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BONGATO V.

MALVAR, 387 SCRA 327


FACTS:
Spouses Severo and Trinidad Malvar filed a complaint in the MTCC for forcible entry against
Teresita Bongato, alleging that Bongato unlawfully entered a parcel of land belonging to the
spouses and erected thereon a house of light materials.
MTCC decided in favor of Malvar and ordered Bongato to vacate the land. RTC affirmed the
decision. CA also held that MTCC had jurisdiction. On appeal, Bongato raised the issue of
MTCC jurisdiction; that the complaint was filed beyond the one-year prescriptive period.

ISSUE:
Wherther or not the MTCC had jurisdiction since the Complaint was filed beyond the one-year
period from date of alleged entry?

HELD:
No, MTCC had no jurisdiction. It is wise to be reminded that forcible entry is a quieting process,
and that the restrictive time bar is prescribed to complement the summary nature of such process.
Indeed, the one-year period within which to bring an action for forcible entry is generally
counted from the date of actual entry to the land. However, when entry is made through stealth,
then the one-year period is counted from the time the plaintiff learned about it. After the lapse of
the one-year period, the party dispossessed of the parcel of land may file either accion
publiciana; or an accion reivindicatoria, which is an action to recover ownership as well as
possession.
One the basis of the facts, it is clear that the cause of action for forcible entry filed by
respondents had already prescribed when they filed the complaint on July 10, 1992 (the house
was built as early as 1987), thus the MTCC had no more jurisdiction to hear and decide the case.

IGNACIO V. DIRECTOR OF LANDS AND


VALERIANO
108 SCRA 335
FACTS
Faustino Ignacio filed an application to register a parcel of land (mangrove) which he alleged he
acquired by right of accretion since it adjoins a parcel of land owned by the Ignacio. His
application is opposed by the Director of Lands, Laureano Valeriano, contending that said land
forms part of the public domain. The Trial Court dismissed the application holding that said land
formed part of the public domain. Thus the case at bar.

ISSUE:
Whether or not the land forms part of the public domain

HELD: YES
1. The law on accretion cited by Ignacio in inapplicable in the present case because it refers to
accretion or deposits on the banks of rivers while this refers to action in the Manila Bay, which is
held to be part of the sea
2. Although it is provided for by the Law of Waters that lands added to shores by accretions
caused by actions of the sea form part of the pubic domain when they are no longer necessary for
purposes of public utility, only the executive and the legislative departments have the authority
and the power to make the declaration that any said land is no longer necessary for public use.
Until such declaration is made by said departments, the lot in question forms part of the public
domain, not available for private appropriation or ownership.

JLT AGRO V. BALASAG


453 SCRA 211

FACTS:
Don Julian had two marriages during his lifetime. During his first one, with Antonia, he had two
children. In the second marriage, he had 4 children with Milagros. Upon the death of Antonia,
the first children sought the partition of the property. On the disputed Lot 63, there was a
compromise agreement entered into by the parties whereby Lot 63 was supposed to be
exclusively adjudicated in favor of his second wife and children by the same.

HELD:
The partition inter vivos of Don Julian is valid. Considering however that such would be
effective upon his death only, the right of his heirs from the second marriage would become
legally operative only upon the death of Don Julianall is just a mere expectancy. Evidently, at
the time of execution of deed of assignment, Julian remained the owner of the properties.

QUIMEN V. CA
257 SCRA 163
FACTS:
The classic battle of an avocado tree and a sarisari store of strong materials.

HELD:
Where the easement may be established on any of the several tenements surrounding the
dominant estate, the one where the way is shortest and will cause the least damage should be
chosen but if these two circumstances dont concur in a single interest, the way which will cause
least damage should be used, even if it will not be shortest.

FRANSISCO V. IAC
177 SCRA 527
FACTS:
The Malinta estate was co-owned by two sisters who later donated 1/3 of the property to their
niece, 1/3 to the heirs of their deceased sister, and 1/3 was solely conveyed to Cornelia.
Adjoining this estate was property of Fransisco, fronting the Paradas road. The new co-owners
then partitioned the lot. All the frontage went to the niece. Cornelia subsequently sold her
property to Eugenio sisters who then sold it to Ramos. Ramos wanted a right of way through
Fransiscos property.

HELD:
If the enclosure or isolation was due to the proprietors own acts, then there couldnt be any
compulsory right of way.

TANEDO V. BERNAD
165 SCRA 86
FACTS:
Cardenas was the owner of two lots. One lot was sold to Tanedo and the other was mortgaged.
The mortgaged lot had an four-storey apartment and house constructed thereon with a septic
tank. The other lot had on it a house. Thereafter, the second lot was sold to spouses Sim who
blocked the sewage pipe.

HELD:
Absent any statement abolishing the easement of drainage the use of the septic tank is continued
by operation of law. The new owners of the servient estate cannot impair the use of the easement.

SOLID MANILA V. BIO HONG TRADING


195 SCRA 748
FACTS:
Defendant purchased property which had an alleyway for the passage of people living in the
same vicinity. It closed the alleyway.

HELD:
The vendee of real property in which a servitude or easement exists didnt acquire the right to
close that servitude or put up obstructions thereon, to prevent the public from using it.

BALURAN V. NAVARRO
79 SCRA 309
FACTS:
Spouses Paraiso entered into a barter agreement with the spouses Baluran. The former
transferred use of their residential house in favor of the latter in exchange for the latters riceland.

HELD:
No barter agreement for purposes of transferring ownership can be inferred when it is clear that
the parties merely intended to transfer material possession thereof.

LIM KICH TONG V. CA


195 SCRA 398
FACTS:
Lim and his family originally occupied a room for residential purposes. After they transferred
residence, they utilized the room for the storage of some important belongings. The building had
a common main door through which the occupants of the various rooms therein can get in and
out therefrom. Each occupant was given a duplicate key to such doorlock. On a relevant date,
when Lim needed to get his law books, his key couldn't open the door. He then needed to incur
expenses in buying new law books because of the incident. When he was able to contact the
officer-in charge, the latter refused to issue to him a new key.

HELD:
Any person deprived of possession of any land or building or part thereof, may file an action for
forcible entry and detainer in the proper inferior courts against the person unlawfully depriving
or withholding possession from him. This relief is also available to lessees and tenants.

WILMON AUTO SUPPLY V. CA


208 SCRA 108
FACTS:
Wilmon was the lessee of a commercial building and bodegas standing on a registered land
owned in common by the Lacsons, Solinap, and Jarantilla. The leases were embodied in deeds
wherein one of the clauses provided for a reservation of rightsthe seller has the right to
encumber or sell the property provided that the transferee would respect the lease of Wilmon. On
a relevant date, after the expiration of the lease period, the premises were sold to Star Group
Resources and Development. The latter instituted an action for unlawful detainer against
Wilmon. Wilmon impugned Stars right to eject them. It alleges that its right of preemption has
been violated, as well as their leasehold rights, and that it was denied the option to extend the
lease. These same propositions were also raised in the case it filed with the RTC. In the unlawful

detainer cases, it was decided by the MTC that the case should proceed against some of the
lessees but not with the others. The lessees filed a motion for reconsideration but it was denied.
They filed a petition for certiorari and the RTC held in the end that the pendency of the case in
the RTC didn't warrant suspension of the unlawful detainer case with the MTC.

HELD:
An ejectment suit cannot be suspended by an action filed with the RTC based on a tenants claim
of his right of preemption was violated. The actions in the RTC didn't involve physical
possession and on not a few occasions, that the case in the RTC was merely a ploy to delay
disposition of the ejectment proceeding.

Coca-Cola vs. Court of Appeals, 227


SCRA 293
Facts:
Respondent Lydia Geronimo was the proprietess of Kindergarten Wonderland Canteen, engaged
in the sale of soft drinks and other goods to the students of Kindergarten Wonderland and to the
public. On August 12, 1989, some parents of the students complained that the Coke and Sprite
soft drinks contained fiber-like matter and other foreign substances. She discovered the presence
of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter
in the contents of an unopened Sprite bottle. The Department of Health informed her that the
samples she submitted are adulterated. Her sales of soft drinks plummeted, and not long after
that, she had to close shop. She became jobless and destitute. She demanded from the petitioner
the payment of damages but was rebuffed by it. She then filed a complaint before the RTC of
Dagupan City, which granted the motion to dismiss filed by petitioner, on the ground that the
complaint is based on contract, and not on quasi-delict, as there exists pre-existing contractual
relation between the parties. Thus, on the basis of Article 1571, in relation to Article 1562, the
complaint should have been filed within six months from the delivery of the thing sold. The CA
reversed the RTC decision and held that Geronimos complaint is one for quasi-delict because of
petitioners act of negligently manufacturing adulterated food items intended to be sold for
public consumption; and that the existence of contractual relations between the parties does not
absolutely preclude an action by one against the other for quasi-delict arising from negligence in
the performance of a contract. Hence, this petition.
Issue:
Whether or not the action for damages by the proprietess against the soft drinks manufacturer
should be treated as one for breach of implied warranty against hidden defects, which must be
filed within six months from the delivery of the thing sold, or one for quasi-delict, which can be
filed within four years pursuant to Article 1146 of the Civil Code.
Held:
The action in based on quasi-delict, therefore, it prescribes in four years. The allegations in the
complaint makes a reference to the reckless and negligent manufacture of adulterated food
items intended to be sold for public consumption. The vendees remedies are not limited to
those prescribed in Article 1567 of the Civil Code. The vendor could be liable for quasi-delict
under Article 2176, and an action based thereon may be brought by the vendee.

The existence of a contract between the parties does not bar the commission of a tort by the one
against the other and the consequent recovery of damages therefor. Liability for quasi-delict may
still exist despite the presence of contractual relations.

Libi vs. Intermediate Appellate Court,


214 SCRA 16
Facts:
On January 14, 1979, Julie Ann Gotiong and Wendell Libi died, each from a single gunshot
wound from a revolver licensed in the name of petitioner Cresencio Libi. The respondents,
parents of Julie Ann, filed a case against the parents of Wendell to recover damages arising from
the latters vicarious liability under Article 2180 of the Civil Code. The trial court dismissed the
complaint. On appeal, the IAC set aside the judgment of the lower court dismissing the
complaint of Julie Anns parents.
Issue:
Whether or not Article 2180 of the Civil Code was correctly interpreted by the respondent Court
to make petitioners liable for vicarious liability.
Held:
Yes. The petitioners were gravely remiss in their duties as parents in not diligently supervising
the activities of their son. Both parents were wanting in their duty and responsibility in
monitoring and knowing the activities of their son. The petitioners utterly failed to exercise all
the diligence of a good father of a family in preventing their son from committing the crime by
means of the gun which was freely accessible to Wendell Libi because they have not regularly
checked whether the gun was still under lock, but learned that it was missing from the safety
deposit box only after the crime had been committed. The civil liability of parents for quasidelicts of their minor children, as contemplated in Article 2180, is primary and not subsidiary.

Custodio vs Court of Appeals, 253


SCRA 483
Facts:
Respondents owned a parcel of land wherein a two-door apartment was erected. Said property
was surrounded by other immovables owned by petitioners, spouses Custodio and spouses
Santos. As an access to P. Burgos Street from the subject property, there are two possible
passageways. The first passageway is approximately one meter wide and is about 20 meters
distant from Mabasas residence to P. Burgos Street. Such path is passing in between the
previously mentioned row of houses. The second passageway is about 3 meters in width and
length from plaintiff Mabasas residence to P. Burgos Street; it is about 26 meters. In passing thru
said passageway, a less than a meter wide path through the septic tank and with 5-6 meters in
length, has to be traversed. Petitioners constructed an adobe fence in the first passageway making
it narrower in width. Said adobe fence was first constructed by defendants Santoses along their
property which is also along the first passageway. Defendant Morato constructed her adobe fence
and even extended said fence in such a way that the entire passageway was enclosed. As a result,
the tenants left the apartment because there was no longer a permanent access to the public

street. Respondents then filed an action for the grant of an easement of right of way. The trial
court ordered the petitioner to give respondents a permanent access to the public street and that
in turn, the respondent will pay a sum of Php 8,000.00 to the petitioner as an indemnity for the
permanent use of the passageway. On appeal by the respondent to the CA, the decision of the
trial court was affirmed, such that a right of way and an award of actual, moral and exemplary
damages were given to the respondents. Hence, this petition.
Issue:
Whether or not the award of damages is proper?
Held:
No. To warrant the recovery of damages, there must be both a right of action for a legal wrong
inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without
damage, or damage without wrong, does not constitute a cause of action, since damages are
merely part of the remedy allowed for the injury caused by a breach or wrong. There is a material
distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is
the loss, hurt, or harm which results from the injury, and damages are the recompense or
compensation awarded for the damage suffered. Thus, there can be damage without injury in
those instances in which the loss or harm was not the result of a violation of a legal duty. These
situations are often called damnum absque injuria. In order that a plaintiff may maintain an
action for the injuries of which he complains, he must establish that such injuries resulted from a
breach of duty which the defendant owed to the plaintiff. There must be a concurrence of injury
to the plaintiff and legal responsibility by the person causing it.
In the instant case, although there was damage, there was no legal injury. Contrary to the claim
of respondents, petitioners could not be said to have violated the principle of abuse of right. In
order that the principle of abuse of right provided in Article 21 of the Civil Code can be applied,
it is essential that the following requisites concur: (1) The defendant should have acted in a
manner that is contrary to morals, good customs or public policy; (2) The acts should be willful;
and (3) There was damage or injury to the plaintiff. The act of petitioners in constructing a fence
within their lot is a valid exercise of their right as owners, hence not contrary to morals, good
customs or public policy. The law recognizes in the owner the right to enjoy and dispose of a
thing, without other limitations than those established by law. It is within the right of petitioners,
as owners, to enclose and fence their property. Article 430 of the Civil Code provides that
(e)very owner may enclose or fence his land or tenements by means of walls, ditches, live or
dead hedges, or by any other means without detriment to servitudes constituted thereon.
At the time of the construction of the fence, the lot was not subject to any servitudes. There was
no easement of way existing in favor of private respondents, either by law or by contract. The
fact that respondents had no existing right over the said passageway is confirmed by the very
decision of the trial court granting a compulsory right of way in their favor after payment of just
compensation. It was only that decision which gave private respondents the right to use the said
passageway after payment of the compensation and imposed a corresponding duty on petitioners
not to interfere in the exercise of said right. The proper exercise of a lawful right cannot
constitute a legal wrong for which an action will lie, although the act may result in damage to
another, for no legal right has been invaded. One may use any lawful means to accomplish a
lawful purpose and though the means adopted may cause damage to another, no cause of action
arises in the latters favor. An injury or damage occasioned thereby is damnum absque injuria.
The courts can give no redress for hardship to an individual resulting from action reasonably
calculated to achieve a lawful means.

Rafael Reyes vs. People, 329 SCRA 600


Facts:
In the early morning of June 20, 1989, the White Truck driven by Dunca left Tuguegarao,
Cagayan bound to San Fernando, Pampanga loaded with 2,000 cases of empty beer Grande
bottles. Seated at the front right seat beside him was Ferdinand Domingo, his truck helper. At
around 4:00 oclock that same morning while the truck was descending at a slight downgrade
along the national road at Tagaran, Cauayan, Isabela, it approached a damaged portion of the
road covering the full width of the trucks right lane going south and about six meters in length.
These made the surface of the road uneven because the potholes were about five to six inches
deep. The left lane parallel to this damaged portion is smooth. As narrated by Ferdinand
Domingo, before approaching the potholes, he and Dunca saw the Nissan with its headlights on
coming from the opposite direction. They used to evade this damaged road by taking the left
lance but at that particular moment, because of the incoming vehicle, they had to run over it. This
caused the truck to bounce wildly. Dunca lost control of the wheels and the truck swerved to the
left invading the lane of the Nissan. As a result, Duncas vehicle rammed the incoming Nissan
dragging it to the left shoulder of the road and climbed a ridge above said shoulder where it
finally stopped. The Nissan was severely damaged and its two passengers, namely, Feliciano
Balcita and Francisco Dy, Jr. died instantly. On October 10, 1989, Provincial Prosecutor Durian
filed with the RTC an amended information charging Dunca with reckless imprudence resulting
in double homicide and damage to property. On November 29, 1989, the offended parties filed
with the RTC a complaint against petitioner Rafael Reyes Trucking Corporation, as employer of
driver Dunca, based on quasi delict. Respondents opted to pursue the criminal action but did not
withdraw the civil case quasi ex delicto they filed against petitioner. On December 15, 1989,
respondents withdrew the reservation to file a separate civil action against the accused and
manifested that they would prosecute the civil aspect ex delicto in the criminal action. However,
they did not withdraw the separate civil action based on quasi delict against petitioner as
employer arising from the same act or omission of the accused driver. The RTC held that the
driver was guilty. Respondents moved for amendment of the dispositive portion of the joint
decision so as to hold petitioner subsidiarily liable for the damages awarded to the private
respondents in the event of insolvency of the accused, which the lower court granted.
Issues:
(1) Whether or not petitioner as owner of the truck involved in the accident may be held
subsidiarily liable for the damages awarded to the offended parties in the criminal action against
the truck driver despite the filing of a separate civil action by the offended parties against the
employer of the truck driver; and
(2) Whether or not the Court may award damages to the offended parties in the criminal case
despite the filing of a civil action against the employer of the truck driver.
Held:
(1) No. In negligence cases, the aggrieved party has the choice between (1) an action to enforce
civil liability arising from crime under Article 100 of the Revised Penal Code; and (2) a separate
action for quasi delict under Article 2176 of the Civil Code of the Philippines. Once the choice is
made, the injured party can not avail himself of any other remedy because he may not recover
damages twice for the same negligent act or omission of the accused. This is the rule against
double recovery.In other words, the same act or omission can create two kinds of liability on the
part of the offender, that is, civil liability ex delicto, and civil liability quasi delicto either of
which may be enforced against the culprit, subject to the caveat under Article 2177 of the Civil

Code that the offended party can not recover damages under both types of liability. In the
instant case, the offended parties elected to file a separate civil action for damages against
petitioner as employer of the accused, based on quasi delict, under Article 2176 of the Civil Code
of the Philippines. Petitioner, as employer of the accused who has been adjudged guilty in the
criminal case for reckless imprudence, cannot be held subsidiarily liable because of the filing of
the separate civil action based on quasi delict against it. In view of the reservation to file, and the
subsequent filing of the civil action for recovery of civil liability, the same was not instituted
with the criminal action. Such separate civil action was for recovery of damages under Article
2176 of the Civil Code, arising from the same act or omission of the accused.
(2) No. The award of damages in the criminal case was improper because the civil action for the
recovery of civil liability was waived in the criminal action by the filing of a separate civil action
against the employer. The only issue brought before the trial court in the criminal action is
whether accused Dunca is guilty of reckless imprudence resulting in homicide and damage to
property. The action for recovery of civil liability is not included therein, but is covered by the
separate civil action filed against the petitioner as employer of the accused truck-driver. The
policy against double recovery requires that only one action be maintained for the same act or
omission whether the action is brought against the employee or against his employer. The injured
party must choose which of the available causes of action for damages he will bring.

Dulay vs. Court of Appeals, 243


SCRA 220
Facts:
On December 7, 1988, an altercation between Benigno Torzuela and Atty. Napoleon Dulay
occurred at the Big Bang Sa Alabang, Alabang Village, Muntinlupa as a result of which
Benigno Torzuela, the security guard on duty at the said carnival, shot and killed Atty. Napoleon
Dulay. Petitioner Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own
behalf and in behalf of her minor children, filed an action for damages against Benigno Torzuela
and private respondents Safeguard and/or Superguard, alleged employers of defendant Torzuela.
Respondent Superguard filed a Motion to Dismiss on the ground that the complaint does not
state a valid cause of action. Superguard claimed that Torzuelas act of shooting Dulay was
beyond the scope of his duties, and that since the alleged act of shooting was committed with
deliberate intent (dolo), the civil liability therefor is governed by Article 100 of the Revised
Penal Code. Superguard further alleged that a complaint for damages based on negligence under
Article 2176 of the New Civil Code, such as the one filed by petitioners, cannot lie, since the
civil liability under Article 2176 applies only to quasi-offenses under Article 365 of the Revised
Penal Code. In addition, the respondent argued that petitioners filing of the complaint is
premature considering that the conviction of Torzuela in a criminal case is a condition sine qua
non for the employers subsidiary liability. Respondent Safeguard also filed a motion praying
that it be excluded as defendant on the ground that defendant Torzuela is not one of its
employees. Petitioners opposed both motions, stating that their cause of action against the private
respondents is based on their liability under Article 2180 of the New Civil Code. Respondent
judge declared that the complaint was one for damages founded on crimes punishable under
Articles 100 and 103 of the Revised Penal Code as distinguished from those arising from, quasidelict.
Issues:
(1) Whether or not Torzuela s act of shooting Napoleon Dulay constitutes a quasi-delict
actionable under Article 2176 of the New Civil Code;

(2) Whether or not Article 33 of the New Civil Code applies only to injuries intentionally
committed; and
(3) Whether or not the liability or respondents is subsidiary under the Revised Penal Code.
Held:
(1) Yes. Article 2176 of the New Civil Code provides that whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual relation between the parties is called a
quasi-delict and is governed by the provisions of this Chapter. Contrary to the theory of private
respondents, there is no justification for limiting the scope of Article 2176 of the Civil Code to
acts or omissions resulting from negligence. Well-entrenched is the doctrine that article 2176
covers not only acts committed with negligence, but also acts which are voluntary and
intentional.
(2) No. The term physical injuries in Article 33 has already been construed to include bodily
injuries causing death. It is not the crime of physical injuries defined in the Revised Penal Code.
It includes not only physical injuries but also consummated, frustrated, and attempted homicide.
Although in the Marcia case, it was held that no independent civil action may be filed under
Article 33 where the crime is the result of criminal negligence, it must be noted, however, that
Torzuela, the accused in the case at bar, is charged with homicide, not with reckless imprudence,
whereas the defendant in Marcia was charged with reckless imprudence. Therefore, in this case,
a civil action based on Article 33 lies.
(3) No. Under Article 2180 of the New Civil Code, when an injury is caused by the negligence of
the employee, there instantly arises a presumption of law that there was negligence on the part of
the master or employer either in the selection of the servant or employee, or in supervision over
him after selection or both. The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent employee and a prior
showing of the insolvency of such employee. Therefore, it is incumbent upon the private
respondents to prove that they exercised the diligence of a good father of a family in the
selection and supervision of their employee.

Africa vs. Caltex, 16 SCRA 448


Facts:
In the afternoon of March 18, 1948, a fire broke out at the Caltex service station at the corner of
Antipolo St. and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank
truck into the underground storage, right at the opening of the receiving tank where the nozzle of
the hose was inserted. The fire spread to and burned several houses. The owners, among them
petitioner spouses Africa and heirs of Ong, sued respondents Caltex Phil., Inc., the alleged owner
of the station, and Mateo Boquiren, the agent in charge of its operation, for damages. The CFI
and CA found that the petitioners failed to prove negligence of the respondents, and that there
was due care in the premises and with respect to the supervision of their employees.
Issue:
Whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa
loquitur should apply so as to presume negligence on the part of the respondents.
Held:

Yes. Res ipsa loquitur literally means the thing or transaction speaks for itself. For the doctrine
of res ipsa loquitur to apply, the following requisites should be present: (a) the accident is of a
kind which ordinarily does not occur in the absence of someones negligence; (b) it is caused by
an instrumentality within the exclusive control of the defendant or defendants; and (c) the
possibility of contributing conduct which would make the plaintiff responsible is eliminated. In
the case at bar, the gasoline station, with all its appliances, equipment and employees, was under
the control of respondents. A fire occurred therein and spread to and burned the neighboring
houses. The persons who knew or could have known how the fire started were respondents and
their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable
inference that the incident happened because of want of care. The negligence of the employees
was the proximate cause of the fire, which in the ordinary course of things does not happen.
Therefore, the petitioners are entitled to the award for damages.
PRESUMPTIVE DEATH
Republic of the Philippines VS. Bermudez Lorino
G.R. No. 160258. January 19, 2005
Facts: Gloria Bermudez and Francisco Lorino were married in June 1987. The wife was unaware
that her husband was a habitual drinker with violent attitude and character and had the propensity
to go out with his friends to the point of being unable to work. In 1991 she left him and returned
to her parents together with her three children. She went abroad to work for her support her
children. From the time she left him, she had no communication with him or his relatives.
In 2000, nine years after leaving her husband, Gloria filed a verified petition with the RTC under
the rules on Summary Judicial Proceedings in the Family Law. The lower court issued an order
for the publication of the petition in a newspaper of general circulation.
In November 7, 2001, the RTC granted the summary petition. Although the judgment was final
and executors under the provisions of Act. 247 of the Family Code, the OSG for the Republic of
the Philippines filed a notice of appeal.
Issue: Whether or not the factual and legal bases for a judicial declaration of presumptive death
under Art 41 of the Family Code were duly established.
Held: Art. 238 of the Family Code under Title XI Summary Judicial Proceeding in the Family
Law, sets the tenor for cases scoured by these rules, to wit:
Art238. Until modified by the Supreme Court, the procedural rules in this Title shall apply in all
cases provided for in this Code requiring summary court proceeding. Such cases shall be decided
in an expeditions manner with out regards technical rules.
The judge of the RTC fully complied with the above-cited provision by expeditiously rending
judgment within ninety (90) days after the formal offer of evidence by the petitioner.

CO- OWNERSHIP
Buenaventura VS. CA
G.R. Nos. 127358 and G.R. Nos. 127449
March 31, 2005
Facts: Noel Buenaventura filed a position for the declaration of nullity of marriage on the ground
that both he and his wife were psychologically incapacitated.

The RTC in its decision, declared the marriage entered into between petitioner and respondent
null and violation ordered the liquidation of the assets of the conjugal partnership property;
ordered petitioner a regular support in favor of his son in the amount of 15,000 monthly, subject
to modification as the necessity arises, and awarded the care and custody of the minor to his
mother.
Petitioner appealed before the CA. While the appeal was pending, the CA, upon respondents
motion issued a resolution increasing the support pendants like to P20, 000.
The CA dismissal petitioner appeal for lack of merit and affirmed in to the RTC decision.
Petitioner motion for reconsideration was denied, hence this petition.
Issue: Whether or not co-ownership is applicable to valid marriage.
Held: Since the present case does not involve the annulment of a bigamous marriage, the
provisions of article 50 in relation to articles 41, 42 and 43 of the Family Code, providing for the
dissolution of the absolute community or conjugal partnership of gains, as the case maybe, do
not apply. Rather the general rule applies, which is in case a marriage is declared void ab initio,
the property regime applicable to be liquidated, partitioned and distributed is that of equal coownership.
Since the properties ordered to be distributed by the court a quo were found, both by the RTC
and the CA, to have been acquired during the union of the parties, the same would be covered by
the co-ownership. No fruits of a separate property of one of the parties appear to have been
included or involved in said distribution.

ADOPTION; ILLEGITIMATE CHILD

IN THE MATTER OF THE ADOPTION OF STEPHANIE NATHY ASTORGA GARCIA


G.R. No. 148311. March 31, 2005
Facts: Honorato B. Catindig filed a petition to adopt his minor illegitimate child Stephanie
Astorga Garcia. He averred that Stephanie was born on June 26, 1994; that Stephanie had been
using her mothers middle name and surname; and that he is now a widower and qualified to be
her adopting parent. He prayed that Stephanies middle name be changedto Garcia, her mothers
surname, and that her surname Garcia be changed to Catindig his surname.
The RTC granted the petition for adoption, and ordered that pursuant to article 189 of the Family
Code, the minor shall be known as Stephanie Nathy Catindig.
Honorato filed a motion for classification and/or reconsideration praying that Stephanie be
allowed to use the surname of her natural mother (Garcia) as her middle name. The lower court
denied petitioners motion for reconsideration holding that there is no law or jurisprudence
allowing an adopted child to use the surname of his biological mother as his middle name.
Issue: Whether or not an illegitimate child may use the surname of her mother as her middle
name when she is subsequently adopted by her natural father.
Held: One of the effects of adoption is that the adopted is deemed to be a legitimate child of the
adapter for all intents and purposes pursuant to Article 189 of the Family Code and Section 17 of

Article V of RA 8557.
Being a legitimate by virtue of her adoption, it follows that Stephanie is entitled to all the rights
provided by law to a legitimate child without discrimination of any kind, including the right to
bear the surname of her father and her mother. This is consistent with the intention of the
members of the Civil Code and Family Law Committees. In fact, it is a Filipino custom that the
initial or surname of the mother should immediately precede the surname of the father.
JUDICIAL DECLARATION OF NULLITY
Cojuangco vs Palma
A.C. No. 2474 June 30, 2005
Facts: On June 22, 1982, respondent Atty. Leo J. Palma, despite his subsisting marriage, wed
Maria Luisa Cojuangco, the daughter of complainant Eduardo M. Cojuangco, Jr. Thus, the latter
filed on November 1982, a complaint disbarment against respondent. Palma moved to dismiss
the complaint.
On March 2, 1983, the court referred the case to OSG for investigation and recommendation.
The Assistant Solicitor General heard the testimonies of the complainant and his witness in the
presence of respondents counsel.
On March 19, 1984 respondent filed with the OSG an urgent motion to suspend proceedings on
the ground that the final actions of his civil case for the declaration of nullity of marriage
between him and his wife Lisa, poses a prejudicial question to the disbarment proceeding, but it
was denied.
The OSG transferred the disbarment case to the IBP, the latter found respondent guilty of gross
immoral conduct and violation of his oath as a lawyer, hence, was suspended from the practice of
law for a period of three years.
In his motion for reconsideration, respondent alleged that he acted under a firm factual and legal
conviction in declaring before the Hong Kong Marriage Registry that he is a bachelor because
his first marriage is void even if there is judicial declaration of nullity.
Issue: Whether or not a subsequent void marriage still needs a judicial declaration of nullity for
the purpose of remarriage.
Held: Respondents arguments that he was of the firm factual and legal conviction when he
declared before the HIC authorities that he was a bachelor since his first marriage is void and
does not need judicial declaration of nullity cannot exonerate him. In Terre vs Terre, the same
defense was raised by respondent lawyer whose disbarment was also sought. We held:
xxx respondent Jordan Terre, being a lawyer, knew or should have known that such an argument
ran counter to the prevailing case law of this court which holds that purposes of determining
whether a person is legally free to contract a second marriage, a judicial declaration that the first
marriage was null and void an initio is essential. Even if we were to assume, arguendo merely,
that Jordan Terre held that mistaken belief in good faith, the same result will follow. For if we are
to hold Jordan Terre to his own argument, his frist marriage to complainant Dorothy Terre must
be deemed valid, with the result that his second marriage must be regarded as bigamous and
criminal.

MARITAL CONSENT
Pelayo vs. Perez
G.R. No. 141323
Facts: David Pelayo through a Deed of Absolute Sale executed a deed of sale and transferred to
Melki Perez two parcel of agricultural lands. Loreza Pelayo and another one whose signature is
eligible witnesses such execution of deed.
Loreza signed only on the third page in the space provided for witnesses, as such, Perez
application was denied.
Perez asked Loreza to sign on the first and should pages of the deed of sale but she refused. He
then filed a complaint for specific performance against the Pelayo spouses.
The spouses moved to dismiss the complaint on the ground for lack of marital consent as
provided by art166 of the Civil Code.
Issue: Whether or not the deed of sale was null and viol for lack of marital consent.
Held: Under Art 173, in relation to Art166, both of the NCC, W/C was still in effect on January
11, 1988 when the deed in question was executed, the lack of marital consent to the disposition
of conjugal property does not make the contract viol of initio but Merely violable. Said
provisions of law provide:
Art 166. Unless the wife has been declared a non compass mentis or a spedthriff, or is under civil
interdiction or is confined in a lepresarium, the husband connot alienate or encumber any real
property not the Longugal property w/o the wifes consent. It she refuses nreasonable to give her
consent, the court may compel her to grant the same.
Art 173. The wife may during the marriage and w/in 10 years the transaction questioned, ask the
court for the annulment of any contract of the husband w/c tends to defraud her or impair interest
in the conjugal partnership property. Should the wife fail to exercise this right she her heir, after
the dissolution of the marriage may demand the value of property fraudulently alienated by the
husband.
MARITAL CONSENT
BRAVO ET AL. VS. COURT OF APPEALS
Facts: Spouses Mauricio and Simons owned two parcel of land. It contain a large residential
dwelling or smaller house and other improvements.
They had three children Roland, Cesar and Lily, Cesar died. Lily married David and had a son,
David Jr,, Senia, Benjamin and their half-sister, Ofelia.
Simona executed a General Power of Attorney (GPA) on June 17, 1966, appointing her husband
as her attorney-in-fact. He subsequently mortgaged the land to the PNB and DBP.
On October 25, 1970, Mauricio executed a Deed of Sale with assumption of Real Estate
Mortgage transferring the properties to Roland, Ofelia and Elizabeth. It was conditioned on the
payment of P1,000 and on the assumption of the vendees of the PNB and DBP mortgages over
the properties.
The deed of sale was notarized but was not annotated on TCT, neither was it presented to DBP
and PNB. The mortgage loans and receipts for loan payment issued by the two banks continued

to be in Mauricios name even after his death November 1973. Simona passed away in 1977.
Issue: Whether or not the deed of sale was void for lack of marital consent.
Held: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is
under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber
any real property of the conjugal partnership without the wife's consent. If she refuses
unreasonably to give her consent, the court may compel her to grant the same.
This article shall not apply to property acquired by the conjugal partnerships before the effective
date of this Code.
Article 166 expressly applies only to properties acquired by the conjugal partnership after the
effectivity of the Civil Code of the Philippines ("Civil Code"). The Civil Code came into force
on 30 August 1950.1161 Although there is no dispute that the Properties were conjugal properties
of Mauricio and Simona, the records do not show, and the parties did not stipulate, when the
Properties were acquired.1171 Under Article 1413 of the old Spanish Civil Code, the husband
could alienate conjugal partnership property for valuable consideration without the wife's
consent.1181
Even under the present Civil Code, however, the Deed of Sale is not void. It is well-settled that
contracts alienating conjugal real property without the wife's consent are merely voidable under
the Civil Code - that is, binding on the parties unless annulled by a competent court - and not
void ab initial
Article 166 must be read in conjunction with Article 173 of the Civil Code ("Article 173"). The
latter prescribes certain conditions before a sale of conjugal property can be annulled for lack of
the wife's consent, as follows:
Art. 173. The wife may, during the marriage and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered into without
her consent, when such consent is required, or any act or contract of the husband which tends to
defraud her or impair her interest in the conjugal partnership property. Should the wife fail to
exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband. (Emphasis supplied)
Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real
property without her consent. The wife must file the action for annulment during the marriage
and within ten years from the questioned transaction. Article 173 is explicit on the remedies
available if the wife fails to exercise this right within the specified period. In such case, the wife
or her heir; can only demand the value of the property provided they prove that the husband
fraudulently alienated the property. Fraud is never presumed, but must be established by clear
and convincing evidence.
ILLEGITIMATE CHILDS SURNAME
ALBA vs. COURT OF APPEALS
G.R. No. 164041, July 29, 2005
Facts: Private respondent Rosendo C. Herrera filed a petition for cancellation of the following
entries in the birth certificate of Rosendo Alba Herrera, Jr, to wit: (1) the surname Herrera as
appended to the name of the said child; (2) the reference to private respondent as the father of

Rosendo Alba Herrera Jr.; and (3) the alleged marriage of private respondent to all childs
mother, Armi A. Alba He averred that such challenged entries are false.
Private respondent contended that he married only once, as evidenced by certification from NSO
and Civil Registrar of Mandaluyong.
The RTC, finding the petition to be sufficient in form and substance the hearing was set. On the
scheduled hearing the counsel from the OSG appeared but filed no opposition, Armi was not
present.
The court a quo rendered a decision ordering the correction of the entries in the Certification of
Live Birth of Rosendo Alba Herrera, Jr.
Armi filed a petition for the annulment of the judgment, contending that she came to know of the
decision of the RTC where the school where her son was enrolled, was furnished by private
respondent with a copy of a court order directing the change of petitioners surname from
Herrera to Alba. Armi contended that she and private respondent cohabited and after their
separation, he continued to give support to their son.
Private respondent denied paternity of petitioner minor and his purported cohabitation with
Armi.
Issue: Whether or not an illegitimate child shall use the surname of their mother.
Held: Under Art. 176 of the Family Code as amended by RA No. 9255, w/c took effect on March
19, 2004, illegitimate children shall use the surname of their mother , unless their father
recognizes their filiation, in w/c case they may bear the fathers surname. In Wang vs. Cebu Civil
Registrar it was held that an illegitimate child whose filiations is not recognized by the father
bears only a given name and his mothers surname. The name of the unrecognized illegitimate
child identifies him as such. It is only when said child is recognized that he may use his fathers
surname, reflecting his status us an acknowledged illegitimate held.

CHILD CUSTODY
PABLO-GUALBERTO VS. COURT OF APPEALS
G.R. Nos. 154994 and 156254 June 28, 2005
Facts: Crisanto Rafaelito G. Gualberto V filed before the RTC a petition for declaration of nullity
of his marriage to Joycelyn w/ an ancillary prayer for custody pendente lite of their almost 4 year
old son, Rafaello, whom her wife took away w/ her from their conjugal home and his school
when she left him.
The RTC granted the ancillary prayer for custody pendente lite, since the wife failed to appear
despite notice. A house helper of the spouses testified that the mother does not care for the child
as she very often goes out of the house and even saw her slapping the child. Another witness
testified that after surveillance he found out that the wife is having lesbian relations.
The judge issued the assailed order reversing her previous order, and this time awarded the
custody of the child to the mother. Finding that the reason stated by Crisanto not to be a
compelling reason as provided in Art 213 of the Family Code.
Issue: Whether or not the custody of the minor child should be awarded to the mother.

Held: Article 213 of the Family Code provided: Art 213. In case of separation of parents
parental authority shall be exercised by the parent des granted by the court. The court shall take
into account all relevant consideration, especially the choice of the child over seven years of age,
unless the parent chosen is unfit.
No child under seven yrs of age shall be separated from the mother unless the court finds
compelling reasons to order otherwise,
This Court has held that when the parents separated, legally or otherwise, the foregoing provision
governs the custody of their child. Article 213 takes its bearing from Article 363 of the Civil
Code, w/c reads:
Art 363. In all question on the care, custody, education and property pf children, the latter
welfare shall be paramount. No mother shall be separated from her child under seven years of
age, unless the court finds compelling reason for such measure.
ANNULMENT OF MARRIAGE; PSYCHOLOGICAL INCAPACITY
DEBEL VS. COURT OF APPEALS, ET AL.
G.R. No. 151867. January 29, 2004

Facts: David Debel met Sharon Corpuz while he was working in the advertising business of his
father. The acquaintance led to courtship and romantic relations, culminating into marriage
before the City Court of Pasay on September 28, 1966. On May 20, 1967, the civil marriage was
ratified in a church wedding. The union produced four children. The petitioner avers that during
the marriage Sharon turned out to be an irresponsible and immature wife and mother. She had an
illicit affair with several men and then later to a Jordanian national named Ibrahim. Sharon was
once confined for psychiatric treatment but she didnt stop her illicit relationship with the
Jordanian national whom she married and whom she had two children. Ibrahim left Sharon so
she returned back to the petitioner who had accepted her back. However on December 9, 1995,
Sharon abandoned the petitioner and joined Ibrahim in Jordan with their two children. After
giving up all hope for reconciliation, petitioner filed on April 1, 1997 a petition seeking the
declaration of nullity of his marriage on the ground of psychological incapacity. The RTC
granted the nullity of the marriage. It was appealed in the CA which set aside the decision of
RTC and ordered dismissal of the case. Hence, the instant petition was filed to the Supreme
Court.
Issue: Whether or not private respondents sexual infidelity or perversion and abandonment fall
within the term of psychological incapacity.
Held: In this case private respondents sexual infidelity or perversion and abandonment can
hardly qualify as mental or psychological illness to such extent that she could not have known
the obligation she was assuming. It appears that private respondents promiscuity did not exist
prior to or at the inception of the marriage; in fact, the record disclosed that there was a blissful
marital union. It must be shown that the acts are a manifestation of a disordered personality
which makes respondent completely unable to discharge the essential obligations of marital state,
not merely due to her youth, immaturity or sexual promiscuity.

ACTION FOR RECOGNITION OF ILLEGITIMATE CHILDREN WHO ARE MINORS


AT THE TIME OF THE EFFECTIVITY OF THE FAMILY CODE MAY BE BROUGHT
FOR A PERIOD OF 4 YEARS FROM ATTAINING MAJORITY AGE; SPURIOUS
CHILDREN
BERNABE VS. ALEJO
G.R. No. 140500. January 21, 2002
Facts: The late Fiscal Ernesto Bernabe allegedly fathered a son with his secretary Carolina Alejo
and was named Adrian Bernabe who was born on September 18, 1981. After Ernesto Bernabe
and Rosalina, his legal wife died, the only heir left is Erestina. Carolina, in behalf of Adrian, filed
a complaint praying that Adrian be declared an acknowledged illegitimate son of Fiscal Bernabe
and be given a share of his fathers estate.
Issue: Whether or not Adrian Bernabe may be declared an acknowledged illegitimate son.
Held: Under the new law, an action for the recognition of an illegitimate child must be brought
within the lifetime of the alleged parent. The Family Code makes no distinction on whether the
former was still a minor when the latter died. Thus, the putative parent is given by the new code
a chance to dispute the claim, considering that illegitimate children are usually begotten and
raised in secrecy and without the legitimate family being aware of their existence.
OBLIGATIONS AND CONTRACTS
SAN MIGUEL CORPORATION vs. TROY FRANCIS L. MONASTERIO
G.R. No. 151037. June 23, 2005
Facts: SMC entered into an Exclusive Warehouse Agreement with SMB Warehousing Services,
represented by its manager, Troy Francis L. Monasterio. SMB undertook to provide land,
physical structures, equipment and personnel for storage, warehousing and related services such
as, but not limited to, segregation of empty bottles, stock handling, and receiving SMC products
for its route operations. From September 1993 to September 1997 and May 1995 to November
1997, aside from rendering service as warehouseman, Monasterio was given the additional task
of cashiering in SMCs Sorsogon and Camarines Norte sales offices for which he was promised a
separate fee. But it was only on December 1, 1997, that petitioner SMC started paying
respondent P11,400 per month for his cashiering services. Monasterio demanded P82,959.32 for
warehousing fees, P11,400 for cashiering fees for the month of September, 1998, as well as
exemplary damages, and attorneys fees in the amount of P500,000 and P300,000, respectively.
SMC filed a Motion to Dismiss on the ground of improper venue The RTC denied the motion.
Issue: Did the RTC of Naga City err in denying the motion to dismiss filed by SMC alleging
improper venue?
Held: Exclusive venue stipulation embodied in a contract restricts or confines parties thereto
when the suit relates to breach of the said contract. But where the exclusivity clause does not
make it necessarily all encompassing, such that even those not related to the enforcement of the
contract should be subject to the exclusive venue, the stipulation designating exclusive venues
should be strictly confined to the specific undertaking or agreement. Otherwise, the basic

principles of freedom to contract might work to the great disadvantage of a weak party-suitor
who ought to be allowed free access to courts of justice.
GF EQUITY, INC. vs. ARTURO VALENZONA
G.R. No. 156841. June 30, 2005
Facts: GF Equity hired Valenzona as Head Coach of the Alaska basketball team in the Philippine
Basketball Association under a Contract of Employment where GF Equity would pay Valenzona
the sum of P35,000.00 monthly. While the employment period agreed upon was for two years
commencing, the last sentence of paragraph 3 of the contract carried the following condition: 3.
x x x If at any time during the contract, the COACH, in the sole opinion of the CORPORATION,
fails to exhibit sufficient skill or competitive ability to coach the team, the CORPORATION may
terminate this contract. The caveat notwithstanding, Valenzona still acceded to the terms of the
contract. Thereafter, Valenzona was terminated as coach of the Alaska team. Valenzona
demanded from GF Equity payment of compensation arising from the arbitrary and unilateral
termination of his employment. GF Equity, however, refused the claim. Valenzona thus filed
before the RTC Manila a complaint against GF Equity for breach of contract with damages. The
trial court, upholding the validity of the assailed provision of the contract, dismissed the
complaint.
Issue: Whether the questioned last sentence of paragraph 3 is violative of the principle of
mutuality of contracts.
Held: Mutuality is one of the characteristics of a contract, its validity or performance or
compliance of which cannot be left to the will of only one of the parties. The ultimate purpose of
the mutuality principle is thus to nullify a contract containing a condition which makes its
fulfillment or pre-termination dependent exclusively upon the uncontrolled will of one of the
contracting parties. In the case at bar, the contract incorporates in paragraph 3 the right of GF
Equity to pre-terminate the contract. The assailed condition clearly transgresses the principle of
mutuality of contracts. GF Equity was given an unbridled prerogative to pre-terminate the
contract irrespective of the soundness, fairness or reasonableness, or even lack of basis of its
opinion. The assailed stipulation being violative of the mutuality principle underlying Article
1308 of the Civil Code, it is null and void.
NORKIS FREE & INDEPENDENT WORKERS UNION vs. NORKIS TRADING
COMPANY, INC.
G.R. No. 157098 June 30, 2005
Facts: On January 27, 1998, a Memorandum of Agreement was forged between the parties
wherein petitioner shall grant a salary increase to all regular and permanent employees Ten pesos
per day increase effective August 1, 1997; Ten pesos per day increase effective August 1, 1998.
On March 10, 1998, the RTWPB of Region VII issued Wage Order ROVII-06 which established
the minimum wage of P165.00, by mandating a wage increase of five (P5.00) pesos per day
beginning April 1, 1998, thereby raising the daily minimum wage to P160.00 and another
increase of five (P5.00) pesos per day beginning October 1, 1998, thereby raising the daily
minimum wage to P165.00 per day. In accordance with the Wage Order and Section 2, Article
XII of the CBA, petitioner demanded an across-the-board increase. Respondent, however,

refused to implement the Wage Order, insisting that since it has been paying its workers the new
minimum wage of P165.00 even before the issuance of the Wage Order, it cannot be made to
comply with said Wage Order.
Issue: Whether respondent violated the CBA in its refusal to grant its employees an across-theboard increase as a result of the passage of Wage Order No. ROVII-06.
Held: The employees are not entitled to the claimed salary increase, simply because they are not
within the coverage of the Wage Order, as they were already receiving salaries greater than the
minimum wage fixed by the Order. Concededly, there is an increase necessarily resulting from
raising the minimum wage level, but not across-the-board. Indeed, a double burden cannot be
imposed upon an employer except by clear provision of law. It would be unjust, therefore, to
interpret Wage Order No. ROVII-06 to mean that respondent should grant an across-the-board
increase. Such interpretation of the Order is not sustained by its text.
CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO,
CORAZON A. JALECO and LILIA A. OLAYON vs. SPOUSES ANTONIO PADUA and
EUGENIA PADUA
G.R. No. 165420. June 30, 2005
Facts: Spouses Eugenia and Antonio Padua owned a 216.40 sq. m. lot with an unfinished
residential house Thereafter, Concepcion Ainza bought one-half of an undivided portion of the
property from her daughter, Eugenia and the latters husband, Antonio, for P100,000.00. No
Deed of Absolute Sale was executed to evidence the transaction, but cash payment was received
by the respondents, and ownership was transferred to Concepcion through physical delivery to
Natividad Tuliao. However, respondents caused the subdivision of the property into three
portions and registered it in their names in violation of the restrictions annotated at the back of
the title. Antonio claimed that his wife, Eugenia, admitted that Concepcion offered to buy 1/3 of
the property who gave her small amounts over several years which totaled P100,000.00 by 1987
and for which she signed a receipt.
Issue: Whether there was a valid contract of sale between Eugenia and Concepcion.
Held: There was a perfected contract of sale between Eugenia and Concepcion. The records
show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer
and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when
both parties fully complied with their respective obligations. Eugenia delivered the property to
Concepcion, who in turn, paid Eugenia the price of P100,000.00, as evidenced by the receipt.
The verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the
Statute of Frauds. When a verbal contract has been completed, executed or partially
consummated, as in this case, its enforceability will not be barred by the Statute of Frauds, which
applies only to an executory agreement. However, the sale of the conjugal property by Eugenia
without the consent of her husband is voidable. It is undisputed that the subject property was
conjugal and sold by Eugenia in April 1987 or prior to the effectivity of the Family Code on
August 3, 1988. Thus, the contract of sale between Eugenia and Concepcion being an oral
contract, the action to annul the same must be commenced within six years from the time the
right of action accrued. It is binding unless annulled. Antonio failed to exercise his right to ask
for the annulment within the prescribed period, hence, he is now barred from questioning the
validity of the sale between his wife and Concepcion.

OLIVERIO LAPERAL& FILIPINAS GOLF & COUNTRY CLUB INC. vs. SOLID
HOMES, INC.
G.R. No. 130913. June 21, 2005
Facts: Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas
Golf and Country Club, Inc., represented by its then President, Oliverio Laperal, entered into a
Development and Management Agreement with respondent Solid Homes, Inc., a registered
subdivision developer, involving several parcels of land owned by Laperal and FGSDC. Under
the terms and conditions of the aforementioned Agreement and the Supplement, respondent
undertook to convert at its own expense the land subject of the agreement into a first-class
residential subdivision, in consideration of which respondent will get 45% of the lot titles of the
saleable area in the entire project. The aforementioned Agreement was cancelled by the parties,
and, in lieu thereof, two contracts identically denominated Revised Development and
Management Agreement were entered into by respondent with the two successors-in-interest of
FGSDC. Unlike the original agreement, both Revised Agreements omitted the obligation of
petitioners Laperal and FGCCI to make available to respondent Solid Homes, Inc. the owners
duplicate copies of the titles covering the subject parcels of land. It appears, however, that even
as the Revised Agreements already provided for the non-surrender of the owners duplicate
copies of the titles, respondent persisted in its request for the delivery thereof .Then, petitioners
served on respondent notices of rescission of the Revised Agreements with a demand to vacate
the subject properties and yield possession thereof to them.
Issue: Whether the termination of the Revised Agreement and Addendum, because of the
contractual breach committed by respondent solid homes, carried with it the effect provided
under Article 1385 of the New Civil Code.
Held: Mutual restitution is required in cases involving rescission under Article 1191. Since
Article 1385 of the Civil Code expressly and clearly states that rescission creates the obligation
to return the things which were the object of the contract, together with their fruits, and the price
with its interest, the Court finds no justification to sustain petitioners position that said Article
1385 does not apply to rescission under Article 1191.As a consequence of the resolution by
petitioners, rights to the lot should be restored to private respondent or the same should be
replaced by another acceptable lot. Applying the clear language of the law and the consistent
jurisprudence on the matter, therefore, the Court rules that rescission under Article 1191 in the
present case, carries with it the corresponding obligation of restitution.
MONDRAGON LEISURE AND RESORTS CORPORATION vs. COURT OF APPEALS,
ASIAN BANK CORPORATION, FAR EAST BANK AND TRUST COMPANY, and
UNITED COCONUT PLANTERS BANK
G.R. No. 154188 June 15, 2005
Facts: Mondragon International Philippines, Inc., Mondragon Securities Corporation and herein
petitioner entered into a lease agreement with the Clark Development Corporation for the
development of what is now known as the Mimosa Leisure Estate.To help finance the project,
petitioner, entered into an Omnibus Loan and Security Agreement with respondent banks for a
syndicated term loan in the aggregate principal amount of US$20M. Under the agreement, the
proceeds of the loan were to be released through advances evidenced by promissory notes to be

executed by petitioner in favor of each lender-bank, and to be paid within a six-year period from
the date of initial advance inclusive of a one year and two quarters grace period. Petitioner,
which had regularly paid the monthly interests due on the promissory notes until October 1998,
thereafter failed to make payments. Consequently, written notices of default, acceleration of
payment and demand letters were sent by the lenders to the petitioner. Then, respondents filed a
complaint for the foreclosure of leasehold rights against petitioner. Petitioner moved for the
dismissal of the complaint but was denied.
Issue: Whether or not respondents have a cause of action against the petitioner?
Held: Under the foregoing provisions of the Agreement, petitioner may be validly declared in
default for failure to pay the interest. As a consequence of default, the unpaid amount shall earn
default interest, and the respondent-banks have four alternative remedies without prejudice to the
application of the provisions on collaterals and any other steps or action which may be adopted
by the majority lender. The four remedies are alternative, with the right of choice given to the
lenders, in this case the respondents. Under Article 1201 of the Civil Code, the choice shall
produce no effect except from the time it has been communicated. In the present case, we find
that written notices were sent to the petitioner by the respondents. The notices clearly indicate
respondents choice of remedy: to accelerate all payments payable under the loan agreement It
should be noted that the agreement also provides that the choice of remedy is without prejudice
to the action on the collaterals. Thus, respondents could properly file an action for foreclosure of
the leasehold rights to obtain payment for the amount demanded.
SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND
NATIONAL HOME MORTGAGE FINANCE CORPORATION,
G.R. No. 139523. May 26, 2005
Facts: Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for
P173, 800.00 to purchase a house and lot located at Pulang Lupa, Las Pias, To secure payment,
a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings &
Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses
from Fortune Savings & Loan Association for P173, 800.00. Petitioner Leticia Cannu agreed to
buy the property for P120, 000.00 and to assume the balance of the mortgage obligations with
the NHMFC and with CERF Realty. Of the P120, 000. 00, several payments were made leaving
a balance of P45, 000.00. A Deed of Sale with Assumption of Mortgage Obligation was made
and entered into by and between spouses Fernandina and Gil Galang and spouses Leticia and
Felipe Cannu over the house and lot. Petitioners immediately took possession and occupied the
house and lot. Despite requests from Adelina R. Timbang and Fernandina Galang to pay the
balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused
to do so. Issues: 1) Whether or not the breach of the obligation is substantial.
2) Whether or not there was substantial compliance with the obligation to pay the monthly
amortization with NHMFC.
3) Whether or not respondents-spouses Galang demanded from petitioners a strict and/or faithful
compliance of the Deed of Sale with Assumption of Mortgage. 4. Whether or not the action for
rescission is subsidiary.

Held: 1) Rescission may be had only for such breaches that are substantial and fundamental as to
defeat the object of the parties in making the agreement. The question of whether a breach of
contract is substantial depends upon the attending circumstances and not merely on the
percentage of the amount not paid. In the case at bar, we find petitioners failure to pay the
remaining balance of P45,000.00 to be substantial. Taken together with the fact that the last
payment made was on 28 November 1991, eighteen months before the respondent Fernandina
Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of
petitioners to renege on their obligation is utterly clear.
2) The petitioners were not religious in paying the amortization with the NHMFC. As admitted
by them, in the span of three years from 1990 to 1993, their payments covered only thirty
months. This, indeed, constitutes another breach or violation of the Deed of Sale with
Assumption of Mortgage. On top of this, there was no formal assumption of the mortgage
obligation with NHMFC because of the lack of approval by the NHMFC on account of
petitioners non-submission of requirements in order to be considered as assignees/successors-ininterest over the property covered by the mortgage obligation.
3) There is sufficient evidence showing that demands were made from petitioners to comply with
their obligation. Adelina R. Timbang, attorney-in-fact of respondents-spouses, per instruction of
respondent Fernandina Galang, made constant follow-ups after the last payment made on 28
November 1991, but petitioners did not pay. Sometime in March 1993, due to the fact that full
payment has not been paid and that the monthly amortizations with the NHMFC have not been
fully updated, she made her intentions clear with petitioner Leticia Cannu that she will rescind or
annul the Deed of Sale with Assumption of Mortgage. 4. The subsidiary character of the action
for rescission applies to contracts enumerated in Articles 1381 of the Civil Code. The contract
involved in the case before us is not one of those mentioned therein. The provision that applies in
the case at bar is Article 1191.As a consequence of the rescission or, more accurately, resolution
of the Deed of Sale with Assumption of Mortgage, it is the duty of the court to require the parties
to surrender whatever they may have received from the other. The parties should be restored to
their original situation.
ROMAGO ELECTRIC CO., INC. vs. HONORABLE COURT OF APPEALS, SOLEDAD
C. CAC, JOEPHIL BIEN, RENATO CUNANAN and DELFIN INCIONG
G.R. No. 130721. May 26, 2005
Facts: The National Power Corporation entered into an agreement with ROMAGO ELECTRIC
CO., INC. for the erection and installation of NPCs 69 KV 3-Phase Transmission Lines for
P2,657,856.40. Subsequently, ROMAGO subcontracted the project to BICC Construction, an
unregistered loose partnership composed of Soledad Cac, Delfin Inciong, Joephil Bien and
Renato Cunanan, for P1,614,387.99. When the project was completed, there was an outstanding
balance due to BICC Construction from ROMAGO, part of which was the formers share in the
CPA amounting to 70% of the NPC-ROMAGO contract or P175,545.05. Mrs. Soledad Cac,
wrote NPC to hold its payment to ROMAGO of the aforementioned CPA amounting to
P250,778.65. Payment was nonetheless released to ROMAGO by virtue of a sworn affidavit
executed that there does not exist any lien or encumbrances against the said NPC-ROMAGO
contract. It appears that Mariano Cac, authorized representative and husband of Soledad Cac,
was paid the amount of P38,712.70 in full payment of accounts including retention of various
works at NPC-Isabela under defendants Cash Disbursement Voucher No. 23162 dated 03

October 1983.When BICCs demands for payment were ignored by ROMAGO, the partners,
thru Mrs. Soledad Cac as lone plaintiff, filed a complaint for collection of sum of money with
damages.
Issues: 1) Whether or not the private respondents are entitled to the CPA accorded to the
petitioner by NPC.
2) Whether or not the particulars of petitioners cash disbursement voucher no. 23162 signed by
private respondents authorized representative / agent acknowledging receipt of said amount did
not extinguish, relieve, release any and all claims including contract price adjustment which
private respondents may have against petitioner on the subcontract.
Held: 1. Contrary to the petitioners asseverations that the CPA was not intended to be made
applicable to the Romago-BICC subcontract, it must be remembered that the petitioner and the
private respondents expressly agreed what documents were going to be incorporated in the
principal subcontract. We agree with the appellate court that the qualifying phrase obligations
and responsibilities contained in the Romago-BICC subcontract was applicable only to the
NPC-Romago contract. What is more, the CPA is not found in the NPC-Romago contract, but in
the NPC's Plans and Specifications which was expressly included as part of the Contract
Documents.
2. Said pleading expressly states that the CPA is not included in the computation. This is
precisely because the petitioner believes that the private respondents are not entitled to the CPA,
hence, there is no basis for including it. Said CPA not being part of the subcontract price of
P1,614,387.99, the release mentioned in the cash voucher cannot, therefore, be construed as a
release of the CPA.
FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY ARNAIZ,
ROLLY ARNAIZ, DOMINGO SALARDA, JULIO CAHILIG and NICANOR LABUEN,
vs. RIZALINO UY
G.R. No. 161003. May 6, 2005
Facts: As a final consequence of the final and executory decision of the Supreme Court which
affirmed with modification the decision of the NLRC, hearings were conducted to determine the
amount of wage differentials due the eight petitioners. The petitioners filed a Motion for Issuance
of Writ of Execution. Rizalino Uy filed a Manifestation requesting that the cases be terminated
and closed, stating that the judgment award as computed had been complied with to the
satisfaction of petitioners. Said Manifestation was also signed by the eight petitioners. Together
with the manifestation is a Joint Affidavit dated May 5, 1997 of petitioners, attesting to the
receipt of payment from respondent and waiving all other benefits due them in connection with
their complaint. On October 20, 1997, six of the eight petitioners filed a Manifestation requesting
that the cases be considered closed and terminated as they are already satisfied of what they have
received from respondent. Together with said Manifestation is a Joint Affidavit in the local
dialect, of the six petitioners attesting that they have no more collectible amount from respondent
and if there is any, they are abandoning and waiving the same.
Issues: 1. Whether or not the final and executory judgment of the Supreme Court could be
subject to compromise settlement;
2. Whether or not the petitioners affidavit waiving their awards in the labor case executed

without the assistance of their counsel and labor arbiter is valid.


Held: 1. There is no justification to disallow a compromise agreement, solely because it was
entered into after final judgment. The validity of the agreement is determined by compliance
with the requisites and principles of contracts, not by when it was entered into. Petitioners
voluntarily entered into the compromise agreement. Circumstances also reveal that respondent
has already complied with its obligation pursuant to the compromise agreement. Having already
benefited from the agreement, estoppel bars petitioners from challenging it.
2. The presence or the absence of counsel when a waiver is executed does not determine its
validity. There is no law requiring the presence of a counsel to validate a waiver. The test is
whether it was executed voluntarily, freely and intelligently; and whether the consideration for it
was credible and reasonable. Where there is clear proof that a waiver was wangled from an
unsuspecting or a gullible person, the law must step in to annul such transaction. In the present
case, petitioners failed to present any evidence to show that their consent had been vitiated.
SPOUSES DANILO and CRISTINA DECENA, vs. SPOUSES PEDRO and VALERIA
PIQUERO
G.R. No. 155736. March 31, 2005
Facts: Spouses Danilo and Cristina Decena were the owners of a house and lot in Paraaque
City. The petitioners and the respondents, the Spouses Pedro and Valeria Piquero, executed a
Memorandum of Agreement in which the former sold the property to the latter for P940,250.00
payable in six (6) installments via postdated checks. The vendees forthwith took possession of
the property. It appears in the MOA that the petitioners obliged themselves to transfer the
property to the respondents upon the execution of the MOA with the condition that if two of the
postdated checks would be dishonored by the drawee bank, the latter would be obliged to
reconvey the property to the petitioners. On May 17, 1999, the petitioners, then residents of
Malolos, Bulacan, filed a Complaint against the respondents with the RTC Malolos, Bulacan, for
the annulment of the sale/MOA, recovery of possession and damages. The petitioners alleged
therein that, they did not transfer the property to and in the names of the respondents as vendees
because the first two checks drawn and issued by them in payment for the purchase price of the
property were dishonored by the drawee bank, and were not replaced with cash despite demands
therefor.
Issue: Whether or not venue was properly laid by the petitioners in the RTC of Malolos, Bulacan.
Held: After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of
the Rules of Court does not apply. This is so because the petitioners, as plaintiffs in the court a
quo, had only one cause of action against the respondents, namely, the breach of the MOA upon
the latters refusal to pay the first two installments in payment of the property as agreed upon,
and turn over to the petitioners the possession of the real property, as well as the house
constructed thereon occupied by the respondents. The claim for damages for reasonable
compensation for the respondents use and occupation of the property, in the interim, as well as
moral and exemplary damages suffered by the petitioners on account of the aforestated breach of
contract of the respondents are merely incidental to the main cause of action, and are not
independent or separate causes of action. The action of the petitioners for the rescission of the
MOA on account of the respondents breach thereof and the latters failure to return the premises

subject of the complaint to the petitioners, and the respondents eviction therefrom is a real
action. As such, the action should have been filed in the proper court where the property is
located, namely, in Paraaque City, conformably with Section 1, Rule 4 of the Rules of Court.
Since the petitioners, who were residents of Malolos, Bulacan, filed their complaint in the said
RTC, venue was improperly laid; hence, the trial court acted conformably with Section 1(c),
Rule 16 of the Rules of Court when it ordered the dismissal of the complaint.
LIABILITY FOR PRICE ESCALATION FOR LABOR AND MATERIAL COST
H.L. CARLOS CONSTRUCTION, INC. VS. MARINA PROPERTIES CORPORATION,
ET AL.
G.R No. 147614, January 29, 2004
Facts: Marina Properties Corporation entered into a contract with H.L. Carlos Construction, Inc.
to construct a condominium complex for a total consideration of P35.58 million within a period
of 365 days from receipt of notice to proceed. The original completion date of the project was
May 16, 1989, but it was extended to October 31, 1989 with a grace period until November 30,
1989. On December 15, 1989, HLC instituted a case for sum of money, among others, for costs
of labor escalation, change orders and material price escalation. The Construction Contract
contains the provision that no cost escalation shall be allowed except on the labor component of
the work. HLC argues that it is entitled to price escalation for both labor and material because
MPC was delayed for paying its obligations. MPC, on the other hand, avers that HLC was
delayed in finishing its project; hence, it is not entitled to price increases.
Issue: Whether or not MPC is liable for price escalation.
Held: MPC is liable for price escalation, but only for the labor component. The Construction
Contract contains the provision that no cost escalation shall be allowed except on the labor
component of the work. Since the contract allows escalation only of the labor component, the
implication is that material cost escalations are barred. There appears to be no provision, either in
the original or in the amended contract that would justify billing of increased cost of material.
HLC attempts to pass off material cost escalation as a form of damages suffered by it as a natural
consequence of the delay in the payment of billings. However, the contentious billing itself
contains no claim for material cost escalation.
STAGES OF CONTRACT; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE
INSURANCE LIFE ASSURANCE COMPANY, LTD. VS. ASSET BUILDERS
CORPORATION
G.R. No. 147410, February 5, 2004
Facts: Insular Life Insurance Company, Limited invited companies to participate in the bidding
of the proposed Insular Life building. The Instruction to Bidders prepared by Insular Life
expressly required a formal acceptance and a period within which such acceptance was to be
made known to the winner. Asset Builders Corporation submitted a bid proposal secured by bid
bonds valid for 60 days. Under its proposal form, Asset Builders bound and obliged itself to enter
into a contract with Insular Life within 10 days from the notice of the award, with good and

sufficient securities. The project was awarded to the Asset Builders and a notice to proceed with
the construction was sent by Insular Life to the former. However, Asset Builders project. Neither
did it execute any construction agreement. It informed Insular Life that it will not proceed with
the project.
Issue: Whether or not there is a perfected contract between Insular Life and Asset Builders.
Held: There was indeed no acceptance of the offer by Asset Builders. Such failure to comply
with the condition imposed for the perfection of the contract resulted in the failure of the
contract. There are three distinct stages of a contract- preparation or negotiation, perfection or
consummation. Negotiation begins when the prospective contracting parties manifest their
interest in the contract and ends at the moment of their agreement. Perfection occurs when they
agree upon the essential elements thereof. The last stage is the consummation where they fulfill
the terms agreed upon culminating in the extinguishment of the contract.
CONTACTS ARE PERFECTED BY MERE CONSENT; EFFECTS OF PERFECTION
OF CONTRACTS
METROPOLITAN MANILA DEVELOPMENT AUTHORITY VS. JANCOM
ENVIRONMENTAL CORPORATION
GR No. 147465, January 30, 2002
Facts: A build-Operate-Transfer Contract for the waste-to energy project was signed between
JANCOM and the Philippine Government. The BOT Contract was submitted to President Ramos
for approval but was then too close to the end of his term that his term expired without him
signing the contract. He, however, endorsed the same to incoming President Estrada. With the
change in administration came changes in policy and economic environment, thus the BOT
contract was not pursued and implemented. JANCOM appealed to the President for
reconsideration and despite the pendency of the appeal, MMDA caused the publication of an
invitation to pre-qualify and submit proposals for solid waste management.
Issue: Whether or not there is a valid and binding contract between the Republic of the
Philippines and JANCOM.
Held: There is a valid and binding contract between JANCOM and the Republic of the
Philippines. Under Articles 1305 of the Civil Code, A contract is a meeting of the minds
between two persons whereby one binds himself, with respect to the other, to give something or
to render some service. Art. 1315 of the Civil Code provides that a contract is perfected by mere
consent. Consent, on the other hand, is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract (Art. 1319, Civil Code). In the
case at bar, the signing and execution of the contract by the parties clearly show that, as between
the parties, there was a concurrence of offer and acceptance with respect to the material details of
the contract, thereby giving rise to the perfection of the absence of Presidents signature is
untenable. Significantly, the contract itself provides that the signature of the President is
necessary only for its effectivity, not its perfection.
There being a perfected contract, MMDA cannot revoke or renounce the same without the
consent of the other. From the moment of perfection, 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, may be in keeping with good faith, usage and law. (Art. 1315) It is a
general principle of law that no one may be permitted to change hid mind or disavow and go
back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party.
PENALTY CLAUSE
LIGUTAN VS. COURT OF APPEALS
G.R. No. 147465, February 12, 2002
Facts: Ligutan and dela Llana obtained a loan from Security Bank and Trust Co. They executed a
promissory note binding themselves jointly and severally to pay the sum borrowed with an
interest of 15.89% per annum upon maturity and to pay a penalty of 5% every month on the
outstanding principal and interest in case of default. In addition, they agreed to pay 10% of the
total amount due by way of attorneys fees if the matter were indorsed to a lawyer for collection
or if a suit were instituted to enforce payment. Ligutan and dela Llana failed to settle the debt. A
complaint for recovery of the amount due was filed with the RTC. The court held, among others,
the borrowers were liable for a 3% per month penalty (instead of 5%) and 10% of the total
amount of the indebtedness for attorneys fee, in addition to the principal loan.
Issue: Whether the court is correct in holding the borrowers liable for the penalty.
Held: A penalty clause, expressly recognized by law, is an accessory undertaking to assume
greater liability on the part of an obligor in case of breach of an obligation. It functions to
strengthen the coercive force of the obligation and to provide for what could be the stipulated
indemnity without the necessity of proof on the existence and on the measure of damages caused
by the breach. Although the court may not at liberty ignore the freedom of the parties to agree on
such terms and conditions as they see fit, a stipulated penalty, nevertheless may be equitably
reduced by the courts if iniquitous or unconscionable or if the principal obligation has been
partly or irregularly complied with. The reduction is justified by the facts that the borrowers were
able to partly comply with their obligations.

SIMULATED CONTRACTS
CRUZ VS. BANCOM FINANCE CORPORATION
G.R. No. 147788 March 19, 2002
Facts: Norma Sulit was introduced by Candelaria Sanchez to Edilberto and Simplicio Cruz and
offered to purchase the parcel of land owned by the Cruz brothers. The asking-price for the land
was P700, 000, but Sulit had only P25,000 which Edilberto accepted as earnest money with the
agreement that title would pass to Sulit on the payment of the balance. Sulit failed to pay the
balance. Capitalizing on the close relationship of Sanchez with the brothers, Sulit succeeded in
having the brothers execute a document of sale in favor of Sanchez who would then obtain a
bank loan in her name using the said land as collateral. On the same day, Sanchez executed
another Deed of Absolute Sale in favor of Sulit. Sulit assumed all the obligations of Sanchez to
the original owners of the land in a Special Agreement. Unknown to the brothers, Sulit managed

to obtain a loan from Bancom secured by a mortgage over the land. Because Sulit failed to pay
the purchase price stipulated in the Special Agreement, the brothers filed a complaint for
reconveyance. Sulit also defaulted in her payment to the Bank and her mortgage was foreclosed.
At the auction sale, Bancom was declared the highest bidder.
Issue: Whether or not the Deeds of Sale were valid and binding.
Held: Simulation takes place when the parties do not really want the contract they have executed
to produce the legal effects expressed by its wordings. Art. 1345 states that simulation of a
contract may be absolute or relative. The former takes place when the parties conceal their true
agreement while Art. 1346 states that an absolutely simulated contract is void. A relative
stimulation, when it does not prejudice a third person and is not intended for any purpose
contrary to law, morals, good customs, public order or pubic policy binds the parties to their
agreement. The Deeds of Sale were executed merely to facilitate the use of the property as
collateral to secure a loan from a bank. Although the Deed of Sale between the brothers and
Sanchez stipulated a consideration, there was actually no exchange of money. Moreover, the
failure of Sulit to take possession of the property sold to her was a clear badge of simulation that
rendered the whole transaction void and without force and effect.
NOVATION
PILIPINAS BANK VS. ONG
387 SCRA 97, August 8, 2002
Facts: On April 1991, Baliwag Mahogany Corporation (BMC), through its president, respondent
Alfredo T. Ong, applied for a domestic commercial letter credit with petitioner Pilipinas Bank
(the bank) to finance the purchase of Air Dried, Dark Lauan sawn lumber.
The bank approved the application and issued a Letter of Credit. To secure payment of the
amount, BMC, through respondent Ong, executed two (2) trust receipts providing that it shall
turn over the proceeds of the goods to the bank, if sold, or return the goods, if unsold, upon
maturity on July 28, 1991 and August 4, 1981.
On due dates, BMC failed to comply with the trust receipt agreement. On November 22, 1991, it
filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a
Declaration in a State of Suspension of Payments. On January 8, 1992, the SEC issued an order
creating a Management Committee wherein the bank is represented.
On October 13, 1992, BMC and a consortium of 14 of its creditor banks entered into a
Memorandum of Agreement (MOA) rescheduling the payment of BMCs existing debts.
On November 27, 1992, the SEC rendered a Decision approving the Rehabilitation Plan of BMC
as contained in the MOA and declaring it in a state of suspension of payments.
However, BMC and respondent Ong defaulted in the payment of the obligations under the
rescheduled payment scheme provided in the MOA. On April 1994, the bank filed a complaint
charging respondents Ong and Leoncia Lim (as president and treasurer of BMC) with violation
of the Trust Receipts Law (PD 115). The bank alleged that both respondents failed to pay their
obligation under the trust receipt despite demand.
The Court of Appeals renders its decision holding that the execution of the MOA constitutes
novation which places petitioner bank in estoppel to insist on the original trust relation and
constitutes a bar to the filing of any criminal information for violation of the trust receipts law.

The Motion for Reconsideration was denied.


Hence this Petition.
Issue: Whether or not the MOA was a novation of the trust agreement between the parties.
Held: Petition is DENIED, MOA novates the trust agreement.
Mere failure to deliver the proceeds of the sale of the goods, if not sold, constitutes violation of
PD 115. However, what is being punished by the law is the dishonesty and abuse of confidence
in the handling of money or goods to the prejudice of another regardless of whether the latter is
the owner. It bears emphasis that when the petitioner bank made a demand upon a BMC on
February 11, 1994 to comply with its obligations under the trust receipts, the latter was already
under the control of the Management Committee created by SEC. The Management Committee
took custody of all BMCs assets and liabilities, including the red lauan lumber subject of trust
receipts, and authorized their use in the ordinary course of business operations. Clearly, it was
the Management Committee which could settle BMCs obligations.
In Quinto vs. People, this Court held that there are two ways which could indicate the presence
of novation, thereby producing the effect of extinguishing an obligation by another which
substitutes the same. The first is when novation has been stated and declared in unequivocal
terms. The second is when the old and the new obligations are incompatible on every point. The
test of incompatibility is whether or not the two obligations can stand together. If they cannot,
they are incompatible and the latter obligation novates the first. The incompatibility must take
place in any of the essential elements of the obligation, such as its object, cause or principal
conditions.
Contrary to petitioners contention, the MOA did not only reschedule BMCs debts, but more
importantly, it provided principal conditions, which are incompatible with the trust agreement.
The execution of the MOA extinguished respondents obligation under the trust receipts.
Respondents liability, if any, would only be civil in nature since the trust receipts were
transformed into mere loan documents after the execution of the MOA.
CONDITIONAL OBLIGATION; WHERE THE VENDEE DOES NOT COMPLY WITH
HIS OBLIGATION TO PAY THE BALANCE OF THE PURCHASE PRICE, THE
VENDORS OBLIGATION TO EXECUTE A DEED OF ABSOLUTE SALE WILL NOT
ARISE.
CORINTHIAN REALTY, INC. VS. COURT OF APPEALS
349 SCRA 260, December 26, 2002
Facts: Private respondents and petitioner entered into a Deed of Conditional Sale (the deed) of a
parcel of land. Under the deed, the remaining balance will be paid by the vendee to the vendors
within the period of ninety (90) days from the execution of the deed; and if for no justifiable
reason, the vendee fails and/ or refuses to comply with this obligation, the vendors, without prior
notice to the vendee, shall forfeit the earnest money, but as soon as the vendee complies with his
obligations under the contract, then the vendors shall immediately execute the absolute deed of
sale.
CONTRACTS
TANONGON VS. SAMSON

382 SCRA 130, May 9, 2002


Facts:
Cayco Marine Service (CAYCO) is engaged in the business of hauling oil. It is operated by
Illuminada Cayco Olizon (Olizon). Resondents Felicidad Samson, Casiano Osin, Alberto Belbes
and Luisito Venus were among the employees of CAYCO and/or Olizon.
On MARCH 9, 1994, respondents filed a complaint against CAYCO and Olixzon for illegal
dismissal, underpayment of wages, non-payment of holiday pay, rest day pay and leave pay. The
labor arbiter dismissed the complaint for lack of merit. On appeal, it was reversed by the NLRC.
On June 25, 1997, the NLRC Research and Investigation Unit submitted to the labor arbiter the
judgment award for each respondent.
On June 24, 1997, a writ of execution was issued directing the NLRC sheriff to collect from
CAYCO and Olizon the responding award due for each respondent
On August 8, 1997, after the notice of levy/sale on execution of personal property was issued,
CAYCO nad Olizons motor tanker was seized, to be sold at public auction on August 19, 1997.
On August 15, 1997, petitioner Doretea Tanongon, filed a third party claim before the labor
arbiter, alleging that she was the owner of the subject motor tanker, having acquired the same
from Olizon on July 29, 1997, and in consideration.
On October 15, 1997, the labor arbiter issued an order dismissing the third party claim for lack of
merit. On appeal, the NLRC reversed that of the labor arbiter thereby lifting the levy and
restrained execution.
The Court of Appeals debunked the claim that the petitioner was a buyer in good faith on the
ground that purchasers could not close their eyes to facts that should put reasonable persons on
guard. The records show that the sale was hastily concluded; the tanker and the necessary
documents were immediately delivered to the new owner to the new owner. These facts
confirmed respondents suspicion that Olizon had intended to overcome the enforcement of the
Writ of Execution.
Hence this Petition.
Issue: Whether or not petitioner Dorotea Tanongon is a buyer in good faith and for value.
Held: Petition is DENIED; Petitioner Dorotea Tanongon is not a purchaser in good faith and for
value.
There is sufficient basis to affirm the CA finding that petitioner was a buyer in abs faith. The writ
of Execution was issued by the labor arbiter on July 24, 1997. And the sale of the levied tanker
was made only on July 29, 1997. The CA correctly ruled that the act of Olizon was a cavalier
attempt to evade payment of the judgment debt. She obviously got word of the issuance of these
antecedents, petitioner bought the tanker barely ten days before it was levied upon on August 8,
1997.
Purchaser in good faith or an innocent purchaser for value is one who buys properly and pays a
full and fair price for it at the time of the purchase or before any notice of some other persons
claim on or interest in it.
Petitioner should have inquired whether Olizon had other unsettled obligations and
encumbrances that could burden the subject property. Any person engaged in business would be
wary of buying from a company that is closing shop, because it may be dissipating its assets to
defraud its creditors.

PROPERTY
ISSUANCE OF WRIT OF POSSESSION; REAL ESTATE MORTGAGE

TERESITA V. IDOLOR VS. HON. COURT OF APPEALS, SPOUSES GUMERSINDO DE


GUZMAN and ILUMINADA DE GUZMAN and HON. JOSE G. PINEDA, Presiding
Judge of Regional Trial Court, National Capital Judicial Region, Branch 220, Quezon City
G.R. No. 161028. January 31, 2005
Facts: Petitioner Teresita V. Idolor obtained a loan from respondent-spouses Gumersindo and
Iluminada De Guzman secured by a real estate mortgage over a property covered by TCT No.
25659. Upon default by petitioner in the payment of her obligation, respondent instituted extrajudicial foreclosure proceedings against the real estate mortgage.During the auction sale,
respondents emerged as the highest bidder and were issued a Certificate of Sale.
On June 25, 1998, petitioner filed a complaint for annulment of the Certificate of Sale with
prayer for the issuance of a TRO and a writ of preliminary injunction. The RTC issued a writ of
preliminary injunction, however, the Court of Appeals annulled the same on the ground of grave
abuse of discretion. The ownership over the subject property having been consolidated in their
name, respondent-spouses De Guzman moved for the issuance of a writ of possession with the
Regional Trial Court where the case for the annulment of the Certificate of Sale was pending.[5]
On May 27, 2002, the trial court denied the motion, ruling that the the lifting of the writ of
preliminary injunction does not ipso facto entitle defendant De Guzman to the issuance of a writ
of possession over the property in question. It only allows the defendant Sheriff to issue a final
deed of sale and confirmation sale and the defendant De Guzman to consolidate the
ownership/title over the subject property in his name.
In a petition for certiorari before the Court of Appeals, the appellate court found that the trial
court gravely abused its discretion in denying the motion for the issuance of the writ of
possession to the mortgagee or the winning bidder is a ministerial function of the court and that
the pendency of an action questioning the validity of a mortgage cannot bar the issuance of the
writ of possession after title to the property has been consolidated in the mortgagee.[7] Hence, it
reversed and set aside the May 27, 2002 order of the trial court.
Issue: Whether or not the mortgage, by mere motion, not by petition, may apply for a Writ of
Possession in the same case for annulment of the Certificate of Sale of which he is a defendant.
Held: A writ of possession is an order whereby the sheriff is commanded to place a person in
possession of a real or personal property. It may be issued under the following instances: (1) land
registration proceedings under Sec. 17 of Act 496; (2) judicial foreclosure, provided the debtor is
in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had
intervened; and (3) extrajudicial foreclosure of a real estate mortgage under Sec. 7 of Act 3135 as
amended by Act 4118, to which the present case falls.
Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of
possession during the redemption period by filing for that purpose an ex parte motion under oath,
in the corresponding registration or cadastral proceeding in the case of a property with torrens
title. Upon the filing of such motion and the approval of the corresponding bond, the court is
expressly directed to issue the writ.

Upon the expiration of the redemption period, the right of the purchaser to the possession of the
foreclosed property becomes absolute. The basis of this right to possession is the purchasers
ownership of the property. Mere filing of an ex parte motion for the issuance of the writ of
possession would suffice, and the bond required is no longer necessary, since possession
becomes an absolute right of the purchaser as the confirmed owner.
In this case, respondent-spouses acquired an absolute right over the property upon the failure of
petitioner to exercise her right of redemption and upon the consolidation of the title in their
name.
An ex-parte petition for issuance of possessory writ under Section 7 of Act No. 3135 is not,
strictly speaking, a judicial process. Even if the same may be considered a judicial proceeding
for the enforcement of ones right of possession as purchaser in a foreclosure sale, it is not an
ordinary suit filed in court, by which one party sues another for the enforcement or protection of
a right, or the prevention or redress of a wrong.[18] It is a non-litigious proceeding and
summary in nature as well. As such, the rigid and technical application of the rules on legal fees
may be relaxed in order to avoid manifest injustice to the respondent This rule is applicable in
the present case. Although respondent- spouses have been declared as the highest bidder and
despite having consolidated the title in their name, they still failed to take possession of the
property through numerous legal maneuverings of the petitioner. A simple ex parte application
for the issuance of a writ of possession has become a litigious and protracted proceeding.

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID VS. HON. COURT OF APPEALS
AND PEDRO P. PECSON
G.R. No. 151815. February 23, 2005
Facts: Pedro P. Pecson owned a commercial lot on which he built a 4-door 2-storey apartment
building. For failure to pay realty taxes, the lot was sold at public auction to Mamerto
Nepomuceno, who in turn sold it to the spouses Juan and Erlinda Nuguid. Pecson challenged the
validity of the auction sale before the RTC of Quezon City, which upheld the spouses title but
declared that the apartment building was not included in the auction sale. This was affirmed in
toto by the Court of Appeals and thereafter by this Court. On June 23, 1993, by virtue of the
Entry of Judgment, the Nuguids became the uncontested owners of the 256-square meter
commercial lot. As a result, the Nuguid spouses moved for delivery of possession of the lot and
the apartment building.
The trial court, relying upon Article 546[1][7] of the Civil Code, ruled that the Spouses Nuguid
were to reimburse Pecson for his construction cost, the spouses Nuguid were entitled to
immediate issuance of a writ of possession over the lot and improvements. The RTC also
directed Pecson to pay the same amount of monthly rentals to the Nuguids as paid by the tenants
occupying the apartment units. Pecson duly moved for reconsideration, the RTC issued a Writ of
Possession,directing the deputy sheriff to put the spouses Nuguid in possession of the subject
property with all the improvements thereon and to eject all the occupants therein.Pecson then
filed a special civil action for certiorari and prohibition with the Court of Appeals, which
affirmed the order of payment of construction costs but rendered the issue of possession moot on
appeal.
Frustrated by this turn of events, Pecson filed a petition for review before this Court. On May 26,
1995, the Court handed down the decision remanding to the trial court for it to determine the
[

current market value of the apartment building on the lot. The value so determined shall be
forthwith paid by Spouses Juan and Erlinda Nuguid] to Pedro Pecson otherwise the petitioner
shall be restored to the possession of the apartment building until payment of the required
indemnity.
On the basis of this Courts decision, Pecson filed a Motion to Restore Possession and a Motion
to Render Accounting, praying respectively for restoration of his possession over the subject
256-square meter commercial lot and for the spouses Nuguid to be directed to render an
accounting under oath, of the income derived from the subject four-door apartment from
November 22, 1993 until possession of the same was restored to him.
Issue: Whether or not the petitioners are liable to pay rent over and above the current market
value of the improvement and that such increased award of rentals by the RTC was reasonable
and equitable.
Held: It is not disputed that the construction of the 4-door 2-storey apartment, subject of this
dispute, was undertaken at the time when Pecson was still the owner of the lot. When the
Nuguids became the uncontested owner of the lot, by virtue of entry of judgment of the Courts
decision, the apartment building was already in existence and occupied by tenants.
Under Article 448, the landowner is given the option, either to appropriate the improvement as
his own upon payment of the proper amount of indemnity or to sell the land to the possessor in
good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full
reimbursement for all the necessary and useful expenses incurred; it also gives him right of
retention until full reimbursement is made. As we earlier held, since petitioners opted to
appropriate the improvement for themselves as early as June 1993, when they applied for a writ
of execution despite knowledge that the auction sale did not include the apartment building, they
could not benefit from the lots improvement, until they reimbursed the improver in full, based
on the current market value of the property.
Despite the Courts recognition of Pecsons right of ownership over the apartment building, the
petitioners still insisted on dispossessing Pecson by filing for a Writ of Possession to cover both
the lot and the building. Clearly, this resulted in a violation of respondents right of retention.
Worse, petitioners took advantage of the situation to benefit from the highly valued, incomeyielding, four-unit apartment building by collecting rentals thereon, before they paid for the cost
of the apartment building. It was only 4 years later that they finally paid its full value to the
respondent.
Given the circumstances of the instant case where the builder in good faith has been clearly
denied his right of retention for almost half a decade, we find that the increased award of rentals
by the RTC was reasonable and equitable. The petitioners had reaped all the benefits from the
improvement introduced by the respondent during said period, without paying any amount to the
latter as reimbursement for his construction costs and expenses. They should account and pay for
such benefits.
We need not belabor now the appellate courts recognition of herein respondents entitlement to
rentals from the date of the determination of the current market value until its full payment.
Respondent is clearly entitled to payment by virtue of his right of retention over the said
improvement.

HEIRS OF JUAN PANGANIBAN & INES PANGANIBAN, namely: ERLINDA B.

PACURSA, ERNESTO P. BACONGA, EVELYN BACONGA, AMY B. BIHAG,


SIEGFREDO BACONGA, IMELDA B. PACALDO, BACONGA, IMELDA B. PACALDO,
REBECCA B. LI, OFELIA B. OALIVAR, GEMMA BACONGA, MARIE INES
BACONGA, MELANIE BACONGA, and ANITA FUENTES VS. ANGELINA N. DAYRIT.
G.R. No. 151235, July 28, 2005
Facts: The property subject of controversy is a 2,025-square meter portion of a lot denominated
as Lot 1436, situated at Kauswagan, Cagayan de Oro City. It constitutes 3/4 of Lot 1436, one of
the 3 lots covered by OCT No. 7864, the other two being Lots 1441 and 1485. Said OCT was
registered in the names of Juan and Ines Panganiban, father and daughter respectively.
Herein petitioners alleged that they are the possessors and owners of Lot 1436 which they
inherited from the late Juan and Ines. They acknowledge that Lot 1436 was the only remaining
lot covered by OCT No. 7864, Lots 1485 and 1441 having been sold in 1949 to Galo Sabanal
and Pablo Dagbay respectively.
The owners duplicate copy of OCT No. 7864 covering Lot 1436 had been lost but upon petition
with the trial court in 1977 by Erlinda B. Pacursa, one of the heirs of Ines and a petitioner herein,
the trial court granted the petition. Accordingly, the Register of Deeds of Misamis Oriental issued
an owners duplicate certificate of the OCT Erlinda.
Petitioners further alleged that unknown to them, a certain Cristobal Salcedo asserted ownership
over Lot 1436 and believing that it was unregistered, sold a portion of it to respondent. The latter
subsequently discovered that what she had bought was registered land. Unable to annotate the
deed of sale at the back of OCT No. 7864, respondent fraudulently filed a petition for issuance of
the owners copy of said title, alleging that the copy issued to Erlinda was lost in the fire that
razed Lapasan, Cagayan de Oro City in 1981.
The petition was granted and the Register of Deeds of Misamis Oriental issued the second
owners duplicate certificate of OCT to respondent which contained an annotation of a Notice of
Adverse Claim filed by Erlinda. The Notice of Adverse Claim alleged in part that Erlinda is one
of the lawful heirs of Juan and Ines, the registered owners of the property, and as such, she has a
legitimate claim thereto.
Petitioners further alleged that the newly issued owners duplicate certificate of OCT to
respondent was prejudicial to their previously issued title which is still in existence. Thus, they
prayed among others that they be declared as the rightful owners of the property in question and
that the duplicate certificate of OCT in their possession be deemed valid and subsisting.
In her answer to the amended complaint, respondent denied all the material allegations but
alleged that Lot 1436 was actually sold sometime in 1947 by the petitioners themselves and their
father, Mauricio Baconga. The sale was purportedly covered by a Deed of Definite Sale. Salcedo
then came into ownership, possession and enjoyment of the property in question and sold a
portion of Lot 1436 with an area of 2,025 square meters, more or less, to respondent. From then
on, the property in question has been in her actual and physical enjoyment. Respondent further
alleged that the complaint was barred by the principles of estoppel and laches by virtue of the
sales executed by petitioners themselves and their father.
After due trial and consideration of the documentary and testimonial evidence adduced by both
parties, the trial court rendered a decision against petitioners and in favor of respondent which
declared defendant as the true and real owner of the lot in question; and thatthe owners duplicate
copy of Original Certificate of Title No. 7864 null and void same being obtained by plaintiffs
when they were not owners anymore of Lot 1436; the owners duplicate copy of OCT obtained
by defendant as the one valid.

The Regional Trial Court Decision was modified by the CA on appeal by petitioners. The
appellate court held that contrary to the ruling of the trial court, the valid and subsisting duplicate
certificate of OCT No. 7864 was the one issued to Erlinda, not to respondent, considering that
respondent had failed to comply with the mandatory jurisdictional requirements of law for the
reconstitution of title under Sec. 13 of Republic Act No. 26.
The CA invoked the doctrine that a trial court does not acquire jurisdiction over a petition for the
issuance of a new owners duplicate certificate of title if the original is in fact not lost.
Nonetheless, the CA affirmed in all other respects the ruling of the trial court, including the
critical holding that respondent was the owner of the subject property. The decision of the trial
court is modified so as to order the cancellation of the owners duplicate copy of OCT No. 7864
issued to defendant Angelina Dayrit and declaring the owners duplicate copy of OCT No. 7864
to be still valid for all intents and purposes.
Issues: 1. Who between petitioners and respondent is the rightful owner of the property in
dispute.
2. Whether petitioners right to recover the property is barred by laches assuming they are the
rightful owners thereof as they claim.
3. Which owners duplicate certificate of title is valid and subsisting, the one in petitioners
possession or the one issued to respondent.
Held: The resolution of the foregoing issues hinges on the question of What appears on the face
of the title is controlling in questions of ownership since the certificate of title is an absolute and
indefeasible evidence of ownership of the property in favor of the person whose name appears
therein.
The CA correctly ruled that the duplicate certificate of title in petitioners possession is valid and
subsisting. This Court had already ruled in Serra Serra v. Court of Appeals that if a certificate of
title has not been lost but is in fact in the possession of another person, the reconstituted title is
void and the court rendering the decision has not acquired jurisdiction over the petition for
issuance of a new title. Since the owners duplicate copy of OCT No. 7864 earlier issued to
Erlinda is still in existence, the lower court did not acquire jurisdiction over respondents petition
for reconstitution of title. The duplicate certificate of title subsequently issued to respondent is
therefore void and of no effect.
The registered owners of OCT No. 7864 on the face of the valid and subsisting duplicate
certificate of title are still Juan and Ines, petitioners predecessors in interest. Per Section 46 of
the Land Registration Act, no title to registered land in derogation to that of the registered owner
shall be acquired by prescription or adverse possession. This rule taken in conjunction with the
indefeasibility of a Torrens title leads to the conclusion that the rightful owners of the property in
dispute are petitioners.
These premises considered, it was error on the part of the trial court to rule that respondent was
the owner of the subject property and for the CA to have affirmed such holding. We rule instead
that the successors-in-interest of Juan and Ines are the legal owners of the subject property,
namely petitioners herein.
Petitioners ownership of the property having been established, the question now is whether they
are entitled to its possession. On this point, the Court rules in the negative. Petitioners are no
longer entitled to recover possession of the property by virtue of the equitable defense of laches.
Thus, petitioners argument that laches is not applicable to them has no merit. By laches is
meant: the failure or neglect, for an unreasonable and unexplained length of time, to do that

which by exercising due diligence could or should have been done earlier, it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it. The defense of laches is an
equitable one and does not concern itself with the character of the defendants title but only with
whether or not by reason of plaintiffs long inaction or inexcusable neglect, he should be barred
from asserting his claim at all, because to allow him to do so would be inequitable and unjust to
defendant.
In our jurisdiction, it is an enshrined rule that even a registered owner of property may be barred
from recovering possession of property by virtue of laches. In this case, both the lower court and
the appellate court found that contrary to respondents claim of possession, it was Salcedo,
respondents predecessor-in-interest who had been in actual possession of the property. Salcedo
was the owner and the one in possession of the land until 1978 when respondent became the
possessor thereof based from the ocular inspection by the lower court.
It was only 45 years from the time Salcedo took possession of the property that petitioners made
an attempt to claim it as their own. Petitioners declared the property for tax purposes, registered
their adverse claim to respondents title, and filed the instant case all in 1992. These actuations of
petitioners point to the fact that for forty-five (45) years, they did nothing to assert their right of
ownership and possession over the subject property. Given the circumstances in the case at bar,
the application of the equitable defense of laches is more than justified.
All the four (4) elements of laches prescribed by this Court in the case of Go Chi Gun, et al. v.
Co Cho, et al.[42] and reiterated in the cases of Mejia de Lucas v. Gamponia, Miguel v. Catalino
and Claverias v. Quingco are present in the case at bar, to wit:
(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made for which the complaint seeks a remedy;
(2) delay in asserting the complainants rights, the complainant having had knowledge or notice,
of the defendants conduct and having been afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would assert
the right on which he bases his suit; and
(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the
suit is not held to be barred.
RUBEN S. SIA VS. HEIRS OF JOSE P. MARIANO (Helen S. Mariano, Jose M.S.
Mariano, Danilo D.S. Mariano, Ma. Sofia C.S. Mariano, Ma. Leonor S. Mariano),
TESTATE ESTATE OF IRENE P. MARIANO, and ERLINDA MARIANO-VILLANUEVA
G.R. No. 143606. June 29, 2005
Facts: Spouses Macario and Irene P. Mariano during their lifetime owned the following six
parcels of land covered by five titles: Lot 15-A (TCT No. 1962), Lot 15-B (TCT No. 1963), Lot
15-C (TCT No. 1964), Lots 545 and 2348 (TCT No. 259)[2] and Lot 612 (TCT No. 219). On
December 1, 1972, Macario died and the surviving heirs, spouse Irene and children, Jose and
Erlinda, were issued new titles in their names. On December 9, 1974, Irene married Rolando S.
Relucio Four months later, Irene executed a Deed of Absolute Sale covering the six parcels of
land in favor of Raul Santos, Rolandos first cousin, for a total consideration of P150,000.00.
On June 7, 1979, Irene sold Lot 612 to Greta Tinga de los Reyes. On March 10, 1982, Irene
executed another Deed of Absolute Sale in favor of Raul covering Lots 545 and 2348. On
October 2, 1987, the three remaining lots were transferred in the name of Raul. Previously, on

November 24, 1986, Lot 15-C was levied upon in favor of Francisco Bautista in Civil Case No.
R-570 before Branch 22 of the Regional Trial Court of Camarines Sur. On December 9, 1988, it
was sold at public auction to Ruben Sia.
On June 26, 1988, Irene died. Three weeks later, Jose and Erlinda filed a complaint against
Rolando, Raul and the Register of Deeds of Naga City before the RTC of Naga City for
annulment of sale with damages, docketed as Civil Case No. 88-1506. They sought the
annulment of the Deed of Absolute Sale on grounds of forgery and simulated sale, the
reconveyance of the properties, and damages.
When Jose died on December 2, 1989 he was substituted by his surviving heirs, likewise, when
Rolando died, he was substituted by his surviving heirs. Meanwhile, on August 9, 1990, Lot 15A was transferred to Amado Sanao under a Deed of Sale with Real Estate Mortgage. Heirs of
Jose and the Testate Estate of Irene filed a complaint for annulment of title and deed with
damages. Such Civil Case was consolidated for joint trial with former Civil Case and a Joint
Judgment was rendered by the trial court dismissing the complaints and counterclaims and
upholding the validity of the Deeds of Absolute Sale executed by Irene in favor of Raul.
On appeal, the CA held that: only four lots are subject of the case; despite the execution of the
two Deeds of Absolute Sale in favor of Raul, Irene continued to possess, exercise management
and control over the subject properties. Irene constructed a building on Lots 545 and 2348; such
acts of dominion demonstrate that the two Deeds of Absolute Sale executed by Irene in favor of
Raul are simulated or fictitious contracts. Accordingly, TCT issued in the name of Raul Santos
and Amado Sanao are ordered cancelled. A Motion for Reconsideration was filed by Raul. The
Heirs of Jose and Erlinda M. Mariano filed a Motion for Partial Reconsideration/Clarification.
Thus, the assailed Resolution, and Motion for Reconsideration filed separately by Raul Santos
and as well as the Motion for Reconsideration/Clarification filed by Heirs of Jose P. Mariano and
Erlinda were denied, while the Supplemental Motion to Restore Possession and Administration
to Plaintiffs-Appellants was granted. Finally, plaintiffs-appellants are declared to have the right
to redeem Lot 15-C from Ruben Sia.
Issue: Whether or not the Court of Appeals erred in having declared in its resolution that
plaintiffs-appellants have the right to redeem Lot 15-C from herein petitioner.
Held: Three undisputed facts are prominent in the present petition which have great bearing in
the disposition thereof: (1) petitioner is neither a party before the trial court nor in the CA; (2)
Lot 15-C is not a subject matter of the case; and (3) our decision in G.R. Nos. 94617 and 95281,
wherein herein respondent Erlinda Villanueva and petitioner Sia are parties, had expressly
declared that respondents have the right to redeem the lot covered by TCT No. 17745 which
refers to Lot 15-C.
There is no question that Lot 15-C is not one of the parcels of land involved in the appeal before
the CA. In its decision, it specifically mentioned only Lot 15-A, Lot 15-B, Lot 545 and Lot 2348
as the lots subject of the case. Thus, this fact and the fact that petitioner is not a party to the case,
militate against the propriety of declaring in the assailed Resolution that respondents have the
right to redeem Lot 15-C.
Finally, there is no longer any actual case or controversy between the parties insofar as the issue
of redemption of Lot 15-C is concerned. This is settled by the decision of this Court which orders
the Provincial Sheriff of Camarines Sur to accept payment of redemption money for the property
levied in Civil Case No. R-570 from petitioner Erlinda Mariano, to execute and deliver to
Erlinda Mariano a duly accomplished certificate of redemption of said property. The Definite

Deed of Sale and writ of execution issued in favor of Ruben Sia are nullified.
MODE OF ACQUIRING OWNERSIP; PRESCRIPTION; A POSSESSOR IN THE
CONCEPT OF OWNER
SOLEDAD CALICDAN, ETC. VS. SILVERIO CENDANA, ETC.
G.R. No.155080, February 5, 2004
Facts: On August 25, 1947, Fermina, widow of Sixto Calicdan, who died intestate, executed a
deed of donation intervivos whereby she conveyed a 750-square meter of unregistered land
located in Mangaldan, Pangasinan formerly owned by Sixto to respondent Silverio Cendana who
immediately entered into possession of the land. Sometime in 1949, Cendana constructed a twostorey residential house thereon where he resided until his death in 1998.
On June 19, 1992, petitioner Soledad, daughter of Fermina, through her legal guardian,
Guadalupe Castillo, filed a Complaint for Recovery of Ownership, Possession and Damages
against the respondent alleging that; 1) the donation was void; 2) the respondent took advantage
of her incompetence in acquiring the land; and 3) she merely tolerated respondents possession of
the land as well as the construction of his house thereon.
In his answer with Motion to dismiss, respondent contended that; 1)the land was donated to him
by Fermina in 1947; 2) he had been publicly, peacefully, continuously and adversely in
possession of the land for a period of 45 years; and 3) the complaint was barred by prior
judgment in the special proceedings.
In its decision dated November 12, 1996, the trial court ordered Silverio Cendana to vacate the
land and surrender ownersip and possession of the same to petitioner. On appeal, the Court of
Appeals reversed the trial courts decision and declared that the donation was valid and that the
petitioner lost her ownership of the property by prescription.
Issue: Whether or not the deed of donation inter vivos executed on August 25, 1947 was void.
Held: Prescription is another mode of acquiring ownersip and other real right over immovable
property. It is concerned with lapse of time in the manner and uner conditions laid down by law,
namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted
and adverse. The good failth of the possessor consists in the reasonable belief that the person
from whom he received the thing was the owner thereof, and could transmit his ownership. For
purposes of prescription, there is just title when the adverse claimant came into possession of the
property through one of the modes recognized by law for the acquisition of ownership or other
real rights, but the grantor was not the owner or could not transmit any right.
In this case at bar, as it demands that the possession be in good faith and with just title and there
is no evidence on record to prove respondents good faith, nevertheless, his adverse possession of
the land for more than 45 years aptly shows he has met the requirements for extraordinary
acquisitive prescription to set in.
DONATION MORTIS CAUSA OR INTER VIVOS
MA. ESTELA MAGLASANG VS. THE HEIRS OF CORAZON CABATINGAN
G.R. No.131953, June 5, 2002

Facts: Conchita Cabatingan executed in favor of her brother, Nicolas Cabatingan, a Deed of
Conditional Donation Inter Vivos for House and Lot. Four other deeds of donation were
subsequently executed by Conchita Cabatingan bestowing parcels of land upon Estela
Maglasang, Nicolas Cabatingan and Merly Cabatingan. These deeds of donation contain similar
provisions, which state that the donation, will become effective upon the death of the donor;
provided, however, that in the event that the donee should die before the donor, the present
donation shall be deemed automatically rescinded and of no further force and effect.
Later, Conchita Cabatingan died.
Issue: Whether or not the donations were inter vivos or mortis causa.
Held: In a donation mortis causa, the right of disposition is not transferred to the donee while the
donor is still alive. In determining whether a donation is one of mortis causa, the following
characteristics must be taken into account:
1.) It conveys no title or ownership to the transferee before the death of the transferor; or what
amounts to the same thing, that the transferor should retain the ownership and control of the
property while alive;
2.) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but
the revocability may be provided for indirectly by means of a reserved power in the donor to
dispose of the properties conveyed; and
3.) That the transfer should be void if the transferor should survive the transferee.
The disputed donations are donations mortis causa. In the present case, the nature of the
donations as mortis causa is confirmed by the fact that the donations do not contain any clear
provision that intends to pass propriety rights to donee prior to Cabatingans dearh. Cabatingan
did not intend to transfer the ownership of the properties to the donee during her lifetime.
SALES
SALE BY A CO-OWNER; CO-OWNERSHIP
AGUIRRE ET, AL. VS. COURT OF APPEALS, ET AL.
G.R. No. 122249. January 29, 2004
Facts: Leocadio Medrano and his first wife Emilia owned a piece of land. After the death of
Emilia, Leocadio married his second wife Miguela. When Leocadio died, all his heirs agreed that
Sixto Medrano, a child of the first marriage, should manage and administer the said property.
After Sixto died, his heirs learned that he had executed an Affidavit of Transfer of Real Property
in which he falsely stated that he was only heirs of Leocadio. Sixto, then living, was able to sell
the property to Maria Bacong a portion of the property, and another portion to Tiburcio Balitaan.
Maria Bacong later sold the said portion to Rosendo Bacong.
Petitioners, all heirs of Leocadio who were affected by the sale demanded reconveyance of the
portions sold by Sixto but the 3 vendees refused. So, petitioners sued them seeking the nullity of
the documents and partition. The vendees contended that they acquired the property under the
valid deed of sale and petitioners cause of action was bared by laches and prescription. Tiburcio
also contended that he is an innocent purchaser for value.

Issue: Whether there was a valid sale made by a co-owner ( Sixto) without the consent of the
other co-owners.
Held: A sale by a co-owner of the whole property as his will affect only his own share but not
those of the other co-owners who did not consent to the sale ( Art. 493, NCC). It clearly provides
that the sale or other disposition affects only the sellers share pro indiviso, and the transferee
gets only what corresponds to his grantors share in the partition of the property owned in
common. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by
one co-owner without the consent of the other co-owner is NOT NULL AND VOID; only the
rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the
property. The proper action in cases like this is not for the nullification of the sale or for the
recovery of possession of the things owned in common from the third person who substituted the
co-owner or co-owners who alienated their shares, but the DIVISION of the common property as
if it continued to remain in the possession of the co-owners who possessed and administered it.
( Mainit v. Bandoy). It is clear therefore that the deed of sale executed by Sixto in favor of
Tiburcio Balitaan is valid conveyance only insofar as the share of Sixto in the co-ownership is
concerned.
As we have enunciated in Salvador v. CA (1995), to wit: this Court has held that the possession
of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners
but in fact beneficial to all of them. Acts which may be considered adverse to strangers may not
be considered adverse in so far as co-owners are concerned. A mere silent possession by a coowner, his receipts of rentals, fruits or profits from the property, the erection of buildings and
fences and planting of trees thereon, and the payment of land taxes, cannot serve as proof of
exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised
such acts of possession which unequivocally constituted an ouster or deprivation of the rights of
the other co-owners.
Thus, in order that a co-owners possession may be deemed adverse to the cetui que trust or the
other co-owners, the following elements must concur: (1) that he has performed unequivocal acts
of repudiation amounting to an ouster of the cetui que trust or the other co-owners; (2) that such
positive acts of repudiation have been known to the cestui que trust or the other co-owners; and
(3) that the evidence thereon must be clear and convincing. Tested against these guidelines, the
respondents failed to present competent evidence that the acts of Sixto adversely and clearly
repudiate the existing co-ownership among the heirs of Leocadio Medrano.
Respondents reliance on the tax declaration in the name of Sixto Medrano is unworthy of credit
since we have held on several occasions that tax declarations by themselves do not conclusively
prove title to land. Further, respondents failed to show that the Affidavit executed by Sixto to the
effect that he is the sole owner of the subject property was known or made known to the other
co-heirs of Leocadio Medrano.

RESCISION OF CONTRACT TO BUY


ANAMA VS. COURT OF APPEALS, ET AL.
GR. No. 128609. January 29, 2004
Facts: The property was previously owned by Douglas Anamas parents, who mortgaged it to
Philippine Savings Bank and later was foreclosed. Douglas and the PSBank entered into an

agreement denominated as a Contract to Buy whereby the bank agreed to sell to Douglas the said
land with all the improvements thereon. The Contract to Buy provides that Anama shall purchase
the property of a certain amount and shall pay to the PSBank; it also provides that (1) Anama
shall apply with the bank for a loan, the proceeds of which answer for the balance of the
purchase price; (2) should the petitioner fail to comply with any of the terms of contract, all
amounts paid are forfeited in favor of PSBank, the latter having the option either to demand full
payment of total price or to rescind the contract.
Anama was able to pay the first and second installments; however, he failed to pay the third
installment when it became due. There were several transactions between them to settle the
amount due. But later, the bank executed an Affidavit of Cancellation rescinding the contract,
and forfeited the payments made by Anama which were applied as rentals of the use of the
property. Anama was then advised to vacate the property despite his opposition to the rescission
of the Contract to Buy. The bank sold the property to spouses Co, in whose favor TCT was
issued. Anama then filed a case for Declaration of Nullity of Deed of Sale, Cancellation of TCT,
and Specific Performance with Damages.
Issue: Whether the rescission of the Contract to Buy was valid.
Held: Since Anama failed to pay the third installment, PSBank was entitled to rescind the
Contract to Buy. The contract provides the Bank two options in the event that petitioner fails to
pay any of the installments. This was either (1) to rescind the contract outright and forfeit all
amounts paid by the petitioner, or (2) to demand the satisfaction of the contract and insist on the
full payment of the total price. After petitioner repeatedly failed to pay the third installment, the
Bank chose to exercise the first option.
The Contract to Buy is actually a contract to sell whereby the vendor reserves ownership of the
property and is not to pass until full payment. Such payment is a positive suspensive condition,
the failure of which is not a breach but simply an event that prevents the obligation of the vendor
to convey title from acquiring binding force. Since ownership of the subject property was not
pass to petitioner until fill payment of the purchase price, his failure to pay on the date stipulated,
or in the extension granted, prevented the obligation for the Bank to pass title of the property to
Anama. The bank could validly sell the property to the spouses Co, the right of the bank to sell
the property being unequivocal.

IMPOSTION OF 12% ANNUAL INTEREST RATE


ALMEDA VS. CARIO ET AL.
GR. No. 152143. January 13, 2003
Facts: Ponciano L. Almeda (vendee) and Avelino Cario (vendor), predecessors-in-interest of
petitioners and respondents, entered into two agreements to sell, one covering eight titled
properties, and the other, three untitled properties. The agreed price of the eight titled properties
was P 1,743,800.00, twenty percent (20%) of which was to be paid upon the signing and
execution of the agreement and the balance to be paid in four equal semi-annual installments,
beginning six (6) months from the signing thereof, with the balance earning twelve percent
(12%) interest per annum. On the other hand, the purchase price of the three untitled properties
was P1,208,580.00, fifteen percent (15%) of which was to be paid upon the signing and

execution of the agreement, and the balance, bearing a twelve percent (12%) annual interest from
the signing thereof, to be paid as follows: fifteen percent (15%) of the purchase price plus
interest to be paid upon the issuance of titles to the lots, and the balance plus interests to be paid
in semi-annual installments starting form the date of issuance of the respective certificates of title
to the lots involved, which must not be later than March 30, 1982.
Later, Cario and Almeda executed an amendment to their agreements to sell (a) extending the
deadline for the production of the titles to the untitled properties, (b) providing for a partial
payment of P300,000.00 for the titled properties, (c) requiring Cario to render an accounting of
the proceeds of the sugar cane crop on the properties subject of the sale up to the 1982 harvest
season, and (d) obliging Cario to pay Almeda the sum of P10,000.00 a month in case of the
failure of the former to produce the certificates of title to the untitled properties by June 30,
1982.
Almeda asked Cario for the execution of a Deed of Absolute Sale over the eight titled properties
although they had not been fully paid. Cario granted the request and executed the Deed of Sale
over the eight titled lots in favor of Almeda. The latter executed an undertaking to pay Cario the
balance of the purchase price. Deeds of Sale for two of the three untitled lots were also executed.
Cario made demands for the full and final payment of the balance due him in the amount of
P477,589.47 and the interest thereon. Despite demand letters sent to Almeda, the balance was not
paid. Hence, Cario filed before the RTC a complaint against Almeda. Cario prayed that
Almeda be ordered to pay him the balance, the legal interests thereon from demand to full
payment, fifteen percent (15%) of all the amounts due, including interests as attorneys fees,
litigation expenses, moral, exemplary, and nominal damages and the costs of the suit.
The RTC found the claim of Cario to be well founded and gave judgment in his favor. The CA
subsequently affirmed the lower courts decision.
The Almedas claim that the imposition of a 12% annual interest is erroneous because it is
contrary to law and jurisprudence. According to them, the applicable rate is 6% since the case
does not involve a loan or forbearance of money, as provided for under Central Bank Circular
No. 416.
Issue: Whether or not the contention of Almeda is meritorious.
Held: This contention is without merit. Art. 2209, NCC provides: If the obligation consists in the
payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there
being no stipulation to contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per cent per annum.
The contracts to sell of the parties stipulated that the balance of the purchase price shall earn an
interest rate of 12% per annum upon signing of the contract. Such stipulations have the force of
law between the contracting parties and should be complied with in good faith. The interest in
this case should be allowed to run from March 9, 1993, respondents extrajudicial demand for
payment of the remaining balance plus interest having begun on said date.
In addition, in accordance with our decision in Eastern Shipping Lines, Inc. vs. Court of Appeals,
when the judgment of the court awarding the sum of money becomes final and executory, a 12%
interest per annum shall also be imposed from such finality until satisfaction thereof, this interim
period by deemed to be by then an equivalent to a forbearance of credit.
EQUITABLE MORTGAGE

HILADO VS. HEIRS OF RAFAEL MEDALLA


377 SCRA 257. February 15, 2002
Facts: Gorgonio Macainan was the owner of the several properties. After his death, his estate was
divided among his heirs, including his children by his first wife, a contract ( Anita, Rosita &
Berbonio) As Berbonio had predeceased Gorgonio, her children ( Rafael, Lourdes&Teresita
surnamed Medalla) succeeded to her inheritance. Respondents herein are the heirs of Rafael
Medalla.
Rafael Medalla executed a Deed of Absolute Sale purporting to sell his share in the inheritance to
Gorgonio Hilado. Later, he executed anotherDeed of Absolute Sale in favor of Hilado over his
share in another inherited property. Over the next 2 years, Hilado and Medalla executed 3 more
contracts concerning the sold properties;(1) Memorandum of Agreement,(2) Deed of
Resale, whereby Hilado resold to Medalla two of the 5 hectares a lot, and (3)Agreement.
Anita Macainan (his aunt) tried to redeem the first property that was sold from Hilado but she
failed, so she filed a suit against Rafael and Hilado for Legal redemption before the RTC. So,
Rafael filed a cross-claim against Hilado, alleging that the first deed of sale was in fact an
equitable mortgage to secure a loan from Hilado. The latter denied that the agreement between
them was a loan but a Deed of Sale, reflecting their true agreement.
Issue: Whether the Deed of Absolute Sale executed by Medalla and Hilado is in fact an equitable
mortgage.
Held: Under Art. 1602 in relation to Art. 1604, NCC, a contract purporting to be an absolute sale
is presumed to be an equitable mortgage--- (1) when the price of a sale.is unusually
inadequate; (2) when the vendor remains in possession as lessee or otherwise;(3) when after the
expiration of the right to repurchase another instrument extending the period of the redemption
or granting a new period is executed;(4) when the purchaser retains for himself a part of the
purchase price;(5) when the vendor binds himself to pay the taxes on the thing sold;(6) in any
other case where it may be fairly inferred that theh real intention of the parties is that the
presence of any of these circumstances is sufficient for a contract to be presumed as an equitable
mortgage.
In view of the conclusions we have reached, it is unnecessary to pass upon Hilados contention
that respondents are bound by the terms of the Deed of Sale in question as the law between the
parties. It will suffice to say that even if a document appears on its face to be a sale, the owner of
the property may prove that the contract is really a loan with a mortgage that the document does
not express the true intent and agreement of the parties.
CONTRACTS OF SALE; ELEMENTS;CONTRACT WHERE CONSENT IS VITIATED
IS VOIDABLE;ANNULMENT AND RESTITUTION OF THE PROPERTY AND ITS
FRUITS TO THE RESPONDENT IS JUST AND PROPER.
KATIPUNAN VS. KATIPUNAN, JR.
3537 SCRA 199. January 30, 2002

Facts: Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door
apartment constructed thereon, which were occupied by lessees. Respondent assisted by his

brother petitioner Miguel entered into a Deed of Absolute Sale with brothers Edardo Balguma
and Leopoldo Balguma, Jr. ( co-petitioners), represented by their lawyer-father involving the
subject property for a consideration of P187,000.00. So, the title was registered in the names of
the Balguma brothers and they started collecting rentals thereon.
Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending that his
brother Miguel, Atty. Balguma and Inocencio Valdez ( one of the petitioners) convinced him to
work abroad. Through insidious words and machinations, they made him sign a document
purportedly a contract of employment, which document turned out to be a Deed of Absolute
Sale. He further alleged that he did not receive the consideration stated in the contract. He
claimed that there was evident bad faith and conspiracy in taking advantage of his ignorance, he
being only a third grader.
The RTC dismissed the complaint because Braulio failed to prove his cause of action since he
admitted that he obtained loans from the Balgumas, he signed the Deed of Absolute Sale, and he
acknowledged selling the property and stopped collecting the rentals. But when the case was
elevated, the decision of RTC was reversed and it was held that Braulio was incompetent, has
very low I.Q., illiterate and has a slow comprehension. The CA based its decision on Arts.1332
and 1390 of NCC and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a
party in contract.
Issue: Whether there was a valid contract of sale between the parties.
Held: The Supreme Court found the petition devoid of merit. There was a vitiated consent on the
part of the respondent as he signed the Deed of Absolute Sale without the remotest idea of what
it was and received no consideration thereof. The contract entered into by the parties being
voidable contract, was correctly annulled on appeal.
A contract of sale is born from the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price. This meeting of minds speaks of the intent of the
parties in entering the contract respecting the subject matter and the consideration thereof. Thus,
the elements of a contract of a sale are consent, object, and price in money or its equivalent.
Under Art. 1330 of NCC, consent may be vitiated by any of the following: mistake, violence,
intimidation, undue influence, and fraud. The presence of any of these vices renders the contract
voidable.
A contract where one of the parties is incapable of giving consent or where consent is vitiated by
mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the
parties unless annulled proper court action. The effect of annulment is to restore the parties to the
status quo ante insofar as legally and equitably possible---this much is dictated by Art. 1398
provides that when the defect of the contract consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any restitution, except when he has been benefited by
the things or price received by him. Thus, since the Deed of Absolute Sale between respondent
and Balguma brothers is voidable and hereby annulled, then the restitution of the property and its
fruits to respondent is just and proper.

SALE BY AN AGENT;SPECIAL POWER OF ATTORNEY


PINEDA VS. COURT OF APPEALS
367 SCRA 222. February 6,2002

Facts: Nelson and Mercedez Baez are the original owners of a parcel of land together with its
improvements located at White Plains, Q.C.(Q.C. Property) while Alejandria Pineda is the owner
of a house located at Los Angeles, California (California Property), the two parties executed an
Agreement to Exchange Real Properties. In the agreement, they agreed to: 1) exchange their
respective properties, 2) Pineda to pay an earnest money of $ 12,000 on February 1983, and 3) to
consummate the exchange of properties not later than June 1983. It was agreed also that both
should undertake to clear the mortgages over their respective properties.
The Baez were allowed to occupy or lease to a tenant the California property, and Pineda was
authorized to occupy the Q.C. property. Pursuant to the agreement, Pineda paid the earnest
money of $12,000, but the latter failed to clear the mortgages over her California property. Later,
unknown to the Baezes, Pineda and spouses Duque executed an Agreement to Sell over the
Q.C. property whereby Pineda sold the property to the spouse Duque for 1.6 M.
The record shows that pursuant to the agreement to sell, there were payments that occupying
their Q.C. property. The latter were interested in the property so the Baezes did not insist on the
return of said property. So, there were negotiations for the purchase of the property that was held
between them, but the same failed which resulted in the Baezes demanding for the Duques to
vacate the property and later filed a case before the court.
Issue: Whether the Duques validly acquired the Q.C. property.
Held: Pinedas sale of the property to Duques was not authorized by the real owners of the land
Baez. The Civil Code provides that in a sale of a parcel of land or any interest therein made
through an agent, a special power of attorney is essential. This authority must be in writing;
otherwise the sale shall be void. In his testimony, Duque confirmed that at the time he purchased
the property from Pineda, the latter had no special power of attorney to sell the property.
A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired for a valuable consideration. Without an authority in
writing, Pineda could not validly sell the subject property to Duque. Hence, any sale in favor of
Duque is void.
As the consent of the real owner of the property was not obtained, no contract was perfected
(Art. 1318 of the Civil Code)

LAND TITLES AND DEEDS


JURISDICTION
MATEO vs. COURT OF APPEALS
G.R. No. 128392 April 29, 2005
Facts: Casimiro Development Corporation (CDC) alleged that it was the owner of a parcel of
registered land since it acquired the same from the previous owner, China Banking Corporation
(CBC). After the sale CDC advised the petitioners that it was the new owner and that they had
failed to pay the rentals due to it and to its predecessors-in-interest. The petitioners refused to pay
and vacate the premises despite demands to settle their obligations and notice to vacate were
served upon them. This prompted CDC to file a complaint for Unlawful Detainer against the

petitioners before the Metropolitan Trial Court (MeTC). The petitioners maintained that since the
land was classified as agricultural as evidenced by a Tax Declaration Certificate, it is the
Department of Agrarian Reform Adjudication Board (DARAB) that has jurisdiction over the
case. It should be noted that the land is covered by a Transfer Certificate of Title in the name of
CDCs predecessor-in-interest CBC.
Issue: Whether or not jurisdiction over the subject matter lies with the DARAB or with the
Metropolitan Trial Court.
Held: For the DARAB to have jurisdiction over the case, there must be a tenancy relationship
between the parties. One of the indispensable elements in order for a tenancy agreement to take
hold over a dispute is that the parties are the landowner and the tenant or agricultural lessee. It
must be noted that the petitioners failed to adequately prove ownership of the land. They merely
showed tax declarations. As against a transfer certificate of title, tax declarations or receipts are
not adequate proofs of ownership. Hence, it is the MeTC that has jurisdiction over the subject
matter there being no proof of tenancy relationship.

RECONVEYANCE
HEIRS OF POMPOSA SALUDARES VS. COURT OF APPEALS
G.R. No. 128254. January 16, 2004
Facts: The heirs and their father, Juan Dator executed a Deed of Extrajudicial Partition of the
share of Pomposa in the Tanza estate with the eastern portion thereof going to Juan and the
western half to the children. Juan remained in possession of his share until his death. Isabel Dator
applied for a free patent over the entire Tanza estate in behalf of the heirs thus it was awarded.
Private respondents filed an action for reconveyance against petitioner heirs. They alleged that
they were the owners in fee simple and they were in possession of the land, and Isabel Dator
obtained free patent in favor of the heirs by means of fraud and misrepresentation. Petitioners
alleged that they and their predecessors in interest had been in actual, continuous, adverse and
public possession of the land in the concept of owners since time immemorial, and the title to the
lot was issued to them after faithful compliance with the requirements for the issuance of a free
patent.
Issues: 1) Whether or not the reconveyance is still available notwithstanding the indefeasibility
of the Torrens Title.
2) Whether or not the heirs have been in open and continuous possession of the disputed lot.
Held: 1) The registered owner may still be compelled to reconvey the registered property to its
true owner. Reconveyance does not set aside or re-subject to review the findings of fact of the
Bureau of Lands. Thus, the decree of registration is respected as incontrovertible. What is sought
is the transfer of the property or its title, which has been wrongfully or erroneously registered in
another persons name, to its rightful or legal owner or to the one with a better right.
2) The heirs convincingly established their open and continuous occupation of the entire Tanza

estate. The farm was under the administration of Beata and Isabel Dator who took over its
management after Petra Dator died; heirs tenant Miguel Dahilig had been consistently tending
the land since 1947 and was the one who planted the various crops and trees on the lot.
EXTRINSIC FRAUD
REXLON REALTY GROUP, INC. VS. COURT OF APPEALS
G.R. No. 128412. March 15, 2002
Facts: Respondent Alex David was the registered owner of two parcel of land. Petitioner Rexlon
Realty Group, Inc. (Rexlon) entered into an agreement with respondent for the purchase of the
two parcels of land as evidenced by an absolute deed of sale. Respondent filed with the
Regional Trial Court a petition for the issuance of the owners duplicate copies which were
allegedly lost; petition granted by the court. Rexlon then filed with the Court of Appeals a
petition for annulment of the decision of the trial court on the ground that David allegedly
employed fraud and deception in securing the replacement owners duplicate copies.
Issue: Whether or not such misrepresentation or fraud of respondent David can be characterized
as an extrinsic fraud as to merit the annulment of the trial courts decision.
Held: Extrinsic fraud contemplates a situation where a litigant commits acts outside the trial of
the case; the effect of which prevents a party from having a trial, a real contest, or from
presenting all of his case to the court, or where it operates upon matters pertaining to the
judgment itself, but to the manner in which it was produced so that there is not a fair submission
of the controversy. It is well settled that the use of forged instrument or prejudiced testimonials
during trial is not an extrinsic fraud, because such evidence does not preclude the participation of
any party in the proceedings. While a perjured testimony may prevent a fair and just
determination of a case, it does not bar the adverse party from rebutting or opposing the use of
such evidence. Furthermore, it should be stressed that extrinsic fraud pertains to an act
committed outside of the trial. The alleged fraud in this case was perpetrated during the trial.
PRESCRIPTION DOES NOT RUN AGAINST THE STATE
PAGKATIPUNAN VS. COURT OF APPEALS
G.R. No. 129682. March 21, 2002
Facts: On June 15, 1967, the Court of First Instance of Gumaca, Quezon promulgated a decision
confirming petitioners title to properties located in San Narciso, Quezon. Almost eighteen (18)
years later, the Republic of the Philippines filed with the Intermediate Appellate Court an action
to declare the proceedings in the LRC case null and void and to cancel the original certificate of
title and to confirm the subject land as part of the public domain. The Republic claimed that the
subject land was classified as timberland; hence, inalienable and not subject to registration. On
the other hand, petitioners raised the special defense of indefeasibility of title and res judicata.
Issues: 1) Whether or not prescription runs against the state.
2) Whether or not occupation will ripen into ownership.

Held: 1) Prescription does not run against the state. The lengthy occupation of the disputed land
by petitioners cannot be counted in their favor, as it remained part of the patrimonial property of
the state which is inalienable and not disposable.
2) Unless public land is shown to have been reclassified or alienated to a private person by the
state it remains part of the inalienable public domain. Occupation thereof in the concept of
owner, no matter how long, cannot ripen into ownership and be registered as a title.

A TORRENS TITLE, ONCE REGISTERED, SERVES AS NOTICE TO THE WHOLE


WORLD
ALVARICO VS. SOLA
G.R. No. 138953. June 6, 2002
Facts: Fermina Lopez executed a Deed of Self-Adjudication and Transfer of Rights over lot 5 in
favor of Amelita Sola, who agreed to assume all the obligations, duties and conditions imposed
which was approved by the Bureau of Lands. Castorio Alvarico filed a civil case for
reconveyance against Amelita. He claimed that Fermina donated the land to him and
immediately thereafter, he took possession of the same. He averred that the donations to him had
the effect of withdrawing the earlier transfer to Amelita. Amelita maintained that the donation to
petitioner was void because Fermina was no longer the owner of the property when it was
allegedly donated to petitioner, the property having been transferred earlier to her. She added that
the donation was void because of lack of approval from the Bureau of Lands and that she had
validly acquired the land as Ferminas rightful heir.
Issue: Who between the petitioner and respondent has a better claim to the land?
Held: The execution of public documents, as in the case of Affidavits of Adjudication is entitled
to the presumption of regularity, hence convincing evidence is required to assail and controvert
them. A Torrens title, once registered, serves as notice to the whole world. All persons must take
notice and no one can plead ignorance of its registration. Clearly then, petitioner has no standing
at all to question the validity of Amelitas title. It follows that he cannot recover the property
because he has not shown that he is the rightful owner thereof.
OPEN, CONTINUOUS, AND NOTORIOUS POSSESSION OF THE LAND
DEL ROSARIO VS. REPUBLIC
G.R. No. 148338. June 6, 2002
Facts: Petitioner filed an application for registration of a parcel of land. The clerk of court
transmitted to the Land Registration Authority (LRA) the duplicate copy of petitioners
application for registration, the original tracing cloth plan, and the other documents submitted by
petitioner in support of his application. During the initial hearing, no oppositor appeared except
for the provincial prosecutor who appeared on behalf of the Solicitor General in representation of
the Republic of the Philippines. The trial court granted the application. Respondent appealed for

failure of petitioner to submit in evidence the original tracing cloth plan and to establish that he
and his predecessors in interest had been in open, continuous, and notorious possession of the
land.
Issues: 1) Whether or not the submission in evidence of th
original tracing cloth plan is a mandatory requirement.
2) Whether or not petitioners had been in open, continuous, and notorious possession of the land.
Held: 1) The submission in evidence of the original tracing cloth plan duly approved by the
Bureau of Lands in cases for application of original registration of land is mandatory
requirement. The reason for the rule is to establish the true identity of the land to ensure that it
does not overlap a parcel of land or portion thereof already covered by a previous land
registration, and to forestall the possibility that it will be overlapped by a subsequent registration.
2) A mere casual cultivation of portions of the land by the claimant does not constitute
possession under claim of ownership for him. Possession is not exclusive and notorious so as to
give rise to a presumptive grant from the state. The possession of the land however long the
period thereof may have extended never confers title thereto upon the possessor because the
Statute of Limitations with regard to public land does not operate against the state unless the
occupant can prove possession and occupation of the same under the claim of ownership for the
required number of years.
REDEMPTION PERIOD OF THE PROPERTY
RECAA VS. COURT OF APPEALS
G.R. No. 123850. January 5, 2001
Facts: Lot 6 of Block 2 of the Tondo Foreshore Land of the Land Tenure Administration was sold
to Macario Arboleda, petitioner-spouses predecessor in interest. The land was covered by an
original certificate in the name of Arboleda. The city treasurer of Manila auctioned the lot at a
public auction sale due to tax delinquency. Spouses Cirilo and Miguela Montejo sold the
property to petitioner-spouses who refunded the amount equivalent to the delinquent taxes and
other expenses entailed. Private respondents, the other children and heirs of Macarion Arboleda
filed for declaration of co-ownership and partition against petitioner. They asserted that the
repurchase by the petitioner of the lot redounded to their benefit as co-heirs and now as coowners. Petitioners contended that Section 4 of R.A. 1597, the law governing the subdivision of
the Tondo Foreshore Lands from which the subject property emanated does not apply to the
attendant facts in this case. Instead they instead that it was Section 78 of P.D. 464 which was
applicable.
Issue: Which of the two laws, Section 4 of R.A. 1597 or Section 78 of P.D. 464, should apply in
so far as the redemption period of the subject property is concerned?
Held: A special statute, provided for a particular case or class of cases, is not repealed by a
subsequent statute, general in its terms, provisions and applications, unless the intent to repeal or
alter is manifest although the terms of the general law are broad enough to include the cases

embraced in the special law. Repeal of laws should be made clear and express. The failure to add
a specific repealing clause indicates that the intent was not to repeal any existing law unless there
is an irreconcilable or repugnancy between Section 4 of R.A. 1597 and Section 78 of P.D. 464.
The former law is of special and exclusive application to lots acquired from the Tondo Foreshore
Land only. The latter is a law or decree of general application. Petitioners repurchase of the
subject lot within the five-year redemption period of Section 4 of R.A. 1597 is within the
purview of redemption by a co-owner which inures to the benefit of all the other co-owners of
the property.
INNOCENT PURCHASER FOR VALUE
NAZARENO VS. COURT OF APPEALS
G.R. No. 138842. October 18, 2000
Facts: Petitioners and respondent Romeo Nazareno are three of the five children of spouses
Maximino and Aurea Nazareno, who during their marriage had acquired properties. After the
death of Maximino, Sr., Romeo filed for intestate proceedings and he was thereafter appointed
administrator of his fathers estate. Romeo discovered a deed o f sale selling petitioner Natividad
six lots including Lot-3b occupied by Romeo but which was sold to petitioner Maximino, Jr.
Maximino, Jr. filed an action for recovery of possession which was favored by the court. Romeo
in turn filed an annulment of the sales on the ground of lack of consideration in that the transfer
was merely to avoid inheritance tax and that Natividad was only to hold the said lots in trust for
her siblings. Petitioners on the other hand filed a third party complaint against Romeo and his
wife Eliza seeking the annulment of the transfer to Romeo of Lot 3 which is granted by the trial
court except as to Lots 3, 13-b, 13 and 14 which had passed on to third persons.
Issue: Whether or not a person dealing with a registered land may rely on the certificate of title.
Held: The sale of Lots 13 and 14 to Ros-Alva Marketing will have to be upheld for Ros-Alva
Marketing is an innocent purchaser for value which relied on the title of Natividad. The rule is
settled that every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefore and the law will in no way oblige him to go behind the
certificate to determine the condition of the property.
TORTS AND DAMAGES
YHT Realty Corp, et al vs. Court of Appeals
G.R. No. 126780. February 17, 2005
Facts: MAURICE McLaughlin is an Australian national who comes to the Philippines for
business. During his trips he stays in Tropicana, a hotel recommended to him by Brunhilda Tan.
McLaughlin deposited cash and jewelry to the safety deposit box of the Hotel. The safety deposit
box cannot be opened unless the key of the guest and that of the management are present. Lainez
and Payam are employees of Tropicana who is charged with the custody of the keys. Thereafter,
McLaughlin found out that some of the money and jewelry he deposited were missing. Lainez
and Payam admitted that they assisted Tan to open his deposit box. Tan admitted that she stole
McLaughlins keys. Tan executed a promissory note to cover the amount of the stolen money and

jewelry. McLaughlin wanted to make the management liable.


Issue: Whether or not a hotel may evade liability for the loss of items left with it for safekeeping
by its guests, by having these guests execute written waivers holding the establishment or its
employees free from blame for such loss in light of Article 2003 of the Civil Code which voids
such waivers.
Held: The issue of whether the Undertaking For The Use of Safety Deposit Box executed by
McLoughlin is tainted with nullity presents a legal question appropriate for resolution in this
petition. Notably, both the trial court and the appellate court found the same to be null and void.
We find no reason to reverse their common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the
effect that he is not liable for the articles brought by the guest. Any stipulation between the hotelkeeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to
2001[37] is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely
to apply to situations such as that presented in this case. The hotel business like the common
carriers business is imbued with public interest. Catering to the public, hotelkeepers are bound
to provide not only lodging for hotel guests and security to their persons and belongings. The
twin duty constitutes the essence of the business. The law in turn does not allow such duty to the
public to be negated or diluted by any contrary stipulation in so-called undertakings that
ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.
Nikko Hotel Manila Garden & Ruby Lim vs. Reyes
G.R. No. 154259. February 28, 2005
Facts: Robeto Reyes known as Amay Bisaya saw in a hotel lobby his friend Dr. Violeta Filart
who he said to have invite him the party of the hotels outgoing manager. So Reyes carried the
fruit basket of Filart to the penthuse where the party is. However, Ruby Lim, the coordinator of
the party asked him to leave since it is an exclusive party and he is not one of those invited.
Reyes did not leave the party as was instructed but created a scene, thereby he was escorted out.
He sued the hotel and Ruby Lim for damages.
Issue: Whether or not Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. Amay Bisaya,
to leave the party where he was not invited by the celebrant thereof thereby becomes liable under
Articles 19 and 21 of the Civil Code.
Held: The Supreme Court ruled that Ruby Lim did not act abusively in asking Roberto Reyes in
leaving the party to which he is not invited. In the absence of any proof of motive on the part of
Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is highly unlikely that
she would shout at him from a very close distance. Ms. Lim having been in the hotel business for
twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr.
Reyes that she acted to the contrary does not inspire belief and is indeed incredible. Thus, the
lower court was correct in observing that Considering the closeness of defendant Lim to
plaintiff when the request for the latter to leave the party was made such that they nearly kissed
each other, the request was meant to be heard by him only and there could have been no intention
on her part to cause embarrassment to him. It was plaintiffs reaction to the request that must
have made the other guests aware of what transpired between them, had plaintiff simply left the
party as requested; there was no need for the police to take him out.
Article 19 involves a legal wrong committed for which the wrongdoer must be responsible. The
object of this article, therefore, is to set certain standards which must be observed not only in the

exercise of ones rights but also in the performance of ones duties. Its elements are the
following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole
intent of prejudicing or injuring another. When Article 19 is violated, an action for damages is
proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising from a
violation of law which does not obtain herein as Ms. Lim was perfectly within her right to ask
Mr. Reyes to leave. Article 21refers to acts contra bonus mores and has the following elements:
(1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order,
or public policy; and (3) it is done with intent to injure. Under the above mentioned articles the
act must be intentional. Absent such intention and as the Court observed the conduct of Lim of
asking Reyes to leave was in an exemplary manner, there can be no damages to be awarded. Any
damage suffered by Reyes must be borne by him alone.
Quezon City Government vs. Dacara
G R No. 150304 June 15, 2005
Facts: Dacara Jr.s car turned turtle upon hitting a rammed into a pile of earth/street diggings
found at Matahimik St., Quezon City, which was then being repaired by the Quezon City
government. As a result, Dacarra (sic), Jr. allegedly sustained bodily injuries and the vehicle
suffered extensive damage. Thus his father Fulgencio Dacara Senior (Fulgencio) filed a calim for
damages against the Local Government. The LGU contended that the fault is with the driver,
since the LGU have out up warning signs. The trial court ruled that the LGU is liable.
Issue: Whether or not the Quezon City Government is liable for moral and exemplary damges
due to the injuries suffered by Dacara Jr.
Held: To award moral damages, a court must be satisfied with proof of the following requisites:
(1) an injury -- whether physical mental, or psychological -- clearly sustained by the claimant;
(2) a culpable act or omission factually established; (3) a wrongful act or omission of the
defendant as the proximate cause of the injury sustained by the claimant; and (4) the award of
damages predicated on any of the cases stated in Article 2219. In the present case, the Complaint
alleged that respondents son Fulgencio Jr. sustained physical injuries. The son testified that he
suffered a deep cut on his left arm when the car overturned after hitting a pile of earth that had
been left in the open without any warning device whatsoever. It is apparent from the Decisions of
the trial and the appellate courts, however, that no other evidence (such as a medical certificate or
proof of medical expenses) was presented to prove Fulgencio Jr.s bare assertion of physical
injury. Thus, there was no credible proof that would justify an award of moral damages based on
Article 2219(2) of the Civil Code. Moreover, the Decisions are conspicuously silent with respect
to the claim of respondent that his moral sufferings were due to the negligence of petitioners. The
Decision of the trial court, which summarizes the testimony of respondents four witnesses,
makes no mention of any statement regarding moral suffering, such as mental anguish,
besmirched reputation, wounded feelings, social humiliation and the like. well-settled is the rule
that moral damages cannot be awarded -- whether in a civilor a criminal case, in the absence of
proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or similar injury. The award of moral
damages must be solidly anchored on a definite showing that respondent actually experienced
emotional and mental sufferings. Mere allegations do not suffice; they must be substantiated by
clear and convincing proof.
Article 2231 of the Civil Code mandates that in cases of quasi-delicts, exemplary damages may
be recovered if the defendant acted with gross negligence. Gross negligence means such utter

want of care as to raise a presumption that the persons at fault must have been conscious of the
probable consequences of their carelessness, and that they must have nevertheless been
indifferent (or worse) to the danger of injury to the person or property of others. The negligence
must amount to a reckless disregard for the safety of persons or property. Such a circumstance
obtains in the instant case. A finding of gross negligence can be discerned from the Decisions of
both the CA and the trial court. We quote from the RTC Decision: Sad to state that the City
Government through its instrumentalities have failed to show the modicum of responsibility,
much less, care expected of them (sic) by the constituents of this City. It is even more deplorable
that it was a case of a street digging in a side street which caused the accident in the so-called
premier city. Article 2229 of the Civil Code provides that exemplary damages may be imposed
by way of example or correction for the public good. The award of these damages is meant to be
a deterrent to socially deleterious actions. Public policy requires such imposition to suppress
wanton acts of an offender. It must be emphasized that local governments and their employees
should be responsible not only for the maintenance of roads and streets, but also for the safety of
the public. Thus, they must secure construction areas with adequate precautionary measures.
SUCCESSION
AZNAR BROTHERS REALTY COMPANY VS. LAURENCIO AYING
G.R. No. 144773. May 16, 2005
Facts: The disputed property is Lot No. 4399 with an area of 34,325 square meters located at
Dapdap, Lapu-Lapu City. Crisanta Maloloy-on petitioned for the issuance of a cadastral decree
in her favor over said parcel of land. After her death in 1930, the Cadastral Court issued a
Decision directing the issuance of a decree in the name of Crisanta Maloloy-ons eight children,
namely: Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all
surnamed Aying. The certificate of title was, however, lost during the war. The siblings extrajudicially sold the lot however, three siblings, namely, Roberta, Emiliano and Simeon Aying did
not participate in the extra-judicial partition. After the partition the lot was sold. 29 years after,
the Roberta, Emiliano and Simen filed a case for the ejectment of the present occupants.
Issue: Whether or not respondents cause of action is imprescriptible
Held: The facts on record show that petitioner acquired the entire parcel of land with the
mistaken belief that all the heirs have executed the subject document. Thus, the trial court is
correct that the provision of law applicable to this case is Article 1456 of the Civil Code which
states: ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes. The rule that a trustee cannot acquire by prescription ownership over property
entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting
implied trusts. However, in constructive implied trusts, prescription may supervene even if the
trustee does not repudiate the relationship. Necessarily, repudiation of said trust is not a condition
precedent to the running of the prescriptive period. An action for reconveyance based on an
implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line
of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it
is now well-settled that an action for reconveyance based on an implied or constructive trust
prescribes in ten years from the issuance of the Torrens title over the property. With regard to
petitioners argument that the provision of Article 1104 of the Civil Code, stating that a partition
made with preterition of any of the compulsory heirs shall not be rescinded, should be applied,

suffice it to say that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is not
being rescinded. In fact, its validity had been upheld but only as to the parties who participated in
the execution of the same. As discussed above, what was conveyed to petitioner was ownership
over the shares of the heirs who executed the subject document. Thus, the law, particularly,
Article 1456 of the Civil Code, imposed the obligation upon petitioner to act as a trustee for the
benefit of respondent heirs of Emiliano and Simeon Aying who, having brought their action
within the prescriptive period, are now entitled to the reconveyance of their share in the land in
dispute.
TESTATE ESTATE OF THE LATE ALIPIO ABADA, BELINDA CAPONONG-NOBLE,
petitioner, vs. ALIPIO ABAJA and NOEL ABELLAR
G.R. No. 147145. January 31, 2005
Facts: This is a case of the probate of the will of Alipio Abada. Thereafter, the probate of the will
of Paula Toray was also filed with the court. The oppositors in the will of Abada nand Toray are
their nephews and nieces. The ground for opposition is that decedent left no will or if there is a
will it was executed not in consonance with the law. Belinda Caponong-Noble was assigned as
the administratix of the estate of Abada by the trial court. Thereafter, Abellar was appointed
administratix of Torays property. The RTC ruled only on , whether the will of Abada has an
attestation clause as required by law. The RTC-Kabankalan further held that the failure of the
oppositors to raise any other matter forecloses all other issues. Unsatisfied with the decision
Caponong-Noble appealed.
Issue: Whether or not the will of Abada has an attestation clause, and if so, whether the
attestation clause complies with the requirements of the applicable laws.
Held: The Court of Appeals did not err in sustaining the RTC-Kabankalan in admitting to probate
the will of Abada. Abada executed his will on 4 June 1932. The laws in force at that time are the
Civil Code of 1889 or the Old Civil Code, and Act No. 190 or the Code of Civil Procedurewhich
governed the execution of wills before the enactment of the New Civil Code. The matter in
dispute in the present case is the attestation clause in the will of Abada. Section 618 of the Code
of Civil Procedure, as amended by Act No. 2645 governs the form of the attestation clause of
Abadas will.
There is no statutory requirement to state in the will itself that the testator knew the language or
dialect used in the will. This is a matter that a party may establish by proof aliunde. CaponongNoble further argues that Alipio, in his testimony, has failed, among others, to show that Abada
knew or understood the contents of the will and the Spanish language used in the will. However,
Alipio testified that Abada used to gather Spanish-speaking people in their place. In these
gatherings, Abada and his companions would talk in the Spanish language. This sufficiently
proves that Abada speaks the Spanish language. An attestation clause is made for the purpose of
preserving, in permanent form, a record of the facts attending the execution of the will, so that in
case of failure of the memory of the subscribing witnesses, or other casualty, they may still be
proved. (Thompson on Wills, 2d ed., sec. 132.) A will, therefore, should not be rejected where its
attestation clause serves the purpose of the law. We rule to apply the liberal construction in the
probate of Abadas will. Abadas will clearly shows four signatures: that of Abada and of three
other persons. It is reasonable to conclude that there are three witnesses to the will. The question
on the number of the witnesses is answered by an examination of the will itself and without the
need for presentation of evidence aliunde. The Court explained the extent and limits of the rule
on liberal construction. Precision of language in the drafting of an attestation clause is desirable.

However, it is not imperative that a parrot-like copy of the words of the statute be made. It is
sufficient if from the language employed it can reasonably be deduced that the attestation clause
fulfills what the law expects of it.
PRESCRIPTIVE PERIOD TO RECOVER PROPERTY OBTAINED BY FRAUD
GIVING RISE TO AN IMPLIED TRUST; PROBATE FOR WILL
SPOUSES RICARDO PASCUAL AND CONSOLACION SISON VS. COURT OF
APPEALS AND REMEDIOS EGUENIO-GINO
G.R. No. 115925. August 15, 2003
Facts: Petitioner Sison and respondent Eugenio-Gino are the niece and granddaughter ,
respectively of the late Canuto Sison. Canuto and 11 other individuals including his sister
Catalina and his brother Victoriano were co-owners of a property known as Lot 2 covered by an
original certificate of title.
On September 26, 1956, Canuto and Consolacion executed a Kasulatan ng Bilihang Tuluyan
under which, Canuto sold his share in Lot 2 in favor of Consolacion.
On October 23, 1968, the surviving children of Canuto, namely Felicidad and Beatriz, executed a
joint affidavit affirming the Kasulatan in favor of Consolacion, which the latter registered with
the Office of the Register of Deeds.
On February 4, 1988, Remedios filed a complaint against Consolacion and her spouse, Ricardo
Pascual for annulment of transfer of certificate of title because the former claimed that she is the
owner of the lots since Catalina devised the land to her in Catalinas last will. Remedies also
added that the lots were obtained through fraudulent means since the area covered by the TCT is
twice the size of Canuto.
Petitioner sought to dismiss the complaint on the ground of prescription. Petitioners claim that
the basis of the action is fraud and the action should have been filed within four years from the
registration of Consolacions title on October 28, 1968 and not some 19 years later on February
4, 1988.
The trial court denied petitioners motion to dismiss holding that the reckoning of the
prescriptive period for filing complaint is evidentiary in nature and must await the presentation
of the parties evidence during the trial.
Issue: Whether or not the action for annulment or cancellation of transfer of certificate of title by
Remedios has prescribed.
Held: The four-year prescriptive period relied upon by the trial court applies only if the fraud
does not give rise to an implied trust and the action is to annul a voidable contract under Article
1390 of the Civil Code. In such a case, the four-year prescriptive period begins to run from the
time of the discovery of the mistake, violence, intimidation, undue influence or fraud.
It is now well-settled that the prescriptive period to recover property obtained by fraud or
mistake, giving rise to an implied trust under Article 1456 of the Civil Code is ten years pursuant
to Article 1144. this ten-year prescriptive period begins to run from the date the adverse party
repudiates the implied trust which repudiation takes place when the adverse party registers the
land.
Remedies filed her complaint on February 4, 1988 or more than 19 years after Consolacion
registered her title over the lot on October 28, 1968. Unquestionably, Remedios filed the
complaint late thus warranting its dismissal.
Remedies anchors her right in filing the suit on her being a devisee of Catalinas last will.
However, since the probate court has not admitted Catalinas last will, Remedios has not

acquired any right under the last will. Remedies is thus without any cause of action either to seek
reconveyance of Lot 2 or to enforce an implied trust over these lots.
It was inappropriate to order the reconveyance of the subject lots to Remedios in her capacity as
executrix of Catalinas last will because she sued petitioners not in such capacity but as the
alleged owner of the disputed lots.
SUCCESSION; PARTITION INTER VIVOS MAY BE DONE FOR AS LONG AS
LEGITIMATES ARE NOT PRECLUDED; LEGITIME OF COMPULSORY HEIRS IS
DETERMINED AFTER COLLATION; PROPERTY CERTIFICATE NOT SUBJECT TO
COLLATERAL ATTACK
SPOUSES FLORENTINO ZARAGOZA AND ERLINDA ENRIQUEZ-ZARAGOZA VS.
THE HONORABLE COURT OF APPEALS
G.R. No. 106401. September 29, 2000
Facts: Flavio Zaragoza Cano was the registered owner of certain parcels of land. He had four
children namely: Gloria, Zacariaz, Florentino and Alberta, all surnamed Zaragoza. On December
9, 1964, he died without a will and was survived by his four children.
On December 28, 1981, private respondent Alberta Zaragoza-Morgan filed a complaint with the
Court of First Instance against petitioner-spouses Florentino and Erlinda for delivery of her
inheritance share and for payment of damages. She claims that she is a natural-born Filipino
citizen and the youngest child of the late Flavio. She further alleged that her father in his lifetime
partitioned the properties among his four children. The shares of her brothers and sister were
given to them in advance by way of deed of sale, but without valid consideration, while her share
was not conveyed by way of deed of sale then.
Petitioners denied knowledge of an alleged distribution by way of deeds of sale to them by their
father. They denied knowledge of the alleged intention of their father to convey the cited lots to
Alberta, much more, the reason for his failure to do so because she became an American citizen.
They denied that there was partitioning of the estate of their father during his lifetime.
The Regional Trial Court rendered judgment adjudicating Lot 471 in the name of Flavio
Zaragoza Cano to Alberta Zaragoza-Morgan as appertaining her share in his estate.
Issues: (1) Whether the partition inter vivos by Flavio Zaragoza Cano of his properties is valid.
(2) Whether the validity of the deed of sale and consequently, the transfer certificate of title over
the lot registered in the name of petitioners can be a valid subject matter of the entire proceeding
for the delivery of inheritance share.
Held: Both the trial court and the public respondent found that during the lifetime of Flavio, he
already partitioned and distributed his properties among his three children, excepting private
respondent through deeds of sale. A deed of sale was not executed in favor of private respondent
because she had become an American citizen and the Constitution prohibited a sale in her favor.
It is basic in the law of succession that a partition inter vivos may be done for as long as
legitimes are not prejudiced. Unfortunately, collation cannot be done in this case where the
original petition for delivery of inheritance share only impleaded one of the other compulsory
heirs. The petition must therefore be dismissed without prejudice to the institution of a new
proceeding where all the indispensable parties are present for the rightful determination of their
respective legitime and if the legitimes were prejudiced by the partitioning inter vivos.
Private respondent, in submitting her petition for the delivery of inheritance share, was in effect
questioning the validity of the deed of sale in favor of petitioner and consequently, the transfer of
certificate of title issued in the latters name. although the trial court, as an obiter, made a finding

of validity of the conveyance of the said lot, since according to it, private respondent did not
question the genuineness of the signature of the deceased, nevertheless, when the case was
elevated to the Court of Appeals, the latter declared the sale to be fictitious because of finding of
marked differences in the signature of Flavio in the deed of sale vis--vis signatures found in
earlier documents. Could this be done? The petition is a collateral attack. A certificate of title
shall not be subject to collateral attack. It cannot be altered, modified or cancelled except in a
direct proceeding in accordance with law.
CREDIT TRANSACTIONS
FIRST FIL-SIN LENDING CORPORATION VS. GLORIA PADILLO
G.R. No. 160533. January 12, 2005
Facts: Respondent Gloria D. Padillo obtained a P500,000.00 loan from petitioner First Fil-Sin
Lending Corp. and subsequently obtained another P500,000.00 loan from the same. In both
instances, respondent executed a promissory note and disclosure statement. For the first loan,
respondent made 13 monthly interest payments of P22,500.00 each before she settled the
P500,000.00 outstanding principal obligation. As regards the second loan, respondent made 11
monthly interest payments of P25,000.00 each before paying the principal loan of P500,000.00.
In sum, respondent paid a total of P792,500.00 for the first loan and P775,000.00 for the second
loan. Thereafter, respondent filed an action for sum of money against petitioner alleging that she
only agreed to pay interest at the rates of 4.5% and 5% per annum, respectively, for the two
loans, and not 4.5% and 5% per month. The trial court dismissed respondents complaint. On
appeal, the appellate court ruled that, based on the disclosure statements executed by respondent,
the interest rates should be imposed on a monthly basis but only for the 3-month term of the
loan. Thereafter, the legal interest rate will apply. The court also found the penalty charges
pegged at 1% per day of delay highly unconscionable as it would translate to 365% per annum.
Thus, it was reduced to 1% per month or 12% per annum.
Petitioner maintains that the interest rates are to be imposed on a monthly and not on a per
annum basis. However, it insists that the 4.5% and 5% monthly interest shall be imposed until
the outstanding obligations have been fully paid.
As to the penalty charges, petitioner argues that the 12% per annum penalty imposed by the
Court of Appeals in lieu of the 1% per day as agreed upon by the parties violates their freedom to
stipulate terms and conditions as they may deem proper.
Respondent avers that the interest on the loans is per annum as expressly stated in the promissory
notes and disclosure statements. The provision as to annual interest rate is clear and requires no
room for interpretation. Respondent asserts that any ambiguity in the promissory notes and
disclosure statements should not favor petitioner since the loan documents were prepared by the
latter.
Issue: Whether or not the applicable interest should be the legal interest of twelve percent (12%)
per annum despite the clear agreement of the parties on another applicable rate.
Held: Perusal of the promissory notes and the disclosure statements pertinent to the loan
obligations of respondent clearly and unambiguously provide for interest rates of 4.5% per
annum and 5% per annum, respectively. Nowhere was it stated that the interest rates shall be
applied on a monthly basis. Thus, when the terms of the agreement are clear and explicit that
they do not justify an attempt to read into it any alleged intention of the parties, the terms are to
be understood literally just as they appear on the face of the contract. It is only in instances when

the language of a contract is ambiguous or obscure that courts ought to apply certain established
rules of construction in order to ascertain the supposed intent of the parties.
PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS
G.R. No. 126908. January 16, 2003
Facts: Spouses Mateo and Carlita Cruz owned a parcel of land. They obtained a loan from the
Philippine National Bank (PNB) in the amount of Php70,000 and constituted a real estate
mortgage using their parcel of land to secure said loan. Subsequently, Mateo Cruz obtained an
agricultural crop loan from PNB in the amount of Php156,000 which was also secured by a real
estate mortgage. After Land Bank remitted to PNB Php359, 500 in bonds, Php174.43 in cash and
transferred Php25,500 in bonds, PNB issued a Deed of Release of Real Estate Mortgage in favor
of the Spouses Cruz. Consequently, PNB released all titles to them. Later Spouses Cruz loaned
again from PNB and secured it with another real estate mortgage. Spouses Antonio and Soledad
So Hu paid for the release of the mortgaged property since they were interested in it. Thus a
Deed of Absolute Sale was entered into by Spouses So Hu and Spouses Cruz, conveying the
property to the former. PNB conducted a public auction sale covering the property in question
under the contention that Spouses Cruz failed to pay their loan. Since it was the sole and highest
bidder, it now claimed the property. When PNB found Spouses So Hu In possession of the
property, they were asked to vacate the property.
Issue: Is the extra judicial foreclosure of the third mortgage valid?
Held: It is manifested in records that Spouses So Hu had already paid the principal obligation
secured by the third mortgage. A contract of mortgage is an accessory contract which derives its
existence from the principal contract. Thus, if the principal ceases to be it also ceases. In this
case, with the extinguishment of the loan, the mortgage is also extinguished.
Note that the loan secured by the mortgage was already paid prior to the foreclosure. Thus, the
property can no longer be validly foreclosed since it would be a foreclosure that satisfies an
extinguished obligation.
RAMIREZ VS. COURT OF APPEALS
G.R. No. 133841. August 15, 2003
Facts: On December 29, 1965, private respondent spouses Loreto Claravall and Victoria
Claravall executed a deed of sale in favor of spouses Francisco and Carolina Ramirez covering a
parcel of land including the improvements thereon with an option to repurchase within a period
of two years. At the expiration of the two-year period, the Claravalls failed to redeem the
property, prompting them to file a complaint against the spouses Ramirez to compel the latter to
sell the property back to them. The Supreme Court found that the Deed of Absolute sale with
option to repurchase was one of equitable mortgage.
Following the death of Francisco Ramirez, the spouses Claravall filed a complaint for accounting
and damages against the Intestate Estate of Francisco Ramirez alleging among others that the
spouses Ramirez acted fraudulently and in bad faith in refusing and obstructing the redemption
of the property by the private respondents from January 2, 1968 to December 31, 1993 during
which petitioners were receiving rentals from the tenants of the property which must be
accounted for and returned to private respondents.
Issue: Whether or not petitioners were entitled to the fruits of the property as prior to the

redemption thereof, they were the registered owners and not private respondents.
Held: The declaration by the Supreme Court in the first case that the deed of sale with option to
repurchase entered into by the spouses Ramirez and private respondents was an equitable
mortgage necessarily takes the deed out of the ambit of the law on sales and puts into operation
the law on mortgage.
It is a well-established doctrine that the mortgagors default does not operate to vest the
mortgagee the ownership of the encumbered property and the act of the mortgagee in registering
the mortgaged property in his own name upon the mortgagors failure to redeem the property
amounts to pactum commissorium, a forfeiture clause declared by the Court as contrary to good
morals and public policy and, therefore, void. Before perfect title over a mortgaged property may
thus be secured by the mortgagee, he must, in case of non-payment of the debt, foreclose the
mortgage first and thereafter purchase the mortgaged property at the foreclosure sale.
CONTRACT OF LOAN; REAL CONTRACT; RECIPROCAL OBLIGATION
BPI INVESTMENT CORPORATION VS. COURT OF APPEALS
377 SCRA 177. February 15, 2002
Facts: Frank Roa obtained a loan Ayala Investment and Development Corporation (AIDC), the
predecessor of BPIIC, for the construction of a house on his lot in Muntinlupa. Said house and
lot were mortgaged to AIDC to secure the loan. In 1980, Roa sold the house and lot to
respondents ALS Management and Development Corporation (ALS) and Antonio Litonjua. As
paty of the purchase price, ALS and Litonjua assumed the balance of the Roas indebtedness with
AIDC. Thereafter, AIDC granted the respondents a new loan of P500 000 to be applied to Roas
debt and such loan to be secured by the property, at an interest rate of 20% per annum and
service fee of 1% per annum on the outstanding principal balance payable within ten years. On
March 31, 1981, respondents executed a mortgage deed containing the above stipulations with
the provision that payments of monthly amortization shall commence on May 1, 1981. On
September 13, 1982, BPIIC released to respondents P&146.87 purporting to be what was left of
the latter5s loan after fully paying the loan of Roa.
On June 1984, BPIIC instituted foreclosure proceedings against the respondents because of their
failure to pay the mortgage indebtedness. However, respondents filed a civil case against BPIIC
opposing the foreclosure proceedings. In the said case, BPIIC claims that a contract of loan is a
consensual contract and a contract of loan is perfected at the time the contract of mortgage is
executed conformably with the ruling in Bonnevie vs. CA (125 SCRA 122). In the present case,
the loan contract was perfected on March 31, 1981, the date when the mortgage deed was
executed; hence, the amortization and interests on the loan should be computed from the said
date. On the other hand, respondents argue that based on Article 1934 of the NCC, a simple loan
was perfected upon the delivery of the contract, hence a real contract. In this case, it was only on
September 13, 1982 that the loan contract was perfected, the date when the full loan was released
to the respondents. The trial court rendered a decision in favor of the respondents, which was
subsequently affirmed by the Court of Appeals.
Issue: Whether or not a contract of loan is a consensual contract or real contract.
Held: A contract of loan is not a consensual contract but a real contract. It is perfected only upon
the delivery of the object of the contract. Petitioner misapplied the Bonnevie case. The contract

in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause
of Art. 1934 of the NCC. It is an accepted promise to deliver something by way of a simple loan.
Also, a contract of loan involves a reciprocal obligation wherein the obligation of each party is
the consideration for that of the other. In reciprocal obligations, neither party incurs in delay if
the other does not comply or is not ready to comply in a proper manner with what is incumbent
upon him; only when a party has performed his part if the contract can he demand that the other
party also fulfill his own obligation an if the latter fails, default sets in. Consequently, petitioner
could not demand for the payment of the monthly amortization after September 134, 1982 for it
was only then when it complied with its obligation under the loan contract. Therefore, in
computing the amount due, the starting date is October 13, 1982 not May 1981.
MORTGAGE; BANKING INSTITUTION
BENJAMIN NAVARRO VS. SECOND LAGUNA DEVT. BANK
G.R. No. 129428. February 27, 2003
Facts: Spouse Catalino and Consuelo Navarro owned a certain registered land and sold 5/6 of the
said lot to their five children. By virtue of the sale, petitioners Benjamin and Rosita Navarro are
listed as co-owners of the property. Without the knowledge and consent of the petitioners, the
other owners of the property executed a falsified deed of absolute sale wherein they made it
appear that the entire lot was sold to spouses Donalito Velasco and Esther Navarro. Thus a new
TCT was issued in the name of the spouses Velasco. Subsequently, spouses Velasco mortgaged
the property to respondent Laguna Development Bank to secure payment of a loan. Thereafter,
the bank had the mortgaged foreclosed. On two occasions, petitioners wrote the bank, offering to
redeem the property which petitioner failed to do and led to the consolidation of the ownership
over the property in favor of the respondent bank. Petitioners filed a complaint praying, inter
alia, the annulment of the mortgage. They alleged that the sale of the lot with respect to their 1/6
share is void ab initio considering the signatures appearing in the Deed of Absolute Sale were
falsified and as such the mortgage contract involving their share executed by spouses alleging
that the respondent spouses were purchasers in bad faith because they knew of the pending
litigation concerning the property.
Issue: Whether or not the respondent bank acted in bad faith when it accepted said mortgage the
property subject of a falsified Deed of Sale and when it subsequently sold property to respondent
spouses Guzman.
Held: Respondent did not act in bad faith. This Court stressed that a mortgagee-bank is expected
to exercise greater care and prudence before entering into a mortgage contract, even those
involving registered land. The ascertainment of the status or the consdition of a property offered
to it as a security for a loan must be a standard and indispensable part of its operation.
In entering into a mortgage contract with spouses Velasco, there was no indication that
respondent bank acted in bad faith. Spouses Velasco presented to the bank their TCT showing
they were then the absolute owners thereof. Indeed there was no circumstances or indications
that aroused respondent banks suspicion that the title was defective. Moreover, it is a settled
jurisprudence that whoever alleges bad faith in any transaction must substantiate his allegation,
since, it is presumed that a person takes ordinary care of his concerns and that private
transactions are entered into in good faith. Clearly, petitioners are wanting in this respect. In this

connection, it bears reiterating that in their two letters to respondent bank earlier mentioned,
petitioners did not state that spouses Velasco falsified their signatures appearing in the Deed of
Absolute Sale. Nor did they question the validity of the mortgage and its foreclosure. Indeed,
those letters could have led the bank to believe that petitioners recognize the validity of the Deed
of Absolute Sale and the mortgage as well as its subsequent foreclosure.
MORTGAGE; BANKING INSTITUTION
CRUZ VS. BANCOM FINANCE CORPORATION
379 SCRA 490. March 19, 2002
Facts: Petitioners Edilberto and Simplicio Cruz were registered owners of a parcel of agricultural
land. They sold the land for P700,000 to Norma Sulit who gave P25, 000 as earnest money.
However, Sulit failed to pay the balance price; consequently, the petitioners did not transfer the
title of the land to Sulit. But capitalizing on the close relationship of one Candelaria Sanchez
with the petitioners, Sulit succeeded in having the petitioners execute a document of sale of the
land in favor of Sanchez and on the same day, Sanchez executed another deed of absolute sale
over the said land in favor of Sulit. As a result, Sulit was able to effect the transfer of the title in
her name. In a special agreement, Sulit assumed Sanchezs obligation to pay the petitioners
within six months. Unknown to the petitioners, Sulit managed to obtain a loan from respondent
Bancom secured by a mortgage over the land.
On account of Sulits failure to pay the amount stipulated, petitioners filed a complaint for
reconveyance of the land. Bancom intervened in the case and claimed priority as mortgagee in
good faith. Meanwhile, Sulit defaulted in her payment to Bancom and her mortgage was
foreclosed. Petitioners argue that respondent was not a mortgagee in good faith because at the
time it registered the real estate mortgage over the subject matter, their adverse claim and notice
of lis pendens had already been annotated in the title. On the other hand, respondent maintains
that petitioners were the ones in bad faith because they already had knowledge of the existence
of the mortgage over the property when they caused the annotations. Respondent further claims
that, being an innocent mortgagee, it should not be required to conduct an exhaustive
investigation on the mortgagors title before it could extend a loan.
Issue: Whether or not respondent Bancom is a mortgagee in good faith.
Held: First, as a general rule, every person dealing with a registered land may safely rely on the
correctness of the certificate of title and is no longer required to look behind the certificate in
order to determine the actual owner. This rule, however, is subject to the right of a person
deprived of the land through fraud to bring an action for rconveyance, provided the rights of
innocent purchaser for value and in good faith are not prejudiced. An innocent purchaser for
value includes an innocent lessee, mortgage or any other encumbrancer for value. Respondent,
however, is not an ordinary mortgagee; it is a mortgagee bank. As such, unlike private
individuals, it is expected to exercise greater care and prudence in its dealings, including those
involving registered lands. The ascertainment of the status for a loan must be a standard and
indispensable part of its operations. Respondent was clearly wanting in the observance of the
necessary precautions to ascertain flaws in the title of Sulit. It should have not simply relied on
the face of the certificate of title as its ancillary function of investing funds required a greater
degree of diligence. The rule that persons dealing with registered lands can rely solely on the

certificate of title does not apply to banks.


Second, respondent was already aware that there was an adverse claim and notice of lis pendens
annotated on the certificate of title when it registered the mortgage. Although, registration is not
the operative act for a mortgage to be binding between parties, to third persons, it is
indispensable. Thus, petitioners being third parties to the unregistered mortgage were not bound
by it.