Significant Rulings in Civil Law

Based on Del Castillo Decisions

2018 Bar Examinations
Prepared by Atty. Victoria V. Loanzon
(U.P. College of Law)
with the assistance of Atty. Zarah Suarez
(U.S.T. Faculty of Civil Law)
and Atty. Aika Pineda
(U. E. College of Law)

1. CONFLICT OF LAWS
Norma A. Del Socorro for and in behalf of her minor child Rodrigo Norjo Van Wilsem v.
Ernst Johan Brinkman Van Wilsem (G.R. No. 193707, 10 December 2014)
Q. Petitioner Norma married Ernst, a Dutch national. Wilhelm was born out their
marriage. The spouses were divorced when Wilhelm was only 18 years old. After the
divorce, Norma decided to return to the Philippines with Wilhelm. Ernst agreed to support
Wilhelm but he never made good his promise.
When Ernst returned to the Philippines, he remarried another Filipina. Norma filed an
action against Ernst to obtain support from him. She hinged her claim based on Article 195
of the Family Code which provides the parent’s obligation to support his child. Petitioner
contends that notwithstanding the existence of a divorce decree issued in relation to Article
26 of the Family Code, respondent is not excused from complying with his obligation to
support his minor child with petitioner. On the other hand, respondent contends that there
is no sufficient and clear basis presented by petitioner that she, as well as her minor son,
are entitled to financial support. Respondent also added that by reason of the Divorce
Decree, he is not obligated to petitioner for any financial support.
Norma also instituted a criminal action against Ernst for violation of VAWC Act.

(a) Does Ernst have an obligation to support his minor child under Philippine law?
Answer: No. petitioner cannot rely on Article 195 of the New Civil Code in demanding
support from respondent, who is a foreign citizen, since Article 15 of the New Civil Code
stresses the principle of nationality. In other words, insofar as Philippine laws are
concerned, specifically the provisions of the Family Code on support, the same only applies
to Filipino citizens. By analogy, the same principle applies to foreigners such that they are
governed by their national law with respect to family rights and duties.
Under the Doctrine of Processual Presumption, if the foreign law involved is not properly
pleaded and proved, our courts will presume that the foreign law is the same as our local or
domestic or internal law. Hence, for Ernst’s failure to prove a foreign law, it will bar its
application in the Philippines.

(b) Can Ernst be held criminally liable under R.A. No. 9262 for his unjustified failure to
support his minor child?
Answer: Respondent may be made liable under Section 5(e) and (i) of R.A. No. 9262 for
unjustly refusing or failing to give support to petitioner’s son. The deprivation or denial of
financial support to the child is considered an act of violence against women and children.
The act of denying support to a child under Section 5(e)(2) and (i) of R.A. No. 9262 is a

1|Page
continuing offense and will not prescribe for as long as respondent has not provided
support to his son.

2. PROOF OF FOREIGN JUDGMENT

DAVID A. NOVERAS vs. LETICIA T. NOVERAS (G.R. No. 188289, August 20, 2014, J.
Perez)
Q. Spouses Noveras were former Filipino who became naturalized American citizens.
When they suffered financial reverses, David decided to return in the Philippines. The
spouses obtained a divorce from the State of California wherein the court awarded all the
properties in the USA to Leticia.
Leticia sought for the Judicial Separation of Conjugal Property before the RTC of Baler,
Aurora. Without authentication, David opposed the petition alleging that a judgment for
the dissolution of their marriage was rendered by the Superior Court of California. He
demanded that the conjugal partnership properties, which also include the USA properties,
be liquidated and that all expenses of liquidation, including attorney’s fees of both parties
be charged against the conjugal partnership.
The RTC considered the petition filed by Leticia as one for liquidation of the absolute
community of property regime instead of an action for judicial separation of conjugal
property. The trial court ruled that in accordance with the doctrine of processual
presumption, Philippine law should apply. It held that the absolute community properties
cannot be forfeited in favor of Leticia and her children.
On appeal, the Court of Appeals modified the trial court’s Decision by directing the equal
division of the Philippine properties between the spouses.

(a) Is the divorce decree issued by the California Court binding to the trial court?
Answer: No. The divorce decree should not be judicially recognized for the requisites were
not complied with.
The requirements of presenting the foreign divorce decree and the national law of the
foreigner must comply with our Rules of Evidence. Specifically, for Philippine courts to
recognize a foreign judgment relating to the status of a marriage, a copy of the foreign
judgment may be admitted in evidence and proven as a fact under Rule 132, Sections 24
and 25, in relation to Rule 39, Section 48(b) of the Rules of Court.

(b) Was the petition for judicial separation of the absolute community of property of the
spouses proper?
Answer: Yes. Having established that Leticia and David had actually separated for at least
one year, the petition for judicial separation of absolute community of property should be
granted.
Separation in fact for one year as a ground to grant a judicial separation of property was
not tackled in the trial court’s decision because, the trial court erroneously treated the
petition as liquidation of the absolute community of properties.

3. NULLITY OF MARRIAGE AND FOREIGN JUDGMENT

Minoru Fujiki vs. Maria Paz Galela Marinay, Shinichi Maekara, Local Civil Registrar of
Quezon City, and the Administrator and Civil Registrar General of the National Statistics
Office

2|Page
(G.R. No. 196049, 26 June 2013)
Question: Is the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment
of Voidable Marriages (A.M. No. 02-11-10-SC) applicable to a petition to recognize a
foreign judgment?
Answer: No. The Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages (A.M. No. 02-11-10-SC) does not apply in a petition to
recognize a foreign judgment relating to the status of a marriage where one of the parties is
a citizen of a foreign country. Moreover, in Juliano-Llave v. Republic, this Court held that
the rule in A.M. No. 02-11-10-SC that only the husband or wife can file a declaration of
nullity or annulment of marriage "does not apply if the reason behind the petition is
bigamy.”
To hold that A.M. No. 02-11-10-SC applies to a petition for recognition of foreign judgment
would mean that the trial court and the parties should follow its provisions, including the
form and contents of the petition, the service of summons, the investigation of the public
prosecutor, the setting of pre-trial, the trial and the judgment of the trial court. This is
absurd because it will litigate the case anew. It will defeat the purpose of recognizing
foreign judgments, which is "to limit repetitive litigation on claims and issues." The
interpretation of the RTC is tantamount to relitigating the case on the merits. In Mijares v.
Rañada, this Court explained that "[i]f every judgment of a foreign court were reviewable
on the merits, the plaintiff would be forced back on his/her original cause of action,
rendering immaterial the previously concluded litigation."

Question: What is the effect of a foreign judgment on a marriage of a Filipino citizen to an

alien?
Answer: A foreign judgment relating to the status of a marriage affects the civil status,
condition and legal capacity of its parties. However, the effect of a foreign judgment is not
automatic. To extend the effect of a foreign judgment in the Philippines, Philippine courts
must determine if the foreign judgment is consistent with domestic public policy and other
mandatory laws. Article 15 of the Civil Code provides that "[l]aws relating to family rights
and duties, or to the status, condition and legal capacity of persons are binding upon
citizens of the Philippines, even though living abroad." This is the rule of lex nationalii in
private international law. Thus, the Philippine State may require, for effectivity in the
Philippines, recognition by Philippine courts of a foreign judgment affecting its citizen,
over whom it exercises personal jurisdiction relating to the status, condition and legal
capacity of such citizen.

4. PERSONS AND FAMILY RELATIONS: GOOD FAITH

Heirs of Jose Ochoa vs. G & S Transport Corporation (G.R. No. 170071, July 16, 2012)
Q. Jose Marcial K. Ochoa boarded a taxicab operated by G & S Transport and driven by
Bibiano Padilla, Jr. While going up the Santolan fly-over, he overtook another vehicle
which was trying to overtake another vehicle, a ten-wheeler cargo truck.
Bibiano tried to avoid the collision but was unsuccessful and his taxi cab fell in the middle
of EDSA. Ochoa was declared dead on arrival from the accident. Bibiano was acquitted in
the reckless imprudence case but the heirs of Ochoa filed the present Breach of Contract
case. Will the case prosper?

3|Page
Answer: Yes. The acquittal of Bibiano in the criminal case is immaterial to the instant case
for breach of contract. Article 31 of the Civil Code provides, “when the civil action is based
on an obligation not arising from the act or omission complained of as a felony, such civil
action may proceed independently of the criminal proceedings and regardless of the result
of the latter. A common carrier is required to observe extraordinary diligence.

5. HUMAN RELATIONS: ABUSE OF RIGHT PRINCIPLE

Elizabeth L. Diaz v. Georgina R. Encanto, et. al., (G.R. No. 171303, 20 January 2016)
Q. Diaz applied for a sabbatical leave which was initially recommended for approval by
her immediate supervisor but was later denied. She was only allowed to go on leave based
on her accumulated leave credits but hoping that the higher authorities of the University of
the Philippines would approve of her, she expressed her unwillingness to take any teaching
assignments.
With the disapproval of her sabbatical leave, she accepted her new teaching assignments.
She did not, however, comply with the Duty Form so her salaries were withheld.
She instituted an action against the respondents before the RTC of Pasig City praying that
the respondents be adjudged, jointly and severally to pay her damages. She claimed,
among others, that [respondents] conspired together as joint tortfeasors, in not paying her
salaries from July 1, 1988 in the first semester of academic year 1988-89, for the entire
period when her sabbatical application was left unresolved, as well as the salaries she
earned from teaching in the second semester from November 1988 to May 1989. She
likewise claimed moral and exemplary damages and attorney's fees.
The trial court ruled in favor of Diaz. It held that held that petitioner Diaz was entitled to
sabbatical leave as a privilege and found that the delay in the resolution of her application
was unreasonable and unconscionable.
The Court of Appeals found neither negligence nor bad faith on the part of the respondents
in their denial of petitioner Diaz's sabbatical leave application and in withholding her
salaries.
Diaz appealed the decision to the Supreme Court. Resolve the appeal of Diaz.
Answer: The appeal of Diaz must be dismissed. The decision of the Court of Appeals must
be sustained. Evidently, Diaz failed to prove bad faith on the part of the respondents.
Article 19 of the Civil Code "prescribes a 'primordial limitation on all rights' by setting
certain standards that must be observed in the exercise thereof." Abuse of right under
Article 19 exists when the following elements are present: (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.

This Court, expounding on the concept of bad faith under Article 19, held:
“Malice or bad faith is at the core of Article 19 of the Civil Code. Good faith refers to
the state of mind which is manifested by the acts of the individual concerned. It consists of
the intention to abstain from taking an unconscionable and unscrupulous advantage of
another. It is presumed. Thus, he who alleges bad faith has the duty to prove the same. Bad
faith does not simply connote bad judgment or simple negligence; it involves a dishonest
purpose or some moral obloquy and conscious doing of a wrong, a breach of known duty
due to some motives or interest or ill will that partakes of the nature of fraud. Malice
connotes ill will or spite and speaks not in response to duty. It implies an intention to do
ulterior and unjustifiable harm. Malice is bad faith or bad motive.” (Citations omitted.)

4|Page
6. LEGAL INCAPACITY
Lontoc-Cruz v. Cruz (G.R. No. 201988, October 11, 2017, Castillo, J.)
Q. Maria Victoria Socorro Lontoc-Cruz and Nilo Cruz are husband and wife. After almost
two decades of being together and with two children, Maria filed for nullification of their
marriage on the ground that Nilo is psychologically incapacitated. She anchored her case
on the allegations on Nilo’s infidelity and his acting like a bachelor, lack of oneness in their
marriage, treatment of her like a mayordoma, keeping from her his whereabouts, lack of
sexual contact, preference towards the company of friends and even preference for anal
sex.
Upon the other hand, Nilo accused Maria Victoria being jealous of his friends, has volatile
temperament, impulsive in making decisions, lacks respect towards him and accuses him of
being gay. She even talks about their sexual problem with her family.
As judge, will you grant the annulment of marriage of the spouses?
Answer: No, I will not grant the annulment of the marriage of Nilo and Maria Victoria.
Mere showing of irreconcilable differences and conflicting personalities do not constitute
psychological incapacity. Article 36 contemplates “incapacity or inability,” not merely
“difficulty, refusal or neglect.”

7. PROOF IN PETITION FOR DECLARATION OF NULLITY

Matudan vs. Republic (G.R. No. 203284, November 14, 2016)
Q. Spouses Nicolas and Marilyn have been married for nine years when the latter decided
to work abroad. She has not communicated with her family and this prompted Nicolas to
file an action for Petition for Declaration of Nullity on the ground of psychological
incapacity. The trial court found no sufficient ground to grant the petition because the
testimony of the child cannot be given credence as she was only two years old when
Marilyn left for abroad and the testimony of the expert witness was based on a one-sided
account.

(a) Does abandonment constitute incapacity that will merit annulment of marriage?
Answer: No. Abandonment does not indicate one’s incapacity. Psychological incapacity
refers to no less than mental- not physical– incapacity that causes a party to be truly
incognitive of the basic marital covenants that concomitantly must be assumed and
discharged by the parties to the marriage, as expressed in Article 68 of the Family Code.

(b) What will indicate incapacity to perform one’s marital duties?

Answer: In the landmark case of Santos v. Court of Appeals, the taught us that
psychological incapacity under Article 36 of the Family Code must be characterized by (a)
gravity, (b) juridical antecedence, and (c) incurability. Thus, the incapacity "must be grave
or serious such that the party would be incapable of carrying out the ordinary duties
required in marriage; it must be rooted in the history of the party antedating the marriage,
although the overt manifestations may emerge only after marriage; and it must be
incurable or, even if it were otherwise, the cure would be beyond the means of the party
involved."

(c) Who has the burden of proving psychological incapacity?

5|Page
Answer: The burden is on the petitioner, pursuant to Republic v. Court of Appeals or the
Molina case. The existence or absence of the psychological incapacity is based strictly on
the facts of each case and not on a priori assumptions, predilections or generalizations.
Indeed, the incapacity should be established by the totality of evidence presented during
trial, making it incumbent upon the petitioner to sufficiently prove the existence of the
psychological incapacity. Indeed, what is important is the presence of evidence that can
adequately establish the party's psychological condition. The complete facts should allege
the physical manifestations, if any, as are indicative of psychological incapacity at the time
of the celebration of the marriage. Petitioner's judicial affidavit and testimony during trial,
however, fail to show gravity and juridical antecedence. (Matudan v. Republic, G.R. No.
203284, November 14, 2016)
(d) Was the dismissal of the petition proper?
Answer: Yes, the child was not a competent witness to prove psychological incapacity of his
mother since he was barely two years old when his parents separated and for the court to
consider incapacity as a ground for annulment, the expert witness must have examined
both spouses.

8. HUMAN RELATIONS AND GENERAL PRINCIPLES

Q. X, an employee of Y Company, obtained a car plan where it was agreed that half of the
cost of the vehicle shall be paid by Y company while the other half shall be deducted from
X's salary. X was able to pay his 50% share and thereafter, he resigned from work. He
offered to purchase the vehicle from Y Company but the latter refused, saying that the
deductions made from X's salary will be treated as rentals for the use of the car and shall
not be refunded.
(a) Is Y Company guilty of unjust enrichment?
Answer: Yes. There is unjust enrichment ''when a person unjustly retains a benefit to the
loss of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience." The principle of unjust
enrichment requires two conditions: (1) that a person is benefited without a valid basis or
justification, and (2) that such benefit is derived at the expense of another. The main
objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration.

(b) What are the indicators that Y Company has enriched itself?
Answer: From the evidence on record, it is seen that the Y Company’s car plan offered to X
was subject to no other term or condition than that Y Company shall cover one-half of its
value, and petitioner shall in turn pay the other half through deductions from his monthly
salary. xxx It may not be said that the car plan arrangement between the parties was a
benefit that the petitioner enjoyed; on the contrary, it was an absolute necessity in Y
Company’s business operations, which benefited it to the fullest extent: without the service
vehicle, petitioner would have been unable to rapidly cover the vast sales territory assigned
to him, and sales or marketing of Y Company’s products could not have been booked or
made fast enough to move the company’s inventory. The Court held that Y Company may
not enrich itself by charging petitioner for the use of its vehicle which is otherwise
absolutely necessary to the full and effective promotion of its business. It may not, under the
claim that petitioner’s payments constitute rents for the use of the company vehicle, refuse
6|Page
to refund what petitioner had paid, for the reasons that the car plan did not carry such a
condition; the subject vehicle is an old car that is substantially, if not fully, depreciated; the
car plan arrangement benefited Y Company for the most part; and any personal benefit
obtained by petitioner from using the vehicle was merely incidental. (Locsin v. Mekeni, G.R.
NO. 192105, December 9, 2013)

9. PERSONS AND FAMILY RELATIONS: THE FAMILY HOME

Q. Spouses AB obtained a loan from Spouses YZ secured by a real estate mortgage over
their residential house. For failure to pay despite demand, Spouses YZ applied for
extrajudicial foreclosure where C emerged as the highest bidder. After the expiration of the
redemption period, C applied for a writ of possession with the trial court. This was opposed
by Spouses AB contending that the issuance of writ of possession is not always ministerial.
They also argued that the subject property is a family home exempt from forced sale.
Hence, they should be allowed to exercise the right of redemption even after the expiration
of the one-year period.
(a) Is the issuance of writ of possession in this case ministerial?
Answer: YES. Unless a case falls under recognized exceptions provided by law and
jurisprudence, the issuance of a writ of possession remains ex parte, non-adversarial,
summary and ministerial in nature of as outlined in Section 7 of Act No. 3135, as amended
by Act No. 4118. The issuance of writ of possession ceases to be ministerial if there is a
third party holding the property adversely to the judgment debtor. Where such third party
exists, the trial court should conduct a hearing to determine the nature of his adverse
possession. xxx Here, there are no third parties holding the subject property adversely to
the judgment debtor. Xxx Indeed, "[t]he judge with whom an application for writ of
possession is filed need not look into the validity of the mortgage or the manner of its
foreclosure." The writ issues as a matter of course. "The rationale for the rule is to allow
the purchaser to have possession of the foreclosed property without delay, such possession
being founded on the right of ownership."

(b) May Spouses AB be allowed to redeem their family home despite expiration of the
period for redemption?
Answer: NO. As a rule, the family home is exempt from execution, forced sale or
attachment. However, Article 155(3) of the Family Code explicitly allows the forced sale of
a family home "for debts secured by mortgages on the premises before or after such
constitution." In this case, there is no doubt that spouses Fortaleza voluntarily executed on
January 28, 1998 a deed of Real Estate Mortgage over the subject property which was even
notarized by their original counsel of record. And assuming that the property is exempt
from forced sale, spouses Fortaleza did not set up and prove to the Sheriff such exemption
from forced sale before it was sold at the public auction. Failure to do so would estop the
party from later claiming the exemption. Although the Rules of Court does not prescribe
the period within which to claim the exemption, the rule is, nevertheless, well-settled that
the right of exemption is a personal privilege granted to the judgment debtor and as such,
it must be claimed not by the sheriff, but by the debtor himself at the time of the levy or
within a reasonable period thereafter. Certainly, reasonable time for purposes of the law
on exemption does not mean a time after the expiration of the one-year period for a

7|Page
judgment debtor to redeem the property. (Spouses Fortaleza v. Spouses Lapitan, G.R. No.
178288, August 15, 2012)
10. MARRIAGE – PROOF OF ABSENCE OF SPOUSE
Republic v. Sareñogon, Jr. (G.R. No. 199194, February 10, 2016)
Q. Jose Sareñongon filed a Petition for the Declaration of Presumptive Death of her wife
Netchie. While he left to work as a seaman, Netchie went to Hongkong as a domestic
helper. He did not receive any communication with her and did not know her whereabouts.
His efforts to locate her through her family, relatives and friends proved futile. As he
wanted to contract another marriage, he filed the Petition under Article 41 of the Family
Code.
Based on the above facts, did Jose’s effort to locate his wife Netchie sufficiently support a
well-founded belief that she is probably dead?
Answer: The “well-founded belief” requisite under Article 41 of the Family Code is
complied with only upon a showing that “sincere honest to goodness efforts” had indeed
been made to ascertain whether the absent spouse is still alive or is already dead. Here,
Jose failed to comply with the accepted standard of proof. Jose did not call to the witness
stand specific individuals or persons whom he allegedly saw or met in the course of his
search or quest for the allegedly missing Netchie. Neither did he prove that he sought the
assistance of the pertinent government agencies as well as the media.

11. VALIDITY OF MARRIAGE UNDER MUSLIM PERSONAL LAWS (P.D. 1803)

Juliano-Llave vs. Republic, et al. (G.R. No. 169766, March 30, 2011)
Q. Before he died, Senator Tamano married Estrellita twice once under the Islamic laws
and, subsequently, under civil ceremonies. In their marriage contracts, Sen. Tamano's civil
status was indicated as divorced. Estrellita represented herself to the whole world as Sen.
Tamano's wife, and upon his death, his widow.
In 1994, Haja Putri Zorayda A. Tamano (Zorayda) and her son Adib Ahmad A. Tamano
(Adib), in their own behalf and in behalf of the rest of Sen. Tamano's legitimate children
with Zorayda, filed a complaint with the RTC of Quezon City for the declaration of nullity
of marriage between Estrellita and Sen. Tamano for being bigamous. The complaint
alleged that Sen. Tamano married Zorayda on May 31, 1958 under civil rites, and that this
marriage remained subsisting when he married Estrellita in 1993.
RTC-QC ruled that Tamano’s marriage to Estrellita is void ab initio. The Court of Appeals
affirmed the RTC decision.
Estrellita assailed the decision as being both Muslims, the marriage of Tamano and
Zorayda must be governed by the provision of P.D. 1083, otherwise known as the Code of
Muslim Personal Laws. Thus, the declaration of Tamano as being divorced must be given
credence.
(a) What is the effect of P.D. 1083 on the marriages of Tamano and Estrellita and Tamano
and Zorayda?
Answer: P.D. No. 1083 cannot benefit Estrellita. Firstly, Article 13 (1) thereof provides that
the law applies to "marriage and divorce wherein both parties are Muslims or wherein
only the male party is a Muslim and the marriage is solemnized in accordance with Muslim
law or this Code in any part of the Philippines." Article 13 of PD 1083 does not provide for
a situation where the parties were married both in civil and Muslim rites."

8|Page
(b) Can the Muslim Code be applied retroactively as to affect provisions of the Civil Code
which govern the marriage of Tamano and Zorayda?
Answer: The Muslim Code took effect only on February 4, 1977, and this law cannot
retroactively override the Civil Code which already bestowed certain rights on the
marriage of Sen. Tamano and Zorayda. The marriage of the two was still subsisting when
Tamano contracted his second marriage.

(c) Do Zorayda and Adib have locus standi to file the Petition?
Answer: Zorayda and Adib, as the injured parties, have the legal personalities to file the
declaration of nullity of marriage. A.M. No. 02-11-10-SC, which limits to only the husband
or the wife the filing of a petition for nullity is prospective in application and does not shut
out the prior spouse from filing suit if the ground is a bigamous subsequent marriage.

12. SALE OF CONJUGAL PROPERTY

Titan Construction Corporation, vs. Spouses David (G.R. No. 169548, March 15, 2010)
Q. Manuel and Martha own a 602- meter lot in White Plains. They separated in 1978 and
lost communication. In 1995, Manuel learned that Martha sold to Titan Construction
Corporation the White Plains property.
Manuel filed a complaint for Annulment of Contract and Reconveyance. He alleged that
the sale was without his knowledge. Titan Construction Corporation claimed it is a buyer
in good faith. Is the Deed of Sale executed by Martha to Titan Construction valid?
Answer: The sale is not valid. In the absence of Manuel's consent, the Deed of Sale is void.
Article 165 of the Civil Code expressly provides that "the husband is the administrator of
the conjugal partnership." Article 172 of the Civil Code ordains that "(t) he wife cannot
bind the conjugal partnership without the husband's consent, except in cases provided by
law." Similarly, Article 124 of the Family Code requires that any disposition or
encumbrance of conjugal property must have the written consent of the other spouse,
otherwise, such disposition is void.
Article 116 of the Family Code is unequivocal in that "all property acquired during the
marriage, whether the acquisition appears to have been made, contracted or registered in
the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.”
The presumption being in favor of the conjugal nature of the property, the burden to prove
otherwise rested with Titan Construction Corporation.

13. QUIETING OF TITLE

Q. X claimed to own a parcel of land covered by a tax declaration in her name. It was
originally owned by her father who had introduced improvements thereon. The land was
mortgaged to ABC Bank, which acquired it in the foreclosure sale. ABC Bank then sold the
land to Q who eventually donated the same to X. X filed an action for quieting of title
against Z, alleging that Z occupied the northern portion of her property and
surreptitiously declared it in his name for tax purposes. In his defense, Z denied the
encroachment and maintained that he and his ancestors have openly and continuously
possessed the subject land since time immemorial. He and his siblings were born on that
land and, at that time, the area around the house was already planted with bananas, alnos,
and coffee.
Who between Z and Z have a better right over the property?

9|Page
Answer: It is Z who has the better claim or title over the subject property. Z was able to
prove actual possession of the subject property coupled with his tax declaration. We have
ruled in several cases that possession, when coupled with a tax declaration, is a weighty
evidence of ownership. It certainly is more weighty and preponderant than a tax
declaration alone. The preponderance of evidence is therefore clearly in favor of Z
particularly considering that, as the actual possessor under claim of ownership, he enjoys
the presumption of ownership. (Palali v. Awisan, G.R. No. 158385, February 12, 2010,
Second Division)

14. BUILDER IN BAD FAITH

Pen Development Corp, et al., v. Martinez Leyba, Inc.(G.R. No. 211845, August 9, 2017)
Q. Martinez Leyba, Inc. is the owner of three parcels of contiguous lands. Pen
Development Corp. and Las Brisas Resorts Corp., which merged into one corporate entity,
likewise owns a land adjacent to Leyba’s properties.
Las Brisas fenced its land which encroached on Leyba’s property. Leyba sent a letter to
Las Brisas informing it of the encroachment and requested it to refrain from performing
other acts that would impair Leyba’s property. Despite several notices, Las Brisas
continued on developing the property.
Martinez filed a Complaint for Quieting of Title, Cancellation of Title and Recovery of
Ownership with Damages. Las Brisas denied the encroachment.
(a) Is Las Brisas a possessor/builder in good faith.
Answer: Las Brisas is a builder in bad faith because of its obstinate refusal to abide with
Martinez’s repeated demands to cease and desist from encroaching on their area.
The Civil Code provides:
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or that
the planting or sowing be removed, in order to replace things in their former
condition at the expense of the person who built, planted or sowed; or he may
compel the builder or planter to pay the price of the land, and the sower the
proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is
entitled to damages from the builder, planter or sower.

(b) Was Leyba guilty of laches in enforcing its putative rights?

Answer: Leyba is not guilty of laches because as owner of the land, it has an
imprescriptible right to recover possession thereof from any person illegally occupying its
lands. “prescription and laches cannot apply to registered land covered by the Torrens
system” pursuant to Section 47 of the Property Registration Decree 1529, which states that
“no title to registered land in derogation of the title of the registered owner shall be
acquired by prescription or adverse possession.”

(c) May the trial court grant indemnity in favor of Leyba?

10 | P a g e
Answer: Yes. Leyba has the right to recover damages. As a builder in bad faith, Las Brisas
is not entitled to indemnity and Martinez may demand the demolition of the developments
in the property.

15. TAX DECLARATIONS AS PROOF OF OWNERSHIP OF LAND

Q. X claimed ownership over a parcel of land along the creek on which stands the house of
Z. Z filed a complaint before the RTC sitting as a Court of Agrarian Relations (CAR), for
"maintenance and damages" against X where Z alleged that Z's father was the bona fide
agricultural lessee of X. After the issuance of PD No. 27, an approximate two-hectare
portion of X’ landholding was awarded to Z's father, who was issued a Certificate of Land
Transfer (CLT). Z contended that the subject property occupied by his house was part of
his father's farm lot. Thus, Z prayed to be maintained in the subject property and that X
be ordered to refrain from ejecting them from the subject property.
Are tax declaration and a certificate of land transfer (CLT) are sufficient proof of
ownership?
Answer: NO. The said CLT did not indicate the metes and bounds of the awarded farm lot;
it only stated that the farm lot awarded to Z's father consisted of two hectares. Hence, it
became necessary to prove, beyond the CLT, that the subject property is actually included
in the farm lot. Z, however, failed to discharge this burden. Z also presented his father's tax
declaration covering the awarded farm lot, which described the actual boundaries thereof.
Instead of helping their cause, the trial court found the stated southern boundary of the
farm lot (the Camambugan Creek) as evidence that the subject property was not included
therein. The ocular inspection revealed that the subject property lies on the other side of
the Camambugan Creek, physically separate from the farm lot of Z's father. The trial
court thus concluded that the subject property is not part of the farm lot, which conclusion
is not unwarranted. The CLT, tax declaration and investigation reports are, at best,
inconclusive and insufficient to prove their claim that the subject property is included in
the farm lot. In fact, they even prove quite the opposite: that the subject property is
actually not included in the farm lot. (Palomata v. Colmenares, G.R. No. 174261, December
15, 2010)

16. SALE OF REAL PROPERTY ON INSTALLMENT

Q. For failure to pay the monthly amortization of a house and lot which was the subject of
a Contract to Sell, the seller sent the buyer a notarized Notice of Delinquency and
Cancellation of Contract to Sell. The seller likewise file an action for unlawful detainer
against the buyer.
(a) In case the sale should be cancelled, is the seller required to refund all the monthly
installments paid by the buyer?
Answer: NO, since the buyer paid at least two (2) years of installment, he is only entitled to
receive the cash surrender value of the payments he made which, under Section 3(b) of the
Maceda Law, is equivalent to 50% of the total payments made. Under the Maceda Law, the
actual cancellation of a contract to sell takes place after 30 days from receipt by the buyer
of the notarized notice of cancellation, and upon full payment of the cash surrender value
to the buyer. In other words, before a contract to sell can be validly and effectively
cancelled, the seller has (1) to send a notarized notice of cancellation to the buyer and (2) to
refund the cash surrender value.

11 | P a g e
Until and unless the seller complies with these twin mandatory requirements, the contract
to sell between the parties remains valid and subsisting. Thus, the buyer has the right to
continue occupying the property subject of the contract to sell, and may still reinstate the
contract by updating the account during the grace period and before the actual
cancellation of the contract. In this case, the seller complied only with the first condition by
sending a notarized notice of cancellation to the buyer. It failed, however, to refund the
cash surrender value to him. Thus, the Contract to Sell remains valid and subsisting and
supposedly, the buyer has the right to continue occupying the subject property.

(b) Is the seller required to pay the buyer the value of the house erected on the subject lot?
Answer: YES. The buyer is entitled to reimbursement of the improvements made on the
property. In view of the special circumstances obtaining in this case, the Court is
constrained to rely on the presumption of good faith on the part of the buyer. Thus, the
buyer is presumed builder in good faith.

17. SALES: SUSPENSIVE CONDITION IN A CONTRACT OF SALE

Spouses Domingo vs. Spouses Manzano (G.R. No. 201883, Nov. 16, 2016)
Q. Spouses Manzano and Spouses Domingo executed a Contract of Sale which allowed
Spouses Domingo to pay in installments Spouses Manzano’s property. Spouses Domingo
failed to pay the property in full. The land remained in possession of the Spouses Manzano.
It took Spouses Domingo a while to pay the balance and by that time, Spouses Manzano no
longer accepted their payment. Spouses Domingo caused the annotation of an affidavit of
adverse claim.
Spouses Manzano sold the property to a certain Carmelita Aquino. This prompted Spouses
Domingo file a Complaint for Specific Performance and Damages, with prayer that the new
titled issued to Carmelita be cancelled.
(a) Under the foregoing facts, who will the Spouses Domingo have a better right than
Carmelita?
Answer: Spouses Domingo will not have a better right than Carmelita.

(b) Is there a double sale under the foregoing facts?

There is no double sale. In a contract to sell, the full payment of the purchase price
partakes of a suspensive condition, the non-fulfillment of which prevents that obligation to
sell from arising and thus ownership is retained by the seller.
Without that sale, Article 1544 shall not apply as there is no case of double sale. There is
here only one sale and that is to Carmelita.

(c) What reliefs may the trail court grant to Spouses Domingo?
Answer: The court may order Spouses Manzano to reimburse Spouses Domingo of the
amount they paid in installments plus nominal damages and interests.

18. SALE OF REAL PROPERTY: BAD FAITH ON THE PART OF THE SELLER;
MORTGAGE WITHOUT THE CONSENT OF SPOUSE
Q. Bignay EX-IM Phils. Inc. v. Union Bank of the Phil. (G.R. No. 171590, February 12,
2014)

12 | P a g e
Bignay bought from Union Banka a foreclosed property subject of a pending case between
Union Bank and Rosario De Leon, the mortgagor. De Leon had filed an action for
annulment of mortgage as the foreclosed property was mortgaged by her husband without
her consent. The trial court annulled the mortgage and ruled that Rosario was the owner of
the undivided half of the property.
Bignay filed a case against Union Bank for breach of warranty against eviction under
Article 1547 and 1548 of the Civil Code. The RTC held that Union Bank acted in bad faith
in selling the property to Bignay. The CA made Union Bank liable for the amount of the
land and building constructed on it by Bignay.
Was the judgment against Union Bank making it liable to pay Bignay the cost of the land
and building correct?
Answer: The judgment is correct. Union Bank is liable to Bignay. It appears that Union
Bank did not inform Bignay of the pending case between Union Bank and Rosario. Under
the law, Bignay shall have the right to demand of Union Bank the return of the value which
the thing sold had at the time of the eviction, be it greater or less than the price of the sale
as well as the expenses of the contract, if the vendee has paid them and the damages and
interests, and ornamental expenses, if the same was made in bad faith.

19. RECISSION OF A CONTRACT BASED ON FAILURE TO FULFILL SUSPENSIVE

CONDITION; APPLICATION OF MACEDA LAW ON SALE OF REAL PROPERTY
ON INSTALLMENT
Q. Spouses Bonrostro v. Spouses Luna (G.R. No. 172346, July 24, 2013)
Constancia Luna entered into a Contract to Sell over a house and lot with Bliss
Development Corp.(“BDC”), a government-owned and control corporation. Luna sold to
Spouses Bonrostro the house for the price of P1,250,000, payable on four (4) installments.
It was stipulated that should Spouses Bonrostro fail to pay, the Contract to Sell shall be
deemed cancelled and rescinded and 5% of the total price shall be forfeited. After the
execution of the contract, Spouses Bonrostro took possession of the property but failed to
pay the three other installments. Luna was compelled to pay the unpaid amortization so
that her Contract to Sell would not be cancelled and she would not be liable for interest.
Luna then filed a Complaint for Rescission against Spouses Bonrostro. Luna instructed
BDC not to receive payment from the Spouses Bonrostro anymore. Meanwhile, the
Spouses Bonrostro claimed that they made a tender of payment.
(a) Is rescission the proper remedy for failure to pay the installments in a Contract to Sell
real property?
Answer: No. Rescission is not the property remedy. In a Contract to Sell, payment of the
price is a positive suspensive condition. Failure of which is not a breach of contract
warranting rescission under Article 1191 of the Civil Code, but rather just an event that
prevents the supposed seller from being bound to convey the title to the supposed buyer.

(b) What is the proper remedy under the foregoing facts?

Answer: Maceda law shall apply. Section 4 thereof provides that “in case where less than
two years of installment were paid, the seller shall give the buyer a grace period of not less
than sixty days from the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may cancel the contract

13 | P a g e
after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.”

(c) Was there a valid tender of payment of Spouses Bonrostro?

Answer: There was no valid tender of payment. Tender of payment, without money,
produces no effect. To have the effect of payment and the consequent extinguishment of the
obligation to pay, the law requires the companion acts of tender of payment and
consignation.
(d) Can the court impose interest payment on Spouses Bonrostro?
Answer: Spouses Bonrostro are liable for the payment of interest. Contancia and her
spouse suffered damages brought about by the failure of the Spouses Bonrostro to comply
with their obligation on time. " Under Article 2209 of the Civil Code, "[i]f 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 the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest.

20. RESCISSION FOR SUBSTANTIAL BREACH OF CONDITION

Spouses Tumibay v. Spouses Lopez (G.R. No. 171692, June 3, 2013)
Q.Spouses Tumibay issued a SPA in favor of Reynalda for the sale of a parcel of land.
Reynalda sold the land to her daughter Rowena. Equipped with the SPA, Reynalda,
without the consent of Spouses Tumibay, executed a Deed of Sale in favor of Rowena
despite the fact that the price has not yet been paid in full. This resulted to the transfer of
title in the name of Rowena.
(a) May the Spouses Tumibay rescind the Contract to Sell to Rowena?
Answer: The Contract to Sell executed between Reynalda and Rowena may be rescinded.
As a general rule, "rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are substantial and fundamental as to defeat the
object of the parties in making the agreement." Rowena's act of transferring the title to the
subject land in her name, without the knowledge and consent of petitioners and despite
non-payment of the full price thereof, constitutes a substantial and fundamental breach of
the Contract to Sell.
(b) Are Spouses Tumibay entitled to other reliefs?
Answer: Yes. As a consequence of the wrongful act of Rowena, Spouses Tumibay are
entitled to moral damages and attorney's fees while Rowena is entitled to the
reimbursement of the monthly installments she made with legal interest.

21. PERFECTION OF A CONTRACT OF SALE

First Optima Realty Corp. v. Securitron Security Services, Inc. (G.R. No. 199648, January
28, 2015)
Mr. Antonio Eleazar, the General Manager of Securitron sent a letter to First Optima
offering to purchase a property. A series of telephone negotiations ensued between Eleazar
and First Optima’s employees. Eleazar also went to the office of First Optima and offered
to pay in cash but Carolina Young, Executive Vice President of First Optima refused to
accept it.

14 | P a g e
Securitron made a formal offer in a letter accompanied by a check in the amount of
P100,000. The check was deposited and credited to First Optima. Securitron then
demanded to proceed with the sale.
Securitron filed a complaint for specific performance with damages since First Optima
refused to honor the agreement between them. First Optima claimed that it did not agree to
sell the property.
(a) Was the contract of sale between First Optima and Securitron perfected?
Answer: The contract of sale was never perfected. Nothing shows that the parties had
agreed on any final arrangement containing the essential elements of a contract of sale,
namely (1) consent or the meeting of the minds; (2) object or subject matter of the contract;
and (3) the price or consideration of the sale.
(b) Can the P100,000 deposited to the account of First Optima be considered earnest
money?
Answer: Earnest money applies to a perfected sale. Article 1482 states that “there must be
first a perfected contract of sale before we can speak of earnest money.”

22. FORBEARANCE
Hermojina Estores v. Spouses Arturo and Laura Supangan (G.R. No. 175139, 18 April
2012)
Q. What is forbearance?
Answer: In Crismina Garments, Inc. v. Court of Appeals, "forbearance" was defined as a
"contractual obligation of lender or creditor to refrain during a given period of time, from
requiring the borrower or debtor to repay a loan or debt then due and payable."
In such case, "forbearance of money, goods or credits" will have no distinct definition from
a loan.
Forbearance of money, goods or credits refers to arrangements other than loan
agreements, where a person acquiesces to the temporary use of his money, goods or credits
pending happening of certain events or fulfillment of certain conditions.

23. AWARD OF ACTUAL DAMAGES

Engr. Apolinario Dueñas v. Alice Guce-Africa (G.R. No. 165679, 5 October 2009)
Q: When can actual damages be recovered?
Answer: Article 2199 of the Civil Code provides that "one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved."
In Ong v. Court of Appeals, the Court held that "actual damages are such compensation or
damages for an injury that will put the injured party in the position in which he had been
before he was injured. They pertain to such injuries or losses that are actually sustained
and susceptible of measurement." To be recoverable, actual damages must not only be
capable of proof, but must actually be proved with reasonable degree of certainty. The
Court cannot simply rely on speculation, conjecture or guesswork in determining the
amount of damages. Thus, it was held that before actual damages can be awarded, there
must be competent proof of the actual amount of loss, and credence can be given only to
claims which are duly supported by receipts.

15 | P a g e
24. RIGHT OF FIRST REFUSAL IN A CONTRACT OF LEASE; UNLAWFUL
DETAINER
Tuazon v. Del Rosario-Suarez (G.R. No. 168325, December 8, 2010)
Q. Lourdes Q. del Rosario-Suarez LEASED her land to Roberto D. Tuazon. She offered to
sell to the latter subject parcel of land. She pegged the price at P37, 541,000.00 and gave
him two years from January 2, 1995 to decide on the said offer.
More than four (4) months after the expiration of the Contract of Lease, Lourdes sold
subject parcel of land to her only child, Catalina Suarez-de Leon, her son-in-law Wilfredo
de Leon, and her two grandsons, Miguel Luis S. de Leon and Rommel S. de Leon for a total
consideration of only P2,750,000.00 as evidenced by a Deed of Absolute Sale. TCT was
thereafter issued.
The co-owners De Leon filed a complaint for Unlawful Detainer against Roberto when he
refused to vacate the sold property.
What is the nature of the letter Lourdes to Roberto? Is it an Option Contract or a grant of
the right of first refusal?
Answer: The letter sent by Lourdes embodies an option contract as it grants Roberto a
fixed period of only two (2) years to buy the subject property at a price certain.
Article 1324 of the Civil Code reads:
Art. 1324. When the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
Option Contract is an agreement in writing to give a person the 'option' to purchase lands
within a given time at a named price. It is neither a sale nor an agreement to sell. In a right
of first refusal, while the object might be made determinate, the exercise of the right,
however, would be dependent not only on the grantor's eventual intention to enter into a
binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up.

25. ACCESSION AND SALE OF REALPROPERTY ON INSTALLMENT

Q. What is the applicable rule on improvements made a seller on a property sold on
installment?
Answer: While Article 448 on builders in good faith as a general rule does not apply where
there is a contractual relation between the parties such as in the instant case, it can still be
applied if the parties failed to attach a copy of the contract in the records of the case.
The rule that the choice under Article 448 of the Civil Code belongs to the owner of the
land is in accord with the principle of accession, i.e., that the accessory follows the principal
and not the other way around. Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. The landowner cannot refuse to exercise either option and
compel instead the owner of the building to remove it from the land. The raison d’être for
this provision has been enunciated thus: Where the builder, planter or sower has acted in
good faith, a conflict of rights arises between the owners, and it becomes necessary to
protect the owner of the improvements without causing injustice to the owner of the land.
In view of the impracticability of creating a state of forced co-ownership, the law has
provided a just solution by giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity, or to oblige the builder or planter to

16 | P a g e
pay for the land and the sower the proper rent. He cannot refuse to exercise either option.
It is the owner of the land who is authorized to exercise the option, because his right is
older, and because, by the principle of accession, he is entitled to the ownership of the
accessory thing. In conformity with the foregoing pronouncement, we hold that seller, as
landowner, has two options. It may appropriate the new house by reimbursing buyer the
current market value thereof minus the cost of the old house. Under this option, buyer
would have "a right of retention which negates the obligation to pay rent." In the
alternative, seller may sell the lots to buyer at a price equivalent to the current fair value
thereof. However, if the value of the lots is considerably more than the value of the
improvement, buyer cannot be compelled to purchase the lots. He can only be obliged to
pay reasonable rent. (Communities Cagayan v. Sps. Nanoy, G.R. No. 17679, November 14,
2012)

26. CO-OWNERSHIP
Antipolo Ining (deceased), survived by Manuel Villanueva, et. al. v. Leonardo R. Vega,
substituted by Lourdes Vega, et. al. (G.R. No. 174727, 12 August 2013)
Question: What are the requisites in order that the title may prescribe in favor of a co-
owner?
Answer: The requisites in order that the title may prescribe in favor of a co-owner are: (1)
the co-owner has performed unequivocal acts of repudiation amounting to an ouster of the
other co-owners; (2) such positive acts of repudiation have been made known to the other
co-owners; and (3) the evidence thereof is clear and convincing.

27. CO-OWNERS, NOT INDISPENSABLE PARTIES TO A CASE

Rey Castigador Catedrilla v. Mario and Margie Lauron (G.R. No. 179011, 15 April 2013)
Question: Are all co-owners indispensable parties even if only one of them filed a case
covering the property they co-own?
Answer: No. In suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and the relevant jurisprudence, any one
of them may bring an action, any kind of action for the recovery of co-owned properties.
Therefore, only one of the co-owners, namely the co-owner who filed the suit for the
recovery of the co-owned property, is an indispensable party thereto. The other co-owners
are not indispensable parties. They are not even necessary parties, for a complete relief can
be afforded in the suit even without their participation, since the suit is presumed to have
been filed for the benefit of all co-owners.

28. SALE OF PROPERTY GOVERNED BY CO-OWNERSHIP; QUIETING OF TITLE

Gil Macalino, Jr., Teresita Macalino, et. al. v. Artemio Pis-An, (G.R. No. 204056, 1 June
2016)
Q: EJ is the sole owner of Lot 2780. When he died, Lot 2780 was divided into three
because of the barangay road which cut across the said lot. Years after, A, who is the
grandson-in-law of EJ commissioned a Geodetic Engineer 1 to survey the lot so that taxes
would be assessed only on the portions which remained as private property. Consequently,
a sketch plan was made presenting the three portions of Lot 2780 – Lot 2780-A (the portion
on the left side of the road), Lot 2780-B (the portion which was converted into a barangay

17 | P a g e
road), and Lot 2780-C (the portion on the right side of the road). The sketch plan also
revealed that the portion occupied by A contained an area of 207 square meters.
A and other heirs of EJ executed an Extra Judicial Settlement of Estate and Absolute Sale
adjudicating among themselves and selling a 207-square meter portion of the same to the
Spouses Sillero. The document, did not, however, identify the portion being sold as Lot No.
2780-A but stating only “…a portion of the above-described parcel of land (Lot 2780)
which is TWO HUNDRED SEVEN (207) square meters…” Thereafter, Spouses Sillero sold
the lot to GM. The Deed of Sale states, “…the TWO HUNDRED SEVEN (207) square
meter (portion) of the above-described Lot 2780 which xxx portion is now known as
SUBLOT 2780-A…”
GM caused the survey of Lot 2780-A by Geodetic Engineer 2. It was discovered that the
portion occupied by GM consists only of 140 square meters. GM claimed that the property
sold to the spouses Sillero consists of Lot 2780-A with an area of 140 square meters and Lot
2780-C with an area of 67 square meters. Years after, A built a pig pen on Lot 2780-C
which GM questioned but was ignored by the former. Due to the fact of failure barangay
conciliation, GM filed an action for quieting of title.
(a) Does GM have legal title over Lot 2780-C to justify the action for quieting of title?
Answer: No. The testimonial evidence presented by A sufficiently supports the conclusion
that only Lot 2780-A was sold to spouses Sillero. While A was selling Lot 2780-A, he
pointed out to spouses Sillero the boundaries of the said. In addition, the son of A stated
during trial that Spouses Sillero never took possession of Lot 2780-C. It is very clear that
the property sold to the spouses was only the Lot 2780-A. Therefore, only the same lot was
sold to GM.
Quieting of title is a common law remedy for the removal of any cloud upon or doubt or
uncertainty with respect to title to real property. In order that an action for quieting of title
may prosper, it is essential that the plaintiff must have legal or equitable title to, or interest
in, the property which is the subject-matter of the action. Legal title denotes registered
ownership, while equitable title means beneficial ownership. In the absence of such legal or
equitable title, or interest, there is no cloud to be prevented or removed.

(b) Question: What are indispensable requisites for an action to quiet title?
Answer: The indispensable requisites are: (1) the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the action; and (2) the deed,
claim, encumbrance, or proceeding claimed to be casting cloud on his title must be shown
to be in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.

29. EFFECT OF NULLITY OF MARRIAGE ON CONJUGAL PROPERTY

Marietta N. Barrido v. Leonardo V. Nonato (G.R. No. 176492, 20 October 2014)
Question: Is the property still owned in common after the marriage was declared void on
the GROUND of psychological incapacity.
Answer: Yes. In this case, the records reveal that Nonato and Barrido’s marriage had been
declared void for psychological incapacity under the Family Code. During their marriage,
however, the conjugal partnership regime governed their property relations. Although
Article 129 provides for the procedure in case of dissolution of the conjugal partnership

18 | P a g e
regime, Article 147 specifically covers the effects of void marriages on the spouses’
property relations.
This particular kind of co-ownership applies when a man and a woman, suffering no illegal
impediment to marry each other, exclusively live together as husband and wife under a
void marriage or without the benefit of marriage.
It is clear, therefore, that for Article 147 to operate, the man and the woman: (1) must be
capacitated to marry each other; (2) live exclusively with each other as husband and wife;
and (3) their union is without the benefit of marriage or their marriage is void.

30. REAL ESTATE MORTGAGE AS SECURITY TO A PRINCIPAL LOAN

Spouses Charlie and Ofelia Fortaleza v. Spouses Raul and Rona Lapitan (G.R. No. 178288,
15 August 2012)
Question: Spouses Fortaleza obtained a loan from spouses Rolando and Amparo Lapitan
in the amount of PhP1,200,000.00 subject to 34% interest per annum. For security
purpose, the spouse Fortaleza executed a Deed of Real Estate Mortgage over their
residential house and lot. Spouses Fortaleza failed to pay the loan, hence, the subject
property was foreclosed. Spouses Raul and Rona Lapitan became the highest bidders and a
Certificate of Sale was issued in their favor. The redemption period expired without the
spouses Fortaleza repurchasing the subject property. Spouses Lapitan executed an
affidavit of consolidation of ownership and caused the cancellation of the TCT registered
under the name of spouses Fortaleza and the registration of new TCT in their favor.
Spouses Fortaleza refused to vacate the subject property upon demand made by Spouses
Lapitan. Spouses Fortaleza argued that the subject property cannot be foreclosed because
it is exempt from execution being a family home. Is the subject property exempt from
execution?
Answer: No. As a rule, the family home is exempt from execution, forced sale or
attachment. However, Article 155(3) of the Family Code explicitly allows the forced sale of
a family home “for debts secured by mortgages on the premises before or after such
constitution.” While it is true that the family home is constituted on a house and lot from
the time it is occupied as a family residence and is exempt from execution or forced sale
under Article 153 of the Family Code, such claim for exemption should be set up and
proved to the Sheriff before the sale of the property at public auction. Failure to do so
would estop the party from later claiming the exemption.
In this case, there is no doubt that spouses Fortaleza voluntarily executed a Deed of Real
Estate Mortgage over the subject property which was even notarized by their original
counsel of record. And assuming that the property is exempt from forced sale, spouses
Fortaleza did not set up and prove to the Sheriff such exemption from forced sale before it
was sold at the public auction.

31. QUIETING OF TITLE TO OR INTEREST IN AND REMOVAL OR PREVENTION

OF CLOUD OVER TITLE OR INTEREST IN REAL PROPERTY
Joaquin G. Chung, Jr., Paz Royeraz-Soler, and Mansueto Maceda v. Jack Daniel
Mondragon (deceased), substituted by his sisters namely: Teotima M. Bourbon, et. al.
(G.R. No. 179754, 21 November 2012)

19 | P a g e
Question: F, G and H are descendants of YY by his first wife, XX, while J is the descendant
of YY by his second wife, WW. The OCT No. 31990 is registered in the name of Heirs of
WW represented by V. F, G and H claimed that YY appeared as owner of the subject
property in the tax declaration. Also, a free patent was issued in the name of heirs of WW
upon application of V, who is the sister of F, G and H. However, J claimed that WW is the
exclusive owner of the subject property through succession from her father. In addition, as
long as WW lives, she was in lawful, peaceful and continuous possession of the subject
property in the concept of owner. When she died, her son U took over and paid the taxes
and when U died, his son J came into possession and enjoyment thereof.
J sold a portion of the subject property which was questioned by F, G and H. The three
argued that J has no right to sell a portion of the subject property and doing such created a
cloud upon their title, thus they filed an action. Do F, G and H have a legal and equitable
title to justify the case for quieting of title?
Answer: No. The issues in a case for quieting of title are fairly simple; the plaintiff need to
prove only two things, namely: "(1) the plaintiff or complainant has a legal or an equitable
title to or interest in the real property subject of the action; and (2) that the deed, claim,
encumbrance or proceeding claimed to be casting a cloud on his title must be shown to be
in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.
Stated differently, the plaintiff must show that he has a legal or at least an equitable title
over the real property in dispute, and that some deed or proceeding beclouds its validity or
efficacy."

32. PUBLICATION OF EXTRAJUDICIAL SETTLEMENT OF ESTATE

Noli Alfonso and Erlinda Fundialan v. Spouses Henry and Liwanag Andres (G.R. No.
166236, 29 July 2010)
Question: Is publication of the Deed of Extrajudicial Settlement of the Estate required
before validly entering into a Contract of Sale?
Answer: No. In Alejandrino v. Court of Appeals, the Court upheld the effectivity of a deed of
extrajudicial settlement that was neither notarized nor published.
Significantly, the title of the property owned by a person who dies intestate passes at once
to his heirs. Such transmission is subject to the claims of administration and the property
may be taken from the heirs for the purpose of paying debts and expenses, but this does not
prevent an immediate passage of the title, upon the death of the intestate, from himself to
his heirs. The deed of extrajudicial settlement executed evidences their intention to
partition the inherited property. It delineated what portion of the inherited property would
belong to whom.

33. SUCCESSION: GENERAL PROVISIONS

Antonio B. Baltazar, Sebastian M. Baltazar, Antonio L. Mangalindan, Rosie M. Mateo,
Nenita A. Pacheco, Virgilio Regala, Jr., and Rafael Titco v. Lorenzo Laxa (G.R. No.
174489, 11 April 2012)
Question: Is the state of being forgetful will make an individual mentally unsound to
render him unfit to execute a will?
Answer: No. The Court agrees with the position of the CA that the state of being forgetful
does not necessarily make a person mentally unsound so as to render him unfit to execute a

20 | P a g e
Will. Forgetfulness is not equivalent to being of unsound mind. Besides, Article 799 of the
New Civil Code states:
Art. 799. To be of sound mind, it is not necessary that the testator be in
full possession of all his reasoning faculties, or that his mind be wholly
unbroken, unimpaired, or unshattered by disease, injury or other cause.
It shall be sufficient if the testator was able at the time of making the will
to know the nature of the estate to be disposed of, the proper objects of
his bounty, and the character of the testamentary act.

The testimony of subscribing witnesses to a Will concerning the testator’s mental condition
is entitled to great weight where they are truthful and intelligent. More importantly, a
testator is presumed to be of sound mind at the time of the execution of the Will and the
burden to prove otherwise lies on the oppositor. Article 800 of the New Civil Code states:

Art. 800. The law presumes that every person is of sound mind, in the
absence of proof to the contrary.
The burden of proof that the testator was not of sound mind at the time
of making his dispositions is on the person who opposes the probate of
the will; but if the testator, one month, or less, before making his will was
publicly known to be insane, the person who maintains the validity of the
will must prove that the testator made it during a lucid interval.

34. LEGAL STANDING OF HEIRS TO SUE

Lazaro Pasco and Lauro Pasco v. Heirs of Filomena De Guzman, represented by Cresencia
De Guzman-Principe (G.R. No. 165554, 26 July 2010)
Question: Do heirs have the capacity to sue for collection of the proceeds of the loan on
behalf of the estate of the deceased?
Answer: Yes. Unpaid loans are considered assets of the estate of the creditor-decedent. In
this case, while it is true that Filomena’s estate has a different juridical personality that
that of the heirs, the latter certainly have an interest in the preservation of the estate and
the recovery of its properties for at the moment of Filomena’s death, the heirs start to own
the property, subject to the decedent’s liabilities. In this connection, Article 777 of the Civil
Code states that the rights to the succession are transmitted from the moment of the death
of the decedent.

35. QUIETING OF TITLE

Felizardo T. Guntalilib v. Aurelio Y. Dela Cruz and Salome V. Dela Cruz (G.R. No.
200042, 7 July 2016)
Question: A and S filed a complaint for Quieting of Titles; Annulment and Cancellation of
Unnumbered OCT/Damages against F. They argued that the grandfather of A acquired the
subject property and was passed to his father by succession. The father of A transferred
the subject property to A and his brother. However, the latter waived his right of
ownership in favor of A. A and S claimed that the family of S was in full possession,
occupation and enjoyment of the subject property. In addition, they alleged that F filed a
Petition for Reconstitution or Issuance of a New Certificate of Title in lieu of an allegedly

21 | P a g e
lost unnumbered OCT which was issued in favor of F’s predecessor and that said petition
was granted. More so, the said unnumbered OCT constituted a cloud upon their titles that
must necessarily be removed. F argued that the case constituted a collateral attack on the
unnumbered OCT.
Will a case for quieting of title constitute a prohibited collateral attack on the unnumbered
OCT?
Answer: No. It is true that “the validity of a certificate of title cannot be assailed in an
action for quieting of title; an action for annulment of title is the more appropriate remedy
to seek the cancellation of a certificate of title.” Indeed, it is settled that a certificate of title
is not subject to collateral attack. Even if the complaint filed by A and S is quieting of title,
it is in reality to annul and cancel the unnumbered OCT.

36. LAND TITLES AND DEEDS TORRENS SYSTEM (GENERAL PRINCIPLES)

Republic of the Philippines v. Heirs of Julio Ramos (G.R. No. 169481, 22 February 2010)
Question: What are the jurisdictional requirements for reconstitution of a lost title?
Answer: In petitions for reconstitution of a lost or destroyed Torrens certificate of title,
trial courts are duty bound to examine the records of the case to determine whether the
jurisdictional requirements have been strictly complied with.
Sections 12 and 13 of RA No. 26 laid down the specific procedure for the reconstitution of
lost or destroyed Torrens certificates of title. Section 12 provides for the facts that a
petition must contain while Section 13 requires notice of the petition to be published twice
and to be posted on the main entrance of the provincial and municipal building. Copy of
the notice should also be sent, by registered mail, to every person named therein. The
notice shall state the number of the lost or destroyed certificate of title, name of registered
owner, and names of occupants.

Question: Can Relocation Survey and Technical Description be used as basis for
reconstitution of title?
Answer: No. RA No. 26 enumerates in order the sources from which reconstitution of lost
or destroyed original certificates of title may be based. Subparagraphs (a) to (e) of Section
2 of RA 26 pertain to documents issued or are on file with the Registry of Deeds. Under the
principle of ejusdem generis, where general words follow an enumeration of persons or
things by words of a particular and specific meaning, such general words are not to be
construed in their widest extent, but are to be held as applying only to persons or things of
the same kind or class as those specifically mentioned.
Prima facie evidence of claim of ownership is not the issue in a reconstitution A
reconstitution of title does not pass upon the ownership of land covered by the lost or
destroyed title but merely determines whether a re-issuance of such title is proper.

37. EVIDENTIARY VALUE OF A TITLE ON LAND: INDEFEASIBILTIY OF TITLE

Spouses Federico Valenzuela and Luz Buena-Valenzuela v. Spouses Jose Mano Jr. and
Rosanna Reyes-Mano (G.R. No. 172611, 9 July 2010)
Question: Is a certificate of title sufficient to prove ownership to a parcel of land?
Answer: No. Settled is the rule that a person, whose certificate of title included by mistake
or oversight the land owned by another, does not become the owner of such land by virtue
of the certificate alone. The Torrens System is intended to guarantee the integrity and

22 | P a g e
conclusiveness of the certificate of registration but is not intended to perpetrate fraud
against the real owner of the land. The certificate of title cannot be used to protect a
usurper from the true owner.

38. INDEFEASIBILITY OF TITLE; RESOLVING EXISTENCE OF TWO TITLES

OVER A PARCEL OF LAND
Leoncio C. Oliveros, represented by his heirs, Moises Dela Cruz, and the Heirs of Lucio
Dela Cruz, represented by Felix Dela Cruz v. San Miguel Corporation, the Register of
Deeds of Caloocan City, and the Register of Deeds of Valenzuela (G.R. No. 173531, 1
February 2012)
Question: RTI purchased the subject property but problems began when LO filed a
Petition for Reconstitution of his TCT. LO claimed that the original copy was destroyed in
the fire that gutted the office of the Register of Deeds in Bulacan. Later, he filed a
complaint for the declaration of nullity of RTI’s title. LO argued that he purchased the
subject property sometime in November 1956 from spouses Molina. He added that the
mere existence of his title will negate the validity of the RTI’s title. SMC, successor-in-
interest of RTI showed that LO’s title is spurious.
Will the doctrine of indefeasibility and conclusiveness of title apply in favor of SMC?
Answer: Yes. The principle that the earlier title prevails over a subsequent one applies
when there are two apparently valid titles over a single property. The existence of the
earlier valid title renders the subsequent title void because a single property cannot be
registered twice. As stated in Metropolitan Waterworks and Sewerage Systems v. Court of
Appeals, "a certificate is not conclusive evidence of title if it is shown that the same land
had already been registered and an earlier certificate for the same is in existence.

39. RESTORATION OF TITLES – ERASURE, ALTERATION OR AMENDMENT

Rosario Banguis-Tambuyat v. Wenifreda Balcom-Tambuyat (G.R. No. 202805, 23 March
2015)
Question: What are the instances where the erasure, alteration or amendment of a
certificate of title may be restored?
Answer: Under Section 108 of PD 1529, the proceeding for the erasure, alteration, or
amendment of a certificate of title may be resorted to in seven instances: (1) when
registered interests of any description, whether vested, contingent, expectant, or inchoate,
have terminated and ceased; (2) when new interests have arisen or been created which do
not appear upon the certificate; (3) when any error, omission or mistake was made in
entering a certificate or any memorandum thereon or on any duplicate certificate; (4) when
the name of any person on the certificate has been changed; (5) when the registered owner
has been married, or, registered as married, the marriage has been terminated and no
right or interest of heirs or creditors will thereby be affected; (6) when a corporation,
which owned registered land and has been dissolved, has not conveyed the same within
three years after its dissolution; and (7) when there is reasonable ground for the
amendment or alteration of title.

40. RECONSTITUTION OF TITLE

Republic of the Philippines v. Cesar Pasicolan and Gregorio Pasicolan
(G.R. No. 198543, 15 April 2015)

23 | P a g e
Question: Spouses Pasicolan filed a Petition for Reconstitution of the alleged Original
Certificate of Title claiming that they are the legal heir of the late Pedro Callueng who was
the registered owner. The Regional Trial Court granted the petition. However, on appeal,
the Republic through the Office of the Solicitor General claimed that the trial court erred
in making such decision because the spouses failed to present competent evidence that will
show the lost certificate was valid and subsisting at the time of alleged loss and that mere
photocopy of Decree No. 339880 was not sufficient basis to grant reconstitution. Is the
reconstitution proper?
Answer: No. It is imperative that granting Petitions for Reconstitution is not a ministerial
task. It involves diligent and circumspect evaluation of the authenticity and relevance of all
the evidence presented, lest the chilling consequences of mistakenly issuing a reconstituted
title when in fact the original is not truly lost or destroyed.

41. INDEFEASIBILITY OF TITLE

Augusto Ong Trinidad II et. al. v. Spouses Bonifacio Palad and Felicidad Kausapin (G.R.
No. 203397, 9 December 2015)
Question: What are the purposes or effects of Transfer of Certificate of Title?
Answer: Transfer Certificate of Title constitutes as evidence of ownership over the subject
property, which lies within the area covered by said title; it serves as evidence of
indefeasible and incontrovertible title to the property in favor of whose names appear
therein; and that as registered owners, they are entitled to possession of the subject
property.

42. EVIDENTIARY VALUE OF TRANSFER CERTIFICATE OF TITLE

Gina Endaya v. Ernesto V. Villaos (G.R. No. 202426, 27 January 2016)
Question: Should a Transfer Certificate of Title be given more probative weight than
unregistered deed of sale?
Answer: Yes. In resolving the issue of possession in an ejectment case, the registered owner
of the property is preferred over the transferee under an unregistered deed of sale. In the
present case, there is no dispute that petitioner is the holder of a Torrens title over the
entire lot. Respondents have only their notarized but unregistered Kasulatan sa Bilihan to
support their claim of ownership. Thus, even if respondents’ proof of ownership has in its
favor a juris tantum presumption of authenticity and due execution, the same cannot
prevail over petitioner’s Torrens title. It remains true that the registered owner is
preferred to possess the property subject of the unlawful detainer case. The age-old rule is
that the person who has a Torrens Title over a land is entitled to possession thereof.

43. ORIGINAL REGISTRATION

Josephine Wee v. Republic of the Philippines
(G.R. No. 177384, 8 December 2009)
Question: JW purchased a parcel of land from JG and filed an Application for
Registration of Title. The former argued that both of them have been in open, continuous,
public, peaceful and adverse possession of the land since June 12, 1945, as required by the

24 | P a g e
Property Registration Decree. However, the Republic through the Solicitor General
opposed the application stating that JW and JG cannot be in possession and occupation of
the subject property under the bona fide claim of ownership since the subject land became
part of alienable and disposable land only in 1982. In addition, JW failed to prove that she
undertook clear act of dominion and ownership over the land. Is JW entitled to the
registration of the land?
Answer: No. The phrase "adverse, continuous, open, public, peaceful and in concept of
owner," by which characteristics JW describes his possession, are mere conclusions of law
requiring evidentiary support and substantiation. The burden of proof is on her, as
applicant, to prove by clear, positive and convincing evidence that the alleged possession
was of the nature and duration required by law. Bare allegations without more do not
amount to preponderant evidence that would shift the burden of proof to the oppositor.

44. EVIDENTIARY PROOFS IN REGISTRATION OF ORIGINAL LAND TITLES

Republic of the Philippines v. Spouses Dante and Lolita Benigno (G.R. No. 205492, 11
March 2015)
Question: What must an applicant prove for registration of title under PD 1529?
Answer: Applicants for registration of title under PD 152950 must prove: (1) that the
subject land forms part of the disposable and alienable lands of the public domain; and (2)
that they have been in open, continuous, exclusive and notorious possession and occupation
of the land under a bona fide claim of ownership since 12 June 1945 or earlier.

45. SUBSEQUENT REGISTRATIONS; VOLUNTARY DEALINGS

Spouses Bernadette and Rodulfo Vilbar v. Angelito L. Opinion
(G.R. No. 176043, 15 January 2014)
Question: The subject lots were previously owned by DR. Spouses Vilbar claim they
ownership over the subject lots by virtue of Deed of Absolute Sale and Contract to Sell over
Lot 15 and Lot 16, respectively and that they are in actual and peaceful possession of such
lots. However, AO opposed stating that the subject lots were owned by GJ, his predecessor-
in-interest by virtue of a final judgment rendered in favor of the latter. GJ sold the subjects
lots to AO which was issued a transfer certificate of title in its favor. It is to be noted that at
the time AO acquired the property, no annotation whatsoever appears in the certificate of
title covering the subject lots. Who has a better right over the subject lots?
Answer: AO has a better right over the subject lots. The Court notes that Spouses Vilbar
have been in actual and peaceful possession of the subject lots, despite not having paid the
purchase price, at the time GJ filed a case against DR. However, the Court also notes that
the sale of Lot 20 was not annotated on the original title in the name of DR, while only a
Contract to Sell was executed between the Spouses Vilbar and DR as regards Lot 21 which
makes the issuance of the title questionable. The aforementioned Deed of Absolute Sale and
Contract to Sell were not registered and annotated on the original titles in the name of DR.
Under land registration laws, the said properties were not encumbered then, and third
parties need only to rely on the face of the duly issued titles. Consequently, the Court finds
no bad faith on GJ’s part when he bought the properties at public auction free from liens
and encumbrances. Furthermore, the Court recognizes the settled rule that levy on
attachment, duly registered, takes preference over a prior unregistered sale. This result is a
necessary consequence of the fact that the properties involved were duly covered by the

25 | P a g e
Torrens system which works under the fundamental principle that registration is the
operative act which gives validity to the transfer or creates a lien upon the land.

46. GOOD FAITH UNDER A REAL ESTATE MORTGAGE

Evelyn B. Ruiz v. Bernardo F. Dimailig (G.R. No. 204280, 9 November 2016)
Question: BD owned a parcel of and. He entrusted the owner’s copy of the said TCT to JD,
his brother, who in turn gave the title to ES, a broker, for the intended sale. Without the
knowledge and consent of BD, ES mortgaged the property to ER. Upon discovery, BD filed
a complaint for annulment of the Deed of REM arguing that his signature was forged. In
opposition, ER argued that she met JD when she inspected the property and was given
assurance that BD owned the property and the title is genuine. ER claimed that she is a
mortgagee in good faith and the deed of REM cannot be annulled unless the loan was paid.
Is being a mortgagee in good faith be a defense?
Answer: No. As a rule, no valid mortgage will arise unless the mortgagor has a valid title or
ownership over the mortgaged property. By way of exception, a mortgagee can invoke that
he or she derived title even if the mortgagor's title on the property is defective, if he or she
acted in good faith. In such instance, the mortgagee must prove that no circumstance that
should have aroused her suspicion on the veracity of the mortgagor's title on the property
was disregarded. Where the mortgagor is an impostor who only pretended to be the
registered owner, and acting on such pretense, mortgaged the property to another, the
mortgagor evidently did not succeed in having the property titled in his or her name, and
the mortgagee cannot rely on such pretense as what appears on the title is not the
impostor's name but that of the registered owner.

47. NON-REGISTRABLE PROPERTIES

Republic of the Philippines v. AFP Retirement and Separation Benefits System
(G.R. No. 180463, 16 January 2013)
Question: The subject property was reserved for recreation and health purposes by virtue
of Proclamation No. 168. Later, the Republic filed a petition for reversion, cancellation and
annulment of the AFP-RSBS title on the subject property arguing that those titles were
issued over a public park which is classified as inalienable and non-disposable public land.
On the other hand, AFP-RSBS argued that the predecessor-in-interest acquired the subject
property even before Proclamation No. 168 was issued having occupied for the more than
30years. In addition, their vested rights taken together with the favorable
recommendations and actions of the Department of Environment and Natural Resources
and other government agencies will give an effect that the subject property was alienable
and disposable land of the public domain. Are AFP-RSBS have vested rights over the
subject property?
Answer: No. The sales patents over the subject property are null and void, for at the time
the sales patents were applied for and granted, the land had lost its alienable and
disposable character. It was being utilized for a public purpose, that is, as a recreational
park. AFP-RSBS no longer had any right to subject property – not by acquisitive
prescription, and certainly not by sales patent. In fact, their act of applying for the issuance
of miscellaneous sales patents operates as an express acknowledgment that the State, and
not AFP-RSBS, is the owner of subject property.

26 | P a g e
48. LAND OF PUBLIC DOMAIN
Republic of the Philippines v. Angeline L. Dayaoen, Agustina Tauel, and Lawana T.
Batcagan (G.R. No. 200773, 8 July 2015)
Question: The subject property was owned by AP. He gave as a wedding gift the subject
property to DP (grandson) and AD. Later AD sold two portions to AT and LB. the three of
them filed an Application for Registration. During the hearing, the three presented pieces
of documentary evidence to comply the jurisdictional requirements of notices, posting and
publication. In addition, AD testified on the continuous, open, public and exclusive
possession of the subject property. The trial granted the application despite the opposition
of the Office of the Solicitor General. Was the subject property proven to be alienable and
disposable during the hearing?
Answer: No. Under the Regalian doctrine, all lands of the public domain belong to the
State. The classification and reclassification of such lands are the prerogative of the
Executive Department. The President may at any time transfer these public lands from one
class to another.
In Republic v. Cortez, the Court stressed that incontrovertible evidence must be presented
to establish that the land subject of the application is alienable or disposable. To prove that
the land subject of an application for registration is alienable, an applicant must establish
the existence of a positive act of the government such as a presidential proclamation or an
executive order, an administrative action, investigation reports of Bureau of Lands
investigators, and a legislative act or statute. The applicant must also secure a certification
from the Government that the lands applied for are alienable and disposable
The well-entrenched rule is that all lands not appearing to be clearly of private dominion
presumably belong to the State. The onus to overturn, by incontrovertible evidence, the
presumption that the land subject of an application for registration is alienable and
disposable rests with the applicant.

49. QUIETING OF TITLE TO OR INTEREST IN AND REMOVAL OR PREVENTION

OF CLOUD OVER TITLE OR INTEREST IN REAL PROPERTY
Q. What must the plaintiff in a Complaint for Quieting of Title prove in order to have a
cause of action against the defendant?
A. The plaintiff must prove the following: (1) the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the action; and (2) that the deed,
claim, encumbrance or proceeding claimed to be casting a cloud on his title must be shown
to be in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy. (Chung, Jr. v. Modragon, G.R. No. 179754, November 21, 2012)

50. QUIETING OF TITLE

Q. Does a Complaint for Quieting of Title constitute a collateral attack against the title of
the defendant that was purported to be the cloud on the plaintiff's title?
Answer: NO. It is settled that a certificate of title is not subject to collateral attack.
However, while respondents' action is denominated as one for quieting of title, it is in
reality an action to annul and cancel Bernardo Tumaliuan's unnumbered OCT. The
allegations and prayer in their Amended Complaint make out a case for annulment and
cancellation of title, and not merely quieting of title for having successfully proved the
historical acquisition of the property under question. Besides, the case was denominated as

27 | P a g e
one for "Quieting of Titles; Cancellation of Unnumbered OCT/Damages." It has been held
that "the underlying objectives or reliefs sought in both the quieting-of-title and the
annulment-of-title cases are essentially the same - adjudication of the ownership of the
disputed lot and nullification of one of the two certificates of title." Nonetheless, petitioner
should not have been so simplistic as to think that Civil Case No. 6975 is merely a quieting
of title case. It is more appropriate to suppose that one of the effects of cancelling Bernardo
Tumaliuan's unnumbered OCT would be to quiet title over Lot 421; in this sense, quieting
of title is subsumed in the annulment of title case. (Guntalilib v. DelaCruz, G.R. No. 200042,
July 7, 2016, Second Division)

51. CONCEPT OF AN EQUITABLE TITLE

Q. Distinguish legal from equitable title.
Answer: Legal title denotes registered ownership, while equitable title means beneficial
ownership. In the absence of such legal or equitable title, or interest, there is no cloud to be
prevented or removed. (Macalino, Jr. v. Pis-An, G.R. No. 204056, June 1, 2016)

52. RIGHT TO SUCCEED OVER REAL PROPERTY

Q. Lot 123 in Dagat-Dagatan, Navotas forms part of the land previously expropriated by
the National Housing Authority (NHA) and placed under its Tondo Dagat-Dagatan
Foreshore Development Project – where applicants or beneficiaries may purchase lots on
installment basis. Lot 18 was awarded to Spouses Y and Z under a Conditional Contract to
Sell. When Spouses Y and Z died, their heirs executed an Extra-judicial Settlement and
partitioned Lot 123 among themselves. V, meanwhile, claimed to be an illegitimate son of
Z, and sold a portion of Lot 123 to S. Can the heirs of Spouses Y and Z successfully quiet
their title to the land by mere proof of their heirship?
Answer: NO. From the evidence adduced, it appears that the petitioners have failed to
show their qualifications or right to succeed the deceased in his rights under the NHA
program/project. They failed to present any title, award, grant, document or certification
from the NHA or proper government agency which would show that deceased have become
the registered owners/beneficiaries/ awardees of Lots 18 and 19, or that petitioners are
qualified successors or beneficiaries under the Dagat-Dagatan program/project, taking
over deceased’s rights after his death. For this reason, their rights or interest in the
property could not be established. Petitioners should have shown, to the satisfaction of the
courts that under the NHA program project governing the grant of Lots 18 and 19, they
are entitled and qualified to succeed or substitute for the deceased in his rights upon his
death. (Mananquil, et al., v. Moico, G.R. No. 180076, November 21, 2012)

53. CO-OWNERSHIP and PRESCRIPTION

Q. What are the three (3) requisites in order that the title may prescribe in favor of a co-
owner?
Answer: The three (3) requisites are: (1) the co-owner has performed unequivocal acts of
repudiation amounting to an ouster of the other co-owners; (2) such positive acts of
repudiation have been made known to the other co-owners; and (3) the evidence thereof is
clear and convincing. (Ining v. Vega, G.R. No. 174727, August 12, 2013, Second Division,
DEL CASTILLO, J.)

28 | P a g e
54. POSSESSION OF MORTGAGED PROPERTY; PACTUM COMMISSORIUM
Q. Spouses A and B obtained a loan from V Bank in the amount of P250,000.00 secured by
a Real Estate Mortgage over their property. When the spouses defaulted in payment, extra-
judicial foreclosure of mortgage followed where V Bank emerged as the winning bidder. V
Bank was issued the corresponding Certificate of Sale, duly registered with the Register of
Deeds. Upon the spouses’ failure to redeem the property during the one-year period, V
Bank caused the consolidation of ownership of the property in its name. The spouses,
however, refused to vacate the property. Thus, V Bank applied for the issuance of a Writ of
Possession with the RTC. The spouses opposed the issuance of the writ, and claimed that
the Deed of Sale executed by the V Bank in the bank’s own favor during the consolidation
of title constitutes a pactum commissorium, which is prohibited under Article 2088 of the
Civil Code.
(a) Based on the facts above, did the transaction of the parties constitute pactum
commissorium?
Answer: The transaction does not constitute pactum commissorium. Pactum commissorium
is "a stipulation empowering the creditor to appropriate the thing given as guaranty for the
fulfillment of the obligation in the event the obligor fails to live up to his undertakings,
without further formality, such as foreclosure proceedings, and a public sale."
The elements of pactum commissorium, which enable the mortgagee to acquire ownership
of the mortgaged property without the need of any foreclosure proceedings, are: (1) there
should be a property mortgaged by way of security for the payment of the principal
obligation; and
(2) there should be a stipulation for automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal obligation within the stipulated period.
The second element is missing to characterize the Deed of Sale as a form of pactum
commissorium. V Bank did not, upon the petitioners’ default, automatically acquire or
appropriate the mortgaged property for itself. On the contrary, the V Bank resorted to
extrajudicial foreclosure and was issued a Certificate of Sale by the sheriff as proof of its
purchase of the subject property during the foreclosure sale.
(b) Is the issuance of a writ of possession under Act [No.] 3135 subject to the statute of
limitations?
Answer: NO. The purchaser’s right "to request for the issuance of the writ of possession of
the land never prescribes." "The right to possess a property merely follows the right of
ownership," and it would be illogical to hold that a person having ownership of a parcel of
land is barred from seeking possession thereof. (Spouses Edralin v. Phil. Veterans Bank,
G.R. No. 168523, March 9, 2011)

55. ACTION TO RECOVER POSSESSION AND OWNERSHIP

Q. In 1966, Colonel X entered into a Land Purchase Agreement with Y whereby Colonel X
agreed to purchase a parcel of land, covered by TCT No. 1234, located in Antipolo, Rizal.
Upon full payment of the purchase price, a Deed of Absolute Sale was executed on August
31, 1976 in his favor. Consequently, the old title, TCT No. 0001 which was a transfer from
TCT No. 1234 was cancelled and a new one, TCT No. N-7777 was issued in the name of
Colonel X. Since then, he has been dutifully paying real property taxes over the said
property. Being a member of the Philippine Air Force, he was often assigned to various
stations in the Philippines, thus he had not visited the property in a long time. On

29 | P a g e
December 23, 1993, when he was about to retire from the government service, Colonel X
went to visit his property, where he was planning to build a retirement home. It was only
then that he discovered that it was being occupied by petitioner Z and his family.
May X recover the property from Z and what must X prove in order to win his case?
Answer: YES. Article 434 of the Civil Code provides that "in an action to recover, the
property must be identified, and the plaintiff must rely on the strength of his title and not
on the weakness of the defendant’s claim." In other words, in order to recover possession, a
person must prove (1) the identity of the land claimed, and (2) his title.
In this case, respondent Colonel X was able to prove the identity of the property and his
title. To prove his title to the property, he presented in evidence the following documents:
(1) Land Purchase Agreement; (2) Deed of Absolute Sale; and (3) a Torrens title registered
under his name (Jakosalem v. Barangan, G.R. No. 175025, February 15, 2012)

56. ENCROACHMENT OVER PROPERTY OF ANOTHER; BUILDER IN BAD FAITH

Q. An RTC Decision reconveying to X a portion of Lot 123 which was erroneously included
in Y's free patent application became final and executory. In so ruling, the RTC
acknowledged X's actual and exclusive possession, cultivation, and claim of ownership. The
Deed of Conveyance issued in favor of X, however, could not be annotated on the OCT of
Lot 123 because said title had been cancelled because the area over by the title of his
property was included in homestead title of Y. X’s title was cancelled because Y previously
mortgaged the lot to the bank as security for series of loans, and the mortgage was
eventually foreclosed. Thus, title to the lot was transferred to PNB. X filed a complaint
against PNB and Y for Declaration of Nullity of Mortgage, Foreclosure Sale, Reconveyance
and Damages. According to X, PNB was not an innocent purchaser/mortgagee for value.
According to the bank, the action of X had prescribed. Rule on the respective party's
contentions.
Answer: (1) Ruling on PNB’s contention: PNB is not an innocent purchaser for value or
"one who buys the property of another, without notice that some other person has a right
or interest in such property and pays the full price for the same, at the time of such
purchase or before he has notice of the claims or interest of some other person in the
property. PNB has the burden of evidence that it acted in good faith from the time the land
was offered as collateral. However, PNB miserably failed to overcome this burden. There
was no showing at all that it conducted an investigation; that it observed due diligence and
prudence by checking for flaws in the title; that it verified the identity of the true owner
and possessor of the land; and, that it visited subject premises to determine its actual
condition before accepting the same as collateral. A banking institution is expected to
exercise due diligence before entering into a mortgage contract. The ascertainment of the
status or condition of a property offered to it as security for a loan must be a standard and
indispensable part of its operations.

(2) Ruling X’s Action for Reconveyance: An action for reconveyance filed by a person
claiming to be the owner and who is in actual possession of the property does not prescribe.
The reason for this is that one who is in actual possession of a piece of land claiming to be
the owner thereof may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right, the reason for the rule being, that his undisturbed

30 | P a g e
possession gives him a continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third party and its effect on his own title,
which right can be claimed only by one who is in possession. In X’s case, as it has been
judicially established that he is in actual possession of the property he claims as his and
that he has a better right to the disputed portion, his suit for reconveyance is in effect an
action for quieting of title. Hence, PNB’s defense of prescription against X does not lie.
(3) Ruling on Y’s defense: 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. An action for reconveyance based on implied trust
prescribes in 10 years as it is an obligation created by law, to be counted from the date of
issuance of the Torrens title over the property. This rule, however, applies only when the
plaintiff or the person enforcing the trust is not in possession of the property. (PNB v.
Jumamoy, G.R. No. 169901, August 3, 2011)
57. EFFECTS OF POSSESSION OF PERSONAL PROPERTY
Q. X visited the Subic Casino operated by the Subic Bay. He was closely watched by the
surveillance staff because it was unusual for a Filipino to play using dollar-denominated
chips. Since the cashiers were apprised of a supposed irregularity, they "froze" the
transaction when X sought to encash the chips. Subic Bay confiscated the chips, claiming
that X stole them from it. X thus filed a civil case for recovery of sum of money with
damages against Subic. For Subic Bay’s defense, it claimed that Fernandez had no cause of
action since the confiscated casino chips worth were stolen from it, and thus it has the right
to retain them.
Will X's action prosper?
Answer: YES. Article 559 of the Civil Code provides for legal presumption of title of
possessor of the personal property. If Subic Bay cannot prove that the chips were indeed
stolen from it, then Article 559 cannot apply in its favor. Xxx Given this premise, that
casino chips are considered to have been exchanged with their corresponding
representative value, it is with more reason that this Court should require Subic Bay to
prove convincingly and persuasively that the chips it confiscated from Ludwin and Deoven
were indeed stolen from it. (Subic Bay Legend v. Fernandez, G.R. No. 193426, September
24, 2014)

58. EASEMENTS
Q. What are the requisites for entitlement to a right of way?
Answer: To be entitled to an easement of right of way, the following requisites should be
met: (1) An immovable is surrounded by other immovables belonging to other persons, and
is without adequate outlet to a public highway;
(2) Payment of proper indemnity by the owner of the surrounded immovable;
(3) The isolation of the immovable is not due to its owner’s acts; and
(4) The proposed easement of right of way is established at the point least prejudicial to the
servient estate, and insofar as consistent with this rule, where the distance of the dominant
estate to a public highway may be the shortest. (Naga Centrum v. Sps. Orzals, G.R. No.
203576, September 14, 2016)

31 | P a g e
59. EASEMENT OF RIGHT OF WAY
Andres et. Al. v. Sta. Lucia Realty and Development Inc. (G.R. No. 201405, August 24,
2015)
Q. Petitioners are demanding from respondent an easement of right of way. They alleged
that they are co-owners and possessors for more than 50 years of three (3) parcels of
unregistered agricultural land. The 10,500 square meter claimed by petitioners through
extraordinary and ordinary acquisitive prescription remained to be a public agricultural
land.
When respondent acquired the lands surrounding the subject property and developed it
into a residential subdivision, it also built a concrete perimeter fence around it such that
petitioners were denied access from subject property to the nearest public road and vice
versa. They thus prayed for a right-of-way.
Can the petitioners demand an easement of right-of-way from respondent despite the fact
that they have not acquired ownership over the supposed dominant estate?
Answer: Under Article 649 of the Civil Code, an easement of right-of-way may be
demanded by the owner of an immovable or by any person who by virtue of a real right
may cultivate or use the same.
It appears that the subject property is an unregistered public agricultural land. Thus, being
a land of the public domain, petitioners, in order to validly claim acquisition thereof
through prescription, must first be able to show that the State has -expressly declared
through either a law enacted by Congress or a proclamation issued by the President that
the subject [property] is no longer retained for public service or the development of the
national wealth or that the property has been converted into patrimonial.
Consequently, without an express declaration by the State, the land remains to be a
property of public dominion and hence, not susceptible to acquisition by virtue of
prescription.
In the absence of such proof of declaration in this case, petitioners' claim of ownership over
the subject property based on prescription necessarily crumbles. Conversely, they cannot
demand an easement of right-of-way from respondent for lack of personality.
60.DONATIONS
Q. X is the registered owner of a parcel of land issued in 1986 pursuant to an emancipation
patent. X filed a case for Forcible Entry against Y who, with violence, ousted X from the
land. Y filed a Motion to Dismiss claiming that the land was agricultural land which
allegedly rendered the dispute an agrarian matter within the jurisdiction of the DAR. Y
also claimed that he obtained title through Z whose claim to the property is by virtue of an
unregistered Deed of Donation executed prior to 1972.
(a) Is the case an agrarian dispute which divests the regular court of jurisdiction?
Answer: No. A case involving an agricultural land does not immediately qualify as an
agrarian dispute. For the DAR to acquire jurisdiction over the case, there must be a
tenancy relationship between the parties. It is necessary to establish the indispensable
elements of tenancy:
(1) that the parties are the landowner and tenant or agricultural lessee;
(2) the subject matter of the relationship is an agricultural land;
(3)there is consent between the parties to the relationship; 4)that the purpose of the
relationship is bring about agricultural production;

32 | P a g e
(5) that there is personal cultivation on the part of the tenant or agricultural lessee; and
(6) that the harvest is shared between the parties. In this case, not all the conditions are
present.

(b) Is X bound by the unregistered deed of donation?

Answer: No. In order that the donation of an immovable may be valid, it must be made in a
public document. Article 709 explicitly states that “the titles of ownership, or other rights
over immovable property, which are not duly inscribed or annotated in the Registry of
Property shall not prejudice third persons.” Although the non-registration of a deed of
donation shall not affect its validity, the necessity of registration comes into play when the
rights of third persons are affected, as in the case at bar. The donation executed in this
case, although in writing and duly notarized, has not been registered in accordance with
law. When X’s title was issued in 1986, it became indefeasible and incontrovertible.
Certificates of title issued pursuant to emancipation patents acquire the same protection
accorded to other titles, and become indefeasible upon expiration of one year from the date
of the issuance of the order for the issuance of the patent. Land so titled may no longer be
the subject matter of a cadastral proceeding; nor can they be decreed to other individuals.
(Bumagat, et al. v.Arribay, GR No. 194818, June 9, 2014)

61. RIGHT TO INHERIT OF A RELATIVE BY AFFINITY

Antipolo Ining, et. al v. Leonardo Vega, et al. (G.R. No. 174727, August 12, 2013)
QUESTION: R and G are siblings. In 1997, L, the grandson of R, filed an Action for
Partition claiming that he was entitled to one-half of the property, being R’s heir. G’s heirs
claimed that he has no cause of action as they have become the land’s sole owners through
Lucimo Sr. who executed an Affidavit of Ownership of the Land in 1979, having acquired
it through sale as early as 1943. From then on, Lucimo Sr. enjoyed possession of the
property. This resulted to the repudiation of the co-ownership. Lucimo Sr. appeared to be
the husband of Teodora, Antipolo’s daughter. Antipolo is one of the children of G.
(a) Did L’s right prescribe because 30 years had already lapsed?
Answer: NO, Leonardo’s right did not prescribe. Since Leon died without issue, his heirs
are his siblings, R and G, who thus inherited the property in equal shares. In turn, R’s and
G’s heirs – the parties herein – became entitled to the property upon the sisters’ passing.
Under Article 777 of the Civil Code, the rights to the succession are transmitted from the
moment of death.
For prescription to set in, the repudiation must be done by a co-owner.
Time and again, it has been held that "a co-owner cannot acquire by prescription the share
of the other co-owners, absent any clear repudiation of the co-ownership. In order that the
title may prescribe in favor of a co-owner, the following requisites must concur: (1) the co-
owner has performed unequivocal acts of repudiation amounting to an ouster of the other
co-owners; (2) such positive acts of repudiation have been made known to the other co-
owners; and (3) the evidence thereof is clear and convincing."

(b) Is Lucimo, Jr. a co-owner of the heirs of R and G?

Lucimo, Jr. cannot be considered as a co-owner as he was just the son-in law of Antipolo,
being married to his daughter Teodora. Lucimo is not an heir of Gregoria hence not a co-
owner.

33 | P a g e
 A family relation under Article 150 of the Family Code is confined to husband and wife,
parents and children, ascendants and descendants and brothers and sisters. It was
Teodora who is the co-owner, not Lucimo as he is merely related by affinity to the
decedent.
The Court concluded that one who is merely related by affinity to the decedent does not
inherit from the latter and cannot become a co-owner of the decedent’s property.
Consequently, he cannot effect a repudiation of the co-ownership of the estate that was
formed among the decedent’s heirs.

62. Republic vs. Daclan, et al. (G.R. No. 197115/197267, March 23, 2015)
Q: Federico Daclan, et al. donated about thirteen hectares of land to the government,
subject to the condition that it would be used as a breeding station and shall not be used for
any purpose except with the prior consent of the donors or their heirs.
The Agoo Breeding Station was established by the Department of Agriculture (DA),
through the Bureau of Animal Industry (BAI), which later became defunct. In 1991, the
powers and functions of the DA devolved to the Province of La Union.
Daclan and the other co-owners of the property demanded for the return of the donated
land on the ground that since BAI was abolished, the breeding station as originally
intended can no longer be served.
Rule on the argument of the donors.
Answer: The fact that BAI ceased to exist and its functions were devolved to the Province
of La Union, should not result to the nullification of the Deed of Donation. As a general
rule, rights and obligations derived from contract are transmissible. The preponderance of
evidence points to the fact that the breeding station remained operational even after its
transfer from the Republic to the Province.  The activities of the BAI did not cease even
after it was dissolved after the government adopted the policy of devolution under the
Local Government Code of 1991; these activities were merely transferred to the Province.
As against the bare assertions of the Daclans that the breeding station was abandoned and
became non-operational, the testimonies of the public officers are credible. 
While the breeding station may have been transferred to the Province of La Union by the
Department of Agriculture as a consequence of devolution, it remained as such, and
continued to function as a breeding station; and the purpose for which the donations were
made remained and was carried out.  Besides, the deeds of donation did not specifically
prohibit the subsequent transfer of the donated lands by the donee Republic.  The Daclans
should bear in mind that “contracts take effect between the parties, their assigns and heirs,
except in cases where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law.”  Thus, as a general
rule, rights and obligations derived from contract are transmissible.

63. PRESCRIPTION: ACQUISITIVE AND EXTINCTIVE PRESCRIPTION

Q. May X’s possession of Y’s land, which possession was tolerated by Y for 25 years, ripen
into X’s full ownership over the said land?

34 | P a g e
A. No. Acts that might have been merely tolerated by the owner do not constitute
possession to commence the running of the prescriptive period. (Olegario v. Mari, GR No.
147951, December 14, 2009)
64. CO-OWNERSHIP AND EASEMENT OR RIGHT OF WAY
Q. Petitioners are co-owners for more than 50 years of an unregistered agricultural land in
Rizal. Respondent owns the lands surrounding the petitioner’s property. Respondent
developed the lands, built a concrete perimeter fence around it. As a result, petitioners
were denied access from their property to the nearest public road and vice versa.
Petitioners filed a Complaint for Easement or Right of Way before the RTC to gain access
to the public road. Should the Complaint be granted?
Answer: No. Under Article 649 of the Civil Code, an easement of right of way may be
demanded by the owner or an immovable or by any person who by virtue of a real right
may cultivate or use the same. Only lands of the public domain subsequently declared as
such and no longer intended for public use or for development of national wealth, or
removed from the sphere of public dominion are considered converted into patrimonial
lands or lands of private ownership. The property in this case, being an unregistered
agricultural land, is a land of public domain. Petitioners, in order to validly claim
acquisition thereof through prescription must first be able to show that the state has
expressly declared through either a law enacted by Congress or a proclamation issued by
the President that the subject property is no longer retained for public service or
development of national wealth or that the property has been converted into patrimonial.
Thus, no right of way may be granted to petitioners. (Andres v. Realty & Development Inc.,
GR No. 201405, August 24, 2015)

65. OBLIGATIONS: NATURE AND EFFECTS OF OBLIGATION

Q. Y is engaged in the business of producing cement. He obtained the services of X for the
repair of his drive motor. X, however, incurred delay and failed to repair the drive motor
at the agreed time. Y gave X around 3 chances, but X still failed to repair the drive motor.
Thus, Y filed a Complaint for Sum of Money and Damages against X where Y alleged that
he incurred production losses, as well as labor cost and rental of a crane. Y also claimed for
Penalties for failure of X to repair the drive motor. X, however, invoked Clause 7 of the
General Conditions attached to his previous letter of offer to Y which provides that liability
of X does not extend to consequential damages either direct or indirect. Rule on the parties'
contention.
Answer: (1) Ruling of X’s Right to Invoke Clause 7: Clause 7 of the General Conditions is
not binding on Y because X failed to show that Y was duly furnished with a copy of said
General Conditions. Having breached the contract it entered with Y, X is liable for
damages pursuant to Articles 1167, 1170, and 2201 of the Civil Code, which state:
Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at
his cost. This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore, it may be decreed that what has been poorly done be undone.
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages. Based on the foregoing, a repairman who fails to perform his
obligation is liable to pay for the cost of the execution of the obligation plus
damages.

35 | P a g e
 Article 2201. In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non-performance of the obligation.
(2) Ruling on Y’s contention: Y is entitled to penalties. Under Article 1226 of the Civil
Code, the penalty clause takes the place of indemnity for damages and the payment of
interests in case of non-compliance with the obligation, unless there is a stipulation to the
contrary.
However, Y is not entitled to production, labor losses and crane rental. (G.R. No. 171660,
October 17, 2011 , Continental Cement Corp. vs. Asia Brown)

66. MUTUUM
Bankard v. Alarte (G.R. No. 202573, April 19, 2017)
Q: Petitioner Bankard, Inc. (Bankard, now RCBC Bankard Services Corporation) is a duly
constituted domestic corporation doing business as a credit card provider, extending credit
accommodations to its member-cardholders for the purchase of goods and services
obtained from Bankard-accredited business establishments, to be paid later on by the
member-cardholders following billing.
What is the nature of a credit card transaction?
Answer: Credit card transactions are simple loan arrangements between the card
issuer and the card holder. It actually involves three (3) contracts:
(a) the sales contract between the credit card holder and the merchant;
(b) the loan agreement between the credit card issuer and the credit card holder;
and
(c) the promise to pay between the credit card issuer and the merchant.

67. EFFECT OF RESCISSION OF CONTRACT

Goldloop Properties Inc. v. Government Service Insurance System
(G.R. No. 171076, 1 August 2012)
Question: What is the effect of rescission of contract?
Answer: In cases involving rescission under Article 1191, mutual restitution is required.
The parties should be brought back to their original position prior to the inception of the
contract. "Accordingly, when a decree of rescission is handed down, it is the duty of the
court to require both parties to surrender that which they have respectively received and to
place each other as far as practicable in [their] original situation.” If both parties failed to
comply with their respective obligations, Article 1192 will be applied which reads, “In case
both parties have committed a breach of the obligation, the liability of the first infractor
shall be equitably tempered by the courts. If it cannot be determined which of the parties
first violated the contract, the same shall be deemed extinguished, and each shall bear his
own damages.”

36 | P a g e
68. ENFORCMENT OF A CONDITION UNDER A CONTRACT
Heirs of Mario Pacres, namely: Valentina Vda. De Pacres, et. al. v. Heirs of Cecilia Ygoña,
namely Baudillo Ygoña Yap, et. al. (G.R. No. 174719, 5 May 2010)
Question: The siblings IJKL sold their shares in the property to Y. They allege that when Y
bought portions of the property, aside from the paying the purchase price, she also bound
herself to survey the property including the shares of the MNOP (the non-selling siblings);
to deliver to IJKL, free of cost, the titles corresponding to their definite shares in the
property; and to pay for all their past and present estate and realty taxes. According to
IJKL, Y agreed to these undertakings as additional consideration for the sale, even though
they were not written in the Deeds of Sale. Can the alleged additional obligations be
enforced against Y?
Answer: No. In the first place, under Article 1311 of the Civil Code, contracts take effect
only between the parties, their assigns and heirs (subject to exceptions not applicable here).
Thus, only a party to the contract can maintain an action to enforce the obligations arising
under said contract. Consequently, petitioners, not being parties to the contracts of sale
between Y and the IJKL’s siblings, cannot sue for the enforcement of the supposed
obligations arising from said contracts.
It is true that third parties may seek enforcement of a contract under the second paragraph
of Article 1311, which provides that "if a contract should contain some stipulation in favor
of a third person, he may demand its fulfillment." While petitioners claim that there was
an oral stipulation, it cannot be proven under the Parol Evidence Rule. Under this Rule,
when the terms of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written
agreement.
The Parol Evidence Rule applies to "the parties and their successors in interest."
Conversely, it has no application to a stranger to a contract. For purposes of the Parol
Evidence Rule, a person who claims to be the beneficiary of an alleged stipulation pour
autrui in a contract (such as petitioners) may be considered a party to that contract. It has
been held that a third party who avails himself of a stipulation pour autrui under a contract
becomes a party to that contract. This is why under Article 1311, a beneficiary of a
stipulation pour autrui is required to communicate his acceptance to the obligor before its
revocation.

69. REFORMATION OF INSTRUMENTS

Salun-At Marquez and Nestor Dela Cruz v. Eloisa Espejo, et. al. (G.R. No. 168387, 25
August 2010)
Question: What is the rule in case there is doubt as to the contents of the contract?
Answer: When the parties admit the contents of written documents but put in issue
whether these documents adequately and correctly express the true intention of the parties,
the deciding body is authorized to look beyond these instruments and into the
contemporaneous and subsequent actions of the parties in order to determine such intent.
Well-settled is the rule that in case of doubt, it is the intention of the contracting parties
that prevails, for the intention is the soul of a contract, not its wording which is prone to
mistakes, inadequacies, or ambiguities. To hold otherwise would give life, validity, and
precedence to mere typographical errors and defeat the very purpose of agreements.

37 | P a g e
70. UNENFORCEABLE CONTRACTS
Elena Jane Duarte v. Miguel Samuel A.E. Duran (G.R. No. 173038, 14 September 2011)
Question: When may a party seek the application of the Statute of Frauds?
Answer: The Statute of Frauds applies only to executory, and not to completed, executed or
partially executed contracts.

71. VOID AND INEXISTENT CONTRACTS

Luz S. Nicolas v. Leonora C. Mariano (G.R. No. 201070, 1 August 2016)
Question: What is effect if both parties are in pari delicto?
Answer: When both parties are in pari delicto or in equal fault, none of them may expect
positive relief from the courts in the interpretation of their agreement; instead, they shall
be left as they were at the time the case was filed.

72. AGENCY: NATURE, FORM AND KINDS OF AGENCY

William Angidan Siy v. Alvin Tomlin (G.R. No. 205998, 24 April 2017)
Question: What are the kinds of agency?
Answer: Articles 1869 provides that: Agency may be express, or implied from the acts of
the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority. Agency may be oral,
unless the law requires a specific form.
Article 1870 provides that: Acceptance by the agent may also be express or implied from
his acts which carry out the agency, or from his silence or inaction according to the
circumstances.

73. OBLIGATIONS OF THE AGENT

Nicanora G. Bucton (deceased), substituted by Requilda B. Yray (Petitioner) v. Rural bank
of El Salvador, Inc., Misamis Oriental, and Reynaldo Cuyong (Respondents) v. Erlinda
Concepcion and her husband and Agnes Bucton Lugod (Third-Party Defendants) (G.R.
No. 179625, 24 February 2014)
Question: NB filed a complaint for Annulment of Mortgage, Foreclosure and Special
Power of Attorney against EC and RBES Bank. NB alleged that she is the owner of a parcel
of land. She gave EC the TCT of the parcel of land thinking that the latter will just show it
to a possible buyer. Unfortunately, EC obtained a loan from RBES Bank and as security,
she mortgaged the property. Due to failure to settle the loan, the property was foreclosed
and sold in favor of RBES Bank. NB claimed that she did not allow EC to mortgage the
property. Is there an agency relationship between NB and EC?
Answer: No. In order to bind the principal by a deed executed by an agent, the deed must
upon its face purport to be made, signed and sealed in the name of the principal. In other
words, the mere fact that the agent was authorized to mortgage the property is not
sufficient to bind the principal, unless the deed was executed and signed by the agent for
and on behalf of his principal.
In this case, the authorized agent failed to indicate in the mortgage that she was acting for
and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that
it was signed by EC in her own name and in her own personal capacity. In fact, there is

38 | P a g e
nothing in the document to show that she was acting or signing as an agent of NB. Thus,
consistent with the law on agency and established jurisprudence, NB cannot be bound by
the acts of EC.
EC acted beyond the scope of his authority.

74. CREDIT TRANSACTIONS: LOAN

Jocelyn M. Toledo v. Marilou M. Hyden (G.R. No. 172139, 8 December 2010)
Question: Is the stipulated interest of 6%-7% monthly interest excessive, iniquitous,
unconscionable and exorbitant?
Answer: The disputed 6% to 7% monthly interest rate is not iniquitous or unconscionable
where there was no urgency of the need for money on the part of the debtor which
compelled her to enter into the loan transactions. rebate on her sales. This is the reason
why she did not mind the 6% to 7% monthly interest.
It was clearly shown that before the debtor availed of said loans, she knew full well that the
same carried with it an interest rate of 6% to 7% per month, yet she did not complain. The
debtor cannot now go to court to have the said interest rate be annulled on the ground that
it is excessive, iniquitous, unconscionable, exorbitant, and absolutely revolting to the
conscience of man. This is so because among the maxims of equity are (1) he who seeks
equity must do equity, and (2) he who comes into equity must come with clean hands. It
signifies that a litigant may be denied relief by a court of equity on the ground that his
conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful as to the
controversy in issue.

75. PERFECTION OF A CONTRACT OF LOAN

Spouses Wilfredo Palada and Brigida Palada v. Solidbank Corporation and Sheriff Mayo
Dela Cruz (G.R. No. 172227, 29 June 2011)
Question: When is a contract of loan considered perfected?
Answer: Under Article 1934 of the Civil Code, a loan contract is perfected only upon the
delivery of the object of the contract. In a contract of loan with a bank, although
petitioners applied for a ₱3 million loan, only the amount of ₱1 million was approved by
the bank because petitioners became collaterally deficient. Therefore, only the amount of
₱1 million was released by the bank to petitioners. Upon receipt of the approved loan,
petitioners executed a promissory note for the amount of ₱1 million. As security,
petitioners on the same day executed in favor of the bank a real estate mortgage over the
properties. Clearly, the loan contract was perfected when petitioners received the ₱1
million loan, which was the object of both the promissory note and the real estate mortgage
executed by petitioners in favor of the bank.

76. CREDIT TRANSACTIONS: “HOLD-OUT STATUS OF A BANK ACCOUNT

Metropolitan Bank and Trust Company v. Ana Grace Rosales and Yo Yuk To
(G.R. No. 183204, 13 January 2014)
Question: AR and YT attempted several times to withdraw their deposits but MBTC
refused stating that their bank accounts were placed under “Hold Out” status. No
explanation was given to them. Thus, they filed a complaint for Breach of Obligation and
Contract with Damages and prayed that the Hold Out status be lifted and be allowed to
withdraw their deposits. Is the Hold Out status bank account of proper?

39 | P a g e
Answer: No. Bank deposits, which are in the nature of a simple loan or mutuum, must be
paid upon demand by the depositor.
The "Hold Out" clause applies only if there is a valid and existing obligation arising from
any of the sources of obligation enumerated in Article 1157 of the Civil Code, to wit: law,
contracts, quasi-contracts, delict, and quasi-delict. In this case, MBTC failed to show that
AR and YT have an obligation to it under any law, contract, quasi-contract, delict, or
quasi-delict. And although a criminal case was filed by MBTC against AR, this is not
enough reason for petitioner to issue a "Hold Out" order as the case is still pending and no
final judgment of conviction has been rendered against AR. In fact, it is significant to note
that at the time MBTC issued the "Hold Out" order, the criminal complaint had not yet
been filed. Thus, considering that AR is not liable under any of the five sources of
obligation, there was no legal basis for MBTC to issue the "Hold Out" order. In view of the
foregoing, we find that MBTC is guilty of breach of contract when it unjustifiably refused
to release AR’s and YT’s deposit despite demand. Having breached its contract with AR
and YT, MBTC is liable for damages.
77. CREDIT TRANSACTIONS – BANK DEPOSITS ARE COVERED BY THE
PRINCIPLES ON MUTUUM
Metro Bank v. Rosales and Yo Yuk To (G.R. No. 183204, January 13, 2014)
Question: In 2000, Rosales and Yo Yuk To opened a Joint Peso Account with Metrobank,
Pritil Branch. In May 2002, Rosales also accompanied Liu Chiu Fang, a Taiwanese, in
opening an account with Metrobank, Escolta Branch. In March 2003, Rosales and Yo Tuk
To opened a Joint Dollar Account with Metrobank, Pritil Branch. In July 2003, Metrobank
issued a “Hold-out Order” against Rosales and Yo Yuk To’s account. A case of Estafa was
filed against respondent Rosales and an unidentified woman for unauthorized and
fraudulent withdrawal of US$75,000 from Liu Chiu Fang’s Account.
Rosales and Yo Yuk To filed a complaint against Metrobank for Breach of Obligation and
Contract with Damages.
Did Metrobank commit a breach of contract with its depositors?
Answer: Yes, Metrobank committed breach of contract and is liable for damages.Bank
deposits are in the nature of a simple loan or mutuum and therefore must be paid upon
demand by the depositor. The “Hold-out” clause in the Application and Agreement for
Deposit Account applies only if there is a valid and existing obligation arising from any of
the sources of obligation enumerated under Article 1157 of the Civil Code, such as law,
contracts, quasi-contracts, delict and quasi-delict.

78. KINDS OF OBLIGATIONS: PURE AND CONDITIONAL OBLIGATIONS

Question: Q bought a house and lot from ABC Development Corp under a Contract to Sell.
After a year, Q in turn sold said house and lot to X also under a Contract to Sell.
Immediately after the execution of the said second contract, X took possession for the
property. However, except for the Php.200,000 downpayment, X failed to pay any of the
stipulated subsequent amortization payments. Q filed before the RTC a Complaint for
Rescission of Contract and Damages against the X praying for the rescission of the
contract. In his answer, X averred that he was willing to pay the total balance after a 60-
day extension to pay the same. During the time that he was ready to pay the said amount,
Q failed to show up. Subsequently, X sent Q a letter expressing her desire to pay the

40 | P a g e
balance, but received no response from the latter. X prayed that the court fix the period
within which he can pay the Q.
(a) Did Q avail of the proper remedy before the court?
Answer: No. In a contract to sell, payment of the price is a positive suspensive condition.
The failure of which is not a breach of contract warranting rescission under Article 1191
of the Civil Code but rather just an event that prevents the supposed seller from being
bound to convey title to the supposed buyer. Also, Article 1191 cannot be applied to sales of
real property on installment since they are governed by the Maceda Law (RA 6552).
(b) Was there a valid tender of payment by X?
Answer: No. To have the effect of payment and the consequent extinguishment of the
obligation to pay, the law requires the companion acts of tender of payment and
consignation. Here, the subject letter merely states X’s willingness and readiness to pay but
it was not accompanied by payment. Tender of payment is the manifestation by the debtor
of a desire to comply with or pay an obligation.

41 | P a g e
If refused without just cause, the tender of payment will discharge the debtor of the
obligation to pay but only after a valid consignation of the sum due shall have been made
with the proper court. Consignation is the deposit of the proper amount with a judicial
authority in accordance with rules prescribed by law, after the tender of payment has been
refused or because of circumstances which render direct payment to the creditor
impossible or inadvisable. When a tender of payment is made in such a form that the
creditor could have immediately realized payment if he had accepted the tender, followed
by a prompt attempt of the debtor to deposit the means of payment in court by way of
consignation, the accrual of interest on the obligation will be suspended from the date of
such tender. But when the tender of payment is not accompanied by the means of payment,
and the debtor did not take any immediate step to make a consignation, then interest is not
suspended from the time of such tender.

(c) Should Article 1186 be applied in this case?

Answer: No. Art. 1186 is inapplicable to this case. The said provision explicitly speaks of a
situation where it is the obligor who voluntarily prevents fulfillment of the condition. Here,
Q is not the obligor but the obligee. Moreover, even if this significant detail is to be ignored,
the mere intention to prevent the happening of the condition or the mere placing of
ineffective obstacles to its compliance, without actually preventing fulfillment is not
sufficient for the application of Art. 1186. Two requisites must concur for its application, to
wit: (1) intent to prevent fulfillment of the condition; and, (2) actual prevention of
compliance. (Sps Bonostro vs. Sps. Luna, G.R. No. 172346, July 24, 2013)

79. Mackay v. Spouses Caswell et. al. (G.R. No. 183872, November 17, 2014)
Question: Spouses Caswell engaged the services of Owen Mackay to provide electrical
installation in their newly-built house at the contract cost of P250,000.00. Owen turned
over to Spouses Caswell the electrical installation ready for power service connection.
However, when Zambales Electrical Cooperative inspected the installation and tested
power distribution, the same showed defects which needed to be corrected. Spouses
Caswell incurred the amount of P50,000.00 to rectify the mistake. Thereafter, Spouses
Caswell required Owen to secure a permit and to subject the transformer to testing. Owen
could not be found. This prompted Spouses Caswell to institute an action against him.
Did Spouses Caswell have a cause of action aginst Owen?
Answer: YES, under Article 1715 of the Civil Code, if the work of a contractor has defects
which destroy or lessen its value or fitness for its ordinary or stipulated use, he may be
required to remove the defect or execute another work. If he fails to do so, he shall be liable
for the expenses by the employer for the correction of the work. The demand required of
the employer under the subject provision need not be in a particular form.

80. JOINT AND SOLIDARY OBLIGATIONS

Q. What is a solidary obligation?
A. There is a solidary liability only when the obligation expressly so states, when the law so
provides or when the nature of the obligation so requires.

42 | P a g e
81. EXTINGUISHMENT OF OBLIGATIONS: PAYMENT OR PERFORMANCE
Q. A dacion en pago was executed between a bank and its debtor and it was worded as
follows:
“THAT, the ASSIGNOR acknowledges to be justly indebted to the ASSIGNEE in
the sum of ELEVEN MILLION EIGHT HUNDRED SEVENTY-EIGHT
THOUSAND EIGHT HUNDRED PESOS (P11,878,800.00), Philippine Currency as
of August 25, 1998. Therefore, by virtue of this instrument, ASSIGNOR hereby
ASSIGNS, TRANSFERS, and CONVEYS AND SETS OVER [TO] the ASSIGNEE
that real estate with the building and improvements existing thereon, more
particularly described as follows:
xxxx
of which the ASSIGNOR is the registered owner being evidenced by TCT No. x x x
issued by the Registry of Deeds of Trece Martires City.
THAT, the ASSIGNEE does hereby accept this ASSIGNMENT IN PAYMENT OF
THE TOTAL OBLIGATION owing to him by the ASSIGNOR as above-stated”
The debtor claimed that the bank's acceptance of the assignment, without any reservation
or exception, resulted in the extinguishment of the entire loan obligation. Is the debtor
correct?
Answer: Yes. Like in all contracts, the intention of the parties to the dation in payment is
paramount and controlling. The contractual intention determines whether the property
subject of the dation will be considered as the full equivalent of the debt and will therefore
serve as full satisfaction for the debt. The dation in payment extinguishes the obligation to
the extent of the value of the thing delivered, either as agreed upon by the parties or as may
be proved, unless the parties by agreement, express or implied, or by their silence, consider
the thing as equivalent to the obligation, in which case the obligation is totally extinguished.
In the case at bar, the dacion en pago executed by DELTA and the BANK indicates a clear
intention by the parties that the assigned properties would serve as full payment for
DELTA's entire obligation without any reservation or condition, the dacion stated that the
assigned properties served as full payment of DELTA's total obligation to the BANK.
(Luzon Dev't Bank v. Enriquez, G.R. No. 168646, January 12, 2011)

82. VALID CONSIGNATION

Q. What are the requirements for a valid consignation?
Answer: For consignation to be valid, the debtor must comply with the following
requirements under the law: 1) there was a debt due; 2) valid prior tender of payment,
unless the consignation was made because of some legal cause provided in Article 1256; 3)
previous notice of the consignation has been given to the persons interested in the
performance of the obligation; 4) the amount or thing due was placed at the disposal of the
court; and, 5) after the consignation had been made, the persons interested were notified
thereof:
"Failure in any of the requirements is enough ground to render a consignation
ineffective.” (PNB v. Chan, G.R. No. 206037, March 13, 2017)
83. COMPENSATION
Q. What are the requirements in order for legal compensation to take place and extingusih
an obligation?

43 | P a g e
Answer: For legal compensation to take place, the requirements set forth in 1279 of the
Civil Code must be present, namely: (1) That each one of the obligors be bound principally,
and that he be at the same time a principal creditor of the other; (2) That both debts
consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated; (3) That the two debts be due; (4)
That they be liquidated and demandable; (5) That over neither of them there be any
retention or controversy, commenced by third persons and communicated in due time to
the debtor.

84. OFFSETTING AS A WAY TO EXTINGUISH OBLIGATION

Q. Montemayor filed a Complaint for a Sum of Money against her lawyer, Atty. Millora,
for the payment of a loan that Montemeayor extended to Atty. Millora that remained
unpaid despite demand. In Atty. Millora’s Answer, he interposed a counterclaim for
payment of Attorney's fees previously rendered to Montemayor. In the RTC's judgment,
Atty. Millora was ordered to pay his monetary obligation to Montemyor while
Montemayor was ordered to pay Atty. Milloria professional fees. The RTC dispositive
portion of the decision provides:
“WHEREFORE, premises above-considered, JUDGMENT is hereby rendered
ordering defendant Vicente D. Millora to pay plaintiff Jesus M. Montemayor the
sum of ₱300,000.00 with interest at the rate of 12% per annum counted from the
filing of the instant complaint on August 17, 1993 until fully paid and whatever
amount recoverable from defendant shall be set off by an equivalent amount
awarded by the court on the counterclaim representing attorney’s fees of defendant
on the basis of "quantum meruit" for legal services previously rendered to plaintiff.”
Y argued that offsetting cannot be made because the judgment of the RTC failed to specify
the amount of attorney’s fees and for offsetting to apply, the two debts must be liquidated
or ascertainable. Decide.
Answer: Offsetting may be made on the two obligations. A debt is considered liquidated,
not only when it is expressed already in definite figures which do not require verification,
but also when the determination of the exact amount depends only on a simple arithmetical
operation. When the defendant, who has an unliquidated claim, sets it up by way of
counterclaim, and a judgment is rendered liquidating such claim, it can be compensated
against the plaintiff’s claim from the moment it is liquidated by judgment. In the instant
case, both obligations are liquidated. Y has the obligation to pay his debt due to X in the
amount of ₱300,000.00 with interest at the rate of 12% per annum counted from the filing
of the instant complaint on August 17, 1993 until fully paid. Y, on the other hand, has the
obligation to pay attorney’s fees which the RTC had already determined to be equivalent to
whatever amount recoverable from Vicente. The said attorney’s fees were awarded by the
RTC on the counterclaim of Atty. Millora on the basis of "quantum meruit" for the legal
services he previously rendered to Montemayor. (Montemayor v. Millora, G.R. No. 168251,
July 27, 2011)

85. CONTRACTS: ESSENTIAL REQUISITES

Q. What are the essential elements of a contract of sale?

44 | P a g e
Answer: The essential elements of a contract of sale are: a) consent or meeting of the
minds; b) determinate subject matter; and c) price certain in money or its equivalent.
(Robern Development Corp. vs. Bernardo, G.R. No. 173622, March 11, 2013)
86. CREDIT TRANSACTION – UNCONSCIONABLE INTEREST
Question: Sps. Tan were the former registered owners of a land situated in Bulacan. On
February 17, 1994, they entered into an agreement with Sps. Castro denominated as
Kasulatan ng Sanglaan ng Lupa at Bahay (Kasulatan) to secure a loan of ₱30,000.00 they
obtained from the latter. Under the Kasulatan, the spouses Tan undertook to pay the
mortgage debt within six months or until August 17, 1994, with an interest rate of 5% per
month, compounded monthly. For failure to pay the loan, the mortgage was foreclosed and
the Sps. Castro emerged as the winning bidder. Sps. Tan filed a Complaint for Nullification
of Mortgage and Foreclosure and/or Partial Rescission of Documents and Damages before
the RTC, alleging that the interest rate imposed is unconscionable. If you were the judge,
will you grant the Complaint?
Answer: YES. The 5% monthly interest, compounded monthly, is unconscionable and
should be equitably reduced to the legal rate of 12% per annum. While the parties to a loan
agreement have wide latitude to stipulate on any interest rate in view of the Central Bank
Circular No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective
January 1, 1983, it is also worth stressing that interest rates whenever unconscionable may
still be declared illegal. There is certainly nothing in said circular which grants lenders
carte blanche authority to raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets.
The 5% monthly interest is excessive, iniquitous, unconscionable and exorbitant, contrary
to morals, and the law. It is therefore void ab initio for being violative of Article 1306 of the
Civil Code. In Abe v. Foster Wheeler Corporation, the Court held that the freedom of
contract is not absolute. The same is understood to be subject to reasonable legislative
regulation aimed at the promotion of public health, morals, safety and welfare. (Castro v.
Tan, G.R. No. 168940, November 24, 2009)

87. STIPULATION ON RESCISSION

Q. May the parties to a contract validly stipulate its rescission?
Answer: YES. Parties may validly stipulate the unilateral rescission of a contract. Such is
the case here since the parties conferred upon GSIS the right to unilaterally rescind the
MOA. It is basic that a contract is the law between the parties, and the stipulations therein
– provided that they are not contrary to law, morals, good customs, public order or public
policy – shall be binding as between the parties. (Goodloop Properties vs. GSIS, G.R. No.
171076, August 1, 2012)

88. PURCHASE OF REAL PROPERTY ON INSTALLMENT

Q. Interested in a lot being developed by Moldex Realty, Inc. (Moldex), Z asked Moldex
that said lot be reserved in her favor. Z opted to pay on installment and began making
periodical payments from 1992 to 1996. For failure to pay, Moldex sent Z a Notarized
Notice of Cancellation of Reservation Application and/or Contract to Sell. Z, on the other
hand, filed before the Housing and Land Use Regulatory Board (HLURB) Regional Field
Office a Complaint for the annulment of the contract to sell, recovery of all her payments
with interests, damages, and the cancellation of Moldex’s license to sell. Z alleged that the

45 | P a g e
contract to sell between her and Moldex is void from its inception. According to Z, Moldex
violated Section 5 of Presidential Decree (PD) No. 957when it sold the subject lot to her
before it was issued any license to sell. Z likewise claimed that Moldex violated Section 17
of the same law because it failed to register the contract to sell in the Registry of Deeds.
Rule on Z's contention.
Answer: Z is wrong. The lack of a certificate of registration and a license to sell on the part
of a subdivision developer does not result to the nullification or invalidation of the contract
to sell it entered into with a buyer. The contract to sell remains valid and subsisting. In said
case, the Court upheld the validity of the contract to sell notwithstanding violations by the
developer of the provisions of PD 957. We held that nothing in PD 957 provides for the
nullity of a contract validly entered into in cases of violation of any of its provisions such as
the lack of a license to sell. Thus, the contract to sell entered into between Flora and
Moldex remains valid despite the lack of license to sell on the part of the latter at the time
the contract was entered into. Moreover, Z claims that the contract she entered into with
Moldex is void because of the latter’s failure to register the contract to sell/document of
conveyance with the Register of Deeds, in violation of Section 17 of PD 957. However, just
like in Section 5 which did not penalize the lack of a license to sell with the nullification of
the contract, Section 17 similarly did not mention that the developer’s or Moldex’s failure
to register the contract to sell or deed of conveyance with the Register of Deeds resulted to
the nullification or invalidity of the said contract or deed. (Moldex Realty vs. Saberon, G.R.
No.176289, April 8, 2013)

89. THE CONCEPTS AND DOCTRINES OF RES IPSA LOQUITUR, LAST CLEAR
CHANCE, PROXIMATE CAUSE, DAMNUM ABSQUE INJURIA, PRESUMPTION OF
NEGLIGENCE, VICARIOUS LIABILITY
Q. What are the requisites of the Doctrine of Res Ipsa Loquitur?
A. The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as
follows: (1) the accident is of a kind which does not ordinarily occur unless someone is
negligent; (2) the cause of the injury was under the exclusive control of the person in
charge and (3) the injury suffered must not have been due to any voluntary action or
contribution on the part of the person injured. The above requisites are all present in this
case. (Del Carmen, Jr., vs. Bacoy, G.R. No. 173870, April 25, 2012)

90. EMERGENCY RULE

Q. Explain the “Emergency Rule.”
A. The Emergency Rule states that one who suddenly finds himself in a place of
danger, and is required to act without time to consider the best means that may be adopted
to avoid the impending danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a better method, unless the
emergency in which he finds himself is brought about by his own negligence. (Orix Metro
Lising vs. Mangalinao, G.R. No. 174089, January 25, 2012)

DAMAGES (ARTICLES 2195-2235, CIVIL CODE)

ACTUAL AND COMPENSATORY DAMAGES
91. MORAL DAMAGES

46 | P a g e
Q. May the registered owner of a parcel of land be awarded moral damages for the
defendant's unjustified retention of the title over the land?
Answer: YES. As for the land titles surrendered by Sps. Mateo, the Court determines that
Swift has no basis for retaining the same as collateral for feeds warehousing. In the absence
of such bond agreement or security instrument, it cannot be said that a bond has actually
been posted or constituted. Besides, even assuming that the real properties served as
collateral, Swift cannot just appropriate them in view of the prohibition against pactum
commissorium. Considering the wrongful retention of titles, moral damages should be
awarded to Sps. Mateo. They were able to prove that Swift acted in bad faith in keeping the
titles despite its knowledge that there was no bond or real estate mortgage to justify its
retention thereof. (Swift Foods vs. Sps. Mateo, G.R. No. 170486, September 12, 2011)

92. ACTUAL DAMAGES

Q. May actual damages be awarded sans proof of the actual amount lost? Article 2199 of
the Civil Code provides that "one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved." In Ong v. Court of Appeals, we held
that "actual damages are such compensation or damages for an injury that will put the
injured party in the position in which he had been before he was injured. They pertain to
such injuries or losses that are actually sustained and susceptible of measurement." To be
recoverable, actual damages must not only be capable of proof, but must actually be
proved with reasonable degree of certainty. We cannot simply rely on speculation,
conjecture or guesswork in determining the amount of damages. Thus, it was held that
before actual damages can be awarded, there must be competent proof of the actual
amount of loss, and credence can be given only to claims which are duly supported by
receipts. Here, respondent did not present documentary proof to support the claimed
necessary expenses for the repair and completion of the house. (Dueñas vs. Africa, G.R. No.
165679, October 5, 2009 )

93. MORAL DAMAGES

Q. X leased out his fishponds to Z for a period of 5 years, or from March 1, 1994 up to June
30, 1999. When the lease expired, Z continued to occupy and operate the fishponds until
August 11, 1999, or an additional 41 days. Previously, or on July 22, 1999, X sent a letter to
Z declaring her as trespasser and demanding the settlement of the latter’s outstanding
obligations. X instituted a case for collection of a sum of money with damages in the
Regional Trial Court (RTC) claiming that Z committed violations of their lease agreement
which caused X to incur actual and liquidated damages and other expenses for unpaid rent
and for unpaid additional rent for Z’s one-month extended stay beyond the contract date.
Z argued that an implied new lease was created pursuant to Article 1670 of the Civil Code.
(a) Should the RTC grant X's prayer for the award of damages
Answer: YES. Z had been found guilty of several violations of the agreement and not just
one. Z incurred delay in the payments, and the check payments bounced; for another, Z
subleased the premises to Reyes, in blatant disregard of the express prohibition in the lease
agreement; thirdly, Z refused to honor her obligation, as stipulated under the lease
agreement, to pay the fishpond license and other permit fees and; finally, Z refused to
vacate the premises after the expiration of the lease. Even though X received payments

47 | P a g e
directly from the sublessee Reyes, this could not erase the fact that Z was guilty of
subleasing the fishponds.
(b) What constitutes bad faith?
Answer: Bad faith means breach of a known duty through some motive or interest or ill
will. By refusing to honor her solemn obligations under the lease, and instead unduly
profiting from these violations, Z is guilty of bad faith. Moral damages may be awarded
when the breach of contract is attended with bad faith. Exemplary damages may also be
awarded when a wrongful act is accompanied by bad faith or when the defendant acted in
a wanton, fraudulent, reckless, oppressive, or malevolent manner. And since the award of
exemplary damages is proper in this case, attorney's fees and costs of the suit may also be
recovered as stipulated in the lease agreement.
(c) Was an implied new lease created between the parties?
Answer: YES. When the lease expired on June 30, 1999 and Z continued enjoying the
premises without objection from the lessor, an implied new lease was created pursuant to
Article 1670 of the Civil Code, which placed upon the lessee the obligation to pay additional
rent. (Sps. Castro vs. Palenzuela, G.R. No. 184698, January 21, 2013)

94. DAMAGES FOR MALICIOUS PROSECUTION

Q. What must the plaintiff prove in order to be successfully claim for damages for
malicious prosecution?
Answer: The plaintiff must prove (1) the prosecution did occur, and the defendant was
himself the prosecutor or that he instigated its commencement; (2) the criminal action
finally ended with an acquittal; (3) in bringing the action, the prosecutor acted without
probable cause; and (4) the prosecution was impelled by legal malice -- an improper or a
sinister motive. The gravamen of malicious prosecution is not the filing of a complaint
based on the wrong provision of law, but the deliberate initiation of an action with the
knowledge that the charges were false and groundless. The statutory basis for a civil action
for damages for malicious prosecution are found in the provisions of the New Civil Code on
Human Relations and on damages particularly Articles 19, 20, 21, 26, 29, 32, 33, 35, 2217
and 2219 (8). (Marsman and Company v. Ligo, G.R. No. 198643, August 19, 2015)

95. TEMPERATE OR MODERATE DAMAGES

Q. May the court award damages even if the injury suffered was not proven with
certainty?
Answer: A claimant is entitled to be compensated reasonably and commensurately for
what he or she has lost as a result of another’s act or omission, and the amount of damages
to be awarded shall be equivalent to what have been pleaded and adequately proven.
Should the claimant fail to prove with exactitude the extent of injury he or she sustained,
the court will still allow redress if it finds that the claimant has suffered due to another’s
fault. (Adrian Wilson vs. TMX, G.R. No. 162608, July 26, 2010)

96. EXEMPLARY OR CORRECTIVE DAMAGES

Q. A executed an SPA in favor of B authorizing B to obtain a loan using A's property as
collateral. Without notice to B, A revoked the SPA effective at the end of business hours of
July 17, 2000. On July 18, 2000, the X Bank approved the loan application of B in the
amount of P25 million. On July 31, 2000, B, thru a letter, notified A of the approval of the

48 | P a g e
loan. Sometime in the first week of August 2000, B learned about the revocation of the
SPA. B filed before the RTC a Complaint for Annulment of Revocation of SPA,
Enforcement of SPA and/or interest in the properties covered by said SPA and Damages
against A.
(a) May the SPA be revoked upon the sole will of A?
Answer: NO. There is no question that the SPA executed by A in favor of B is a contract of
agency coupled with interest. This is because their bilateral contract depends upon the
agency. Hence, it cannot be revoked at the sole will of the principal.

(b) When may the court award exemplary damages?

Answer: NO. Article 2229 of the Civil Code provides that exemplary damages may be
imposed "by way of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages." They are, however, not recoverable as a
matter of right. They are awarded only if the guilty party acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. In this case, although the revocation was done
in bad faith, respondents did not act in a wanton, fraudulent, reckless, oppressive or
malevolent manner. They revoked the SPA because they were not satisfied with the amount
of the loan approved. Thus, petitioners are not entitled to exemplary damages. (Ching vs.
Bantolo, et al., G.R. No. 17708, December 5, 2012)

97. CREDIT TRANSACTIONS - PROMISSORY NOTE, ADJUSTMENT OF INTEREST

RATE
Question: Spouses Silos v. PNB (G.R. No. 181045, July 2, 2014)
As a security to their revolving credit line, Spouses Silos constituted a Real Estate
Mortgage (REM) over their two lots. They executed Promissory Notes and Credit
Agreement. The loan was subject to 19.5% interest. The Credit Agreement however
contained a stipulation that “the borrower agrees that the bank may modify the interest
rate in the loan depending on whatever policy the Bank may adopt in the future, etc.” The
Promissory Notes contained a stipulation granting PNB the right to increase or reduce
interest rate “within the limits allowed by law or by the Monetary Board.” The REM
agreement provided the same right to increase or reduce interest “at any time depending
on whatever policy PNB may adopt in the future.”
Can PNB adjust interest rate unilaterally?
Answer: No, PNB cannot adjust interest rate unilaterally. Any modification in the contract,
such as the interest rate, must be made with the consent of the contracting parties. The rate
of interest is a principal condition in a contract of loan if not the most important
component. Article 1956 of the Civil Code provides that no interest shall be due unless it
has been expressly stipulated in writing.
99. COMPROMISE AGREEMENT
Sonley v. Anchor Savings Bank/Equicom Savings Bank (G.R. No. 205623, August 10, 2016)
Question: Conchita Sonley entered into a Contract to Sell with Anchor for the purchase of
the foreclosed property. Sonley defaulted hence Anchor rescinded the Contract. Sonley
filed an action for the court to declare the rescission as null and void. They however
entered into a Compromise Agreement. To settle the matter, the parties agreed to enter
into a Compromise Agreement. Under the Judgment based on the Compromise
Agreement, Sonley would repurchase the property from Anchor. Sonley again defaulted

49 | P a g e
prompting Anchor to move for execution. It prayed that (a) the Compromise Agreement be
rescinded; (b) it be allowed to apply the payments as rentals; and (c) Sonley be evicted
from the property.
Can Anchor ask for execution of the judgment based on a compromise agreement?

Answer: Yes, Anchor may move for execution of judgment based on the Compromise
Agreement executed by the party-litigants and duly approved by the trial court. A
compromise agreement is the law between the parties. Its purpose is to put an end to
litigation because of the uncertainty that may arise from it. Once the compromise is
perfected, the parties are bound to abide by it in good faith. Should a party fail or refuse to
comply with the terms, the other party could either enforce the compromise by a writ of
execution A compromise agreement is equivalent to a ruling on the merits.

(b) Is there a need to file a separate civil action for rescission?

NO, there is no need to file a separate action for rescission. A breach of any of the
conditions of the compromise agreement will give any of the parties to rescind the same
without filing a separate civil action.
100. Compromise Agreement and Injunction
Cathay Land, Inc. et al. v. Ayala Land, Inc. (G.R. No. 210209, August 9, 2017)
Question: Cathay filed a Complaint for easement of right of way against Ayala, claiming it
denied passage to its personnel. Before trial ensued, parties entered into a Compromise
Agreement.
Ayala granted easement of right of way in favor of Cathay, subject to faithful compliance
with its undertaking under the Compromise, such as not to develop “high-rise buildings.”
It was further agreed that Ayala has the right “to withdraw or suspend the grant of
easement of right of way” from Cathay if it “would fail to rectify its breach within a period
of 30 days from receipt of a notice.” The trial court approved the Compromise Agreement.
After the execution of the judgment based on the Compromise Agreement, Ayala noticed
from Cathay’s flyers that it intended to construct high rise building. Ayala made verbal
and written demand to Cathay to abide with the Compromise. Cathay did not heed Ayala’s
demand forcing it to file a Motion for Execution with Prayer for Injunction and TRO. The
trial court granted the execution. What are the limitations when the trial executes a
judgment based on a compromise agreement?
Answer: Courts cannot modify, impose terms different from the term of the agreement or
set aside the compromise and reciprocal concessions made in good faith by the parties
without gravely abusing their discretion. Under the Compromise Agreement, the remedies
of Ayala are: first to notify Cathay of the breach and second to withdraw or suspend the
easement if Cathay failed to rectify such breach within 30 days.
Ayala has no right to seek injunctive relief. Ayala also prematurely moved for the
execution.
101. GUARANTY AND SURETYSHIP
Manila Insurance Company, Inc. v. Spouses Roberto and Aida Amurao (G.R. No. 179628,
16 January 2013)
Question: What is the liability of a surety?

50 | P a g e
Answer: The Court have consistently held that a surety’s liability is joint and several,
limited to the amount of the bond, and determined strictly by the terms of contract of
suretyship in relation to the principal contract between the obligor and the obligee.
However, that although the contract of suretyship is secondary to the principal contract,
the surety’s liability to the obligee is nevertheless direct, primary, and absolute.

102. PLEDGE, MORTGAGE AND ANTICHRESIS, CHATTEL MORTGAGE

(INLCUDE ACT NO. 1508 AND SECTION 47 OF R.A. NO. 8791 OR THE GENERAL
BANKING ACT OF 2000)
Question: Union Bank of the Philippines v. Alain Juniat, Winwood Apparel, Inc., Wingyan
Apparel, Inc., Nonwoven Fabric Philippines (G.R. No. 171569, 1 August 2011)
Question: AJ obtained a loan from UB which was secured by a Chattel Mortgage over the
motorized sewing machines. When AJ failed to pay, UB filed an action for Sum of Money
with Issuance of a Writ of Preliminary Attachment. At the time of issuance of the writ, the
possession of the machines is with NF. The latter argued that it has a better title
considering that the Chattel Mortgage was not notarized. Will the argument of NF prevail?
Answer: No. Indeed, the unnotarized Chattel Mortgage executed by AJ in favor of UB does not
bind NF. However, it must be pointed out that UB’s primary cause of action is for a sum of money
with prayer for the issuance of ex-parte writs of attachment and replevin against AJ and the
person in possession of the motorized sewing machines and equipment. Thus, the fact that the
Chattel Mortgage executed in favor of UB was not notarized does not affect UB’s cause of
action. UB only needed to show that the loan of AJ remains unpaid and that it is entitled to the
issuance of the writs prayed for. Considering that writs of attachment and replevin were issued by
the RTC. NF had to prove that it has a better right of possession or ownership over the attached
properties. This it failed to do.

103. TORTS AND DAMAGES: CLASSIFICATION OF TORTS - NEGLIGENT TORTS

Equitable Banking Corporation v. Special Steel Products, Inc. and Augusto Pardo
(G.R. No. 175350, 13 June 2012)
Question: ICEC purchased welding electrodes from SSPI. As payment, ICEC issued three
crossed checks payable to the order of SSPI with the notation account payee only and was
drawn against EBC.
JU demanded the deposit of the checks in his personal account and EBC allowed such
thinking that JU being the son-in-law of the ICEC majority stockholder had the authority
to make such demand..
Later, SSPI demanded payment from ICEC. SSPI denied receipt of the checks. The two
companies discovered that JU received the proceeds of the checks. Due to the denial of
ICEC of the obligation to pay SSPI, the latter filed a complaint for damages against JU and
EBC. Does SSPI have a cause of action against EBC for quasi-delict?
Answer: Yes. SSPIs cause of action is not based on the three checks. SSPI does not ask
EBC or JU to deliver to it the proceeds of the checks as the rightful payee. SSPI does not
assert a right based on the undelivered checks or for breach of contract. Instead, it asserts
a cause of action based on quasi-delict.
A quasi-delict is an act or omission, there being fault or negligence, which causes damage to
another. Quasi-delicts exist even without a contractual relation between the parties.

51 | P a g e
Equitable did not observe the required degree of diligence expected of a banking institution
under the existing factual circumstances. It should have verified if the payee (SSPI)
authorized the holder (JU) to present the same in its behalf, or indorsed it to him. Such
misplaced reliance on empty words is tantamount to gross negligence, which is the absence
of or failure to exercise even slight care or diligence, or the entire absence of care, evincing
a thoughtless disregard of consequences without exerting any effort to avoid them.

104. LIABILITY UNDER ARTICLE 2180, CIVIL CODE

Greenstart Express, Inc. and Fruto L. Sayson, Jr. v. Universal Robina Corporation and
Nissin Universal Robina Corporation
(G.R. No. 205090, 17 October 2016)
Question: How may a respondent prove that he has no liability under Article 2180?
Answer: This may be done by proof of any of the following: (1) That there is no employee-
employer relationship; or (2) That the employee-driver acted outside the scope of his
assigned tasks; or (3) That employer exercised the diligence of a good father of a family in
the selection and supervision of his employee.

105. FORBEARANCE
Hermojina Estores v. Spouses Arturo and Laura Supangan (G.R. No. 175139, 18 April
2012)
Question: What is forbearance? Is it the same with forbearance of money, goods or
credits?
Answer: In Crismina Garments, Inc. v. Court of Appeals, "forbearance" was defined as a
"contractual obligation of lender or creditor to refrain during a given period of time, from
requiring the borrower or debtor to repay a loan or debt then due and payable." In such
case, "forbearance of money, goods or credits" will have no distinct definition from a loan.
The Court said that the phrase "forbearance of money, goods or credits" is meant to have
a separate meaning from a loan, otherwise there would have been no need to add that
phrase as a loan is already sufficiently defined in the Civil Code. Forbearance of money,
goods or credits should therefore refer to arrangements other than loan agreements, where
a person acquiesces to the temporary use of his money, goods or credits pending happening
of certain events or fulfillment of certain conditions.

106. AWARD OF ACTUAL DAMAGES

Engr. Apolinario Dueñas v. Alice Guce-Africa (G.R. No. 165679, 5 October 2009)
Question: When is an actual damages can be recovered?
Answer: Article 2199 of the Civil Code provides that "one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved." In Ong
v. Court of Appeals, the Court held that "actual damages are such compensation or
damages for an injury that will put the injured party in the position in which he had been
before he was injured. They pertain to such injuries or losses that are actually sustained
and susceptible of measurement." To be recoverable, actual damages must not only be
capable of proof, but must actually be proved with reasonable degree of certainty. We
cannot simply rely on speculation, conjecture or guesswork in determining the amount of
damages. Thus, it was held that before actual damages can be awarded, there must be
competent proof of the actual amount of loss, and credence can be given only to claims

52 | P a g e
which are duly supported by receipts. Here, respondent did not present documentary proof
to support the claimed necessary expenses for the repair and completion of the house.
REMINDER: PLEASE BE PREPARED FOR QUESTIONS WHICH WILL REQUIRE
COMPUTATION IN THE FOLLOWING AREAS:
1. SUCCESSION
2. CO-OWNERSHIP
3. LIQUIDATION CONSIDERING PREFERENCE OF CREDIT

53 | P a g e