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I've long been contemplating to come up with a blog that would help the

barristers,law students and anyone who wishes to get legal updates, review
materials, and digested cases to aid them in their respective endeavors. Finally, it
came into fruition. Thanks to my boredom coz it drives me to nuts in setting this up.




(Source: Philippine Law Reports, UP LAW CENTER)

S.M.: Mortgage; A. 2088
GR # 118342, January 05, 1998
The complaint sought (1) the declaration of nullity of DBPs appropriation
of CUBAs rights, title and interests over a 44 hec. fishpond in Bolinao, Pangasinan for
violating A. 2088, NCC. DBP and Caperal stressed that DBP merely exercised its
contractual right under the Assignment of Leasehold Rights, which, allegedly, was not a
contract of mortgage. CUBA asserted that said Assignment was a mortgage contract since it
was executed simultaneously with the promissory notes covering CUBAs 3 separate loans
amounting to P335k with DBP. In all these notes was the provision that : In the event of
foreclosure of the mortgage securing this note, I/We further bind myself/ourselves, jointly
and severally, to pay the deficiency, if any. HELD: The deeds of assignment constantly
referred to CUBA (assignor) as borrower; the assigned rights as mortgaged properties;
and the instrument itself, as mortgage contract; several conditions in their contract showed
clearly that a mortgage was intended. Also, the parties, in their Stipulation of Facts during
the pre trial, admitted that the assignment was by way of security for the loans
payment. An assignment to guarantee an obligation is in effect a mortgage. (Peoples
Bank & Trust Co. vs. Odom, 64P126).
SM: Succession; determination of relationship under A.962, NCC
GR # 116775, January 22, 1998
FACTS: Justa acquired the 0.5 hec by inheritance from her parents, Juan Arnaldo and
Ursula Tubil, and 2.2 hec by purchase. Estrada, Justas nephew, claimed to be the sole
surviving heir of Justa on the ground that she died intestate. He further claimed that
Pascasio Uriarte who apparently worked the land as Justas tenant refused to give him his
share of the harvest. Estrada claimed that Uriarte has no right to the entire land but could
only claim of the 0.5 hec. Justa inherited from her parents. While the partition case was
pending, Pascasio died and was replaced by petitioners-heirs. Allegedly, the petitioners
were not mere tenants but Justas heirs entitled to her entire land.

HELD: Estrada, as admitted by petitioners, is Justas nephew, his mother, Agatonica, being
Justas half sister. He is thus Justas nearest relative and thus, the only one entitled to her
estate. Estrada is a 3rd degree relative of Justa. On the other hand, petitioners are the
children of Justas cousin. They are thus 5th degree relatives of Justa. Applying the
principle that the nearest excludes the farthest, then Estrada is the lawful heir of Justa. The
fact that his mother is only a half-sister of Justa is of no moment. A nephew is considered
a collateral relative who may inherit if no descendant, ascendant, or spouse survives
the decedent. That Estrada is only a half-blood is immaterial. This alone does not
disqualify him from being his aunts heir. The determination of whether the
relationship is of full or half blood is important only to determine the extent of the
share of the survivors.

SM: Property; forest reserves are incapable of private appropriation and possession
for as long as the reservation subsists..
GR # 127236, January 27, 1998
FACTS: Petitioner Gordula filed an application for a free patent over a land, which he had
been in possession since 1949, in January, 1973. The Free patent was issued on January
01, 1974. The subject land in 1973 was still part of the Caliraya- LumotRiver Forest reserve
and was no longer open to private ownership as it has been classified as public forest
reserve for the public good. Thereafter, on November 18, 1987, the REPUBLIC, thru the
NAPOCOR, filed an action for annulment of petitioners Free Patent, cancellation of titles
and The CA also held that the petitioners could not claim ownership by acquisitive
prescription since as of 1969; Gordula had been in possession of the property for only 25
years. The period of Gordulas occupancy after 1969 should not be tacked to the period
from 1944 since by then the property was not susceptible of occupancy, disposition,
conveyance or alienation. HELD:Forest lands/reserves are incapable of private
appropriation and possession thereof however long can not convert them into private
properties. (Director of Lands vs. CA). This ruling is premised on the Regalian doctrine
enshrined in the 35,73 and 87Constitutions. Further, no public land can be acquired by
private persons without any grant, express or implied from the government; it is
indispensable that there be a showing of a title from the State. Gordula did not acquire title
to the said land prior to its reservation under Proc. # 573. He filed his application 3 years
after said Proclamation was issued in 1969. At that time, the land, as part of the CalirayaLumot River Forest Reserve, was no longer open to private ownership as it has been
classified as public forest reserve for public good.

SM: A.121, Family Code; conjugal partnership
GR # 118305, February 12, 1998
FACTS: Philippine Blooming Mills (PBM) obtained a P 50.3M loan from petitioner AIDC. As
added security for the Pams credit line, respondent Alfredo Ching, EVP of PBM, executed 2
security agreements making himself jointly and severally answerable w/ PBM in its
indebtedness to AIDC. PBM failed to pay the loan. Thus, AIDC filed a case for sum of
money against PBM and Ching w/ the then CFI of Rizal which ruled in AIDCs favor. It
further issued a writ of execution and a notice of Sheriff Sale on 3 of the Chings conjugal
properties. Consequently, the Chings filed an injunction case to enjoin the auction sale
alleging that petitioners can not enforce the judgment against the conjugal properties levied
since the loan did not redound to the benefit of the conjugal partnership.
SC agreed with the CA in ruling that Alfredo signed as a surety for the P50.3M loan
contracted on PBMs behalf and AIDC failed to prove that his acting as surety redounded to
the benefit of the conjugal partnership .The loan procured from AIDC was for the
advancement and benefit of PBM and not for the Conjugal partnerships benefit. Art. 121(3),
FC is emphatic that the payment of personal debts contracted by the husband/wife
before or during the marriage shall not be charged to the conjugal partnership except
to the extent that they redounded to the familys benefit. Here, the property also
involves the family home. The loan is a corporate loan, not a personal one. Signing
as surety is certainly not an excuse of an industry/profession or an act of
administration for the familys benefit.
SM: Wills and Succession; Collation
GR # 118449, February 11, 1998
FACTS: Estrellita purchased form Rafael a 10,110 sq. m. lot located at Valenzuela, Bulacan
for P100k. She sold the Valenzuela property for P3, 405, 612 and in June of the same year,
she bought a house and lot in BF Homes, Paraaque using a portion of the proceeds of the
sale of the Valenzuela lot. Estrellita and her 2 children, Carmela and Jennifer, were
killed. Lauro was left as the sole heir but he entered into an extrajudicial settlement of his
wifes estate with Rafael and Salud, her parents. This settlement provided 50% of the total
amount of the bank deposits of Estrellita and her daughters to Rafael while the other 50%
was given to Lauro. The Paraaque property and the car were also given to Lauro with

Rafael and Salud waiving all their claims, rights, ownership and participation as heirs in the
said properties. Rafael died. In the intestate proceeding the Valenzuela lot allegedly was
given by Rafael to Estrellita and that the heirs legitime should come from collation of all
properties distributed to his children by Rafael during his lifetime. Ramon, Rafaels son,
further claimed that the petitioner is one of Rafaels children by right of representation as
Estrellitas widower. HELD: Petitioner is Rafaels son-in-law and not one of his compulsory
heirs. With respect to Rafaels estate, petitioner, who was not even shown to be a creditor
of Rafael, is considered a 3rd person. As such, he may not be dragged into the intestate
estate proceeding. Secondly, the order of collation is premature since the proceeding is
still in its initiatory stage. There is nothing to indicate that the legitime of any of
Rafaels heirs has been impaired to warrant collation. Further, collation of the
Paraaque property, bought using the proceeds of the sale of the Valenzuela property which
Rafael transferred to Estrellita, has no statutory basis. The Order of the probate court
presupposes that the Paraaque property was gratuitously conveyed by Rafael to
Estrellita. However, Estrellita paid P900, 000 to Premier Homes, Inc. for said property. The
collation is improper for collation covers only properties gratuitously given by decedent
during his lifetime to his compulsory heirs which do not obtain to the transfer of the
Paraaque realty. Moreover, Rafael already waived his right to said realty. Lastly, Estrellita
died ahead of Rafael. In fact, it was Rafael who inherited from her an amount more than the
value of the Valenzuela lot. Thus, even assuming that the latter property maybe collated,
collation may not be allowed as the value of the Valenzuela lot has long been returned to
Rafaels estate.

SM: A.733, NCC; donations (kinds)
GR # 112796, March 05, 1998
Petitioners grandmother Catalina Jacob Vda. De Reyes was awarded a
60.10 sq.m.lot which is a portion of the Monserrat Estate. Shortly before she left forCanada,
Jacob executed as SPA in favor of her son- in-law
Eduardo Espaol authorizing him to execute all documents necessary for the final
adjudication of her claims as awardee of the lot. Jacob revoked said authority in an
instrument executed in Canada. Simultaneously, Jacob executed another SPA in
petitioners favor. Thereafter, Jacob executed in Canada a Deed of Donation overLot 8W in
petitioners favor. The petitioner then checked with the register of Deeds and found out that
the property was in the delinquent list so he paid the remaining balance and declared the lot

in Jacobs name. Subsequently, petitioner sent a demand letter to private respondent asking
him to
vacate Lot8W which the latter refused to do. HELD: The donation in the case at bar was
simple and not onerous as claimed by petitioner. Even conceding that petitioners full
payment of the purchase price of the lot might have been a burden to him; such payment
was not however imposed by the donor as a condition for the donation. In fact, the donor in
the deed did not have any intention to burden/ charge petitioner as the donee. The words in
the deed are typical of a pure donation. The payments made by petitioner were his
voluntary acts. In simple donations, acceptance of the donation by the donee is
indispensable; its absence makes the donation null and void.
S: A.2176, NCC; Damages; quasi - delict for damages suffered by a 3 rd party.
GR # 118889, March 23, 1998
FACTS: 2 vehicles, both Mitsubishi Colt Lancers cruising northward along EDSA,
Mandaluyong City figured in a traffic accident. One car was owned by Lydia Soriano and
was driven by Benjamin Jacildone while the other was owned by respondent FILCAR
Transport Inc., and driven by Peter Dahl- Jensen as lessee. FGU, in view of its insurance
contract with Soriano, paid the latter P25, 382.20. By way of subrogation, it sued DahlJensen and FILCAR as well as respondent Fortune Insurance Co. (FIC) as FILCARS
insure for quasi delict before the Makati City RTC. Dahl- Jensen was dropped from the
complaint. HELD: To sustain a claim based on quasi-delict, the following requisite
must concur: (a) damage suffered by the plaintiff; (b) fault/negligence of the defendant;
and (c) connection of cause and effect between the fault/negligence of the defendant and
the damage incurred by plaintiff. FGU failed to prove the existence of the 2 nd requisite, i.e.
FILCARs fault/negligence, because the only fault/negligence that was established was that
of Dahl-Jensen. FILCAR being engaged in a rent- a-car business was only the owner of the
car. As such, there was no vinculum juris between them as employer and employee which
would make FILCAR liable under Art.2180. FILCAR can not in any way be responsible for
not being an employer of the latter. Logically, FGUs claim against FORTUNE can neither
SM: Property; invalid transfer of land to an alien who later transfers the same to a

GR # 113539, MARCH 23, 1998

FACTS: Private respondents, both American Citizens, inherited real properties from Simeon
de Guzman, who died intestate, located in the Philippines. His wife, Helen, executed a
deed of quit claim assigning, transferring and conveying to their son, David Rey, all her
rights, titles and interests in and over 6 parcels of land which the 2 of them inherited from
Simeon who himself was an AMCIT. David thereafter sold the land to private respondent
Emiliano Cataniag. Petitioners, the adjoining lots owners, questioned the validity and
constitutionality of the 2 conveyances, i.e. from Helen to David and between David and
Emiliano. They also claimed ownership thereto based on their right of legal redemption
under Art.1621, NCC. HELD: The SC ruled that although Helens deed of quit claim -in
which she assigned, transferred and conveyed to David all her rights, titles, and interests
over the property she had inherited from her husband-collided with Sec.7, Art. XII of the 87
Constitution. Since the disputed land is now owned by Cataniag, a FILCIT, the prior invalid
transfer can no longer be assailed. The objective of the constitutional provision to keep our
land in Filipino hands has been served. Non Filipinos can not acquire or hold
title to private lands or to lands of the public domain, except only by way of legal
succession. However, if land is invalidly transferred to an alien who subsequently
becomes a citizen or transfers it to a citizen, the flaw in the original transaction is
considered cured and the title of the transferee is rendered valid.

SM: Contracts; suretyship; Art. 2047, NCC
GR # 126490, March 31, 1998
FACTS: Pursuant to a promissory note (PN), private respondent MB Lending Corp. (MB)
extended a loan to the spouses Azarraga together with petitioner amounting to P30k but
debtors were able to pay only P16, 300. Consequently, on the basis of petitioners solidary
liability under the PN, MB filed a complaint against petitioner as the lone party defendant to
the exclusion of the principal debtors, allegedly due to the latters insolvency. Petitioner
claimed that while she agreed to be liable on the note upon default of the principal debtor,
MB acted in bad faith in suing her alone without including the Azarragas when they were the
only ones who benefited from the loans proceeds. HELD: Petitioner expressly bound
herself to be jointly and severally liable with the principal maker of the note. The terms of the
contract are clear, explicit and unequivocal that petitioners liability is that of a surety. A
surety is an insurer of the debt, a suretyship is an undertaking that the debtor shall
pay. A surety promises to pay the principals debt. If the principal will not pay, he
binds himself to perform if the principal does not, w/o regard to his ability to do so. In

fine, a surety undertakes directly for the payment and is so responsible at once if the
principal debtor makes default. It has not been shown, either in the contract or the
pleadings that MB agreed to proceed against petitioner only if and when the defaulting
principal has become insolvent
SM: Contracts; A. 1342, NCC
PBC vs. CA
GR # 109803, April 20, 1998
FACTS: Chee Puen, then the general manager of Global Inc., informed private respondent,
his estranged wife that their company a P300k loan for its operational expenses. He
proposed that her paraphernal lot in Makati be used as collateral. He assured her that the
loan would not exceed P300k and she was asked to sign 3 sets of blank forms of real estate
mortgage (REM) of PBC. He wrote down in pencil the figure 300 under the space provided
for the amount to be loaned and respondent signed the blank mortgage forms due to Chee
Puens representations. Chee Puen had the REM document later notarized by Atty. Arzadon
using a residence certificate bearing respondents forged signature. Apparently, Chee Puen
applied for a P3M loan from PBC. To secure the loan, he mortgaged respondents
paraphernal lot in Makati, using the blank REM forms signed by her. He also
misrepresented himself as president and acting corporate secretary of Global, Inc. PBC did
not investigate Chee Puens authority to mortgage respondents property.
respondent discovered that Chee Puen obtained a loan of P3M from
PBC. HELD: Respondent has not consented to collateralize Global, Incs P3M loan with her
paraphernal lot. All facts show that she was misled by Chee Puen and thus, the REM
should be nullified. The established facts preclude the application of estoppel against the
respondent. Respondent did not deliberately or intentionally lead the PBCtobelieve that she
was putting up her paraphernal realty to secure the P3M loan of Global.It was Chee Puen
who made the misrepresentation thus defrauding respondent herself.
Further, PBCs reliance in the REMs signed in blank by the respondent was
unreasonable. As a banking institution, PBC was grossly negligent when (a) it took no step
to verify whether the respondent was really offering her paraphernal property as collateral;
(b) made no credit check on respondent and Global, Inc.; and (c) conducted no
investigation on the authenticity of the Secretarys Certificate of Board Resolution.The
business of a bank is affected with public interest and it should observe a higher standard of
diligence when dealing with the public. Neither will it matter that PBC itself was misled by
Chee Puen, a 3rd person to the contract. Under A.1342, NCC, the misrepresentation of a
3rd person will vitiate consent if it has resulted in substantial mistake and the same is

SM: Surety vs. Guaranty; A.2080, NCC does not apply where the liability is as a
surety, not as a guarantor.
GR# 113931, May 6, 1998
FACTS: Respondent Spouses Claveria, doing business under the name Agro Brokers,
applied for a loan with respondent Consolidated Bank & Trust Corp. (now SOLID BANK)
amounting to P2.875M. The loan was granted subject to the condition that respondent
spouses execute a chattel mortgage over the 3 vessels to be acquired and that a continuing
guarantee be executed by Ayala International Phils., Inc., now herein petitioner E.Zobel, Inc.
in SOLID BANKs favor. The Claverias defaulted in the payment of the entire obligation
upon maturity. Petitioner moved to dismiss the complaint asserting that its liability as
guarantor of the loan was extinguished pursuant to A.2080, NCC. It argued that it has lost
its right to be subrogated to the first chattel mortgage in view of SOLIDBANKs failure to
agency. SOLIDBANK meantime claimed that A.2080 is not applicable because petitioner is
not a guarantor but a surety.
HELD: In the contract executed by petitioner in SOLIDBANKs favor, albeit denominated as
a Continuing Guaranty, is in fact a contract of surety. The contracts terms obligates
petitioner as surety to induce SOLIDBANK to extend credit to the Claverias. The contract
clearly disclose that petitioner assumed liability to SOLIDBANK, as a regular party the
undertaking and obligated itself as an original promissory. It bound itself jointly and
severally to the obligation with the Claverias. In fact, SOLIDBANK need not resort to all
other legal remedies or exhaust the Claverias properties before it can hold petitioner liable
for the obligation. Since the petitioner is a surety, A.2080, NCC is inapplicable. Said article
applies where the liability is as a guaranty not as a surety.
SM: Property; easement of right of way; compulsory easement; Arts. 649-650, NCC
GR# 125339, June 22, 1998
FACTS: A portion of private respondents lot was being used as a passageway by
petitioners to and from Visayas Ave. The Paciones and the petitioners met and the latter
offered to pay for the use of a portion of Lot1 as a passageway but the Paciones rejected
said offer. They then started enclosing Lot1 with a concrete fence. Petitioners protested
alleging that their property was bounded on all sides by residential houses belonging to

different owners and had no adequate outlet and inlet to Visayas Ave. except thru the
Paciones property. Petitioners filed an action for easement of right of way with a prayer for
TRO. The case was dismissed for lack of 1 essential requisite of a legal easement of right of
way was not proved, i.e., the absence of an alternative adequate way/outlet to a public
highway. HELD: To be entitled to a compulsory easement of right of way the
preconditions provided under Arts. 649-650, NCC must be established. These are: (1)
that the dominant estate is surrounded by other immovable and has no adequate outlet to a
public highway; (2) that the proper indemnity has been paid; (3) that the isolation was not
due to acts of the proprietor of the dominant estate; (4) that the right of way claimed is at a
point least prejudicial to the servient estate and, in so far as consistent with this rule, where
the distance from the dominant estate to a public highway maybe shortest. The burden of
proving the existence of these prerequisites lies on the owner of the dominant estate. In the
case at bar, the 1st element is palpably absent. As previously found, an outlet already
exists- the path walk located at the left side of petitioners property and which is
connected to a private road about 500 meters long. This in turn leads to Ma. Elena St.,
finally, to Visayas Ave. This outlet was held to be sufficient for the needs of the dominant
estate, hence, petitioners have adequate outlet to Visayas Ave. Further, no evidence was
adduced by petitioner to prove that the easement they seek to impose on private
respondents property is to be established at a point least prejudicial to the servient estate.

SM: Property; lease; PD #1517, Land Tenancy in Urban Reform Areas; requisites
GR# 112041, June 22, 1998
FACTS: The Carreons became members of the Mataas na Lupa Tenants Assoc.
Unfortunately, fire razed the houses in the area including the Carreons
house. One of their children, Honorio, wanted to build a house in the lot and so the
Carreons asked the petitioners who constructed a temporary house to vacate but they
refused. Separate complaints were then filed against them.
Meanwhile, the MNLTA
pursued its plan to acquire the estate after the promulgation of a Supreme Court decision
recognizing its right of first refusal or option to buy pursuant to the Constitution and
PD1517. The MNLTA apparently have acquired the estate thru negotiation with the owners
thereof for a title thereafter, was issued to it.HELD: The SC ruled that petitioners are not
tenants pursuant to PD 1517.Tenant, under Sec.3 (f) of PD1517, refers to the rightful
occupant of land and its structures, but does not include those whose presence on
the land is merely tolerated and without the benefit of a contract; those who entered

the land by force/deceit; or those whose possession is under litigation. In the case at
bar, records showed that petitioners were originally room renters in the Carreons
house. When it was razed to the ground, they asked the Carreons widower to allow them
to construct temporary quarters on the lot with the understanding that they will leave and
vacate the same when private respondents will need the lot upon demand. Obviously, their
stay in the premises was merely an act of tolerance on the respondents part. Their status
as occupants of the lot can not be classified as tenants within the purview of PD 1517.
SM: Torts and Damages; fortuitous event
GR # 126389, July 10, 1998
FACTS: A powerful typhoon Saling hit Metro Manila. Buffeted by very strong winds, the roof
of petitioners building was partly ripped off and blown away, landing on and destroying
portions of the roofing of the PRs house.
The PR then filed a complaint for damages
based on culpa aquiliana alleging that the damage to their house rendered the same
uninhabited, forcing them to stay temporarily in others houses. Petitioner meantime raised
the defense that Saling was an act of God and thus, beyond human control such that
petitioner can not be answerable for the damages wrought thereby, absent any negligence
on its part. HELD: In order that a fortuitous event may exempt person from liability, it
is necessary that he be free from any previous negligence/misconduct by reason of
which the loss may have been occasioned by an act of God. When a persons
negligence concurs with an act of God in producing damage or injury to another,
such person is not exempt from liability by showing that the immediate/proximate
cause of the damage or injury was a fortuitous event. When the effect is found to be
partly the result of the participation of man-whether it be from active intervention, or neglect,
or failure to act- the whole occurrence is thus humanized, and removed from the rules
applicable to acts of God. In the instant case, other than the said ocular inspection, no
litigation was conducted to determine the real cause of the partial unroofing of petitioners
school building. They did not even show that the plans, specifications and design of said
school building were deficient and defective and its construction basically flawed. Thus,
petitioner has not been shown to be negligent or at fault regarding the construction and
maintenance of its school building in question and that Saling was the proximate cause of
the damage suffered by PRs house. It isnt enough that the damage be capable of proof
but must be actually proved with a reasonable degree of certainty.

SM: Property; quieting of title; A.549, NCC

GR# 121270, August 27, 1998
FACTS: Antonio Cerrudo acquired a property during his marriage to Pomposa Glorioso. He
applied for its registration in his name under the Torrens System thru a cadastral case. He
died intestate leaving his wife and son Pablo as heirs. After his death, the land was
registered in his own name. Thereafter, Pablo allegedly executed a public instrument ceding
of the property to his aunt Gregoria, his fathers only sibling. Pablo died 3 years later
survived by his wife, children and his mother. 14 years later, his aunt Gregoria filed a
Petition for Inscription before the then CFI of Sariaya. 30 years later, Gregoria conveyed,
by Deed of Sale, to her children, herein petitioners, her undivided portion of the subject
land. When the petitioners tried to have the property subdivided, the Cerrudos refused.
HELD: Petition for inscription could not have settled Gregorias claim for ownership. This
proceeding, allowed under Sec.112 of the Land Registration Act, is inapplicable. The
proceedings under Sec112 of said Act are inadequate to settle the issue of ownership over
the disputed portion. Matters described in Sec.112 is non-controversial in nature. They are
limited to issues so patently insubstantial as not to be genuine issues. These proceedings
are summary in nature, contemplating corrections/ insertions of mistake which are only
clerical but certainly not controversial issues. Evidence show that there was really no
unanimity among the parties. The issues raised in the petition for inscription should have
been threshed out in a more appropriate proceeding. Further, the action instituted by
private respondents to question the proceedings in 1948 and to recover the portion of the
land in petitioners possession has not been barred by laches. It appears that the
possession by petitioners of the disputed portion of land was merely tolerated by the private
respondents who were compelled to file the action in the lower court when petitioners
sought to partition the whole
property. The lawful owners have a right to demand the return of their property any time as
long as the possession was unauthorized or merely tolerated, if at all. This right is forever
barred by laches (BISHOP vs. CA, 208 S 636).
SM: Quasi delicts; liability of Employer under A.2180, NCC
GR# 119121, August 14, 1998
FACTS: NPCs 4 dump trucks left Marawi City for Iligan City when one of its trucks, RFT-96-673, DRIVEN BY Ilumba figured in a head- on- collision with a Toyota Tamaraw. The
incident resulted in the death of 3 persons riding in the Toyota, as well as physical injuries to

17 other passengers. PHESCO claimed that it was not the dump trucks owner and that
they were owned by NPC. IT further said that it was merely NPCs contractor with the main
duty of supplying workers and technicians for the latters projects. NPC, meantime, denied
such liability and countered that the driver of the dump truck was PHESCOs
employee. HELD: PHESCO was engaged in labor only contracting vis--vis NPC and as
such, it is considered merely as NPCs agent. In such cases, an ER-EE relationship
between the principal employer and the employees of the labor-only contractor is
created. Accordingly, the principal employer is responsible to the employees of the
labor only contractor as if such employees have been directly employed by the
principal employer. Since PHESCO is only a labor only contractor, the workers it
supplied to NPC, including the truck driver, should be considered as NPCs employees.
SM: Donation
GR# 125888, August 13, 1998
FACTS: Aurora Virto Vda. De Montinola executed an instrument entitled Deed of Donation
Inter Vivos naming her grandchildren as donees. The subject of the donation is Lot 3231 of
the Cadastral Survey of Panay in Montinolas name. The deed also contained the donees
signatures in acknowledgment of their acceptance of the donation. The same was
registered, and the donors title cancelled. Montinola however retained the owners
duplicate copy of the new title as well as the property itself, until she transferred the same to
the Sicads. She revoked the donation and filed a petition with the RTC in Roxas City for the
cancellation of the new title and the reinstatement of the donors title. She alleged that her
donation was one mortis causa which had to comply with the formalities of a will and since it
had not, the donation was void. The donees opposed and claimed that the donation was
inter vivos. HELD: A donation which purports to be one inter vivos but with holds from
the donee the right to dispose of the donated property during the donors lifetime is
in truth one mortis causa. In a donation mortis causa the right of disposition is not
transferred to the donee while the donor is still alive. In the case at bar, nothing of any
consequence was transferred by the deed of donation in question to Montinolas
grandchildren, the ostensible donees. They did not get possession of the property
donated. They did not acquire the right to the fruits thereof, or any other right of dominion
over the property. More importantly, they did not acquire the right to dispose of the
property- this would accrue to them only after 10 years from Montinolas death. Indeed,
they never even laid hands on the certificate of title to the same. They were thus simply
paper owners of the donated property.

SM: Family Code; Consent of natural parents in adoption.
GR# 10538, September 25, 1998
FACTS: Petitioner and his wife Ana Marie were legally separated before he left for the U.S.
where he obtained a decree of divorce. Their 2 children were left with Ana Marie who was
abroad often. Hence, she decided to have her children adopted by her brother, Ronald,
herein private respondent. Ana Marie freely gave her Affidavit of Consent and one of her
children, her son, consented to the adoption. The petition alleged that petitioner had not
only divorced Ana Marie but has already abandoned his family to live in the U.S. as an
illegal immigrant. The RTC of Cebu granted the petition for adoption. Petitioner appealed
with the CA asserting that he has not abandoned his children as shown by the money he
sent them through various bank accounts. He also pointed out that he never gave his
written consent to the adoption.HELD: In cases where the father opposes the adoption
primarily because his consent to it was not sought, the matter of whether he had abandoned
his child becomes a central issue. Abandonment of a child by his parent imports any
conduct of the parent which evinces a settled purpose to forego all parental duties
and relinquish all parental claims to the child. It means neglect/refusal to perform the
natural and legal obligations of care and support which parents owe their children. In
the instant case, records show that petitioners conduct did not manifest a settled purpose
to forego all parental duties and relinquish all parental claims over his children as to
constitute abandonment. Though in the U.S., petitioner was not remiss in his natural and
legal obligations of love, care and support for his children.

SM: A.2088, NCC; mortgage; pactum commissorium.
GR # 125055, October 30, 998
FACTS: AFRD granted a P7.5M loan to private respondents, spouses Javillonar covered by
a promissory note, a deed of mortgage over a lot (TCT 58748) with its improvements and an
undated deed of sale of the mortgaged property in AFRDs favor as mortgagee. The
promissory note expressly provided that upon failure of the mortgagor to pay the interest
without prior arrangement with the mortgagee, full possession of the property will be
transferred and the deed of sale will be registered. The owners duplicate of TCT 58748 was
delivered to AFRD. The Javillonars allegedly failed to pay the interest and consequently,

AFRD registered the sale in its favor. TCT 58748 was cancelled and a new TCT was issued
in AFRDs name. Thereafter, the couple obtained an additional loan of P2.5M from AFRD
covered by a promissory note allowing AFRD to appropriate their property covered by
AFRDs new title. AFRD demanded possession of the mortgaged property but the
Javillonars refused to vacate. HELD: A.2088, NCC furnishes 2 elements for pactum
commissorium to exist: (1) that there should be a pledge/mortgage wherein
pledged/mortgaged by way of security for the payment of the principal obligation; and (2)
that there should be a stipulation for an automatic appropriation by the creditor of the thing
pledged/mortgaged in the event of non payment of the principal obligation within the
stipulated period (UY TONG vs. CA, 161 S 383).
Thus, in the case at bar, the
stipulations in the promissory notes providing that (1) upon failure of the couple to pay
interest, ownership of the property would be automatically transferred to petitioner and (2)
the deed of sale in its favor would be registered, are substantially , a pactum
commissorium.The subject transaction being void, the registration of the deed of sale by
virtue of which AFRD was able to obtain TCT 85569 covering the subject lot, must also be
declared void.

SM: A.749, NCC; Donation of real property
GR # 110644, October 30, 1998
FACTS: Augusto Dizon died intestate on May 15.1942 leaving as heirs his 5 children:
Eduardo, Gaudencio, Salud, Valenta and Natividad. Dizon left, among others, a parcel of
land with an area of 2,188 sq. meters covered by OCT 10384 located in Hagonoy, Bulacan.
Gaudencio sold his hereditary rights to his sister Salud for P4k. Petitioners filed an action for
compulsory judicial partition of real properties with the Malolos RTC. They alleged that
Natividad, herein respondent, refused to agree to the formal distribution of the
properties. This was due to Natividads claim that her father donated the lot covered by
OCT 10384 in 1936 with the other heirs consent. HELD: The alleged donation was done
orally and not executed in a public document. Further, the document which was presented
by respondent in support of her claim was a mere private document of conformity which was
executed by her elder brother, Eduardo in 1956. Eduardo and Gaudencio however had
already ceded their hereditary rights to petitioner Salud Salamat even before 1950.
Nevertheless, assuming that Agustin really made the oral donation, respondent can not still
claim ownership over the property. The parties being heirs of Agustin are co-owners of the
properties. A co-ownership is a form of trust, with each owner being a trustee for

each other and possession of a co- owner shall not be regarded as adverse to other
co-owners but in fact is beneficial to them. Mere actual possession by one will not
give rise to the inference that possession was adverse because a co-owner is, after
all entitled to possession of the property. Lastly, respondent never made unequivocal
acts of repudiation, thus, she can not acquire ownership over said realty thru acquisitive
SM: Persons and Family Relations; A. 148, NCC
GR# 102330, November 25, 1998
FACTS: Petitioner is private respondent Eusebio Franciscos legal wife by his 2 nd
marriage. The other private respondents are his children by his 1 st marriage.
Allegedly, the Franciscos have acquired several properties since their marriage in February
1962. Eusebio administered these realties until he was invalidated by various diseases,
rendering him unfit to administer them. Petitioner averred that his children convinced their
father to sign a general power of attorney which authorized one of his children, Conchita, to
administer the house and lot as well as the apartments. Consequently, petitioner filed a suit
for damages and for annulment of said General Power Attorney and thus, enjoining its
enforcement. She also sought to be declared as the administratrix of all the properties.
HELD: The party who invokes the presumption provided by A.160, NCC must first
prove that the property in question was acquired during the marriage. Proof of
acquisition during the coverture is a condition sine qua non for the operation of the
presumption in favor of the conjugal partnership. The party who asserts this
presumption must first prove said time element. The presumption refers only to the
property acquired during the marriage and does not operate when there is no showing as to
when the property alleged to be conjugal was acquired. Further, this presumption in
favor of conjugality is rebuttable, but only with strong, clear and convincing
evidence; there must be a strict proof of exclusive ownership of one of the spouses.
In the case at bar, petitioner failed to adduce ample evidence to show that the properties
which she claimed to be conjugal were acquired during her marriage to Eusebio.
SM: Contracts; Arts. 1385 &1482
GR# 126812, November 124, 1998

FACTS: Petitioner and private respondent Baretto Realty (BR) entered into a contract to sell
for one of the lots sold by BR. Petitioner gave BR earnest money for the said property. It
appeared that the same was intended to form part of the purchase price and absent any
express provision it shall not be forfeited in favor of BR in case petitioner fails to comply with
his obligation. Petitioner informed BR that it would no longer push thru with the sale. It then
resorted to extrajudicial rescission of its agreement to which BR did not object. In fact, BR
sold the subject realty a day after said letter of rescission was received by BRs president.
Petitioner demanded the return of its earnest money but BR refused. HELD: Under
A.1482, NCC, whenever earnest money is given in a contract of sale, it shall be
considered as part of the purchase price and as proof of he perfection of the
contract. Petitioner clearly stated without any objection from BR that the earnest money
was intended to form part of the purchase price. It was an advance payment which must be
deducted from the total price. Thus, the parties could not have intended that the earnest
money or advance payment would be forfeited when the buyer should fail to pay the
balance of the price, especially in the absence of a clear and express agreement
thereon. Petitioner resorted to extrajudicial rescission of its contract with BR which in turn
did not object. If the party does not oppose the declaration of rescission of the other party,
specifying the grounds therefore, and if it fails to reply or protest against it, its silence
thereon suggests an admission of the veracity and validity of the rescinding partys
claim. By virtue of the extrajudicial rescission of the contract to sell by petitioner without
opposition from BR, which, in fact, sold the property to other persons, BR, as the vendor,
had the obligation to return the earnest money of P1M. It would be most inequitable if
respondent BR would be allowed to retain it and at the same time appropriate the proceeds
of the 2nd sale.
SM: Quasi delicts; Liability of employers under Arts.2180 & 2194, NCC
GR# s 116617 & 126395, November 16, 1998
FACTS: Liza Rosalie Rosales died due to a vehicular accident involving petitioner MMTCs
vehicle driven by Pedro Musa. Her parents sued MMTC and Musa for damages. According
to MMTC, it has exercised the diligence of a good father of a family with respect to the
selection of employees by presenting mainly testimonial evidence on its hiring procedure.
Thus, it should not be liable for damages. HELD:The evidence presented by MMTC to show
that it exercised the diligence of a good father of a family in the selection and supervision of
employees and thus avoid the vicarious liability for the negligent acts of its employees is
insufficient to overcome the presumption of negligence against it. MMTC is thus primarily
liable for damages arising from the negligence of its employee in view of A.2180, NCC. It

can recover from its employee but does not make the latters liability subsidiary. They are
solidarily liable. The liability of the registered owner of a public service vehicle for
damages arising from the tortious acts of its driver is primary, joint and direct with
the driver.
SM: Prescription; constructive trust; donation, A. 736, NCC
GR # 125715, December 29, 1998
FACTS: Rafael and Felicidad Marquez have 12 children. Rafael Sr. executed a Deed of
Donation Inter Vivos covering said lot as well as the house thereon to 3 of his children,
namely: (1) petitioner Rafael, Jr.; (2) Alfredo; and (3) Belen, both private respondents, to the
exclusion of his other children, herein petitioners. TCT 33350 was cancelled and TCT
47572 was issued in private respondents names. From 1983 to 1991, the private
respondents were in actual possession of the land. But when petitioners learned about the
existence of TCT 47572, they claimed that since they are also Rafael Sr.s children, they are
entitled to their respective shares over the land in question. The private respondents
however ignored the petitioners demands. Petitioners filed a complaint for Reconveyance
and Partition with Damages alleging that both the Affidavit of Adjudication and Deed of
Donation Inter Vivos were fraudulent since the private respondents took advantage of their
fathers advanced age. The private respondents raised the defense of prescription since the
same should have been filed within 4 years from the date of discovery of the alleged fraud.
HELD: When Rafael Sr.. misrepresented in his unilateral affidavit that he was the only heir
of his wife when in fact, their children were still alive and managed to secure a transfer of
certificate of title under his name a constructive trust under A.1456 was
established. Constructive trusts are created in equity in order to prevent unjust
enrichment. They arise contrary to intention against one who, by fraud, duress or
abuse of confidence, obtains/holds the legal right to property which ought not, in
equity and good conscience, to hold. In this regard, it is settled that an action for
reconveyance based on an implied/constructive trust prescribes in 10 years from the
issuance of the Torrens Title over the property. In the case at bar, the prescriptive
period shall start to run when TCT # 33350 was issued, which was on June 16, 1982. Thus,
since the action for reconveyance was filed on May 31, 1991, approximately 9 years later, it
is evident that prescription has not yet barred the action. Implied trusts are obligations
created by law, thus, the prescriptive period to enforce the same prescribes in 10 years.

SM: Obligations and contracts; double sale
GR# 129760, December 29, 1998
FACTS: Respondent Ramon Genato entered into a contract to sell with the other
respondents, spouses Da Jose. The contract was in a public instrument and was duly
annotated at the back of the 2 Transfer of Certificate of Titles covering the said lots. The
contract provided, among others, the partial down payment of P50k and the payment of the
remaining P950k after 30 days and only after verifying and confirming the truth and
authenticity of the documents. Said 30 days was executed for another 30
Pending the effectivity of said extension, and without notifying the Da Joses,
Genato executed an Affidavit to Annul the Contract to Sell but no annotation of the same
was made at the back of his titles.
Cheng and Genato thereafter entered into a contract of sale over the lands. Genato decided
to continue the contract he had with the Da Joses and sent back Chengs check but Cheng
demanded compliance with their agreement as it was already perfected. Cheng further
executed as Affidavit of Adverse Claim which was annotated on the subject
TCTs. Meanwhile, the Da Joses paid Genato the P950k balance. HELD: The Da Joses
were not in default since the 30 day extension period has not yet expired. In addition, no
further condition was agreed upon when the Da Joses were granted the 30 days extension.
Even if they did default in their Contract to sell, the affidavit to annul is not even called
for. With or with out it, their non-payment to complete the full down payment of the
purchase price ipso facto avoids their contract to sell, it being subjected to a suspensive
condition. When a contract is subject to a suspensive condition, its birth/effectivity
can take place only if and when the event which constitutes the condition happens or
is fulfilled. If it does not take place, the parties would stand as if the conditional
obligation had never existed. Further, the act of a party of canceling a contract should be
made known to the other. Since that was not made, the Da Joses contract was not
rescinded properly. Lastly, the knowledge gained by Cheng of t heist transaction between
the Da Joses and Genato defeats his rights even if he is first to register the 2nd transaction,
since such knowledge taints his prior registration with bad faith.
SM: Succession; A.777, NCC
GR # 126707, February 25, 1999

FACTS: Evarista dela Merced died intestate and was survived by 3 sets of heirs: (1)
Francisco dela Merced, her legitimate brother; (2) Teresita Rupisan her niece from her sister
Rosa who died in 1943; and (3) the legitimate children of Eugenia, her other sister who died
in 1965. Evarista left 5 parcels of land situated in Orambo, Pasig City. A year later,
Francisco died and was survived by his wife and their 3 children. Thereafter, the 3 sets of
heirs of Evarista executed an extrajudicial settlement on her properties, each set with a
share of 1/3 pro-indiviso. Joselito, Franciscos illegitimate son, filed a petition for annulment
of the settlement alleging that he was fraudulently omitted from the said settlement by
petitioners who were fully aware of his relationship to the late Francisco. Claiming
succession rights, Joselito prayed that he be included as one of the beneficiaries to share in
the1/3 pro-indiviso share in Evaristas estate corresponding to Franciscos heirs. HELD: The
case at bar is one where an illegitimate child inherits from his father the latters share in or
portion of what the latter already inherited from his deceased sister Evarista. Article 777,
NCC governs. Thus, an illegitimate child, as an heir of his late father, has a right to the
undivided share of his father from the estate of his fathers sister who had
predeceased him. Since Evarista died ahead of Francisco, the latter inherited a portion of
the formers estate as one of her heirs. Subsequently, when Francisco died, his heirs
namely: his wife; legitimate children; and Joselito, an illegitimate son, inherited Franciscos
share in Evaristas estate. Joselito does not claim to be Evaristas heir by right of
representation but participates in his own right, as an heir of Francisco, in the latters share
in Evaristas estate.
SM: Sales; A.1484 (1)
GR # 109966, May31, 1999
FACTS: Private respondent Rolando Lantan entered into an agreement with his employer,
herein petitioner, leasing unto the former a Colt lancer fro a period of 5 years. The contract
also provided that at the end of the 5 year period, Lantan may exercise the option to
purchase price of the car and he should just pay the remaining balance. Said option is
limited to the employee. It also provided that upon Lantans failure to pay 3 accumulated
monthly rentals, the petitioner will have the option to lease said vehicle to another. Lantan
also has to return the car in case he resigns or is dismissed. He was laid off after petitioner
ceased operations in 1981. At that time, he has paid P61, 070.94. Petitioner then filed a
replevin case against Lantan and his wife, alleging that they have failed to pay the monthly
rentals despite repeated demands. HELD: Although the agreement provides for the
payment by Lantan of monthly rentals, the 5 th paragraph thereof gives them the option to
purchase the motor vehicle at the end of the 5th year or upon payment of the 60 thmonthly

rental when all monthly rentals shall be applied to the payment of the full purchase price of
the car. Clearly, the transaction is a lease in name only. The so-called monthly rentals are
in truth monthly amortizations on the cars price. Being a contract of sale on installment,
A.1484 &1485 apply. As such, the case should be considered as one for specific
performance pursuant to A.1484(1). The prayer for a writ of replevin is only for the
purpose of ensuring specific performance by private respondents. However, the private
respondents could no longer be held liable for the payment of interest on unpaid monthly
rentals since it was entered into in pursuance of a car plan adopted by petitioner for the
benefit of its deserving employees. Further, private respondents default in payment was
due to the cessation of operations of petitioners sister company. Elizalde Steel Company.
That petitioner accepted payments from Lantan more than 2 years after the latters
employment have been terminated constitutes a waiver of petitioners right to collect interest
upon delayed payment. What private respondents paid should be considered the payment
in full.
SM: Property; Action for reconveyance in an implied/ constructive trust
GR# 115794, June 10, 1999
FACTS: Respondents were co owners of 3 parcels of land located in Mabaliguen, San
Narciso, Zambales. Petitioner meantime, was their tenant and had been sharing the
harvest of the land with repondents mother, Macaria Villanueva, during her lifetime. Macaria
sold the realty to petitioners father, Victoriano , for P1k as shown by a duly notarized deed
of sale signed by Macaria and respondents except Inocencio Delos Reyes. The said land
was registered after cadastral proceedings, in the names of Macaria, Cirito and Francisco
Delos Reyes on June 21, 1937.HELD: Petitioners right of action to recover ownership of
the land has prescribed and is barred by laches. The remedy of the land owner whose
property has been wrongfully /erroneously registered in anothers name is to bring
an action in the ordinary courts for reconveyance. An action for reconveyance based
on an implied/ constructive trust prescribes in 10 years from the issuance of the
Torrens Tile over the property. Petitioner slept on his right for 38 years counted from the
time the OCT was issued on January 21, 1937, until he filed his amended answer to
respondents complaint on March 14, 1975, asking for reconveyance of the lots. His right to
bring such action was barred by laches as he took no step towards that direction reasonably
after the title to the property was issued under the Torrens System.

SM: Obligation and contracts; Rescission, A.1191, NCC

ONG vs. CA
GR# 97347, July 06, 1999
FACTS: Petitioner Jaime Ong and respondent spouses Miguel and Alejandra Robles
executed an Agreement of Purchase and Sale on 2 lots for P2M. Ong paid the Robles
couple the initial payment of P103, 499.91 as agreed upon, by depositing it with the
UPCB. Ong took possession of the property will all the improvements thereon. He further
deposited the remaining payment with the BPI in accordance with their stipulation that Ong
pay the respondents loan with BPI. Ong issued 4 post dated Metro Bank checks to answer
fro his P1.4M balance but they were dishonored for insufficient funds. Ong failed to replace
the checks and out of the P496, 500 BPI loan, he only paid P393, 679.60. Respondents
then sold 3 of their rice mills transformers found in the subject lots and Ong gave them the
authority to operate the mill while retaining possession of the lots. Respondents demanded
Ong the return of their properties. Ong ignored the same. HELD: A careful reading of the
parties contract shows that it is a contract to sell whereby ownership is by agreement,
reserved in the vendor and is not to pass to the vendee till full payment of the
purchase price. In a contract to sell, payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, causal or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force. In the instant case, the respondents bound themselves to deliver a
deed of absolute sale and a clean title upon full payment by Ong of the P2M. Ongs failure
to complete payment rendered the contract to sell ineffective and without force and
effect. The breach contemplated in A.1191, NCC is the obligors failure to comply with an
obligation already extant, not a failure of a condition to render binding that
obligation. Hence, the agreement of the parties herein maybe set aside, but not because of
a breach on Ongs part to pay in full. Rather, his failure brought a situation which prevented
the obligation of respondents to convey title from acquiring an obligatory force.
SM: Wills and Succession; Holographic will; A.811, NCC
GR# 123486, August 12, 1999
FACTS: Matilde Seo Vda. De Ramonal executed a holographic will. Herein respondents,
devisees and legatees of said will filed with the RTC of Misamis Oriental a petition for
probate of said will.Petitioners opposed the petition alleging that the holographic will was a
forgery and that the same was even illegible. They argued that the repeated dates
incorporated or appearing on the will after every disposition is out of the ordinary. The CA

held that the testimonies presented by respondents prove the authenticity of the will and the
handwriting and signature therein and allowed the wills probate. HELD: The word shall
in a statute commonly denotes an imperative obligation and is inconsistent with the
idea of discretion and that the presumption is that the word shall when used in a
statute is mandatory. However, in the case at bar, the goal to achieve is to give effect to
the wishes of the deceased and the evil to be prevented is the possibility that unscrupulous
individuals who for their benefit will employ means to defeat the wishes of the testator. Not
all the witnesses presented by the respondents testified explicitly that they were familiar with
the testators handwriting. Further, the will was found not in the decedents personal
belongings but with one of the respondents who kept it even before the decedents
death. There was even no opportunity for an expert to compare the signature and the
handwriting of the deceased with other documents signed and executed by her during her
lifetime. A comparison of the strokes and signature of the decedent in the will with the
other documents written by her prior to said will showed that there is uncertainty that the
holographic will is in the deceaseds handwriting.
SM: Contracts; A.1603, NCC; equitable mortgage
GR # 124355, September 21, 1999
FACTS: Petitioner constructed a house on his Marikina lot (TCT 128394) and agreed to
transfer the same to Vicente for P150, 000 to be paid by Vicente from the proceeds of his
housing loan from the SSS which granted him a P119, 400 loans. Ching then executed a
Deed of Absolute Sale over said realty in Vicentes favor. Ching informed Vicente that he
has a P43k balance on the house and lot. Vicente failed to pay the said amount. Thereafter,
they executed a Deed of Sale with Assumption of Mortgage and With Right to Repurchase
whereby Vicente conveyed the property to Ching. It provided that Ching will assume all the
duties and obligations of Vicente imposed upon by the latter in the deed of mortgage he
executed in SSSs favor, as if Ching was the original mortgagor in the mortgaged deed.
However, Vicente retained possession of the property. Ching paid in full to the SSS
Vicentes account. SSS then issued a release of REM annotated on TCT 146078 under
Vicentes name. Ching demanded that Vicente execute a Deed of Absolute Sale over the
property. Vicente ignored it. HELD: The deed of sale with assumption of mortgage and right
to repurchase is actually an equitable mortgage. The purported consideration for the sale
with right to repurchasing the amount of P60, 242.86 is unusually inadequate compared to
the purchase price of P150k when Vicente bought it from Ching 6 months before the
execution of the deed. Not only did Vicente retained possession of the property but he also
retained ownership thereof which led Ching to file the consolidation case.The real intention

of the parties was to secure the payment by Vicente of the balance of the purchase price
and the transfer fees of P43k. The stipulation in the Deed of sale with right to repurchase
that absolute title shall be vested in the vendee in case the vendor failed to redeem the
property on the specified date is void for being a pactum commissorium. Further, that Ching
assumed the mortgage obligation of Vicente to the SSS does not detract from the real
nature of the agreement as a contract of mortgage to secure the debts payment.

SM: Donation; inofficious donation; A. 1144, NCC cf. A.771, NCC
GR# 112483, October 08, 1999
FACTS: Leoncio Imperial sold his 32,827 sq. meters parcel of land for P1.00 to his
acknowledged son who then acquired title over the land and proceeded to subdivide it into
several lots. 2 years after the donation, Leoncio filed a complaint for annulment of the Deed
of Absolute Sale with the then CFI of Albay alleging that he was deceived by petitioner into
signing the said document. The dispute was however resolved through a Compromise
Agreement. Leoncio died leaving petitioner and an adopted son, Victor as heirs. Victor
thereafter died single and survived only by his natural father, Ricardo Villalon. When
Ricardo died, his 2 children filed a complaint with the RTC of Legazpi City for annulment of
the donation. Petitioner moved for its dismissal on the ground of res judicata, by virtue of the
Compromise Agreement rendered by the CFI of Albay. HELD: Since the action is one for
reduction of an inofficious donation the 30 year prescriptive period is inapplicable. A
claim for legitime does not amount to a claim of title. Since the donation in the case at
bar, the reduction of which hinges upon the allegation of impairment of legitime, is not
controlled by a particular prescriptive period the ordinary rules of prescription apply.Under
A.1144, NCC, actions upon an obligation created by law must be brought within 10
years from the time the right of action accrues. Thus, the 10 year prescriptive period
applies to the obligation to reduce inofficious donations required under A. 771, NCC,
to the extent that they impair the compulsory heirs legitime. The 10 year period
accrues upon the donor-decedents death. It took private respondents 24 years since
Leoncios death to initiate the case. The action thus, has long prescribed. Further, the
private respondents are also guilty of estoppel by laches.

SM: Sales; double sale; A.1544,NCC

GR# 102648, November 24, 1999

FACTS: Respondent spouses purchased the subject property on October 18, 19982 from
Renato Plata, petitioners judgment debtor in Civil Case # 82-12668. Platas TCT was
cancelled and TCT 57006 was issued in respondents names. They relied on Platas
duplicate certificate of title, free from the notice of attachment. However, the notice of
attachment was entered on the primary entry book of the Pasay City Register of Deeds
which failed to annotate the notice of attachment on the original copy of title. Thus, when
the respondents verified the OCT with the Registry of Deeds, they found the same
unblemished by any liens/ encumbrances. HELD: In involuntary registration such as an
attachment, levy on execution, lis pendens and the like entry thereof in the day book
or entry book is a sufficient notice to al persons of such adverse claim. Petitioners
lien of attachment was properly recorded when it was entered in the primary entry book of
the Registry of Deeds on October 06, 1982. When the subject property was sold on
execution to the petitioners said sale retroacted to the date of inscription of petitioners
notice of attachment on October 06, 1982. The earlier registration of the petitioners levy on
preliminary attachment gave them superiority and preference in rights over the attached
property as against respondents. This is in accordance to A. 1544, NCC. Thus, the
execution sale in favor of the petitioners was antecedent and superior to the sale of the
same property to the Bautista couple on October 10, 1982.
SM: Partnership; A. 1767, NCC
GR # 136448, November 03, 1999
FACTS: Antonio Chua and Peter Yao, on behalf of Ocean Quest Fishing Corporation,
entered into a contract worth Philippine Fishing Gear Industries (PFGI) fro the purchase of
fishing nets of various sizes from the latter. Chua and Yao claimed that they were engaged
in a business venture with petitioner Lim albeit the non participation of the latter in the
parties agreement. The buyers failed to pay for the fishing nets and the floats. A collection
suit was brought against the 3 in their capacities as general partners, allegedly because
OQFC was a non-existent corporation as shown by a certification from the SEC. The court
held the 3 as general partners based on a Compromise Agreement executed by Chua, Yao
and Lim in another case brought by Chua and Yao against Lim, among others. It ruled that
though the Compromise Agreement was silent as to the nature of their obligations, their joint
liability could be presumed from the equal distribution of the profit and loss of their
business. HELD: The 3 had decided to engage in a fishing business which they started by
buying boats worth P3.35M financed by a loan secured from Jesus Lim, petitioners

brother. In their Compromise Agreement, they subsequently revealed their intention to pay
the loan with the proceeds of the sale of the boats and to divide equally among them the
excess or loss. These boats, the purchase and the repair of which were financed with
borrowed money, fell under the term common fund under A.1767, NCC. That the parties
agreed that any loss/profit from the sale and operation of the boats would be divided equally
among them also shows that they had indeed formed a partnership. Further, the nets and
floats, both essential to fishing, were obviously acquired in furtherance of their
business. Clearly, Lim benefited from the use of the nets found inside F/B Lourdes, an
asset of the partnership. Under the law, an estoppel by corporation, those action on
behalf of a corporation and those benefited by it, knowing it to be without a valid
existence, are held liable as general partners. Undoubtedly, the 3 decided to form a
corporation which, for unknown reasons, was never legally formed. Nonetheless, their
liabilities as contracting parties in representation of it survive.

SM: Torts; A.2180 (5), NCC
GR# 132266, December 21, 1999
FACTS: Jose Benjamin Abad was a Production Manager of petitioner. Abad was given a
car owned by petitioner since he sometimes does overtime work at the petitioners office.
While leaving a restaurant after work, he figured in a vehicular accident which led to the
death of Vasquez, a side walk vendor and respondents son. Thereafter respondents and
Cebu Doctors Hospital sued Abad and petitioner for damages. HELD: The mere fact that
Abad was using a service vehicle at the time of the accident is not itself sufficient to charge
petitioner with liability for the negligent operation of said car unless it appears that Abad was
operating the vehicle within the course/ scope of his employment. The facts surrounding the
case showed that Abad was engaged in affairs of his own or was carrying out a personal
purpose not in line with his duties at the time the accident occurred. 2:00 am was way
beyond Abads normal working hours as well as his overtime work. His being at a place
known as a haven for prostitutes, pimp and drug pushers and addicts, had no connection
to petitioners business,; neither had it any relation to his duties as petitioners
manager. Rather, using his service car for personal purposes is a form of fringe benefit or
one of the perks attached to his position.

SM: A.36, Family Code; psychological incapacity

GR# 126010, December 8, 1999
FACTS: Petitioner Lucita Estrella Hernandez and private respondent Mario Hernandez were
married and have 3 children. Petitioner filed before the Tagaytay City RTC a petition for
annulment of their marriage on the ground of psychological incapacity of Mario. Allegedly,
from the time of their marriage up to the time of filing of the suit, Mario failed to perform his
obligation to support the family and contribute to the management of the household,
devoting most of his time engaging in drinking sprees with his friends. Further, Mario, after
they got married, cohabited with another woman with whom he sired an illegitimate child
while having different affairs leading to petitioner having STD. Despite petitioners
allegations, the RTC dismissed the petition ruling that her grounds were not those
mentioned in A.55 of the Family Code. It held that fraud must exist at the time of celebration
of the marriage. HELD:Psychological incapacity should refer to no less than a mental
(not physical) incapacity that causes a party to be truly incognitive of the basic
marital covenants that concomitantly must be assumed and discharged by the
parties to the marriage. The law confines psychological incapacity to the most serious
cases of personality disorders clearly demonstrative of an utter insensitivity/ inability to give
meaning and significance to the marriage. This psychological condition must exist at
the time the marriage is celebrated. If drug addiction, habitual alcoholism, lesbianism
or homosexuality should occur only during the marriage, they become mere grounds
for legal separation under A.55, FC.
SM: Contracts; equitable mortgage; A.16029 (6) in relation to A.1604, NCC
GR# 131520, Jaunuary 28, 2000
FACTS: Petitioner and private respondent Teofista Tupas entered into a Deed of Absolute
Sale covering a 3,230 sq. meters parcel of land located in Boracay Island. Consequently,
petitioner took possession and occupied the land. Claiming to have been disturbed in the
possession of he said land, petitioner filed a complaint for Quieting of Title and/or Recovery
of Possession with Damages against the Tupas couple. The other private respondents
came as intervenors, being co-owners with their sister Teofista of the subject
land. HELD: The contract at bar is an equitable mortgage under A.1602 (6). First, the Tupas
couple built 2 cottages on the subject land as well as operated a sari-sari store and grew
banana plants on the same, such that almost 1/2of the area had been occupied by
them. Despite this bold possession, petitioner admits that no demand to vacate the land
was ever made upon the Tupases. Neither was rent ever collected from them for their

occupancy of the land. Their possession remained undisturbed for years till the 1984
The private respondents had continued paying tax on the subject land even
after the supposed sale took place. Further, Teofista executed a Sworn Statement on June
21, 1973, more than a year after the April 30, 1972 transaction. This Statement was
executed in compliance with PD#76 requiring all land owners during the martial Law period
to submit statements of their assets and their corresponding values. Included as asset in
Teofistas Statement is the subject land.
SM: Contracts; void contract; A.1412 (2)
GR# 131679, February 01, 2000
FACTS: Rodolfo Guansing obtained a P90k loan from CDB and mortgaged a lot covered by
TCT#300809 registered in his name. Guansing defaulted in his payment and thus, CDB
foreclosed the mortgage which was sold to CDB in the foreclosure sale that
ensued. Guansing failed to redeem his lot and CDB eventually consolidated title to the
property in its name evidenced by TCT# 355588.Private respondent Lolita Lim offered to
buy the lot from CDB. The offer provided 10% option money and the balance payable in
cash. Lim discovered that the subject property was originally registered in the name of
Perfecto Guansing, Rodolfos father. Apparently, Rodolfo succeeded in having the lot
registered in his name under the title he mortgaged to CDB and from which CDBs title was
derived. However, Perfecto instituted a case for the cancellation of Rodolfos title which was
granted and the decision became final and executory. HELD: In the instant case, the P30k,
although denominated in the offer to purchase as option money, is actually in the nature of
earnest money or down payment when considered with the other terms of the offer. An
option contract is a contract separate from and preparatory to a contract of sale
which, if perfected, does not result in the perfection or consummation of the
sale. Only when the option is exercised may a sale be perfected. Here however, after
the payment of the 10% option money, the offer to purchase provides for the payment only
of the balance of the purchase price. This is the result of paying earnest money under
A.1482, NCC. Clearly, the parties entered into a contract of sale, perfected and partially
executed by the partial payment of the purchase sale. But due to the legal obstacle of the
annulment of Rodolfos title from which CDB derived its own title, the contract between it
and Lim can not be enforced and is void by reasons of public policy. Since CDB can not be
considered a mortgagee in good faith due to its negligence for failing to conduct an
exhaustive investigation, it is liable to return the P30k, plus damages as provided by A.1412
(2), NCC.

SM: Human relations; abuse of rights under A.19, NCC
GR # 132344, February 17, 2000
FACTS: Respondent is a 4th year law student of UE. UE released a tentative list of
graduating students with his name on it. He however had to take a removal examination for
one of his subjects but the results were not released immediately. Jader nevertheless
attended the graduation rights and immediately enrolled in the bar review classes as his
preparation for the bar exams. He however he failed the removal exam and is not a
graduate eligible to take the 1988Bar Exams. Aggrieved, Jader sued UE for damages since
he was not able to take the 1988 Bar Exams due to UEs negligence. UE argued that it
never led respondent to believe he completed the requirements for an LL.B. degree when
his name was included in the tentative list of graduating students. HELD: When a student is
enrolled in any educational/learning institution a contract of education is entered into
between said institution and the student. The professors, teachers/instructors hired by
the schools are considered merely as agents and administrators tasked to perform
the schools commitment under the contract. It is thus the contractual obligation of
the school to timely inform, and furnish sufficient notice and information to each and
every student as to whether s/he had already complied with all the requirements for
the conferment of a degree or whether they would be included among those who will
graduate. Prior or subsequent to the graduation ceremony, the school has the obligation to
promptly inform the student of any problem involving the latters grades and performance
and most importantly, of the procedures for remedying the same. UE, in belatedly informing
Jader of the results of his removal exam, particularly at a time when he had already
commenced preparing for the bar exams, can not be said to have acted in good faith.
Educational institutions are duty- bound to inform the students of their academic status and
not wait for the latter to inquire from the former. Articles 19 & 20, NCC provides for good
dealings between the persons and contracting parties.
SM: Obligation and contracts; rescissible contracts; A.1381(3), NCC
GR# 129644, March 3, 2000

FACTS: Alfonso Roxas Chua obtained a loan from MetroBank which he secured by
mortgaging his conjugal share in a property covered by TCT #410603. Alfonso failed to pay
and consequently MetroBank foreclosed the realty. In 1988, during the period of exercising
his right to redeem said realty, Alfonso sold his right of redemption to his son, Paulino who
redeemed the property and caused the annotation thereof at the back of the title. This
preceded the annotation of the levy of execution in CBCs favor by 2 years and the
certificate of sale also in CBCs favor by more than 3 years. CBC is Alfonsos creditor which
obtained judgment against him and Pacific Multi Agro Industrial Co. on November 07, 1985,
2 years before Alfonso sold his right to redeem to Paulino. Consequently, CBC sued Paulino
alleging that the transaction between him and his father was fraudulent and was meant to
defraud the latters creditors such as CBC.
HELD: Since the judgment of the trial court in CBCs favor against Alfonso was rendered as
early as 1985, there is a presumption that the 88 sale of his property, in this case, the right
of redemption, is fraudulent under A.1387, NCC. The fact that Paulino redeemed the
property and caused its annotation on the TCT ahead of CBC is of no moment since a
fraudulent transaction , such as Alfonsos and Paulinos , is not overcome by the mere fact
that the deeds of sale were in the nature of public instruments. This presumption is
strengthened by the fact that the conveyance has virtually left Alfonsos other creditors with
no other property to attach. The mere fact that the conveyance was founded on
valuable consideration as in the case at bar, does not necessarily negates the
presumption of fraud under A.1387, NCC. There has to be a valuable consideration
and the transaction must have been made bona fide. In the instant case, the
presumption of fraudulent conveyance has not been overcome.
SM: Damages; Willful Misconduct
GR# 135802, March 3, 2000
FACTS: Tan sued NORTHWEST for damages for breach of contract of air carriage when
the latter failed to deliver Tans baggage on the date of her arrival.
The RTC of Makati City found NORTHWEST liable for damages. In its appeal to the CA,
NORTHWEST alleged that it was not guilty of willful misconduct and as such, no damages
should be granted to Tan. HELD: NORTHWEST was not guilty of willful misconduct. For
willful misconduct to exist there must be showing that the acts complained of were impelled
by an intention to violate the law or were in persistent disregard of ones rights. It must be
evidenced by a flagrantly/shamefully wrong or improper conduct. There was nothing in
the respondents conduct which showed that they were motivated by malice or bad faith in
loading her baggage in another plane. Due to weight and balance restrictions, as a safety

measure, respondent had to transport the baggage on a different flight, but with the same
expected date and time of arrival in the Philippines.
Admittedly, NORTHWEST failed to
deliver Tans luggage on time but there was no showing of malice in such failure. By its
concern for safety, respondent had to ship the baggage in another flight with the same date
of arrival. Thus, it did not act in bad faith.
Where in breaching the contract of
carriage, defendant airline is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable consequences of the
breach of obligation which the parties had foreseen. In that case, such liability does
not include moral and exemplary damages.
SM: Persons and Family Relations; A. 83, NCC; bigamous marriages
GR#136467, April 6, 2000
FACTS: Teodorico Calisterio died intestate leaving parcels of land worth P604, 750. He was
survived by his wife, herein respondent Marietta Calisterio. Marietta was previously married
to James Williams Bounds on January 13, 1946 in Caloocan City. Bounds disappeared
without a trace and subsequently, the Calisterio couple was married 11 years later without
Marietta having priorly secured a court declaration that James was presumptively dead.
Petitioner Antonia Armas, Teodoricos sister, filed with the RTC of Quezon City a petition
claiming that she is the sole surviving heir of Teodorico since his marriage to Marietta was
allegedly bigamous and thus, null and void. Marietta opposed the petition stating that by
virtue of Bounds disappearance, her 1st marriage had been dissolved. HELD: When the
couple was married in 1958, the law in force was the New Civil Code and not the Family
Code which only took effect on August 3, 1988. Thus, A.83, NCC applies. In case whereby
the 1st spouse had been absent for 7 consecutive years at the time of the 2nd marriage, the
spouse present so contracting the later marriage must have done so in good faith. Further, a
judicial declaration of absence of the absentee spouse is not necessary as long as the
prescribed period of time has been met. In the instant case, Mariettas 1 st husband has been
absent or has disappeared for more than 11 years before she entered into a 2 nd marriage in
1958 with the decedent. This 2 ndmarriage having been contracted during the regime of the
Civil Code should thus be deemed valid notwithstanding the absence of a judicial
declaration of presumptive death of James Bounds.
SM: A.148, Family Code

GR# 137650, April 12, 2000

FACTS: Petitioner and Mario Fernandez cohabitated for sometime as husband and wife
and eventually stayed in the subject property. Thereafter, petitioner was sued for an
ejectment case by Mario and his legal wife, Lourdes. Petitioner alleged that she is legally
married to Mario and presented a Contract to Sell which showed her claim. Thus, she
asserted that she is the co-owner of the property pursuant to A. 144, NCC. HELD: A. 144,
NCC applies only to a relationship between a man and a woman who are both not
incapacitated to marry each other, or to one in which the marriage of the parties is
void form the beginning. It does not apply to a cohabitation that amounts to adultery
or concubinage, for it would be absurd to create a co-ownership where there exists a
prior conjugal partnership/ absolute community between the man and his lawful
wife.Evidence showed that Mario was incapacitated to marry petitioner for he is legally
married to Lourdes. The petitioner thus cohabitated with Mario in a state of concubinage
and as such, A.144, NCC is inapplicable. What governs petitioner and Marios relationship is
A.148, of the Family. In the case at bar, petitioner failed to show any vested right over the
subject property. Under A.148, FC, only the properties acquired by both parties thru
their actual joint contribution of money, property or industry shall be owned by them
in common in proportion to their respective contributions. Actual contribution is
required to be proven, otherwise, there will be no co-ownership and no presumption
of equal shares.

SM: Property; Easement, A. 637, NCC in relation to A.50 of the Water Code; damages
GR#125018, April 06, 2000
Petitioner Corporation and Crispin E. Lat are adjoining landowners. Lats land
is agricultural and planted mostly with fruit trees. REMMANs land is devoted to its piggery
business and is 1 meters higher in elevation than that of Lat. REMMANs waste disposal
lagoon was already overflowing and inundating of Lats plantation. Almost 1 hectare of
Lats plantation was already inundated with water containing pig manure, as a result of
which the trees growing on the flooded portion started to wither and die. Lat alleged that the

acidity of the soil in his plantation increased because of the overflow of the water heavy with
manure from REMMANs piggery farm. REMMAN raised the defense that he adopted
measures to contain the waste water coming from its piggery to prevent any damage to the
adjoining estates.HELD: The ocular inspection showed that the waste water containing pig
manure was indeed continuously flowing from REMMANs piggery farm to Lats plantation.
Such overflow went on for a year destroying several fruit trees on Lats plantation. Art. 637,
NCC and Art. 50, Water Code impose a natural easement upon the lower estate to receive
the waters which naturally and without the intervention of man descend from higher
states. However, where the waters which flow from a higher state are those which are
artificially collected in man-made lagoons, any damage occasioned thereby entitles the
owner of the lower or servient state to compensation. REMMAN was negligent in its
maintenance of level waste water in its lagoons. As such, even assuming that the heavy
rains constituted as an act of God, by reason of their negligence, the fortuitous event
became humanized and thus, petitioner is liable for the ensuing damages.
SM: Contracts; Lease, A.1196, NCC
GR # 136913, May 12, 2000
FACTS: Petitioner leased from private respondents their 56 sq. meter lot in Manila for the
purpose of turning it into a commercial establishment. Their contract provides, among
others, that the period for the lease shall be 15 years effective June 01, 1979, subject to
renewal for another 10 years. Private respondents reminded petitioner the expiration of the
contract on June 01, 1994 and demanded payment of the rentals in arrears. Consequently,
petitioner refused to pay the increased rental of P1k as early as 1991. The respondents
meanwhile refused to accept the P400 monthly rental of petitioners.
HELD: The contract between the parties did not indicate specifically who may exercise the
option to renew, neither was it stated that the option was given for the petitioners benefit.
Pursuant to A.1196, NCC, the period of the lease contract is deemed to have been set for
the benefit of both parties. Renewal of the contract maybe had only upon their mutual
agreement or at the will of them both. Since the respondents were not amenable to a
renewal, they can not be compelled to execute a new contract when the old contract
terminated on June 01, 1994. It is the owner-lessors prerogative to terminate the lease at
its expiration. The continuance, effectivity and fulfillment of a contract of lease can not be
made to depend exclusively upon the free ad uncontrolled choice of the lessee between
continuing payment the payment of the rentals or not, completely depriving the owner of
any say in the matter. Mutuality does not obtain in such a contract of lease and no equality

exists between the lessor and the lessee since the life of the contract would be dictated
solely by the lessee.
SM: Sales, Legal redemption, A.1523, NCC
GR # 137677, May 31, 2000
FACTS: Petitioner Adalia Francisco and 3 of her sisters were co-owners of 4 parcels of
registered lands on which stands the Ten Commandments Building @ 689 Rizal Avenue
Extension, Caloocan City. They sold 1/5 of their undivided share in said realty to their
mother, Adela Blas, for P10k, thus making the latter a co-owner of said property to the
extent of the share sold. Unknown to her children-co-owners, Blas sold her 1/5 share for
P10k to respondent, another sister of petitioner. Thereafter, petitioner received summons
from respondent demanding her share in the rentals being collected by petitioner from the
buildings tenants. Petitioner then informed respondent she was exercising her right of
redemption as a co-owner of said property and thus, she deposited the P10k as redemption
price with the Clerk of Court. The case was however dismissed. Petitioner filed her own
case alleging that the 30-day period for redemption under A.1623; NCC had not begun to
run against her since Blas never informed her and the other owners of the sale to the
respondent. It was only on August 5, 1992, after she received summons, did she learn of
said sale. Respondent said that petitioner already knew of the sale, the deed of which was
attached, as early as May 30, 1992 when she wrote a demand letter.
HELD: Art.1623, NCC is clear in requiring that the written notification should come from the
vendor/prospective vendor, not from any other person. The vendor of an undivided interest
is in the best position to know who his co-owners are, who, under the law, must be notified
of the sale. By not immediately notifying the co-owner, a vendor can delay or even
effectively prevent the meaningful exercise of the right of redemption. In the case at bar,
the sale took place in 1986 but it was kept secret till 1992 when vendee, private respondent,
needed to notify t petitioner about the sale to demand 1/5 rentals from the property sold.
However, to prevent injustice, the SC held that the receipt by petitioner of summons on
August 05, 1992 constitutes actual knowledge on the basis of which petitioner may now
exercise her right of redemption within 30 days from finality of the SCs decision.

SM: Contracts; mortgage; property; possession in bad faith

GR# 138053, May 31, 2000

FACTS: In a previously decided case between the same parties, the SC affirmed
respondents title over the subject property. It also affirmed the validity of the OCT in
respondents name while at the same time nullifying the original certificate of title in
petitioners name.
As a consequence, the trial court issued a writ of possession against
petitioner. The latter refused to vacate alleging that he was a builder in good faith and is
entitled to reimbursement for the improvements he introduced on the property. He further
argued that the prior decision of the SC did not direct his immediate ouster from the
property and its delivery to respondent. HELD: Since respondent has been declared the
sole owner of the subject lot she has the right to enjoy it. Corollary, respondent also has the
right to exclude from the possession of her property any other person to whom she has not
transmitted such property. Generally, in a mortgage, the mortgagor retains possession of
the mortgaged property since title to the property does not pass to the mortgagee. However,
though a mortgagee does not have possession of the property, there is no impairment of his
security since the mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor maybe, to the fulfillment of the obligation for whose
security it was constituted. Regardless of its possessor, the mortgaged property may still be
sold, with the prescribed formalities in the event of the debtors default in the payment of his
loan obligation. Thus the writ of possession in respondents favor is correct as it was but a
necessary consequence of the SCs earlier ruling. Possession is an essential attribute of
ownership; thus, it would be redundant for respondent to go back to court simply to
establish her right to possess the property. Petitioner is indeed a builder on bad faith since it
was clear that petitioner knew from the beginning that there really was no sale and that he
only held the property as security for the payment of the loan.
SM: Arts. 1733 and 1755, NCC; damages
GR# 122039, May 31, 2000
FACTS: Private respondent Sunga filed an action for breach of contract of carriage against
petitioner. Sunga suffered from injuries when the jeepney owned by petitioner where she
was riding on collided with a truck driven by Verena and owned by Salva. In fact, in another
case against the 2, the negligence of Verena was ruled to be the accidents proximate
cause. HELD: A breach of contract/ culpa contractual is premised upon the negligence in
the performance of a contractual obligation. The action can be prosecuted merely by
proving the existence of the contract and the fact that the obligor, the common carrier in this
case, failed to transport his passenger safely to his destination. It is immaterial that the

proximate cause of the collision between the jeepney and the truck was the truck drivers
negligence. The doctrine of proximate cause is applicable only in actions for quasi-delict,
not in actions involving breach of contract. Where there is a pre-existing contractual relation
between the parties, it is the parties themselves who create the obligation, and the function
of the law is merely to regulate the relation created. In contracts of carriage, the carriers are
presumed negligent in cases of death or injury to passengers. In the case at bar, the
petitioner has to prove that he had observed extraordinary diligence in the care of his
passengers. This it failed to do. Its jeepney was not properly parked; the driver took in more
passengers than the allowed seating capacity of the jeepney- both violations of the
provisions of the Land Transportation and Traffic Code.

SM: Obligations; when is a contract perfected
GR#s 128066 & 128069, June 19, 2000
Purefoods Corporation (PC) decided to install 2 1500kw generators in its food
processing plant in Marikina City due to the 1992 power crisis.3 bidders submitted bid
proposals and gave bid bonds equivalent to 5% of their respective bids as required. Far
East Mill Supply Corporation (FEMSCO) won the contract and immediately submitted the
required performance bond amounting to P1, 841,187.90 and contractors all-risk insurance
policy totaling P6, 137,293 with PC acknowledged in a letter. It also made arrangements
with its principal and started purchasing the necessary materials. PC meanwhile returned
FEMSCOs Bidders Bond of P1M as requested. However, PC unilaterally cancelled the
award allegedly due to significant factors. FEMSCO protested the act and before the matter
could be resolved, PC already awarded the project and entered into a contract with Jardine
Nell, a division of Jardine Davies, Inc (JDI), which was not one of the original
bidders. HELD:Contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. From that moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, maybe in keeping with good faith, usage and law. For a contract to
arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can
be withdrawn/ revoked before it is made known to the offeror. PC started the process on
entering into the contract by conducting bidding. The bid proposals/quotations submitted by

the bidders which included FEMSCO are the offers and PCs reply the acceptance /
rejection of the same. The December 12, 1992 letter of PC to FEMSCO constituted
acceptance of FEMSCOs offer notwithstanding the conditions contained in the contract.
The conditions were imposed on the performance of the obligation rather than on the
perfection of the contract. They were prescriptions on how the obligation was to be
performed and implemented, not conditions imposed on the perfection of the contract. PCs
cancellation of its contract with FEMSCO presupposes that the contract has been
perfected. Here, the SC awarded moral damages to FEMSCO after it sufficiently
showed that its reputation has been tarnished (cf HANIL and ABS-CBN cases).

SM: Contracts; Novation
GR# 116805, June 22, 2000
FACTS: Respondent Diaz originally occupied the subject condo unit in 1987 as a
lessee. While he was its lessee, petitioner agreed to sell the unit to him by
installments. The agreement to sell was provisional as the consideration was payable in
installments. Petitioner terminated the provisional deed of sale by a notarial notice of
cancellation; Diaz remained the lessee but he failed to pay the rentals due. Diaz
subsequently made payment of P100k applicable either to the back rentals or for the
purchase of the unit. Nevertheless, petitioner gave Diaz a notice to vacate the premises and
to pay his back rentals. Diaz failed to do both and so petitioner filed an action for unlawful
detainer against him. Diaz alleged that the provisional deed of sale executed by them
novated the original existing contract of lease and thus, petitioner has no cause of action for
ejectment against him. HELD: Novation must be clearly proved; its existence is not
presumed. It only takes place if the parties expressly so provide, otherwise, the original
contract remain in force. Where there is no clear agreement to create a new contract in
place of the existing one, novation cannot be presumed to take place, unless the terms of
the new contract are fully incompatible with the former agreement on every point. In the
case at bar, after the initial down payment , respondents checks in payment of 6
installments all bounced and were dishonored. This led to petitioners termination of the
provisional deed of sale. Petitioners subsequent acceptance of payment did not withdraw
the cancellation of the provisional sale. Unless the application of payment is expressly
indicated, the payment shall be applied to the most onerous obligation of the debtor, in this
case, the unpaid rentals. Since the payment did not fully settle the unpaid rentals, the cause
of action for ejectment survives.

SM: Prescription; Arts.1106 & 554 (4), NCC
GR# 109215, July 11, 2000
FACTS: The parties common Ancestor, Doque Catanda acquired a parcel of agricultural
land which was declared under Tax Declaration No.6983 in his eldest son Anastacios name.
Anastacio, who had no children, remained in possession of said land from 1933 till 1968
when he executed a deed of extrajudicial settlement of estate which adjudicated and
partitioned said parcel of land among his brothers and sisters. After 1968, his siblings
worked on the land, as shown by several tax declarations and subsequently, their children
and successors; herein petitioners, remained in actual and peaceful possession of said land
until 1988 when private respondents (PRs) filed their action to recover possession.
HELD: PRs cause of action is barred by prescription under A.1106, NCC. Private
respondents did not assert ownership over the lands until 1988-55 years after Anastacio
possessed the same in 1933. The remedies of accion publiciana/reindivicatoria must be
availed of within 10 years from dispossession. Under 555 (4), NCC, the real right of
possession is lost after the lapse of 10 years. Thus, PRs cause of action was barred not by
laches but by extinctive prescription. Further, the facts of the case sufficiently established
that Anastacio was in OCEN possession of the land from 1933 till 1968- or a 35 year period.
Since his possession began under the former Civil Code, 10 years of actual adverse
possession is all that is required regardless of how such occupancy may have commenced
or continued, before possession ripened into full and complete title over the land. Hence, by
1943, 10 years after his possession of the land begun, Anastacio became its owner through
acquisitive prescription. As Anastacio had acquired ownership of said land, he could validly
adjudicate and partition it among his brothers and sisters who were his only heirs. In turn,
petitioners, as children of Anastacios siblings, acquired ownership of the land not through
prescription but through hereditary succession.

SM: Contracts; A. 1479, NCC
GR# 137290, July 31, 2000

FACTS: The parties in the case at bar executed an instrument involving the sale of the
petitioners subject real properties to the Huangs. The Huangs wrote petitioner the terms of
their offer. Among the conditions given by the Huangs are: (1) that they be given the
exclusive option to purchase the property within 30 days from acceptance of the offer; (2)
that during the option period, the parties would negotiate the terms and conditions of the
purchase; and (3) petitioner would secure the necessary approval while respondents would
handle the documents. The Huangs gave petitioner P1M as earnest deposit. However,
the couple and petitioner failed to agree on the terms of the payment. Petitioner gave the
Huangs a 45-day extension so that a final agreement may be had. What transpired
however was nothing more than offers and counter offers. Petitioner then offered the
properties to another.HELD: Under A.1479, NCC, consideration in an option contract maybe
anything of value, unlike in sale where it must be the price certain in money or its
equivalent. In the case at bar, there is no showing of any consideration for the option.
Lacking any proof of such consideration, the option is unenforceable. The manner of
payment of the purchase price is an essential element before a valid and binding contract of
sale can exist. Although the NCC does not expressly state that the minds of the parties
must also meet on the terms/manner of payment of the price, the same is needed;
otherwise, there is no sale. Agreement on the manner of payment goes into the price such
that a disagreement is tantamount to a failure to agree on the price. Thus, it is not the giving
of earnest money, but the proof of the concurrence of all the essential elements of the
contract of sale which establishes the existence of a perfected sale. In addition, the
Huangs did not give the P1M as earnest money as defined by A.1482, NCC. It was only
given not as a part of the purchase price and as proof of the perfection of the contract of
sale but only as a guarantee that respondents would not back out of the sale.
SM: Obligations and Contracts; Contract to Sell vs. Contract of Sale
GR# 120820, August 01, 2000
FACTS: Private respondents, the Caseda couple, possessed the subject house and lot in
Paraaque City. However, the TCT over the same issued by the Register of Deeds of
Paraaque has always remained in Rosalindas name. Although the parties agreed that the
Casedas would assume the mortgage, all amortization, payments made by Carmen Caseda
to the bank were in Rosalindas name. The bank cancelled and discharged the mortgage in
Rosalindas favor. Apparently, petitioners thus informally sold with conditions the said
realties to the Casedas. The Casedas failed to pay in full. The Santoses thus reposed their
property. HELD:A.1458, NCC expressly obliges the vendor in a contract of sale to transfer

the ownership of the thing sold as an essential element of such a contract. After a careful
examination of the contents of the parties unofficial receipt and other proofs, the SC held
that there was no valid transfer of ownership was made by the Santoses to the Casedas.
Absent this essential element, their agreement can not be deemed a contract of sale. What
they had was a mere contract to sell. In contracts to sell, ownership is reserved in the
vendor and is not to pass until full payment of the purchase price. In a contract of sale, the
vendor has lost ownership of the thing sold and can not recover it, unless the contract of
sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner
for as long as the vendee has not complied fully with the condition of paying the purchase. If
the vendor should eject the vendee for failure to meet the condition precedent, he is
enforcing the contract and not rescinding it. Such is what the Santoses did in this case.

SM: family Law; Property relations
GR # 119064, August 22, 2000
FACTS: Decedent Hadji Abdula Malang,a Muslim, had 4 wives at the time he acquired the
subject properties. Under Islamic law, the regime of property relationship is complete
separation of property, in the absence of any stipulation to the contrary in the marriage
settlements or any other contract (A.38, PD 1083).
Petitioner, a Muslim and the decedents 4 th wife, alleged that the properties are her conjugal
property with the decedent since they got married prior to the enactment of PD1083. Thus,
the regime of conjugal partnership of gains applies to them in accordance with the Civil
Code. The Sharia District Court held that Islamic law is applicable and thus, the properties
are not conjugal since under Islamic laws, the regime of relationship is complete separation
of property, in the absence of stipulation to the contrary in the marriage settlement/ any
other contract. In this appeal, petitioner contends that the NCC is applicable. Thus, all
property of the marriage is presumed to belong to the conjugal partnership. HELD: The
validity of the marriages in the case at bar is determined by the NCC. Thus the NCC
determines and governs the property relations of the marriage in the instant case. This is
because at the time of the celebration of the marriages, the Civil Code was the only law on
marriage relations, including property relations between spouses whether Muslim or nonMuslim. The Family Code which made substantial amendments to the NCC particularly to
property acquired from and after August 3, 1988 is also relevant.
Which law would
govern depends upon: (1) when the marriages took place; (2) whether the parties lived
together as husband and wife; and (3) when and how the subject properties were acquired.
A.144, NCC requires that the man and woman living together as husband and wife without
the benefit of marriage must not in any way be incapacitated to marry. Thus the co-

ownership it contemplates is not applicable to Hadjis marriages celebrated subsequent to a

valid and legally existing marriage, since from the NCCs point of view; Hadji is not
capacitated to marry. The law presumes, absent any proof to the contrary, that property
acquired during the subsistence of a valid marriage- and in the NCC, there can be one at
any given time- is conjugal property of such subsisting marriage.

SM: Sales; double sale; A.1544 (2), NCC
GR# 138201, September 12, 2000
FACTS: Julia Deocareza bought the subject property from the Canino siblings. She in turn
sold it first to respondent Nogales under a Deed of Absolute Sale on April 29, 1968. Nogales
thereafter registered with the Register of Deeds said deed. Meanwhile, petitioner bought a
portion of the property from the Canino siblings during the period from June 21, 1971 to
October 13, 1989, long after respondent had purchased the property. HELD: To merit
protection under A.1544 (2), NCC the 2 nd buyer must act in good faith in registering the
deed. Thus, it has been held that in cases of double sale of immovable, what finds
relevance and materiality is not whether or not the 2 nd buyer was a buyer in good faith but
whether or not said 2ndbuyer registers such 2nd sale in good faith, i.e., without knowledge of
any defect in the title of the property sold. Good faith on petitioners part is wanting. The
petitioner had the Deed of Absolute Sale registered with the register of deeds and entered in
the Registry Records as Entry No. 47052, page 51, vol. 14 of the registry record under Act
33444. The registration of the deed, under Act 3344, constitutes constructive notice to the
whole world. As stated in the Santiago case, registration by the 1st buyer under Act 3344
can have the effect of constructive notice to the 2 ndbuyer that can defeat his right as such
buyer. On account of the undisputed fact of registration under Act 3344 by respondent
Nogales as the 1st buyer, necessarily, there is absent good faith in the registration of the
sale by petitioners for which they had been issued certificates of title in their names. It
follows that their title to the land can not be upheld. As to the other petitioners, they failed to
register the portions of the property sold to them, and merely relied on the fact that they
declared the same in their name for taxation purposes. This does not buy itself constitute
evidence of ownership and can not likewise prevail over Nogales title.

SM: Property; Easements; A.619, NCC
GR# 114348, September 20, 2000
FACTS: The subject property was originally public land awarded to private respondent
Manglapus by free patent. Under the Original Certificate of Title, there was a reservation
and condition that the land is subject to all conditions and public easements and servitudes
recognized and prescribed by law especially those mentioned in Secs. 109- 114, CA 141 as
amended. Further, Manglapus TCTs annotation imposed on him the duty to refer to the
conditions annotated on the back of the OCT. The National Irrigation Administration (NIA)
exercised the governments right of easement and constructed a canal which was only 11
meters in width. Manglapus then filed an action against NIA for just compensation for the
taking of his property. HELD: NIA is under no such obligation. The TCT and OCT covering
the subject property contained a reservation granting the government a right of way over the
land covered therein. The reservation under the OCT was not limited by any time period and
is thus a subsisting condition. In the case at bar, the SC declared that a legal easement of a
right of way exists in favor of the government. The land was originally public land, and
awarded to Manglapus by free patent. Lastly, Manglapus is a transferee with notice of all the
liens annotated in the title. One who deals with property registered under the Torrens
System is charged with notice of burdens and claims that are annotated on the title.
SM: Partnership
GR# 126881, October 03, 2000
FACTS: Petitioners filed an action against the decedents brother Tan Eng Lay for
accounting, liquidation and winding up of the alleged partnership formed after WWII
between decedent Tan Eng Kee and Tan Eng Lay. After WWII, the brothers, pooling their
resources and industry together, entered into a partnership engaged in the business of
selling lumber and hardware and construction supplies. They named their business Benguet
Lumber which they jointly managed until Tan Eng Kees death. However, petitioner claimed
that in 1981, Eng Lay and his children converted the partnership into a corporation called
BLC allegedly as a ruse to deprive Eng Kee and his heirs of their rightful participation in the
profits of the business. HELD: No partnership existed between them. Except for the firm
name, there was no firm account, no certificate of partnership, no agreement as to profits

and losses, and no time fixed for the duration of the partnership. It had no agreement as to
profits and losses, and no time fixed for the duration of the partnership. It had no business
book, no written account nor any memo for that matter and no license mentioning the
existence of a partnership. What the evidence show is establishment of only a
proprietorship. The certification dated March 04, 1971 mentioned Eng Lay as the only
registered owner of the Benguet Lumber and hardware. His application for registration,
effective 1954, mentioned that his business started in 1945 till 1985 (thereafter, the
incorporation). The deceased, Kee, meanwhile, was merely an employee of the BLC, on the
basis of his SSS coverage effective 1958; in the payrolls, Kee was only listed as an
employee. It is indeed odd, if not unnatural, that despite the 40 years the partnership was
allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a
partnership is that the partners share in the profits and losses. Each has the right to demand
an accounting as long as the partnership exists. A demand for periodic accounting is
evidence of a partnership. Tan Eng Kee never availed of such right.
SM: Persons; void marriages; psychological incapacity; A. 36, Family Code
GR# 136490, October 19, 2000
FACTS: Petitioner Brenda Marcos and respondent Wilson Marcos were married on
September 06, 1982 in Pasig City. Alleging Wilsons psychological incapacity, Brenda filed
with the RTC a petition to declare their marriage null and void. The RTC ruled in Brendas
favor and declared their marriage null and void. On appeal, the CA reversed the RTC and
held that psychological incapacity had not been established by the totality of the evidence
presented hence, this appeal.
HELD: Though the personal medical/ psychological examination of Wilson is not a
requirement for a declaration of psychological incapacity, nevertheless, the totality of the
evidence petitioner presented does not show such incapacity. Although respondent is
proven to have failed to provide material support to the family and may have resorted to
physical abandonment, the totality of his acts does not lead to a conclusion of psychological
incapacity ion his part. There is absolutely no showing that his defects were already
present at the inception of the marriage or that they are incurable. His alleged psychological
illness was traced only within the 6 years period while he was without any job and not to the
inception of the marriage. Equally important, there is no evidence showing that his
condition is incurable, especially now that he is gainfully employed as a taxi driver. A. 36, FC
refers to a serious psychological illness afflicting a party even before the celebration of the
marriage. It is a malady so grave and so permanent as to deprive one of awareness of the
duties and responsibilities of the matrimonial bond one is about to assume. At best, the

evidence presented by petitioner refers only to grounds for legal separation, not for
declaring a marriage void. As ruled in Molina, the root cause of the psychological
incapacity must be: (a) medically/clinically identified, (b) alleged in the complaint, (c)
sufficiently proven by experts and, (d) clearly explained in the decision. A. 36, FC
requires that the incapacity must be psychological- not physical. Petitioner failed to
observe this as well as the other requirements.
SANTOS vs. CA 240 S 34

SM: Family Code; void marriages
TY vs. CA
GR # 127406, November 27, 2000
FACTS: Private respondent contracted in 1977 a marriage with Villanueva without the
needed license and consent required. Thereafter, he married petitioner in 1979 in civil and
church rites. However, private respondent filed a complaint for annulment of their marriage
alleging that he and petitioner did not have a marriage license when they got married and
that his first marriage to Villanueva had not been nullified judicially. HELD: Since
respondents first marriage was void for lack of license and consent there was no need for
judicial declaration of its nullity before he could contract a 2 nd marriage. The ruling in
Odayat vs. Amante (77 S 338) applies to the case. No judicial decree is necessary to
establish the nullity of void marriages. Thus, private respondents 2nd marriage to
petitioner is valid. The parties had complied with all the essential and formal requisites for a
valid marriage including the requirement of a valid license.
SM: Wills and Succession; Validity of the will; A.17, NCC
GR # 124371, November 23, 2000
FACTS: The testator-decedent, Lorenzo N. Llorente became an American citizen long
before and at the time of: (1) his divorce from Paula; (2) his marriage to Alicia; (3) execution
of his will; and (4) at the time of his death. Under Lorenzos will, his 2 ndwife Alicia and their
children get all his properties. The will was contested. The RTC threw out the will, leaving
Alicia and her 2 children with nothing. The RTC ruled that the will was intrinsically invalid
since it contained depositions favoring Alicia who was thought of as a mere
paramour. HELD: Under the VAN DORM doctrine (139 S 139), only Philippine nationals are

covered by the policy against absolute divorces. Aliens may obtain divorces abroad
provided they are valid according to their national law. The hasty application of Philippine
law and the complete disregard of the will already probated as duly executed in accordance
with the formalities of Philippine law are fatal. As held in Quita vs. CA (300 S 406), once
proven that respondent was no longer a FILCIT when he obtained the divorce from
petitioner, the Van Dorm ruling applies and the petitioner could very well lose her right to
inherit from him. In Pilapil vs. Ibay- Somera (174 s 653), the SC held that divorce and its
legal effects maybe recognized in the Philippines insofar as decedent is concerned n view
of the nationality principle in our civil law on the status of persons. Lorenzos divorce form
his 1st wife Paula being valid in New York where he is a resident was valid and recognized in
this jurisdiction as a matter of comity. The clear intent of Lorenzo to bequeath his property to
his 2nd wife and their children is palpable in the will he executed. His wishes should not be
frustrated since he was a foreigner, not covered by our laws on family rights and duties,
status, condition and legal capacity.

SM: Public Land Act; judicial confirmation of imperfect title
GR#112172, November 20, 2000
FACTS: The subject property is being claimed by respondent Bernardo De Leon. Allegedly,
he and his predecessors- in interest has been in OCEN possession of the land for at least
50 years. It was however shown that the survey plan for the land was approved only in 1992
and respondent paid the realty taxes thereon on October 30, 1992, shortly before he filed
the suit for damages with injunction against PEA.HELD: An applicant seeking to establish
ownership of land must conclusively show that he is the owner in fee simple for the standing
presumption is that all lands belong to the public domain of the state, unless acquired from
the Government either by purchase or by grant, except land possessed by an occupant and
his predecessors since time immemorial. Such possession would justify the presumption
that the land had never been part of the public domain, or that it had been private property
even before the Spanish conquest. Respondent has no title to Lot 5155 at all. He must be
deemed to begin asserting his adverse claim to said lot only in 1992, when he started
paying realty taxes thereon. Further, Lot 5155 was certified as alienable and disposable on
March 27, 1972, per DENRs certificate. It is obvious that respondents possession has not
ripened into ownership. Further, one claiming private rights must prove that he has complied
with CA141,as amended/ Public Land Act, which prescribes the substantive as well as the
procedural requirement for acquisition of public lands. Under said law, OCEN possession
must be since June 12, 1945. Lastly, under CA141as amended, only titles to alienable and
disposable lands of the public domain maybe judicially confirmed. Unless a public land is

reclassified and declared as such, occupation thereof in the concept of owner, no matter
how long ago, can not confer ownership/possessory rights.

SM: Property; accretion; A. 457, NCC
GR# 116290, December 08, 2000
FACTS: Petitioner and respondent are both riparian owners of lots along the Davao River.
Due to the decrease in land area of petitioners lot, allegedly due to a change in the rivers
course, petitioner claimed ownership of the abandoned river bed. She also insisted that Lot
415-C, respondents lot, was part of her property since she has acquired it by accretion
under A. 457, NCC. The lower courts ruled that the decrease in the land area of petitioners
property was brought by erosion and not a change in the rivers course. They concluded this
after finding out in an ocular inspection that the banks located on petitioners land are sharp,
craggy and very much higher than the land on the other side of the river. Additionally, the
riverbank on respondents side is lower and gently sloping. The lower courts held that
naturally, the lower land received the alluvial soil carried by the river current. Both courts
also ruled that petitioner failed to prove that Lot 415-C neither was within the boundaries of
her titled property nor was her private survey plan given probative value. They further held
that the corresponding expansion of respondents property was due to the combined effect
of erosion and accretion respectively. HELD: Petitioner can not claim ownership over the
old abandoned river bed because the same is inexistent. The riverbeds former location can
not even be pinpointed with particularity since the Davao River took place gradually over an
unspecified period of time, up to the present. The rule is well-settled that accretion benefits
a riparian owner when the following requisites are present: (1) that the deposit is
gradual and imperceptible; (2) that it resulted from the effects of the current of the water;
and (3) that the land where accretion takes place is adjacent to the bank of the river. These
requisites were sufficiently proven in respondents favor. In the absence of evidence that the
change in the course of the river was sudden or that it occurred through avulsion was
gradual and was caused by alluvium and erosion. As to Lot 415-C, registration does not
protect the riparian owner against the diminution of the area of his land thru gradual
changes in the course of the adjoining stream. Accretion which the banks of rivers may
gradually receive from the effect of the current became the property of the banks owners.

SM: Wills and Succession; Rule on Proximity in Intestate Succession
GR# 140975, December 08, 2000
FACTS: Augusto H. Piedad died without any direct descendants or ascendants.
Respondent is the maternal aunt of the decedent, a 3 rd degrees relative. Meantime,
petitioner is the daughter of a first cousin of the decedent, or a 5 th degree relative of the
decedent. Citing Articles 1009 and 1010, NCC, petitioner claims that she is also entitled to
succeed to the decedents estate.HELD: The rule on proximity is a concept that favors the
relatives nearest in degree to the decedent and excludes the more distant ones, except
when and to the extent that the right of representation can apply. In the direct line, right of
representation is proper only in the descending, never in the ascending line. In the collateral
line, this right may only take place in favor of the children of the decedents siblings when
such children survive with their aunts/ uncles. Applying A.966,NCC, respondent, being a
relative within the 3rd civil degree of decedent excludes petitioner, a relative of the
5th degree, from succeeding ab intestato to the decedents estate. Among other collateral
relatives, i.e., the 6th in the line of succession to which the parties belong, no preference or
distinction should be observed by reason of relationship by the whole blood. In fine, a
maternal aunt can inherit alongside a paternal uncle, and a 1 st cousin of the full blood can
inherit equally with a first cousin of the half blood, but an uncle/ aunt, being a 3 rd degree
relative, excludes the decedents cousin, being in the 4 th degree of relationship; the latter, in
turn, would have priority in succession to a 5th degree relative.
SM: Obligation and Contracts; Novation
GR# 117660, December 18, 2000
FACTS: The conflict among the parties started from a contract of sale of a farmland
between Agro and Wonderland Food Industries.The original plan was that the initial
payments would be paid in cash. Subsequently, the parties, with respondent banks
participation, executed an addendum providing instead, that Agro would secure a loan in its
name for the total amount of the initial payments, while the settlement of said loan would be
assume by Wonderland. Thereafter, petitioner Soriano signed several promissory notes
(PNs) and received the proceeds in Agros behalf.
In effect, the parties entered into a
subsidiary contract of suretyship since petitioners signed the PNs as makers and
accommodation party for Wonderlands benefit. Petitioners asserted that the addendum

provided that their obligation to pay the PNs was novated by substitution of a new debtor,
Wonderland, and as such, they were not liable anymore on the PNs.
HELD: In order that a novation can take place, the concurrence of the following
requisites is indispensable: (1) there must be a previous valid obligation; (2) there must
be an agreement of the parties concerned to a new contract; (3) there must be the
extinguishment of the old contract; and (4) there must be the validity of the new
In the case at bar, the 1st requisite for a valid novation is lacking. There was no
novation by substitution of debtor because there was no prior obligation which was
substituted by a new contract. The PNs, which bound petitioners to pay, were executed after
the addendum. The addendum modified the contract of sale, not the stipulation in the PNs
which pertain to the surety contract. Wonderland apparently assured the payment of future
debts to be incurred by petitioners. Consequently, only a contract of surety arose. It was
wrong for petitioners to presume that a novation had taken place. Settled is the rule that a
novation is never presumed, it must be clearly and unequivocally shown.
SM: land registration; judicial confirmation of title
GR# 116372, January 18, 2001
FACTS: The Director of Lands initiated a cadastral case, pursuant to law, before the RTC of
Ligao, Albay. Romeo Divinaflor filed his answer to the petition relative to Lot 10739, claiming
ownership of said land by virtue of his possession for over 30 years. The RTC found him,
together with his predecessor- in interest to have been in OCEN possession since 1939 of
said lot and ordered the lots registration and confirmation in the spouses Divinaflors
names. The Director in his appeal to the CA alleged that the RTCs findings were not
sufficiently supported by evidence. He contended that the earliest tax declaration presented
by the claimant took effect only in 1980 and the certificate of real estate tax payment is
dated 1990. HELD: The SC reiterated its ruling in Republic vs. CA (235 s 567 ) that the
Public land Act requires that the applicant must prove the following: (a) that the land is
alienable public land and (b) that his OCEN possession of the same must either be since
time immemorial or for the period prescribed in the Public Land Act. When the conditions
set by law are complied with, the possessor of the land, by operation of law, acquires a right
to grant a government grant, without the necessity of a certificate of title being issued. The
subject lot is undoubtedly alienable and disposable tract of public land. The determination of
whether claimants were in OCEN possession under a bona fide claim of ownership since
1945 as required by law is a question of fact which was resolved affirmatively by both lower

SM: Obligations and Contracts; Novation as a means to extinguish a contract of surety
GR#s 99398/104625, January 26, 2001
FACTS: Babst alleged that DBP sold ELISCONs entire asset to the NADECO, for the latter
to take over and continue the operation of its business. Thereafter, the DBPs Board of
Governors adopted Resolution# 2817 providing that DBP shall enter into a contractual
arrangement with NDC for the latter to pay ELISCON;s creditors, including BPI, amounting
to P 4,015,534.54. A Memorandum of Agreement (MOA) between DBP and NDC followed
which provided that NDC shall pay to ELISCONs creditors, through DBP, the amount of
P299, 524,700. BPI again was listed as a creditor. Babst further alleged that the ELISCON
assets which DBP acquired and later transferred to NADECO (NDC) were placed under the
Asset Privatization Trust. Thus, he was not liable. Due to its failure to make payment, BPI
commenced an action to enforce payment of the credits of ELISCON with CBTC which was
acquired in a merger by BPI. The action was against Pacific Multi Commercial Corporation
and Babst as ELISCONs sureties. HELD: While a surety is solidarily liable with the principal
debtor, his obligation to pay only arises upon the principal debtors failure/ refusal to pay. In
the case at bar, there was no indication that the principal debtor will default in
BPIs conduct further showed a clear and unmistakable consent to DBPs
substitution for ELISCON as debtor. The authority granted by BPI to its account officer to
attend the creditors meeting was an authority to represent the bank such that when he
failed to object to the substitution of debtors, he did so in behalf of and for the bank. Hence,
there was a valid novation which resulted in the release of ELISCON from its obligation to
BPI, whose course of action should be directed against DBP as the new debtor. The original
obligation having been extinguished, the contracts of suretyship executed separately by
Babst and Multi being accessory obligations are likewise extinguished.

SM: Family Code; Void marriages
GR# 132529, February 02, 2001
FACTS: SPO4 Santiago S. Cario contracted 2 marriages in his lifetime. The first was with
petitioner Susan Nicdao Cario, on jUne 20, 1969 and the second was with respondent,

Susan Yee Cario on November 10, 1992. He and Susan however had been living together
since 1982. In 1988 Santiago died under Susan care and she spent for his medical and
burial expenses. Both parties filed claims for monetary benefits and financial assistance
pertaining to the deceased from various government agencies. Petitioner collected P146,
000 while respondent only received P21k. Respondent then filed a case for collection of
sum of money against petitioner whop failed to file her answer. HELD: Under the Civil Code
which was the law in force when the marriage of petitioner and the deceased was
solemnized in 1969, a valid marriage license is a requisite of marriage and the absence
thereof, subject to certain exceptions, renders the marriage voi ab initio. Petitioners
marriage does not fall within those exempt from the license requirement. Thus, a marriage
license was indispensable to the validity of their marriage. This petitioner failed to show.
However, though petitioners marriage is void, the death benefits do not automatically go to
respondent. The nullity of Santiagos previous marriage, without a prior judicial declaration,
does not validate the second marriage of Santiago with respondent which is likewise void ab
initio. One of the effects of the declaration of nullity of marriage is the separation of property
of the spouses. Considering that both marriages are void ab initio, the applicable property
regime would not be absolute community or conjugal partnership of property but Articles
147-148 of the Family Code on Property Regime of Unions without Marriage. The death
benefits were earned by the deceased as a police officer. Respondent could not be said to
have contributed to it. Thus such money is not owned in common but belonged to Santiago.
By intestate succession, the money shall pas to Santiagos legal heirs; respondent is not
included for it is Santiagos marriage with petitioner that is presumed to be in good faith.
Thus, of the death benefits shall go to petitioner as her share and the other half to their 2
SM: Contracts; Unenforceable contracts
GR#140479, March 08, 2001
FACTS: Respondents filed a case against Petitioner Corporation, Rene Joaquin and
Eufrocina De Leon. Originally, the complaint was one for annulment of deed of absolute sale
but was later amended to rescission of absolute deed of sale. The RTC dismissed the case
ruling that the right of redemption on which the case was based was merely an oral one and
as such, is unenforceable under the law. The CA, although holding that the statute of frauds
governs the right of first refusal claimed by respondents, ruled that the latter had duly
proven the same by petitioners waiver of the protection of the statute due to their failure to
object to the presentation of oral evidence of said right hence, this appeal. HELD: A right of
first refusal is not among those listed as unenforceable contracts under the Statute of

frauds. A right of 1strefusal, such as the subject matter in this case, is not by any means a
perfected contract of sale of real property. At best, it is a contractual grant, not of the sale of
the real property involved, but of the right of 1 st refusal over the property sought to be sold.
Thus, the statute of frauds does not contemplate cases involving a right of first refusal which
need not be written to be enforceable and maybe proven by oral evidence. The respondents
however failed to present any evidence that prior to the sale of the property on November
4, 1990,petitioners were aware or had notice of the oral right of first refusal the respondents
have over the property. Since there is no showing of bad faith on petitioners part, the CA
erred in ordering the rescission of the Deed of Absolute Sale between petitioner
R OSENCOR and the Tiangco heirs. ROSENCORs acquisition of the property subject of
the right of first refusal is an obstacle for its rescission where, as in this case, it was shown
that ROSENCOR is in lawful possession of the land and that it did not act in bad
faith. Respondents remedy for the unjustified violation of their right of first refusal over the
property is not an action for the rescission of the Deed of Absolute Sale but an action for
damages against the Tiangco heirs.
SM: Succession; Legitime
GR# 138774, March 08, 2001
FACTS: Petitioners, illegitimate children of the deceased, bought their fathers 2 parcels of
land covered by a Kasulatan. They alleged that they paid their father P10k andP15k for said
properties. However, both of Gregorios children did not have any stable source of income.
Respondent, Gregorios sole legitimate daughter, filed an action to declare the deed of sale
void for lack of consideration.
HELD: Petitioners testimonies failed to prove that they paid their father for the 2 lots. Since
there was no cause/ consideration for the sale, the same was a simulation and hence, null
and void. Further, even if it was not simulated, the sale still violated the law insofar as the
transaction affected respondents legitime under the Civil Code. The sale was executed to
transfer the land to the petitioners at respondents expense. Respondent, by law, is entitled
to half of the estate of her father as his only legitimate child. She can not be deprived of her
share being a compulsory heir save by disinheritance as prescribed by law.
SM: Donation; Articles 745 and 749, NCC
GR# 140487, April 02, 2001

FACTS: Respondents donated a parcel of land in favor of the Bureau of Public Schools,
Municipality of Malangas, Zamboanga del Sur. A school building was immediately
constructed after the donation was executed. However, the lot was later on exchanged for a
bigger land. Respondents thereafter filed an action to declare the Deed of Donation null and
void. Allegedly, the donation was not accepted by the donee or that its acceptance did not
reach the donors. However, in the trial court, an affidavit of acceptance/ confirmation was
offered in evidence. HELD: There was valid acceptance of the donation. The written
acceptance of the donation having been considered by the trial court in arriving at its
decision, there is the presumption that this exhibit was properly offered and admitted by the
court. Further, the purpose of noting the acceptance in the Deed of Donation as required in
Article 749, NCC is to insure that the acceptance of the donation is duly communicated to
the donor. In the case at bar, the donor in fact confirmed the donees acceptance and even
requested that the donated land be not registered during her lifetime. Lastly, since the
denotation was made in favor of the Bureau of Public Schools the acceptance without a
Special Power of Attorney from the republic of the Philippines was authorized under Section
47 of the 19987 Administrative Code.
SM: Sales; double sales; Art. 1544, NCC
GR# 123457, May 21, 2001
FACTS: Private respondents, Spouses Veneracion, bought the subject lot from private
respondent Dela Paz according to a Deed of Sale with Right to Repurchase. The
Veneracions did not physically occupy the 3 lots one of which was occupied by Dela Paz
and the other by petitioner. After the period to redeem expired, the Dela Paz couple told the
Veneracions that they were offering the lots for sale to another person for P200k. The latter
did not object. Nevertheless, the respondents executed a 2 nd Deed of Sale over the same
property. They then filed an action for ejectment of the petitioner who was already in
possession of the property at the time the 2 nd deed was executed. HELD: A purchaser who
is aware of facts which should put a reasonable man upon his guard can not turn a blind
eye and later claim that he acted in good faith. Private respondent Reynaldo Veneracion
admitted during the pre-trial conference in the MTC for their ejectment case that petitioner
was already in possession of the subject property at the time the 2 nd Deed of Sale was
executed on January 01, 1983 and recorded on March 03, 1984. He thus knew that there
were already occupants on the property as early as 1981. The fact that there are other
persons, other than the Dela Paz couple, in actual possession of the lot should have put the
Veneracions on inquiry as to the nature of petitioners right over the property. But they never

talked with petitioner to verify the nature of his right and instead relied on the assurance of
Dela Paz who was not even the owner of said lot. This does not meet the standard of good
SM: Quasi- Contracts; Art. 2141, NCC
GR# 109087, May 09, 2001
FACTS: RODZSSEN applied for and obtained an irrevocable 30- day domestic Letter of
Credit from respondent Bank on January 15, 1979, in favor of Ekman & Co. Inc. in order to
finance the purchase of 5 units of hydraulic loaders amounting to P190k. After several
extensions, the validity was finally granted until October 16, 1979. Far East paid Ekman for
the first 3 hydraulic loaders that w ere delivered. The bank however paid Ekman P76k on
March 14, 1980 for the last 2 units which petitioner accepted under its trust receipt
arrangement with Far East. The latter demanded payment from petitioner which refused the
same since the bank paid Ekman when it was no longer bound to do so under the Letter of
Credit which expired 5 months prior to the payment of the 2 units.
HELD: The subject Letter of Credit had become invalid upon the lapse of period fixed
therein. Thus, respondent should not have paid Ekman since it was not obliged to do so.
However, Far Easts right to seek recovery from the petitioner is anchored not upon the
inefficacious letter of Credit, but on Art. 2142, NCC. Indeed, equitable considerations should
be used to allow recovery by respondent. Thus, it erred in paying Ekman but petitioner itself
was not without fault in the transaction. It must be noted that the latter had voluntarily
received and kept the loaders since October 1979.
SM: Family Code; Parental authority; Arts. 211, 214, FC
GR# 132223, June 19, 2001
FACTS: Petitioner is Valerie and Vincents surviving grandmother while respondent is their
mother. Petitioner alleged that respondent is morally unfit as Valerie;s guardian since her
live- in partner raped Valerie several times. Respondent meanwhile claimed that petitioner
can not qualify as a substitute guardian for the children since she is an American citizen and
a Colorado resident. Since Valerie became of age, the guardianship of Vincent became the
focal point of the proceedings. The lower courts ruled that respondent, being the natural
mother of the minor has the preferential right over of petitioner to be his guardian, hence,

this appeal. HELD: Respondent has the preferential right over that of petitioner to be his
guardian. Being Vincents natural mother, respondent has the corresponding natural and
legal right to his custody. Settled is the rule that the right of the parents to the custody of
their minor children is one of the natural rights incidents to parenthood, a right supported by
law and sound public police. The right is an inherent one, which is not created by the state
or decisions of the courts, but derives from the nature of the parental relationship. Petitioner,
as the surviving grandparent, can exercise substitute parental authority only in case of
death, absence/ unsuitability of respondent. Considering that respondent is very much alive
and has exercised continuously parental authority over Vincent, petitioner has to prove, in
asserting her right to be the minors guardian, respondents unsuitability. Petitioner however
failed in that score.
SM: Damages; registered owners (of any vehicle) liability
GR# 128705, June 29, 2001
FACTS: Petitioners car was damaged due to a collision with another car. The cars driver
Borja was Comsavings Bank employee. Petitioner sued the bank for the damages since the
Lancer driven by Borja was registered in the banks name. The trial court held in petitioners
favor. CA reversed the ruling.In this appeal, petitioner asserts that the existence of
employer- employee relationship between the bank and Borja is immaterial for the
registered owner of a motor vehicle is legally liable for the damages incurred by third
persons for injuries sustained in the operation of said vehicle. Respondent claims
meanwhile that it is not liable since at the time of the accident, Borja was driving the Lancer
in his private capacity and was not performing functions in furtherance of Comsavings
Banks interest. Further, Borja allegedly had bought the car on installment basis. Thus, at
the time of the incident, the bank was no longer the cars owner.
HELD: The registered owner of any vehicle, even if not for public service, is primarily
responsible to third persons for deaths, injuries and damages it cause. This is true even of
the vehicle is leased to third persons. The Motor Vehicle Law does not relieve a registered
owner directly of the responsibility that the law fixes and places upon him as an incident of
registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee/ owner is, it would be easy for him, by collusion with others, or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to
one who can not financially shoulder the damage/ injury done. Thus Comsavings, being the
registered owner of the car is primarily responsible for the damage caused to petitioners car
but CSB has a right to indemnified by the real/actual owner of the amount that he may be
required to pay as damages.

SM: Succession; Art. 1001, NCC
GR# 143256, August 28, 2001
FACTS: Dr. Jose Fernandez died intestate in 1982. An Extra- Judicial Partition of his
properties was executed by his wife Generosa and their son, Rodolfo, herein petitioner. A
Deed of Sale of some properties of Generosa was also executed by her in favor of petitioner
Eddie Fernandez before she died. Respondents, Dr. Joses nephews and nieces, filed an
action for the declaration of absolute nullity of the 2 deeds. HELD: Since the lower courts
found Rodolfo not a child by nature of the spouses Fernandez and not a legal heir of Dr.
Jose, the deed of extra- judicial settlement of Dr. Joses estate between him and Generosa
is null and void insofar as Rodolfo is concerned pursuant to Article 1105, NCC. However,
since the property in question is conjugal, the respondents are entitled to inherit the 1/4
share of the estate while the 3/4 share of the conjugal property still belong to Generosa.
Respondents can not thus possess nor demand reconveyance of the said property since
they are not related by consanguinity to Generosa. Being the owner of the realty, Generosa
can thus sell it as she did in favor of petitioner.
SM: Contracts; Novation as a mode of extinguishing obligations.
GR# 136780, August 16, 2001
FACTS: Danilo Alto is a credit card owner of SDIC. He signed a Surety Undertaking with
petitioner to ensure payment of his credit card debts with SDIC. Under the Undertaking,
petitioner bound herself jointly ad severally with Alto to pay SDIC all obligations and charges
in the use of the Diners Club Card and that any change or novation in the Agreement or any
extension of the time granted by SDIC to pay such obligation shall not release her from the
Surety Undertaking. Alto upgraded his card and became Diamond card holder. However, he
incurred debts of P166, 408.31 in credit card advances which he failed to pay. SDIC sued
Alto and petitioner as his surety to collect said amount. HELD: The upgrading was a
novation of the original agreement covering the 1 st credit card issued to Alto, basically since
it was committed with the intent of canceling and replacing the said card. But the novation
did not serve to release petitioner from her surety obligations because in the Surety
Undertaking she expressly waived discharged in case of change/ novation in the agreement
governing the use of the 1st credit card. The extent of a suretys liability is determined by the

language of the surety ship contract/ bond itself. Also, the Surety Undertaking expressly
provides that petitioners liability is solidary. Although the contract of surety is in essence
secondary only to a valid principal obligation, his liability to the creditor is direct, primary and
absolute; he becomes liable for the debt and duty of another although he possesses no
direct or personal interest over the obligations nor does he receive any benefit there from.
Petitioner had the option to withdraw her suretyship when Alto upgraded his card to one that
permitted unlimited purchases, but instead she approved the upgrading. Hence, her liability
SM: Human Relations; Abuse of Rights under Art. 19, NCC
GR# 138964, August 09, 2001
FACTS: Respondents were Marta Reyes lessees. They had built their houses on the
leased land which over the years underwent continuous improvements. When Marta died,
her son Victor inherited the land. Sometime in 1986, he informed respondents that they
would have a right of first refusal to buy the lot since they have been its lessees for more
than 20 years. However, the land was sold in 1989 to petitioner Cynthia Ortega without
respondents knowledge. She thereafter secured title to the property in her name and
proceeded to condemn the structures on the land via a Condemnation Petition with the
Office of the Building Official in Manila City. The respondents immediately filed with the
Manila RTC a suit for the Declaration of Nullity of the sale in Cynthias favor predicated on
their right of first refusal. Nevertheless, the office of the Building Official issued an order of
demolition of the respondents houses which took place after several
interventions. HELD: The abuse of rights rule established in Article 19, NCC require every
person to act with justice, to give everyone his due and to observe honesty and good faith.
When a right is exercised in a manner which discards these norms resulting in damage to
another, a legal wrong is committed for which the actor can be held accountable. In the case
at bar, the issue is not so much about the existence of the right/validity of the order of
demolition as the question of whether or not petitioners have acted in conformity with, and
not in disregard of, the standard set by Art. 19, NCC. At the time the petitioners
implemented the order of demolition, barely 5 days after respondents received a copy
thereof, the same was not yet final and executory. The latter are given 15 days to appeal.
Due to petitioners premature action of demolishing the houses, the respondents were
effectively deprived of this recourse. The action of petitioners up to the point where they
were able to secure an order of demolition was not condemnable but implementing the
order unmindful of the respondents right to contest the ruling was a different matter and
could only be held utterly indefensible.

SM: Contracts; legal compensation
GR# 129598, August 01, 2001
FACTS: Petitioner is indebted to PNEI for P7, 884,921.10 per a promissory note dated
October 31, 1982 executed by its precursor NAREDECO in PNEIs favor. Said amount
earns an 18% interest/year in case NAREDECO fails to pay the principal after notice;
PNEIs receivables were thereafter conveyed to PNB in payment of PNEIs loan obligation
to the latter, in accordance with a dacion en pago agreement executed between PNEI and
PNB. Allegedly compensation took place between petitioners debts to PNEI and the latters
obligation to it. Nevertheless, PNEI, through respondent, sued petitioner for the latters
debts. HELD: Legal compensation could not have occurred in the case at bar due to the
absence of one requisite: that both debts must be due and demandable. Petitioners
obligation to PNEI is payable on demand, and there being no demand made, it follows that
the obligation is not yet due. Thus, this obligation may not be subject to compensation for
lack of a requisite under the law. Without compensation having taking place, petitioner
remains obligated to PNEI to the extent stated in the promissory note. This obligation may
undoubtedly be garnished in respondents favor to satisfy PNEIs judgment debt.
SM: Contracts; Suretyship
GR# 127261, September 07, 2001
FACTS: Petitioner posted a replevin bond in respondents favor. Respondent Dominador
Ibajan asserted that as intervenor, he assumed the personality of the original defendants in
relation to the plaintiffs bond for the issuance of a writ of replevin. Petitioner meanwhile
claimed that it is not liable to Ibajan because the intervention of the intervenor makes him a
party to the suit but not a beneficiary to the plaintiffs bond. The intervenor was not a party to
the contract of surety; hence, he was not bound by the contract. HELD: A contract of surety
is an agreement where a party called the surety guarantees the performance by the
principal or obligor of an obligation/undertaking , in favor of a 3 rd person called the oblige.
Specifically, suretyship is a contractual relation resulting from an agreement whereby one
person, the surety, engages to be answerable fro the debt, default/miscarriage of the
principal. The suretys obligation can not be extended by implication beyond its specified
limits. The extent of a suretys liability is determined only by the clause of the contract of

suretyship. A contract of surety is not presumed; it can not extend to more than what is
stipulated. Since the obligation of the surety can not be extended by implication, it follows
that the surety can not be held liable to the intervenor when the relationship and obligation
of the surety is limited to the defendants specified in the surety contract.
SM: obligations; damages
GR# 135644, September 17, 2001
FACTS: GSIS and the Deangs had a loan agreement secured by a Real Estate Mortgage.
The Deangs were able to pay said loan and asked that their duplicate copy of title be
released by the GSIS. The latter insisted however that it was not obligated to return said
duplicate copy immediately. As a result, the Deangs were not able to secure another loan,
resulting to damages to their business. Consequently, they sued GSIS for
damages. HELD: Although Article 2180, NCC in inapplicable in the case at bar, GSIS is still
liable for damages. Under Articles 1170 and 2001, NCC, GSIS, due to its negligence and
refusal to return the duplicate copy of title, should pay the Deangs for the damages they
suffered. Since good faith is presumed and bad faith is a matter of fact which should be
proved, GSIS was treated by the SC as a party who defaulted in its obligation to return the
owners duplicate copy of title. As an obligor in good faith, GSIS is liable for all the natural
and probable consequences of the breach of the obligation. The inability of the Deangs to
secure another loan and the damages they suffered thereby has its roots in the failure of
GSIS to return the owners duplicate copy of title. Hence, award of damage due to the
breach of contract is granted.
SM: Partnership
GR# 135813, October 25, 2001
FACTS: Petitioner employed the services of respondent spouses in the money lending
venture with Gragera, with Nieves as book keeper and Arsenio as credit investigator. Nieves
witnessed the signing of the Partnership Agreement between the two. However, petitioner,
Nieves and Zabat were also partners but their partnership ended when Zabat was expelled.
The partnership continued lending money to the members of the Monte Marra Community
Development Group, Inc. Petitioner alleged that Nieves misappropriated the money
intended for Grageras commission. Respondents meanwhile asserted that they were in fact

partners of petitioner and Gragera, thus, they were entitled to the partnerships
profits. HELD: Evidence showed that Nieves was the Second Party named in the
Partnership Agreement, making her a partner of the petitioner. Arsenio meanwhile, on
account of his duties replaced Zabat in the partnership. Their partnership was established to
engage in a money lending business despite the fact that it was formalized only after the
Memorandum of Agreement has been signed by petitioner and Gragera. Since a
partnership exists between the parties, the profits thereof should be divided between the
SM: Family Law; Paternity and Filiation
GR# 142877, October 21, 2001
FACTS: The petition involves the case of two illegitimate children who, having been born in
lawful wedlock claim to be the illegitimate scions of the decedent in order to enforce their
respective shares in the latters estate under the rules on succession.
however were born during their parents marriage. Their certificate of live birth also identified
Danilo De Jesus as being their father. Nonetheless, they presented a written
acknowledgment made by the decedent that he in effect was their
father. HELD:
The filiation of illegitimate children like legitimate children, is
established by (1) record of live birth appearing in the civil register/ final judgment; or (2)
an admission of legitimate filiation in a public document or a private handwritten instrument
and signed by the parties concerned. In the absence thereof, filiation shall be proved by (1)
open and continuous possession of the status of a legitimate child; or (3) any other means
allowed by the Rules of Court and special laws. The due recognition of an illegitimate child
in a record of birth, a will, or a statement before a court of record or in any authentic writing
is in itself a consummated act of acknowledgement of the child and no further court action is
required. In the case at bar, petitioners were born during their parents marriage and Danilo
De Jesus was the father in their certificates of live birth. The rule is settled that the
presumption of children born in wedlock is legitimate. An attempt to establish petitioners
illegitimate filiation to the decedent would impugn their legitimate status as being children of
Danilo and Carolina De Jesus. This can not be done because the law establishes the
legitimacy of children, conceived/born during their parents marriage.The presumption of
legitimacy fixes a civil status for the child born in a wed lock and only the father or in
exceptional instances, the latters heirs, can contest in an appropriate action the
legitimacy of a child born to his wife. Thus, it is only when the legitimacy of a child has
been successfully impugned that the paternity of the husband can be rejected.

SM: Obligation and Contracts RA 6552 (realty Installment Buyer Protection Act); Art. 1169,
GR# 129018, November 15, 2001
FACTS: Petitioner and private respondent Fernando executed a contract to sell over a
piece of property. The contract provided that the vendee, herein petitioner, may continue
occupying said lot as long as she complies with all the terms and conditions agreed upon.
The respondent- vendor meanwhile will only execute a deed of sale after the complete
payment of the total purchase price of the property. The parties agreed further that petitioner
will pay in monthly installments for a period of 10 years. However, after April 01, 1989,
petitioner failed to pay said installments. Respondents thereafter filed an ejectment case
against petitioner. HELD: Petitioners non payment of the installments prevented
respondents obligation to convey the property from arising. In fact, it brought into effect the
provision of the contract on cancellation. Any attempt to cancel the contact to sell would
have to comply with the provisions of RA 6552. RA 6552 recognizes on conditional sales of
all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the
contract upon non- payment of an installment by the buyer, which is simply an event that
prevents the obligation of the vendor to convey title from acquiring binding force. The law
also provides for the rights of the buyer in case of cancellation. Sec. 3(b) provides even that
If the contract is cancelled, refund to the buyer of the case surrender value of the payments
is a must. It also provides that the actual cancellation of the contract shall take place after
30 days from receipt by the buyer of the notice of cancellation/ demand for rescission of the
contract. The decision in the ejectment case operated as the notice of cancellation required
by Sec. 3 (b). As petitioner was not given the cash surrender value of the payments that she
made, there was still no actual cancellation of the contract. Consequently, petitioner may
still reinstate the contract by updating her account.
SM: Obligations and Contracts; Double Sale; Art. 1544, NCC
TAN vs. CA
GR# 135038, November 16, 2001
FACTS: Hayden Luzon bought the subject property from Lorenzo Atega on sale by
installment, starting form 1957 till 1987. Leoncio Paredes bought a portion of his property in
1977 and the remaining portion in 1990. However, no registration of their claims had been
made in their favor, much less any title issued in their name. Petitioner meanwhile bought

the lot through Ismael Elloso. Petitioner thereafter registered said sale with the Register of
Deeds in November 1979, soon after title was issued in Ategas name, segregating his
share in Lot No. 436-A. petitioner filed a notice of adverse claim which was duly annotated
on Ategas title. HELD: There is evidence showing not only that respondents knew of the
sale of the lot by Elloso to petitioner but also that the latter was ahead in registering his
acquisition of the lot with the Register of Deeds. Both the prior registration of the deed of
sale in petitioners favor, as well as the adverse claim, effectively gave Luzon and Paredes
notice of petitioners right on the subject land. Before 2 nd buyers like Luzon and Paderes can
obtain priority over 1st buyers like Elloso, petitioners predecessor- in interest, they must
show that they have acted in good faith throughout, having been ignorant of the 1 st buyers
rights from the time of their acquisition until the title was transferred to them by registration.
The requirement is such that the 2 nd buyer must show continuing good faith and innocence
or lack of knowledge of the 1 st sale till his contract ripens into full ownership through prior
registration as provided by law. Evidently, both respondents claim must yield in petitioners
SM: Obligation and Contracts; reciprocal Obligations; Consignation
GR# 127695, December 03, 2001
FACTS: Petitioners entered into a lease contract with option to buy with respondents. The
private respondents communicated to petitioners their intention to buy the property prior to
the expiration of their contract. However, petitioners refused to execute the deed of sale and
demanded respondents to first deliver the money before they would execute the same. The
respondents filed a case for specific performance in the RTC. Before the RTC rendered its
decision, respondents issued a cashiers check in petitioners favor purportedly to bolster
their claim that they were ready to pay the purchase price. Asserting that the respondents
were in delay when they issued the cashiers check after the contract expired, petitioners
filed this petition. HELD: Obligations under an option to buy are reciprocal obligations. In an
option to buy, the payment of the purchase price by the creditor is contingent upon the
execution and delivery of a deed of sale by the debtor. In the case at bar, when the
respondents opted to buy the property, their obligation was to advise petitioners of their
decision and their readiness to pay the price. They were not yet obliged to make actual
payment. Only upon petitioners actual execution and delivery of the deed of sale were
acquired to pay. Respondents did not incur in delay when they did not yet deliver payment
nor make a consignation before the expiration of the contract. In reciprocal obligations,
neither party incurs in delay if the other does not comply or is not ready to comply in
a proper manner with what is incumbent upon him. Only from the moment one of the

parties fulfills his obligation, does delay by the other begin. Accordingly, as there was
no compliance yet with what was incumbent upon petitioners under the option to buy,
respondents had not incurred in delay when the cashiers check was issued even after the
contract expired.

SM: Family Code; Parental Authority
GR# 140817, December 07, 2001
FACTS: The parties were married under Islam laws. Thereafter, they separated and
petitioner converted back to Catholicism. Petitioner took custody of their children and as a
result; respondent brought an action with the Shari a Court which found petitioner unworthy
to care for her children under the principles of Muslim Law. On the other hand, it found
respondent capable to look after the best interest of his minor children, thus, this
appeal. HELD: Proof of petitioners capacity to have custody of her children is not restricted
to Muslim laws. The Family Code shall be taken into consideration in deciding whether
a non- Muslim woman is incompetent. What determines her capacity is the standard
laid down by the Family Code now that she is not a Muslim. Indeed, what determines
the fitness of any parent is the ability to see to the physical, educational, social and moral
welfare of the children, and the ability to give them a healthy environment as well as
physical and financial support taking into consideration the respective resources and social
and moral situations of the parents. The minors welfare is the controlling consideration
on the issue. Article 211, family Code provides joint parental authority over the
couples children. PD 1083 provides that where the parents are not divorced/legally
separated, the father and mother shall jointly exercise parental authority. However,
under the circumstances of the parties, petitioner has more capacity and time to see to the
childrens needs. Nevertheless, respondent gets visitorial rights.
SM: Donation; Art. 749, NCC
GR# 132681, December 03, 2001
FACTS: Catalino Quilala executed a deed of donation in favor of her alleged daughter
Violeta. It stipulated that the cause of donation was the love and affection of the donor
toward the donee. The donor, donee and their witnesses affixed their signatures below the

terms and stipulations of the donation. The Acknowledgment appearing on the 2 nd page
mentioned only the donor, Catalina. Consequently, petitioner filed an action questioning the
donation asserting that the donation of an immovable, under Art. 749, NCC must be in a
public instrument in order to be valid.HELD: Under Sec. 112(2) PD 1529, the specification
of the location of the signature is merely directory. The fact that one of the parties signs on
the wrong side of the page does not invalidate the document. The requirement is designed
to avoid the falsification of the contract after the same has already been duly executed by
the parties. Corollary, the back of an acknowledgment by the donee before the notary public
does not also render the donation null and void. The fact that it was acknowledged
before a notary public converts the deed of donation in its entirety into a public
instrument. The fact that the donee was not mentioned by the notary public in the
acknowledgment is of no moment. Surely it is the conveyance that should be
acknowledged as a free and voluntary act. In any event, the donees signed on the
second page, which contains the Acknowledgment only. Her acceptance, which is
explicitly set forth on the 1 st page of the notarized deed of donation, was made in a public
instrument. Thus, the donation is valid.
SM: Family Law; Art. 285, NCC
GR# 146500, January 21, 2002
FACTS: The late Fiscal Ernesto A. Bernabe allegedly fathered a son with his secretary,
Carolina Alejo, who was born on September 18, 1981 and was named Adrian Bernabe.
Fiscal Bernabe died on August 13, 1993 while his wife died on December 03, 1993, leaving
Ernestina as the sole surviving heir. On May 05, 1994, Carolina, in Adrians behalf, filed the
aforesaid complaint praying that Adrian be declared an acknowledged illegitimate son of
Ernesto and thus, Adrian should be given his share in Ernestos estate being held by
Ernestina. The RTC dismissed the complaint ruling that the same was barred under the
Family Code. It held that the putative fathers death had barred the action. Since Ernesto
had not acknowledged/ recognized Adrian in writing, the action for recognition should have
been filed during Ernestos lifetime to give him the opportunity to either affirm/deny the
childs filiation. The CA ruled meanwhile that Adrian should be allowed to prove that he was
Ernestos illegitimate son. Since he was born in 1981, the CA held that A.285, NCC, which
allows an action for recognition to be filed within 4 years after the child has attained the age
of majority was not repealed by the Family Code, thus, this appeal.HELD: Article 285, NCC
is a substantive law which gave Adrian the right to file his petition for recognition within 4
years from obtaining majority age. Thus, the Family Code can not impair or take away
Adrians right to file an action for recognition, because the right had already vested prior to
its enactment. Illegitimate children who were still minors at the time the Family Code

took effect and whose putative parent died during their minority are thus given the
right to seek recognition for a period of up to 4 years from attaining majority age.
This vested right was not impaired or taken away by the passage of the Family
Code. The state as parens patriae should protect a minors right. Born in 1981, Adrian was
only 7 years when the family Code took effect and only 12 when his alleged father died in
1993.The minor, the SC held, must be given his day in court.
SM: Donation Inter Vivos
GR# 106755, February 01, 2002
FACTS: Basilica Comerciante bought a parcel of land with the improvement thereon in
Cavite. On December 17, 1975, Basilica executed a document designated as Kasulatan sa
Kaloobpala (donation) in favor of her 4 children covering said property. However, on
February 06, 1979, she also executed a Deed of Absolute Sale of the same property in
favor of petitioner Apolinaria Austria- Magat for P5, 000. Basilicas title was cancelled and a
new one was issued in petitioners favor HELD:When the deed of donation provides that the
donor will not dispose/take away the property donated, thus making the donation
irrevocable, he is in effect making a donation inter vivos. He parts away with his naked title
but maintains beneficial ownership while he lives. It remains to be a donation inter vivos
despite an express provision that the donor continues to be in possession and enjoyment of
the donated property while he is alive. The SC, construing together the provisions of the
deed of donation, held that the donation is inter vivos, thus, irrevocable. Further, the act of
selling the subject property to the petitioner can not be considered as a valid act of
revocation of the deed of donation for the reason that a formal case to revoke the donation
must be filed in court pursuant to Art. 764, NCC within 4 years from the non- compliance of
a condition violated. Lastly, since there was no fraud in the case at bar Art. 1144, NCC
governs. The action for reconveyance thus prescribes in 10 years and the filing by
respondents of the case in 1983 is well within the period.
SM: Articles 218 & 219, Family Code
GR# 143363, February 06, 2002
FACTS: Some students of petitioner school, during a school activity, rode a jeep brought by
one of their classmates, Ched Villanueva and owned by respondent Vicencio Villanueva.

While Ched was driving the vehicle, he allowed James Daniel II, a minor, to drive the jeep.
The steering wheel guide of the jeep was detached and the jeep figured in an accident
resulting in the death of Sherwin Carpitanos, a passenger in the jeep and one of petitioners
student. His parents sued petitioner school fro his death under Arts. 218 and 219, FC and
got a favorable ruling in the lower court. Thus, this appeal. HELD:
For petitioner to be
liable there must be a finding that the act/ omission considered as negligent was the
proximate cause of the injury caused since the negligence must have a causal connection
to the accident. In the case at bar, the respondents failed to show that the negligence of
petitioner was the proximate cause of the victims death. Evidence showed that the
immediate cause of the accident was not the negligence of petitioner or the reckless driving
of James Daniel II but the detachment of the steering wheel of the jeep. Further, there was
no evidence that petitioner allowed James to drive the jeep. Thus the liability for the
accident must be pinned on the minors parents primarily. The negligence of petitioner was
only a remote cause of the accident. Between the remote cause and the injury, there
intervened the negligence of the minors parents or the steering wheel guides detachment.
Petitioner is thus not liable. Lastly, the evidence overwhelmingly showed that the registered
owner of the vehicle should be held responsible for Sherwins death, not the school.
Posted by James Mamba at 6:46 PM

I've long been contemplating to come up with a blog that would help the
barristers,law students and anyone who wishes to get legal updates, review
materials, and digested cases to aid them in their respective endeavors. Finally, it
came into fruition. Thanks to my boredom coz it drives me to nuts in setting this up.
SABADO, MAYO 05, 2012




G.R. No. 118784, September 2, 1999

Facts: Christina and Rafael Ayuste bought a house and lot, the title to which was in the name
of Rafael Ayuste married to Christina Ayuste.
Rafael sold the property to Viena Malabonga in 1987 without the consent of his wife.
The deed of sale was registered and a TCT was issued in the name of the buyer during the
same year.
After her husbands death in 1989, Christina discovered the unauthorized sale. In 1990,
she filed a complaint seeking the annulment of the sale against the buyer. The TC annulled the
sale. The CA however, reversed the decision invoking Art. 172 CC, holding that the right of
Christina to bring an action for the annulment of the sale is barred for failure to file the same
during the existence of the marriage.

Is the action of Christina barred for having been filed out of time?

Held: Yes. Art. 173 is clear. The wife may during the marriage and within 10 years from the
transaction ask the courts for the annulment of any contract entered into by the husband without
her consent.
Although the action was filed within 10 years from the questioned transaction, it was not
brought during the existence of the marriage which was dissolved upon the death of Rafael in


Ownership vs. Possession

G.R. NO. 133140, AUGUST 10, 1999

Facts: In 1981, a lot was registered and sold by Pedro Garcia to the Magpayo spouses. The
Magpayos mortgaged the land to the Philippine Bank of Commerce (PBCom). The spouses
failed to pay, hence, the mortgage was extra-judicially closed. The petition filed by PBCom for
the issuance of the writ of possession was granted, however, upon service of the writ of
possession, Mrs. Magpayos brother, Jose Garcia, who was in possession of the land, refused
to honor it and filed a motion for intervention. He alleged that he inherited the land as one of the
heirs of his mother.

The lower court held that the mortgage was void but, upon appeal, CA reversed its decision.
Petitioner appealed to the SC and raised, as one of the errors, that CA decided the case based on issues
not raised in the trial court nor in the appellants brief.


Did the Court of Appeals err in resolving the issues of ownership and possession?

Held: No. PBComs appellate brief alleged that the trial court could not distinguish ownership
from possession; that plaintiff- appellees possession could not ripen into ownership; that he was
an intruder in bad faith and his possession is certainly not in the concept of an owner.
We stress again that the possession and ownership are distinct legal concepts. Ownership exists
when a thing pertaining to one person is completely subjected to his will in a manner not prohibited by law
and consistent with the rights of others. Ownership confers certain rights to the owner, one of which is the
right to dispose of the thing by way of sale. Pedro Garcia and his wife exercised their right to dispose of
what they owned when they sold the subject property to the Magpayo spouses.

On the other hand, possession is defined as the holding of a thing or the enjoyment of a
right. Literally, to possess means to actually and physically occupy a thing with or without right.
Possession may be had in one of two ways: possession in the concept of an owner and
possession of a holder. A possessor in the concept of an owner may be the owner himself or
one who claims to be so. On the other hand, one who possesses as a mere holder
acknowledges in another a superior right which he believes to be ownership, whether his belief
is right or wrong. The records show that petitioner occupied the property not in the concept of
an owner for his stay was merely tolerated by his parents.



G.R. No. 124262, October 12, 1999

Facts: Private Respondents De Castro filed an action for partition over a parcel of land which
was sold, without their knowledge, by their brother Mariano in favor of Petitioner Tomas Claudio
Memorial College. It is the contention of the private respondent De Castros that Mariano was
only able to sell his undivided share on the lot in question but not the other co-owners
equivalent to four-fifths (4/5) of the property. Mariano, on the other hand, raises the defense of

1) Did the sale by Mariano effectively include the entire land?

2) Was the action for partition filed by the siblings of Mariano barred by prescription?

Held: 1) No. Even if a co-owner sells the whole property as his, the sale will affect only his
own share but not those of the other co-owners who did not consent to the sale. Under Article
493 of the Civil Code, the sale or other disposition affects only the sellers share pro indiviso,
and the transferee gets only that which corresponds to his grantors share in the property owned
in common.
2) No. In the light of the foregoing, petitioners defense of prescription against an action for
partition is a vain proposition. Pursuant to Article 494 of the Civil Code, no co-owner shall be
obliged to remain in the co-ownership. Such co-owner may demand at anytime the partition of
the thing owned in common, insofar as his share is concerned. In Budlong vs. Bondoc, this

Court has interpreted said provision of law to mean that the action for partition is
imprescriptible. It cannot be barred by prescription.

Article 539; Rights of a Possessor


G.R. No. 124658, December 15, 1999

Facts: Private respondent Simeon Policarpio Shipyard and Shipping Corporation filed a
complaint for damages and injunction against petitioner Philtrust company for the fraudulent
possession of the land occupied by the former on the basis of an alias writ of execution. The
writ of execution was based on a judgment previously decided that upheld the validity of
foreclosure of Philtrust of the properties mortgaged by private respondents and Philtrusts right
to possess the property.
Private respondent contends that the property fraudulently possessed by Philtrust was
not included in the foreclosed mortgaged property. Thus, SPSSC is anchoring its complaint for
damages on the improper implementation of the alias writ of execution which as a result it was
deprived of possession of the property (OCT-R-165). Petitioner, on the other hand, contends
that SPSSC no longer owns the subject property because it was already foreclosed by
Landbank; thus, not being the owner, Philtrust alleges that SPSSC cannot be entitled to

Does private respondent SPSSC have a right to institute the complaint for damages?

Since private respondent was in possession of the aforesaid land when the writ of
possession was improperly implemented, it is not correct therefore to say that private
respondent does not have a cause of action. It is elementary that a lawful possessor of a thing
has the right to institute an action should he be disturbed in its enjoyment.
Verily, Article 539 of the Civil Code states that Every possessor has a right to be
respected in his possession; and should he be disturbed therein, he shall be restored to said
possession by the means established by the laws and rules of court. The phrase every
possessor in the article indicates that all kinds of possession, from that of the owner to that of a
mere holder, except that which constitutes a crime, should be respected and protected by the
means established and the laws of procedure. Consequently, private respondent having been
in lawful possession of the property covered by OCT-R-165 at the time of possession was
implemented, may institute an action for having been disturbed in its enjoyment.
G.R. No. 119730, September 2, 1999

Facts: On June 1, 1981, Directo, Noceda, and Arbizo, heirs of the late Celestino Arbizo,
extrajudicially settled a parcel of land known as Lot 1121. However, on August 17, 1981,
another extrajudicial settlement partition of Lot 1121 was executed: 3/5 of the said land went
to Maria Arbizo while Direto and Noceda got only 1/5 each. Later, it was found out that Lot 1121
contained an area in excess of that stated in its tax declaration, which was the basis of partition.

After Directo demanded from Noceda to vacate her land on the ground that the latter
fenced the entire land of the former without her consent, a complaint for the recovery of
possession and ownership and rescission/annulment of donation was filed against Noceda.
Noceda claimed that the discrepancies between the two deeds of partition with respect
to the area of Lot 1121 and the respective share of the parties therein indicated that they never
intended any of the deeds to be the final determination of the portions of Lot 1121 allotted to
Issue: Should Lot 1121 be partitioned in accordance with the extra-judicial settlement dated
August 17, 1981?
Held: Yes. The discrepancies between the extra-judicial settlements executed by Directo,
Noceda and Maria Arbizo on June 1, 1981 and August 17, 1981 only meant that the latter was
intended to supersede the former. Although in the extra-judicial settlement dated August 17, the
heirs of Celestino partitioned only less than the actual land area to conform with the area
declared under tax declaration, the heirs were actually occupying a bigger portion the total land
area of which exceeded that of what is stated in the tax declaration.
The purpose of partition is to put an end to co-ownership. It seeks a severance of the
individual interest of each co-owner, vesting in each a sole estate in specific property and giving
to each one a right to enjoy his estate without supervision or interference from the other. There
is no co-ownership where portion owned is concretely determined and identifiable, though not
technically described, or that said portions are still embraced in one and the same certificate of
title does not make said portions less determinable or identifiable, or distinguishable, one from
the other, or that dominion over each portion less exclusive, in their respective owners. A
partition legally made confers upon each heir the exclusive ownership of the property
adjudicated to him.

Partition; Compromise Agreement


September 30, 1999

Facts: Petitioners and private respondents are co-owners of a hacienda. The co-owners
appointed petitioner Jose Garcia as administrator of the property. When private respondents,
found out that the hacienda was mismanaged, they decided to manage directly the hacienda.
Subsequently, the co-owners agreed to terminate the co-ownership and divide the property
among themselves. The co-owners entered into a compromise agreement to resolve the several
cases for partition filed by the co-owners and such agreement was approved by the lower court.
Private respondents, however, brought an action seeking to annul the compromise
agreement on the ground that it decides the action for the partition and appointment of a
receiver without the benefit of trial on the merits.

Is the compromise agreement conclusive as to the civil cases filed by the co-owners.

Held: Under Article 2028 of the Civil Code, a compromise is a contract whereby the parties,
by making reciprocal concessions, avoid a litigation or put an end to one already commenced.
A judicial compromise has the force of law and is conclusive between the parties. Once an
agreement is stamped with approval, it becomes more than a mere contract binding the parties,

and having the sanction of the court and entered as its determination of the controversy, it has
the force and effect of any other judgment.
It is settled that every act which is intended to put an end to indivision among co-heirs
and legatees or devisees is deemed to be a partition, although it should purport to be a sale, an
exchange, a compromise, or any other transaction.


G.R. No. 123486, August 12, 1999

Facts: Matilde Seno Vda. de Ramonal died on January 16, 1990. On April 6, 1990,
Evangeline Calugay, Josephine Salcedo and Eufemia Patigas, devisees and legatees of the
holographic will of Matilde, filed a petition for probate of the will. On June 28, 1990, Eugenia
Codoy and Manuel Ramonal filed an opposition to the petition for probate, alleging that the will
was a forgery and that it is illegible. The legatees and devisees presented 6 witnesses and
various documentary evidence. The oppositors instead of presenting their evidence, filed a
demurrer to evidence, claiming that the legatees and devisees failed to establish sufficient
factual and legal basis for the probate of the will.
Issues: 1) Are the provisions of Art. 811 NCC permissive or mandatory?
2) Should the probate of the will be allowed?
Held: 1) Art. 811 is mandatory. The word shall connotes a mandatory order. We have
ruled that shall in a statute denotes an imperative obligation and is inconsistent with the idea of
discretion and that the presumption is that the word shall, when used in a statute, is
mandatory. The object of the solemnities surrounding the execution of wills is to close the door
against bad faith and fraud, to avoid substitution of wills and testaments and to guaranty their
truth and authenticity. Therefore the laws on this subject should be interpreted in such a way as
to attain these primordial ends. But, on the other hand, also one must not lose sight of the fact
that it is not the object of the law to restrain and curtail the exercise of the right to make a will.
However, we cannot eliminate the possibility of a false document being adjudged as the will of
the testator, which is why if the holographic will is contested, that law requires 3 witnesses to
declare that the will was in the handwriting of the deceased.
2) Not all the witnesses presented by the legatees and devisees testified explicitly that
they were familiar with the handwriting of the testator. There was no opportunity for an expert to
compare the signature and the handwriting of the deceased with other documents signed and
executed by her during her lifetime. The records are ordered remanded to the court of origin
with instructions to allow the oppositors to the probate to adduce evidence in support of their
opposition to the probate of the will.


G.R. No. 112483, October 8, 1999

Facts: Petitioner Eloy Imperial purchased a parcel of land from his father Leoncio Imperial.
Although the transaction was denominated as a sale, both admit that it was a donation.
Subsequently, Leoncio filed an action for the annulment of the supposed deed of sale
but a compromise agreement was then made by both parties. When Leoncio died, his adopted
son, Victor, substituted him in the Compromise agreement. When Victor also died, his heirs
(herein private respondents) filed an action for annulment of the donation on the ground that
the conveyance of said property in favor of petitioner Eloy impaired the legitime of Victor, their
natural brother and predecessors-in-interest.
Petitioner Imperial raises the defense that the donation did not impair Victors legitime
and that the action of respondents has already prescribed.
Issue: Was the donation made by Leoncio Imperial in favor of petitioner Eloy Imperial
inofficious and should be reduced?
Held: No. Unfortunately for private respondents, a claim for legitime does not amount to a
claim of title. In the recent case of Vizconde vs. CA, we declared that what is brought to
collation is not the donated property itself, but the value of the property at the time it was
donated. The rationale for this is that the donation is a real alienation which conveys ownership
upon its acceptance, hence, any increase in value or any deterioration or loss thereof is for the
account of the heir of the donee.


Article 1249
Facts: Private respondent, Vicente Alegre, invested with CIFC, a banking institution engaged
in money market operations, P500,000.00 in cash. Petitioner issued a promissory note for which
it issued a BPI check on the due date. However, when the check was deposited, the same was
dishonored by BPI. Alegre filed a complaint for recovery of money. In response, CIFC filed a
motion for leave of court to file a third party complaint against BPI.
Petitioner contends that the provisions of the Negotiable Instruments Law (not par. 2 of
Art. 1249 of the Civil Code) are the pertinent laws to govern its money market transactions.
RTC decided in favor of Alegre, CA affirms the decision.

Is Art. 1249 of the New Civil Code applicable in the present case?
Yes. Art. 1249 of NCC provides that:
The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency, which is legal tender in the Philippines.

The delivery of the promissory notes payable to order or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when
through the fault of the creditor they have been impaired.
Considering the nature of money market transaction, the above-quoted provision should
be applied in the present controversy. As held in Perez Vs CA, a money market is a market
dealing in standardized short-term credit instruments (involving large amounts) where lenders
and borrowers do not deal directly with each other but through a middle man or dealer in open
market. In money market transaction, the investor is a lender who loans his money to a
borrower through a middle man or dealer.
In the case at bar, the money market transaction between the petitioner and private respondent is in the
nature of a loan.

Article 1278; Compensation


G.R. NO. 120236, JULY 20, 1999

Facts: E.G.V. Realty is the owner/developer of a seven-storey condominium building known

as Cristina Condominium Corporation (CCC). CCC holds title to all common areas of the
condominium and is in charge of managing, maintaining and administering the Condominiums
common areas and providing for the buildings security. Unisphere International, Inc. is the
owner/occupant of unit 301 of said condominium. Unisphere was robbed twice of various items.
The incidents were reported to CCC. When Unisphere demanded compensation and
reimbursement from petitioner CCC for losses incurred as a result of the robbery, CCC denied
any liability. As a consequence, Unisphere withheld payment of its monthly due.
Unit 301 was sold to Unisphere but the condominium certificate of title bore an annotation of a lien
in favor of petitioners. Petitioners thereafter filed with SEC for the collection of unpaid monthly dues.
The second order of the Hearing Officer declared that the petitioners were not liable for the
articles burglarized. Their appeal was likewise dismissed for having been filed out of time after several
extensions to file its memorandum of appeal.
The CA reversed SEC en bancs order and declared that the monthly dues of Unisphere to the
corporation should be offset by the losses suffered by Unisphere, and for the latter to pay the balance.


Is set-off or compensation proper in the instant case?

Held: No. In Art. 1278 of the Civil Code, compensation is said to take place when two
persons, in their own right, are creditors and debtors of each other. Compensation is a mode of
extinguishing to the concurrent amount, the obligations of those persons who in their own right
are reciprocally debtors and creditors of each other and the offsetting of two obligations which
are reciprocally extinguished if they are of equal value, or extinguished to the concurrent
amount if of different value.
For compensation to take place, a distinction must be made between a debt and a mere claim. A
debt is a claim which has been formally passed upon by the highest authority to which it can in law be

submitted and has been declared to be a debt. A claim, on the other hand, is a debt in embryo. It is mere
evidence of a debt and must pass thru the process prescribed by law before it develops into what is
properly called a debt.
While respondent Unisphere does not deny its liability for its unpaid dues to petitioners, the latter
do not admit any responsibility for the loss suffered by the former occasioned by the burglary. At best,
what respondent Unisphere has against petitioner is just a claim, not a debt.
Tested by the foregoing yardstick, it has not been sufficiently established that compensation/setoff is proper here as there is lack of evidence to show that petitioner EGV Realty and CCC and
respondent Unisphere are mutually debtors and creditors of each other.


G.R. No. 135046, August 17, 1999

Facts: To secure a loan obtained from Apex Mortgage & Loan Corp., petitioners executed a
promissory note (PN) obligating themselves to pay a sum equivalent to the loan with interest
rate of 12% for a period of 240 months to be paid in monthly installments. However, petitioners
failed to pay several installments. They executed another PN in favor of Apex for a bigger
amount at the increased rate of 21% per annum to be paid in monthly installments within a
period of 196 months. Petitioners again failed to pay the installments. Subsequently, Apex
assigned the second PN to respondent Pilar Devt Corp.
1. Was the 1st PN novated by the 2nd PN?
2. Was the interest rate of 21%, as provided in the 2nd PN, valid?
Held: 1. YES. The 1st PN was cancelled by the express terms of the 2nd PN. The 2nd PN
bears a note that it cancels the 1st PN. To cancel is to strike out, to revoke, rescind or abandon,
to terminate. In fine, the 1st note was revoked and terminated. Simply put, it was novated. The
extinguishment of an obligation by the substitution or change of the obligation by a subsequent
one which extinguishes or modifies the first is a novation.
Novation has 4 essential requisites: (1) the existence of a previous valid obligation; (2)
the agreement of all parties to the new contract; (3) the extinguishment of the old contract; and
(4) the validity of the new one. In the instant case, all 4 requisites have been complied with.
2. YES. When the 2nd PN was executed on Sept. 20, 1982, Central Bank Circular No.
705 and 712 were already in effect. These Circulars fixed the effective interest rate for secured
loan transactions with maturiites of more than 730 days at 21% per annum. The interest rate of
21% provided in the 2nd PN was therefore authorized under these Circulars.

Reformation of Instrument; Fortuitous event; Novation; Interests

G.R. No. 102604, December 14, 1999

Facts: On June 30, 1983, Huibonhoa entered into a contract of lease with siblings Rufina
Gojocco Lim, Severino Gojocco and Loreta Gojocco Chua stipulating that Hiponhoa would lease
from them 3 commercial lots for a period of 15 year commencing on July 1, 1983 and renewable
upon agreement of the parties. Based on the said contract, the lessors authorized Huibonhua
to construct a building that must be completed within 8 months from the date of the execution of
the contract. During the aforesaid period, no monthly rental would be collected from
Huibonhua. The parties further agreed that upon termination of the lease, ownership and title to
the building thus constructed would automatically transfer to the lessor.
During the construction of the building, former Senator Benigno Aquino, Jr was
assasinated. This incident affected adversely the construction of the building such that
Huibonhua failed to complete the same with the stipulated eight-month period. It was
completed only in September 1984 or 7 seven months after the target date. Under the contract,
Huibonhua was supposed to start paying rental in March 1984 but she failed to do. On
December 19, 1984, the lessors sent a final letter of demand to pay the rental arrearages and to
vacate the leased premises.
On January 14, 1985, Huibonhua brought an action for reformation of contract alleging
that their true intention as to when the monthly rental would accrue was not therein expressed
due to mistake or accident. She claimed that their true intention was that no rents would accrue
during the entire period of actual construction. Moreover, she averred that by reason of mistake
or accident, the lease contract failed to provide that should an unforeseen event dramatically
increase the cost of construction, such as the assassination of Sen. Aquino, the monthly rental
would be reduced and the term of the lease would be extended for such duration as may fair
and equitable to both the lessors and the lessee. Eleven days later, the lessors filed a
complaint for ejectment against Huabonhua. On January 31, 1995, Rufina Gojocco Lim agreed
with Huibonhua on the accrual of monthly rental, the reduction of its amount and the extension
of the lease by 3 years. After trial on the merits, the RTC dismissed the complaint. It
considered as misplaced Huibonhuas contention that the Aquino assassination was an accident
within the purview of Art. 1359 of the Civil Code. It also held that the act of Rufina in entering an
agreement was not binding upon the 2 other lessees since they were separate and independent
owner of the lots subject of the lease. Subsequently, the Court of Appeals affirmed the decision
of the RTC.
1. Will the action for reformation of instrument prosper?
2. Was the tragic assassination of Former Senator Benigno Aquino a fortuitous event or
force majeure which justified the adjustment of the terms of the contract of lease?
3. Did the act of Rufina in entering an agreement with Huibonhua novated the original
lease contract?
4. Are Severino Gojocco and Loreto Gojocco Chua entitled to interest? If yes, at what
Held: 1. NO. An action for reformation of instrument under Article 1359 may prosper only
upon the concurrence of the following requisites: (1) there must have been a meeting of the
minds of the parties to the contract; (2) the instrument does not express the true intention of the
parties; and (3) the failure of the instrument to express the true intention of the parties is due to
mistake, fraud, inequitable conduct or accident. In case at bar, Huibonhua failed to discharge
the burden of proving that the intention of the parties has not been accurately expressed the
lease contract sought to be reformed; thus, the trial court correctly held that no clear and
convincing proof warrants the reformation thereof. In actions for reformation of contract, the
onus probandi is upon the party who insists that the contract should be reformed.

A contract duly executed is the law between the parties who are obliged to comply with
its terms. Events occurring subsequent to the signing of the agreement may suffice to alter its
terms only if, upon failure of the parties to arrive at a valid compromise, the court deems the
same to be sufficient reasons in law for altering the terms of the contract.
2. NO. A fortuitous event is that which could not be foreseen, or which even if foreseen,
was inevitable. To exempt the obligor from liability for a breach of an obligation due to an act of
God, the following requisites must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the debtor must be free from any participation in, or aggravation of the
injury to the creditor.
In the case under scrutiny, the assassination of Sen. Aquino may indeed be considered
a fortuitous event. However, the said incident per se could not have caused the delay in the
construction of the building. What might have caused the delay was the resulting escalation of
prices of commodities including construction materials. Be that as it may, there is no merit in
Huibonhoas argument that the inflation justified the accrual of monthly rental, the reduction of
its amount and the extension of the lease by 3 years. It is only when an extraordinary inflation
supervenes that the law affords the parties a relief in contractual obligation. For Huibonhua to
claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code, she
must prove that inflation was the sole and proximate cause of the loss or destruction of the
contract. Having failed to do so , Huibonhuas contention is untenable.
3. NO. Under the law, novation is never presumed. The parties to a contract must
expressly agree that they are abrogating their old contract in favor of a new one. No novation of
a contract had occurred when the new agreement entered into between the parties was
intended to give life to the old one. Giving life to the contract was the very purpose for which
Rufina signed the agreement. It was intended to graft into the lease contract provisions that
would facilitate fulfillment of Huibonhuas obligation therein. That the new agreement was
meant to strengthen the enforceability of the lease is further evidenced by the fact that the
agreement does not even hint that the lease itself would be abrogated. Where the parties to the
new obligation expressly recognize the continuing existence and validity of the old one, where,
in other words, the parties expressly negated the lapsing of the obligation, there can be no
4. YES. Loreto is also entitled to interest at the rate of 6% per annum from the accrual of the rent
in accordance with Art. 2209 of the Civil Code until it is fully paid because monetary award does not
partake of a loan or forbearance in money. However, the interim period from the finality of the judgment
until the monetary award is fully satisfied, is equivalent to a forbearance of credit and therefore, during
that interim period, the applicable rate of legal interest shall be 12%. As regards Severino, he shall be
entitled to such interests only from the time that Huibonhua defaulted paying her monthly rentals to him
considering that he had already received from her the amount of P270,825 as rentals.

CAUSE in Contracts; Rescission


GR No. 120465, September 9, 1999

Facts: Petitioners Uy and Roxas offered to sell eight parcels of land, as agents of the owners
thereof, to private respondent National Housing Authority (NHA) for the latter to utilize and
develop as a housing project. The NHA thereafter approved the acquisition but for only 5
parcels of land since it was determined that the other 3 were located at an active landslide area
and thus, not suitable for development into a housing project. Subsequently, the NHA cancelled
the purchase of the 3 lots.
Petitioners then filed an action for damages against the NHA for the cancellation of
purchase contending that there was no basis for its rescission by the NHA. The lower court and
respondent Court of Appeals ruled that the cancellation was justified and that petitioners are not
entitled to damages.
Issue: Does the cancellation of the sale by the NHA for the 3 lots amount to a rescission of
that part of the contract?
Held: No. In this case, the NHA did not rescind the contract. Indeed, it did not have the right
to do so for the other parties to the contract, the vendors, did not commit any breach, much less
a substantial breach. Their obligation was merely to deliver the parcels of land to the NHA, an
obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof.
The cancellation, therefore, was not a rescission under Article 1191. Rather, the
cancellation was based on the negation of the cause arising from the realization that the lands,
which were the object of the sale, were not suitable for housing. Cause is the essential reason
which moves the contracting parties to enter into it.
Ordinarily, a partys motives for entering into a contract do not affect the contract.
However, when the motive predetermines the cause, the motive may be regarded as the cause.
In this case, it is clear that the NHA would not have entered into the contract were the
lands not suitable for housing. In other words, the quality of the land was an implied condition
for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the
cause for its being a party to the sale.
Accordingly, we hold that the NHA was justified in cancelling the contract. The
realization of the mistake as regards the quality of the land resulted in the negation of
the motive/cause thus rendering the contract inexistent.

Article 1177; Requisites for Rescission

of a Fraudulent Sale
G.R. No. 119466, November 25, 1999

Facts: Private respondent Saturnino Bareng was the registered owner of 2 parcels of land.
Petitioners were lessees of a 200 sq.m. portion of one of the said 2 lands.
On April 29, 1985, Saturnino Bareng and his son, Francisco Bareng, obtained a loan from
petitioner amounting to P26,000 in consideration of which they promised to transfer the possession and
enjoyment of the fruits of Lot No. 661-E.

On Aug 3, 1986, Saturnino sold to his son Francisco 18,500 sq.m. of lot No. 661-D-5-A.
In turn, Francisco sold on Aug. 27, 1986 to private respondent Jose Ramos 3,000 sq. m. of the
Petitioner filed a complaint for the annulment of the sale on the ground that the sale was
fraudulently prepared.

Does petitioner have a cause of action?

No. Petitioners do not have such material interest as to allow them to sue for
rescission of the contract of sale. At the outset, petitioners right against private respondents is
only a personal right to receive payment of the loan; it is not a real right over the lot subject of
the deed of sale.
Nor can we sustain petitioners claim that the sale was made in fraud of creditors under
Art. 1177 of the Civil Code. The following successive measures must be taken by a creditor
before he may bring an action for rescission of an allegedly fraudulent sale: 1) exhaust the
property of the debtor through levying by attachment and execution upon all the property of the
debtor, except such as are exempt by law from execution; 2) exercise all the rights and actions
of the debtor, save those personal to him; 3) seek rescission of the contracts executed by the
debtor in fraud of their rights. Without availing of the first and second remedies, i.e.,
exhausting the properties of the debtor or subrogating themselves in Francisco Barengs
transmissible rights and action, petitioners simply undertook the third measure and filed an
action for annulment of sale.



G.R. No. 131784, September 16, 1999

Petitioner Gonzales entered into a Contract of Lease/Purchase with the heirs of
Thomas and Paula Cruz. Based on the said contract, the petitioner was given an option to
purchase the leased property after the expiration of the one-year lease. The option was subject
to a condition contained in par. 9 of the Contract which provided that: The LESSORS (heirs) x x
x shall undertake to obtain a separate and distinct TCT over the leased portion to the LESSEE
within a reasonable period of time which shall not in any case exceed 4 years, x x x. After the
expiration of the lease, petitioner Gonzales did not exercise his option to purchase the property.
He remained in possession without paying the purchase price. Alleging breach of the provisions
of the Contract, the heirs filed a complaint for the recovery of possession of the property. For
his part, the petitioner defended that there was no breach since the heirs had not yet registered
the leased property in their names in accordance with par. 9 of the Contract.
Issues: (1) Is par. 9 of the Lease/Purchase Contract a condition precedent before petitioner could
exercise his option to buy the property?

(2) Can respondents rescind the Contract after the one-year period?
Held: (1) YES. The clear intent of the 9th par. was for respondents to obtain a separate and
distinct TCT in their names. This was necessary to enable them to show their ownership of the
stipulated portion of the land and their concomitant right to dispose of it. It is a well-settled
principle in law 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 that what the seller can transfer legally. Because the 9th clause required respondents
to obtain a separate and distinct TCT in their names and not in the name of petitioner, it logically
follows that such under taking was a condition precedent to the latters obligation to purchase
and pay for the land. Put differently, petitioners obligation to purchase the land is a conditional
one and is governed by Article 1181 of the Civil Code. Condition has been defined as every
future and uncertain event upon which an obligation or provision is made to depend. Without it,
the sale of the property under the Contract cannot be perfected, and the petitioner cannot be
obliged to purchase the property. The obligatory force of a conditional obligation is subordinated
to the happening of a future and uncertain event, so that if that event does not take place, the
parties would stand as if the conditional obligation had never existed.
(2) NO. Respondents cannot rescind the contract because they have not caused the
transfer of the TCT in their names, which is a condition precedent to petitioners obligation.
There can be no rescission (or more properly, resolution) of an obligation as yet non-existent,
because the suspensive condition has not happened.

Fraud in Art. 1338

G.R. No. 110672, September 14, 1999

Facts: A Deed of Absolute Sale with Assumption of Mortgage was executed between Behis
as vendor/assignor and private respondents Rayandayan and Arceno as vendees/assignees for
the sum of P250,000. On the same day, private respondents, together with Behis, executed
another Agreement embodying the real consideration of the sale of the land in the sum of
P2,400,000. Thereafter, private respondents negotiated with the principal stockholder of the
bank, Engr. Natividad, for the assumption of the indebtedness of Behis and the subsequent
release of the mortgage on the property by the bank. Private respondents did not show to the
bank the Agreement with Behis providing for the real consideration of P2,400,000.
Subsequently, the bank consented to the substitution of private respondents as mortgage
debtors in place of Behis in a Memorandum of Agreement. Instead of the bank foreclosing
immediately for non-payment of the delinquent account of Behis, petitioner bank agreed to
receive only a partial payment of P143,000 by installment on specific dates. After payment
thereof, the bank agreed to release the mortgage of Behis; to give its consent to the transfer of
title to the private respondents; and to the payment of the balance of P200,000 under new terms
with a new mortgage to be executed by the private respondent over the same land. Despite
repeated demands by the private respondents, the bank refused to perform its obligations under
the Memorandum of Agreement on the ground of fraud for withholding from the said bank the
real consideration of the sale.

Issue: Is the Memorandum of Agreement voidable on the ground of bad faith or fraud on the
part of the private respondents in concealing the real consideration of the sale during
negotiations with the petitioner bank on the assumption of the mortgage debt?
NO. The kind of fraud that will vitiate a contract refers to those insidious word or
machinations resorted to by one of the contracting parties to induce the other to enter into a
contract which without them he would not have agreed to. Simply stated, the fraud must be the
determining cause of the contract, or must have caused the consent to be given. It is believed
that the non-disclosure to the bank of the purchase price of the sale of the land between private
respondents and Behis cannot be fraud contemplated by Article 1338 of the Civil Code. First of
all, the consideration could not have been the determining cause for the petitioner bank to enter
into the memorandum of agreement. To all intents and purposes, the bank entered into said
agreement in order to effect payment on the indebtedness of Behis. Secondly, pursuant to
Article 1339, silence or concealment, does not constitute fraud unless there is a special duty to
disclose certain facts, or unless according to good faith and the usages of commerce the
communication should be made. Verily, private respondents had no duty and therefore did not
act in bad faith in failing to disclose the real consideration. Thirdly, the bank had other means
and opportunity of verifying the financial capacity of private respondents. Furthermore, the bank
security remained unimpaired regardless of the consideration of the sale.
Consequently, not all elements of fraud vitiating consent for purposes of annulling a
contract concur to wit: (a) It was employed by a contracting party upon the other; (b) It induced
the other party to enter into contract; (c) It was serious; and (d) It resulted in damages and injury
to the party seeking annulment. Petitioner bank has not sufficiently shown that it was induced to
enter into the agreement by the non-disclosure of the purchase price, and that the same
resulted in damages to the bank.



G.R. No. 109355, October 29, 1999

Facts: The parcels of land in question were sold to Ramon Chiang by his wife, Merlinda.
Ramon subsequently sold the subject properties to Serfin Modina as evidenced by a Deed of
Absolute Sale.
Modina brought a complaint for recovery of possession with damages against the
Merlinda sought the declaration of nullity of the Deed of Sale on the ground that the titles
of the parcels of land in dispute were never legally transferred to her husband, the sale being
violative of Article 1490 of the NCC.
Modina stressed that what is applicable is Article 1412 on the principle of in pari delicto.

Is Merlinda barred by the principle of in pari delicto from questioning subject deed of

Held: No. The principle of in pari delicto is inapplicable as the sale was void for want of
consideration. In effect, Merlinda can recover the lots sold by her husband to Modina.

The principle of in pari delicto non oritur action denies all recovery to the guilty parties
inter se. It applies to cases where the nullity arises from the illegality of the consideration or the
purpose of the contract. When two persons are equally at fault, the law does not relieve them.
The exception to this general rule is when the principle is invoked with respect to inexistent
contracts, like in the case at bar.
As the contracts under controversy are inexistent contracts within legal contemplation,
Articles 1411 and 1412 of the NCC are inapplicable. In pari delicto doctrine applies only to
contracts with illegal consideration or subject matter, whether the attendant facts constitute an
offense or misdemeanor or whether the consideration involved is merely rendered illegal.

Rescission; Damages
G.R. No. 133491, October 13, 1999

Facts: Asuncion and Evangelista entered into a Memorandum of Agreement (MOA) whereby
the former agreed to pay latter certain amounts of money and to assume all the liabilities of
Embassy Farms which is controlled by respondent. In return, Evangelista will transfer control of
Embassy Farms and transfer to Asuncion all the real properties held under real estate mortgage
with several savings banks and finance corporations.
While Asuncion fulfilled his payment commitments under the MOA, Evangelista failed to
transfer the title of the real properties and the shares of stock of Embassy Farms in the name of
Asuncion. However, it was respondent who filed a complaint for the rescission of the MOA
arguing that petitioner failed to comply with his obligations under the agreement.
During the trial, Evangelista explained that the reason he did not transfer the real
properties is because Asuncion did not agree to make a formal assumption of the mortgage
under the MOA. Both the TC and CA ruled in favor of Evangelista and ordered the rescission of
the MOA with damages based on the alleged proceeds of the sale of hogs during the period
control of the Embassy Farms was with Asuncion.

Is Evangelista entitled to damages?

Held: No. In case of rescission, while damages may be assessed in favor of the prejudiced
party, only those kinds of damages consistent with the remedy of rescission may be granted,
keeping in mind that had the parties opted for specific performance, other kinds of damages
would have been called for which are absolutely distinct from those kinds of damages accruing
in the case of rescission. Compensatory damages consisting of the value of the private
landholdings would have been proper in case he resorted to the remedy of specific
performance, not rescission.

Art. 1434
G.R. No. 132803, August 31, 1999

Facts: Petra Unating inherited Lot No. 1201 from her mother. During her marriage to Aquilino
Villar, she registered the lot in her name. They had two children Felix and Catalina. In 1948,
Petra died. In 1949, Felix and Catalina sold the entire lot to Agustin Navarra but repossessed
the same upon the latters death in 1958. Meanwhile Aquilino died in 1953.
In 1982, defendant Jessie Pisuena, son-in-law of Agustin wrested possession of the
property from the heirs of Felix and Catalina. The latter filed a complaint for its recovery,
assailing the validity of the deed of sale in favor of Agustin.
Issue: Did the Deed of Sale in 1949 transfer the whole lot in favor of Agustin despite the fact
that Aquilino did not consent to the sale of his share?
Held: No. In 1949, Felix and Catalinas interest in the share of their father is still inchoate.
They cannot dispose such share without the consent of their father. At most they conveyed only
their 2/3 share over the lost. However, when Aquilino died in 1953 without disposing of his1/3
share, Felix and Catalinas interest on it was actualized because succession vested in them the
title to their fathers share and consequently, the entire lot. Thus, the title passed to Agustin
pursuant to Art. 1434 of the present Civil Code, which provides: When a person who is not the
owner of the thing sells or alienates or delivers it, and later, the seller of grantor acquires title
thereto, such title passes by operation of law to the buyer or grantee.



G.R. No. 112483, October 8, 1999

Facts: Petitioner Eloy Imperial purchased a parcel of land from his father Leoncio Imperial.
Although the transaction was denominated as a sale, both admit that it was a donation.
Subsequently, Leoncio filed an action for the annulment of the supposed deed of sale
but a compromise agreement was then made by both parties. When Leoncio died, his adopted
son, Victor, substituted him in the Compromise agreement. When Victor also died, his heirs
(herein private respondents) filed an action for annulment of the donation on the ground that
the conveyance of said property in favor of petitioner Eloy impaired the legitime of Victor, their
natural brother and predecessors-in-interest.
Petitioner Imperial raises the defense that the donation did not impair Victors legitime
and that the action of respondents has already prescribed.

Is the action to question the donation barred by prescription?

Held: Yes. The case of Mateo vs. Lagua, which involved the reduction for inofficiousness of a
donation propter nuptias, recognized that the cause of action to enforce a legitime accrues upon
the death of the donor-decedent. Clearly so, since it is only then that the net estate may be
ascertained and on which basis, the legitimes may be determined.
It took private respondents 24 years since the death of Leoncio to initiate this case, long
beyond the 10 year prescriptive period. The action, therefore, has long prescribed.
G.R. No. 109307, November 25, 1999

Facts: On Dec. 12, 1939 Eugenio Romero bought from spouses Macan the latters rights,
interest, participation in a 12-hectare land. The land in question was then public land. When
Eugenio Romero applied for a homestead patent for said land, the same was disapproved by
the Bureau of Lands because said Romero already had applied for a homestead patent for 24
hectares and was disqualified from owning additional 12 hectares.
Eugenio Romero placed the application in the name of his eldest son, Eutiquio
Romero, allegedly in trust for all the children of Eugenio. When Eutiquio got married and had
children, the application was transferred in the name of Lutero Romero. When Lutero in turn
got married, he relinquished the application in favor of his younger brother Ricardo.
Eugenio Romero died in 1948. In 1961, his widow Teodora caused the land in question
to be subdivided among 6 of her children. The appellants claimed that after the partition, they
had been in occupancy of their respective shares through their tenants.
However, Lutero claimed that in 1969, he was picked up by a policeman and brought to
the office of the mayor. He was then made to sign 3 affidavits conveying his share to his sister
Gloriosa, brother-in-law Sabdullah and to Meliton Pacas. He said that he could not sell his land
because the 5-year period had not yet elapsed. He was made to sign anyway.
Subsequently, he repudiated the affidavits. He then filed an action for the annulment of
the affidavits.

Was there a trust constituted?

Held: No trust is constituted. Petitioners contend that Lutero merely holds Lot 23Pls-35 in
trust for the benefit of the heirs of his father Eugenio since it was actually Eugenio who first
applied for the homestead but considering that Eugenio was already granted a homestead, the
application had to be placed in the name of his eldest son, which was later transferred to
However, it has been held that a trust will not be created when, for the purpose of
evading the law prohibiting one from taking or holding real property, he takes conveyance
thereof in the name of a third person.


G.R. No. 129103, September 3, 1999

Facts: Daluyong Gabriel owns a parcel of land in Tagum, Davao. Because he lives in Manila,
Gabriel appointed his sister as administratrix for the collection of the rentals for those portions
which have been leased to certain tenants. In 1985, Gabriel sent his son Renato to collect the
One of the tenants, Lydia Delos Reyes, verbally agreed to buy a portion of the land of
Gabriel. Receipt of payment of the purchase price was acknowledged by Renato. However, no
deed of sale was executed covering the transactions. The purchaser proceeded with the
construction therein of a 2-storey building. Gabriel demanded the purchaser to cease and
desist from the construction. Delos Reyes filed a complaint for specific performance.

Was there a valid contract of sale covering a portion of the land of Daluyong Gabriel?

Held: No. Renato Gabriel was neither the owner of the subject property nor a duly
designated agent of the registered owner (Daluyong Gabriel) authorized to sell subject property
in his behalf, and there was also no sufficient evidence adduced to show that Daluyong
subsequently ratified Renatos act. In this connection, it must be pointed out that pursuant to
Article 1874 of the Civil Code, when the sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing, otherwise the sale shall be void. In other
words, for want of capacity to give consent on the part of Renato, the oral contract of sale lacks
one of the essential requisites for its validity prescribed under Article 1318 and is therefore null
and void ab initio.



G.R. No. 108169, August 25, 1999

Facts: Spouses David purchased a parcel of land from respondents spouses Tiongson for a
total consideration of P15,000. The parties expressly agreed that as soon as the petitioners
fully paid the purchase price, respondents would execute a deed of absolute sale and cause the
issuance of the certificate of title in petitioners favor. After paying a total of P15,050, the Davids
demanded the execution of the deed of sale and the issuance of the corresponding title, but the
respondents refused. Hence, the Davids filed a complaint for specific performance with
damages. The lower court ruled in favor of the Davids. However, the Court of Appeals modified
the trial courts decision. According to the Appellate Court, there was no agreement as to the
price since the receipts issued by the Mr. Tiongson failed to state the total purchase price or
prove that full payment was made. Hence, there was no meeting of minds regarding the price,
and consequently, there was no perfected contract of sale.

Is there an agreement as to the price of the lot?

Held: YES. The Court of Appeals relied heavily on the receipts issued by Mr. Tiongson.
However, Mrs. David testified that there was an agreement to purchase the lot for P15,000

which respondents failed to rebut. However, in the brief, the Tiongsons alleged that the agreed
price was P120 per sq. m. Hence, they are now estopped to deny the existence of an agreed
price. The question to be determined should not be whether there was an agreed price, but
what that agreed price was, whether for a total of P15,000 or P120 per sq. m. The sellers could
not render invalid a perfected contract of sale by merely contradicting the buyers allegation
regarding the price, and subsequently raising the lack of agreement as to the price. Also, an
overpayment of P50 does not negate the existence of an agreed purchase price instead, this
entitles the buyer to claim reimbursement of any overpayment made.
Contract of sale

CO v.

312 SCRA 528

Plaintiff Adoracion Custodio entered into a verbal contract with defendants spouses Co
for the purchase of the latters house and lot located at Alabang, Metro Manila at the agreed
purchase price of $100,000.00 payable in two payments $40,000.00 in Dec. 4, 1984 and the
balance of $60,000.00 on January 5, 1985. A week thereafter, plaintiff paid defendants the
amount of $1,000.00 and Php40,000.00 as earnest money. On January 25, 1985, although the
period of payment had already expired, plaintiff paid to defendants the sum of $30,000.00 as
partial payment. On March 15, 1985, defendants demanded from plaintiff payment of the
balance of purchase price but to no avail. On Aug. 8, 1986, defendants informed plaintiff that
she lost her option to purchase the property and that her other rights to the property including
payments already made are forfeited. On Sept. 5, 1986, plaintiff informed defendants that she is
now ready to pay the remaining balance but was ignored by the latter. Plaintiff then filed an
action for rescission.
The lower court ruled that the earnest money is forfeited. It also ordered defendants to
remit to plaintiff the peso equivalent of $30,000.00 representing the partial payment of purchase
price. Defendants appealed arguing that plaintiff had already lost her right on option to purchase
and that her failure to exercise said option resulted in forfeiture of any amounts paid.
Whether or not there is a perfected contract of sale and whether defendants can
unilaterally and extra-judicially rescind said contract of sale.
A contract of sale is a consensual contract and is perfected at the moment there is a
meeting of the minds upon the thing which is the object of the contract and upon the price.
Earnest money given in sale transaction is considered part of the purchase price and proof of
the perfection of the sale.
In the absence of an express stipulation authorizing the sellers to extra-judicially rescind
the contract of sale, the defendants cannot unilaterally and extra-judicially rescind the contract
of sale. Despite the fact that plaintiffs failure to pay the amounts of $40,000.00 and $60,000.00
on or before Dec. 4, 1984 and January 5, 1985, respectively, was a breach of her obligation
under Article 1191 of the Civil Code, the defendants did not sue for either specific performance
or rescission of the contract. The defendants were of the mistaken belief that plaintiff had lost
her option over the property when she failed to pay the remaining balance.



G.R. No. 133148, November 17, 1999

Facts: Mary Ruth Elizalde, an American citizen, owned a house and lot situated in Forbes
Park, Makati. On May 22, 1975, she, through her attorney-in-fact, sold the lot to Parex Realty
Corp., excluding the house thereon, payable in 25 equal annual installments of P25,000 each.
Simultaneously with the execution of the contract of sale, Parex and Elizalde entered into a
lease contract whereby Parex leased back to Elizalde the same land for a period of 25 years at
a monthly rental of P2,083.34 which totals P25,000 in a year. By virtue of the sale, a new title
was issued in the name of Parex on May 27, 1975. Elizalde died on March 1, 1990. The
special administrator of her estate, J.R. Blanco, brought an action against Parex and its
incorporators for the reconveyance of the parcel of land. Blanco alleged that the sale was
absolutely simulated and fictitious, and was made in order to circumvent the effects of the
Courts ruling in Republic vs. Quasha which declared that under the Parity Amendment to the
Constitution, US citizens and corporations owned and controlled by them cannot acquire and
own, save in cases of hereditary succession, private agricultural lands in the Philippines.
Blanco also argued that Elizalde did not receive a single centavo from the transactions.
Issue: Is the sale-lease-back agreement between Elizalde and Parex null and void for being
absolutely simulated or fictitious?
Held: No. The fact that the amount of the annual installments of the purchase price dovetails
with the rate of rentals stipulated in the lease contract is not enough reason to claim that there
was no consideration for the contracts of sale and lease. Petitioner argues that Elizalde did not
receive money in the sale of her property. While that may be true, her continued occupancy of
the premises even after she sold it to Parex constitutes valuable consideration which she
received as compensation for the sale.
To resolve the issue of whether or not a sale-lease-back is simulated, it is imperative that
the true intention of the parties, rather than the correct interpretation of the written stipulations in
the contracts, be looked into. However, to do so is to pass upon an issue of fact, a function not
within the province of the SC.





312 SCRA 528



Plaintiff Adoracion Custodio entered into a verbal contract with defendants spouses
Co for the purchase of the latters house and lot located at Alabang, Metro Manila at the agreed
purchase price of $100,000.00 payable in two payments $40,000.00 in Dec. 4, 1984 and the
balance of $60,000.00 on January 5, 1985. A week thereafter, plaintiff paid defendants the
amount of $1,000.00 and Php40,000.00 as earnest money. On January 25, 1985, although the
period of payment had already expired, plaintiff paid to defendants the sum of $30,000.00 as
partial payment. On March 15, 1985, defendants demanded from plaintiff payment of the
balance of purchase price but to no avail. On Aug. 8, 1986, defendants informed plaintiff that
she lost her option to purchase the property and that her other rights to the property including
payments already made are forfeited. On Sept. 5, 1986, plaintiff informed defendants that she is
now ready to pay the remaining balance but was ignored by the latter. Plaintiff then filed an
action for rescission.
The lower court ruled that the earnest money is forfeited. It also ordered defendants to
remit to plaintiff the peso equivalent of $30,000.00 representing the partial payment of purchase
price. Defendants appealed arguing that plaintiff had already lost her right on option to purchase
and that her failure to exercise said option resulted in forfeiture of any amounts paid.
Issue: Is there a perfected contract of sale and can defendants unilaterally and extrajudicially rescind said contract of sale?
Held: Yes, there is a perfected contract of sale. A contract of sale is a consensual contract
and is perfected at the moment there is a meeting of the minds upon the thing which is the
object of the contract and upon the price. Earnest money given in sale transaction is considered
part of the purchase price and proof of the perfection of the sale.
No. In the absence of an express stipulation authorizing the sellers to extra-judicially
rescind the contract of sale, the defendants cannot unilaterally and extra-judicially rescind the
contract of sale. Despite the fact that plaintiffs failure to pay the amounts of $40,000.00 and
$60,000.00 on or before Dec. 4, 1984 and January 5, 1985, respectively, was a breach of her
obligation under Article 1191 of the Civil Code, the defendants did not sue for either specific
performance or rescission of the contract. The defendants were of the mistaken belief that
plaintiff had lost her option over the property when she failed to pay the remaining balance.



G.R. No. 111743, October 8, 1999
Facts: Philippine Realty Corporation (PRC) entered into a contract of lease with private
respondent Maglente over a parcel of land for a period of three years. The agreement provided
for the Lessee to have a first priority to buy in case the Lessor chooses to sell the land.
Maglente subleased portions of the land to the petitioners.
Subsequently, PRC made a written offer to sell the subject property to Maglente.
Thereafter, PRC and Maglente agreed on the price and terms of the purchase and the latter
completed the required downpayment.

Later on, petitioners also expressed their intention to purchase the property. They also
asked PRC to prevent Maglente from demolishing their houses. The parties then filed an action
in court which ruled that Maglente as the rightful party to purchase the land in controversy.
Petitioners appealed contending that as the actual occupants of the property, they have
preferential right to purchase the land and that a contract of sale was yet to be perfected
between PRC and Maglente as they have yet to sign on any written agreement.
Issue: 1) Do petitioners have preferential right to purchase the leased land?
2) Was there a perfected contract of sale between Maglente and PRC?
Held: 1) No. There is no legal basis for the assertion by the petitioners that as actual
occupants of the said property, they have the right of first priority to purchase the same.
As regards the freedom of contract, it signifies or implies the right to choose with whom
to contact. PRC is thus free to offer its subject property for sale to any interested person. It is
not duty bound to sell the same to the petitioners simply because the latter were in actual
occupation of the property absent any prior agreement vesting in them as occupants the right of
first priority to buy.
2) Yes. In the case under consideration, the contract of sale was already perfected. As
a matter of fact, respondents have already completed payment of their downpayment. Anent
petitioners submission that the sale has not been perfected because the parties have not
affixed their signature thereto, suffice to state that under the law, the meeting of the minds
between the parties gives rise to a binding contract although they have not affixed their
signatures to its written form.



G.R. No. 127348, August 17, 1999

Facts: In 1991, petitioner sold to respondents an Isuzu Elf truck, which the latter could use
for hauling their agricultural products, for P300,000 payable as follows: P120,000 as
downpayment upon delivery and the balance on or before 30 May 1992. Respondents paid the
downpayment upon delivery of the truck. Later however it was discovered that the vehicle had
a defective motor; consequently, respondents offered to return the vehicle to the petitioner.
Instead of accepting the vehicle, petitioner lent the respondents P60,000 at 40% interest in
order for the latter to replace the defective motor. To secure payment of the balance of the
purchase price and the P60,000 loan, respondents executed 2 documents purporting to be
deeds of sale of 2 parcels of land with right to repurchase the same on or before 30 May 1992.
The total consideration was P500,000 which the petitioner claimed she paid in cash. Due to
poor harvests, respondents returned the truck. Petitioner accepted it and released respondents
from paying the balance of the purchase price and the P60,000 loan. As regards the 2 Deeds of
Sale with Right to Repurchase, petitioner promised to cancel them. However, petitioner
reneged on her promise when she filed a complaint for consolidation of ownership due to the
failure of the respondents to redeem the properties on or before 30 May 1992. Both the
Regional Trial Court and Court of Appeals dismissed the complaint declaring the 2 deeds of sale
with right to repurchase as equitable mortgages.

Issue: Were the 2 Deeds of Sale of Realty with Right to Repurchase equitable mortgages
under Art. 1602 of the Civil Code?
Held: YES. The instant case falls squarely under par. (6) of Art. 1602 of the Civil Code, to
wit: The Contract shall be presumed to be an equitable mortgage x x x in any other case where
it may be inferred that the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation. Circumstances abound pointing
to this conclusion.
First. Petitioner claims she bought 2 parcels of land from respondents paying the latter
P500,000 in cash. If this were true then why could not respondents afford the P60,000 needed
for the repair of the truck?
Second. Petitioner supposedly paid P500,000 cash to the respondents. If petitioner
indeed paid, why did she have to shell out the full amount of P500,000 considering that
respondents were allegedly indebted to her in the amount of P60,000.
Third. The last day to redeem the 2 parcels of land purportedly fell on 30 May 1992
which interestingly coincided with the date respondents were supposed to pay the remaining
balance of the purchase price of the tuck.
Fourth. The cash receipts signed by the respondents failed to state that they were
intended as payment for the 2 parcels of land supposedly sold by respondents. On the contrary,
they were purportedly advances by respondents who in turn obliged themselves to deliver their
rice produce to petitioner at harvest time.
Fifth. The amounts stated in the 2 deeds of sale with right to repurchase were written
using a different typewriter. In one deed, the TCT was not typewritten along with other details
pertaining to the land. Furthermore, the residence certificate number of one respondent was not
the same.
These circumstances attending the execution of the 2 Deeds of Sale with Right to
repurchase cast serious doubt on petitioners claim that the real intention of the parties was sale
over the properties and not equitable mortgage. The form of the instrument cannot prevail over
the true intent of the parties as established by the evidence. On determining the nature of a
contract, courts are not bound by the title or name given by the parties. The decisive factor in
evaluating such agreement is the intention of the parties, as shown not necessarily by the
terminology used in the contract but by their conduct, word, actions and deeds, prior to, during
and immediately after execution of the agreement. And, in case of doubt, a contract purporting
to be a sale with right of repurchase shall be construed as an equitable mortgage.


G.R. No. 125272, October 7, 1999

Facts: Candido Amil, as seller, and the spouses Gador, as buyers executed a document
entitled Deed of Pacto de Retro Sale. After the redemption period had expired, the spouses
Gador filed a petition for the consolidation of their ownership over the property. Amil was
declared in default as his counsel failed to file an answer to the petition. The case was heard
and a judgment rendered declaring the spouses Gador as the absolute owners of the lot and
ordering the Register of Deeds to make the annotation of the Consolidation of Ownership in the
vendees-a-retro upon payment of prescribed fees. Amil, through new counsel, filed a motion for
a new trial which was denied. The CA affirmed the denial of a new trial.