its owner.

The obligation to pay rentals or deliver the thing in a contract of lease falls within the
prestation "to give";
24

The principle of rebus sic stantibus neither fits in with the facts of the case. Under this
theory, the parties stipulate in the light of certain prevailing conditions, and once these
conditions cease to exist, the contract also ceases to exist.

This article, which enunciates the doctrine of unforeseen events, is not, however, an
absolute application of the principle of rebus sic stantibus, which would endanger the
security of contractual relations. The parties to the contract must be presumed to have
assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional
changes of circumstances that equity demands assistance for the debtor.

Considering that Comglasco' s obligation of paying rent is not an obligation to do, it could not
rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without merit as
financial struggles due to an economic crisis is not enough reason for the courts to grant
reprieve from contractual obligations.

In COMGLASCO Corporation/Aguila Glass v. Santos Car Check Center Corporation, the Court
ruled that the economic crisis which may have caused therein petitioner's financial problems
is not an absolute exceptional change of circumstances that equity demands assistance for
the debtor. It is noteworthy that Comglasco was also the petitioner in the abovementioned
case, where it also involved Article 1267 to pre-terminate the lease contract.

Thus, the RTC was correct in ordering Comglasco to pay the unpaid rentals because the
affirmative defense raised by it was insufficient to free it from its obligations under the lease
contract. In addition, Iloilo Jar is entitled to attorney's fees because it incurred expenses to
protect its interest.

CASE NO. 13 G.R. No. 200009 January 23, 2017


25

SUBJECT: SALES CASE TOPIC: DOUBLE SALE SECOND DIVISION


PONENTE: PERALTA, J CASE: SPRING HOMES NATURE OF ACTION:
SUBDIVISION CO. AND PETITION FOR REVIEW ON
SPOUSES PEDRO L. LUMBRES CERTIORARI
and REBECCA T. ROARING VS.
SPOUSES PEDRO TABLADA,
JR. and ZENAIDA TABLADA

FACTS:

On October 12, 1992, petitioners, entered into a Joint Venture Agreement with Spring
Homes Subdivision Co., for the development of several parcels of land. The Spouses Lumbres
transferred the titles to the parcels of land in the name of Spring Homes.

On January 9, 1995, Spring Homes entered into a Contract to Sell with respondents, Spouses
Pedro Tablada, for the sale of a parcel of land located at Lot No. 8, Block 3, Spring Homes
Subdivision.

On March 20, 1995, the Spouses Lumbres filed with the RTC of Calamba City a complaint for
specific performance for its alleged failure to comply with the terms of the Joint Venture.
Unaware of the pending action, the Spouses Tablada began constructing their house on the
subject lot and thereafter occupied the same. Thereafter, on January 16, 1996, Spring Homes
executed a Deed of Absolute Sale in favor of the Spouses Tablada, who paid Spring Homes a
total of ₱1 79,500.00, more than the ₱157,500.00 purchase price as indicated in the Deed of
Absolute Sale.

On June 20, 2001, the Spouses Tablada filed a complaint for Nullification of Title,
Reconveyance and Damages against Spring Homes and the Spouses Lumbres praying for the
nullification of the second Deed of Absolute Sale executed in favor of the Spouses Lumbres,
as well as the title issued as a consequence thereof, the declaration of the validity of the first
Deed of Absolute Sale executed in their favor, and the issuance of a new title in their name.
The RTC dismissed the action filed by Spouses Tablada. CA reversed finding that Spring
Homes is not an indispensable party. It held that Spring Homes may be the vendor of the
subject property but the title over the same had already been issued in the name of the
Spouses Lumbres. So any action for nullification of the said title causes prejudice and
involves only said spouses, the registered owners thereof.

ISSUE:

Who has a better right over the property?

RULING:

The Spouses Tablada has better right over the property, since, the spouses Lumbres are in
bad faith.

The principle of “primus tempore, potior jure” - The principle of primus tempore, potior
jure (first in time, stronger in right) gains greater significance in case of a double sale of
immovable property. Thus, the Court has consistently ruled that ownership of an immovable
property which is the subject of a double sale shall be transferred: (1) to the person
acquiring it who in good faith first recorded it in the Registry of Property; (2) in default
26

thereof, to the person who in good faith was first in possession; and (3) in default thereof, to
the person who presents the oldest title, provided there is good faith.

The requirement of the law then is two-fold: acquisition in good faith and registration in
good faith. Good faith must concur with the registration - that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have been aware of facts
which should have put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor. If it is shown that a buyer was in bad
faith, the alleged registration they have made amounted to no registration at all.

Here, the first buyers of the subject property, the Spouses Tablada, were able to take said
property into possession but failed to register the same because of Spring Homes' unjustified
failure to deliver the owner's copy of the title whereas the second buyers, the Spouses
Lumbres, were able to register the property in their names. But while said the Spouses
Lumbres successfully caused the transfer of the title in their names, the same was done in
bad faith. As correctly observed by the Court in Spouses Lumbres v. Spouses Tablada, the
Spouses Lumbres cannot claim good faith since at the time of the execution of their
Compromise Agreement with Spring Homes, they were indisputably and reasonably
informed that the subject lot was previously sold to the Spouses Tablada. They were also
already aware that the Spouses Tablada had constmcted a house thereon and were in
physical possession thereof. They cannot, therefore, be permitted to freely claim good faith
on their part for the simple reason that the First Deed of Absolute Sale between Spring
Homes and the Spouses Tablada was not annotated at the back of the subject property's
title. It is beyond the Court's imagination how spouses Lumbres can feign ignorance to the
first sale when the records clearly reveal that they even made numerous demands on the
Spouses Tablada to pay, albeit erroneously, an alleged balance of the purchase price.

“The knowledge gained by the first buyer of the second sale cannot defeat the first buyer's
rights” - Indeed, knowledge gained by the first buyer of the second sale cannot defeat the
first buyer's rights except only as provided by law, as in cases where the second buyer first
registers in good faith the second sale ahead of the first. Such knowledge of the first buyer
does bar her from availing of her rights under the law, among them, first her purchase as
against the second buyer. But conversely, knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith.

Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses Tablada,
the law requires a continuing good faith and innocence or lack of knowledge of the first sale
that would enable their contract to ripen into full ownership through prior registration. But
from the very beginning, the Spouses Lumbres had already known of the fact that the
subject property had previously been sold to the Spouses Tablada, by virtue of a valid Deed
of Absolute Sale. In fact, the Spouses Tablada were already

in possession of said property and had even constructed a house thereon. Clearly then, the
Spouses Lumbres were in bad faith the moment they entered into the second Deed of
Absolute Sale and thereafter registered the subject property in their names. For this reason,
the Court cannot, therefore, consider them as the true and valid owners of the disputed
property and permit them to retain title thereto.

CASE NO. 14 G.R. No. 227894 July 5, 2017


SUBJECT: PROPERTY CASE TOPIC: QUIETING OF THIRD DIVISION
27

TITLE
PONENTE: VELASCO JR., J CASE: JOSE OCAMPO VS. NATURE OF ACTION:
RICARDO OCAMPO SR. PETITION FOR REVIEW ON
CERTIORARI

FACTS:

Petitioner Jose S. Ocampo and respondent Ricardo S. Ocampo are full-blooded brothers
being sons of the late Basilio Ocampo and Juliana Sunglao. The present case arose from a
complaint filed by respondent against petitioner for partition and annulment of Transfer
Certificate of Title (TCT) No. 102822.

In the complaint, respondent alleged that he and petitioner are co-owners of the Subject
Property, which was a conjugal property left by their parents, consisting of a 150-square
meter lot and the improvements thereon located at 2227 Romblon Street, G. Tuazon,
Sampaloc, Manila.

Respondent claimed that petitioner and his wife, Andrea Mejia Ocampo, conspired in
falsifying his signature on a notarized Extra-Judicial Settlement with Waiver ("ESW") dated
September 1970, and effecting the transfer of the property in the name of petitioner under
TCT No. 102822, which was issued on November 24, 1970. Based on a finding by the
National Bureau of Investigation (NBI) that respondent's signature was forged, an
Information was filed against petitioner, the notary public, and two others. Respondent
requested for partition of the property, but petitioner refused to do so and secretly
mortgaged the property for ₱200,000.00.

Petitioner and his wife moved for the dismissal of the complaint, but it was denied by the
trial court. Thereafter, they filed their Answer with Motion for Preliminary Hearing on the
Affirmative Defense of prescription. In an Order dated January 21, 1994, the trial court
dismissed the complaint on the ground of prescription. Respondent filed a Motion for
Reconsideration and other supplemental pleadings, but they were denied by the trial court.
Respondent thus elevated the matter to the CA, which declared the RTC's January 21, 1994
Order null and void.

ISSUE:

Whether quieting of title is applicable in this case.

RULING:

Yes, it is applicable.

quieting of title - Quieting of title is a common law remedy for the removal of any cloud,
doubt, or uncertainty affecting title to real property.

Requisites - In Heirs of Delfin and Maria Tappa v. Heirs of Jose Bacud, this Court reiterated
the requisites for an action for quieting of title:

The action filed by Spouses Tappa was one for quieting oftitle and recovery of possession. In
Baricuatro, Jr. v. Court of Appeals, an action for quieting of title is essentially a common law
remedy grounded on equity, to wit:
28

x x x Originating in equity jurisprudence, its purpose is to secure "an adjudication that a claim
of title to or an interest in property, adverse to that of the complainant, is invalid, so that the
complainant and those claiming under him may be forever afterward free from any danger of
hostile claim. In an action for quieting of title, the competent court is tasked to determine
the respective rights of the complainant and other claimants, "not only to place things in
their proper place, to make the one who has no rights to said immovable respect and not
disturb the other, but also for the benefit of both, so that he who has the right would see
every cloud of doubt over the property dissipated, and he could afterwards without fear
introduce the improvements he may desire, to use, and even to abuse the property as he
deems best."

In our jurisdiction, the remedy is governed by Article 476 and 477 of the Civil Code, which
state:

Art. 476. Whenever there is a cloud on title to real property or any interest therein, by
reason of any instrument, record, claim, encumbrance or proceeding which is apparently
valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable,
and may be prejudicial to said title, an action may be brought to remove such cloud or to
quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real property
or any interest therein.

Art. 477. The plaintiff must have legal or equitable title to, or interest in the real property
which is the subject-matter of the action. He need not be in possession of said property.

From the foregoing provisions, we reiterate the rule that for an action to quiet title to
prosper, two indispensable requisites must concur, namely: (1) the plaintiff or complainant
has a legal or an equitable title to or interest in the real property subject of the action; and
(2) the deed, claim, encumbrance or proceeding claimed to be casting cloud on his title must
be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or
legal efficacy.

A cloud on a title exists when (1) there is an instrument (deed, or contract) or record or claim
or encumbrance or proceeding; (2) which is apparently valid or effective; (3) but is, in truth
and in fact, invalid, ineffective, voidable, or unenforceable or extinguished (or terminated) or
barred by extinctive prescription; and (4) and may be prejudicial to the title.

Since it was already established that respondent's signature on the ESW, which was the basis
of petitioner's title over the property, was forged, then it is only necessary for the cloud on
respondent's title to be removed. Thus, the trial court's order to cancel TCT No. 102822 and
uphold the parties' co-ownership was proper.

CASE NO. 15 G.R. No. 206468 August 2, 2017


SUBJECT: TORTS AND CASE TOPIC: MORAL FIRST DIVISION
DAMAGES DAMAGES
29

PONENTE: DEL CASTILLO, J CASE:JUDITH D. DARINES and NATURE OF ACTION:


JOYCE D. DARINES VS. PETITION FOR REVIEW ON
EDUARDO QUIÑONES and CERTIORARI
ROLANDO QUITAN

FACTS:

Petitioners alleged in their complaint, that on December 31, 2005, they boarded the
Amianan Bus Line with Plate No. ACM 497 and Body No. 808 as paying passengers enroute
from Carmen, Rosales, Pangasinan to Baguio City. Respondent Quitan was driving the bus at
that time. While travelling on Camp 3, Tuba, Benguet along Kennon Road, the bus crashed
into a truck (with Plate No. XSE 578) which was parked on the shoulder of Kennon Road. As a
result, both vehicles were damaged; two passengers of the bus died; and the other
passengers, including petitioners, were injured. In particular, Joyce suffered cerebral
concussion while Judith had an eye wound which required an operation. Petitioners argued
that Quitan and respondent Eduardo Quiñones (Quiñones), the operator of Amianan Bus
Line, breached their contract of carriage as they failed to bring them safely to their
destination. They also contended that Quitan's reckless and negligent driving caused the
collision. Consequently, they prayed for actual, moral, exemplary and temperate damages,
and costs of suit.

ISSUE:

Whether petitioners is entitled to moral damages, exemplary damages and attorney’s fees .

RULING:

No, The petitioner is not entitled to any of it.

Petitioner is not entitled to moral damages - The principle that, in an action for breach of
contract of carriage, moral damages may be awarded only in case (1) an accident results in
the death of a passenger; or (2) the carrier is guilty of fraud or bad faith, is pursuant to
Article 1764, in relation to Article 2206(3) of the Civil Code, and Article 2220 thereof, as
follows:

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance
with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death
of a passenger caused by the breach of contract by a common carrier.

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased.

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if
the court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.
30

When is a person entitled to moral damages - In Viluan v. Court of Appeals, and Bulante v.
Chu Liante, the Court disallowed the recovery of moral damages in actions for breach of
contract for lack of showing that the common carrier committed fraud or bad faith in
performing its obligation. Similarly, in Verzosa v. Baytan, the Court did not also grant moral
damages in an action for breach of contract as there was neither allegation nor proof that
the common carrier committed fraud or bad faith. The Court declared that "to award moral
damages for breach of contract, therefore, without proof of bad faith or malice on the part
of the defendant, as required by Article 2220 of the Civil Code, would be to violate the clear
provisions of the law, and constitute unwarranted judicial legislation."

Meanwhile, in Gatchalian v. Delim, and Mr. & Mrs. Fabre, Jr. v. Court of Appeals, the Court
found the common carriers liable for breach of contract of carriage and awarded moral
damages to the injured passengers on the ground that the common carrier committed gross
negligence, which amounted to bad faith. Particularly, in Mr. & Mrs. Fabre, Jr., the gross
negligence of the common carrier was determined from the fact that its driver was not
engaged to drive long distance travels; he was also unfamiliar with the area where he
detoured the bus as it was his first time to ply such route; the road was slippery because it
was raining, yet the bus was running at 50 kilometers per hour resulting in its skidding to the
left shoulder of the road; and the bus hit the steel brace on the road at past 11:30 p.m. The
Court also noted that other than the imputation of gross negligence, the injured passengers
therein pursued their claim not on the theory of breach of contract of carriage alone but also
on quasi-delicts.

Clearly, unless it is fully established (and not just lightly inferred) that negligence in an action
for breach of contract is so gross as to amount to malice, then the claim of moral damages is
without merit.

Here, petitioners impute negligence on the part of respondents when, as paying passengers,
they sustained injuries when the bus owned and operated by respondent Quiñones, and
driven by respondent Quitan, collided with another vehicle. Petitioners propounded on the
negligence of respondents, but did not discuss or impute fraud or bad faith, or such gross
negligence which would amount to bad faith, against respondents. There being neither
allegation nor proof that respondents acted in fraud or in bad faith in performing their duties
arising from their contract of carriage, they are then not liable for moral damages.

Petitioner is also not entitled to exemplary damages - The Court also sustains the CA's
finding that petitioners are not entitled to exemplary damages. Pursuant to Articles 2229 and
2234 of the Civil Code, exemplary damages may be awarded only in addition to moral,
temperate, liquidated, or compensatory damages. Since petitioners are not entitled to either
moral, temperate, liquidated, or compensatory damages, then their claim for exemplary
damages is bereft of merit.

Finally, considering the absence of any of the circumstances under Article 2208 of the Civil
Code where attorney's fees may be awarded, the same cannot be granted to petitioners.
All told, the CA correctly ruled that petitioners are not entitled to moral and exemplary
damages as well as attorney's fees.