CIVIL LAW

RECENT JURISPRUDENCE

Compromise Agreement; definition and nature; distinction between judicial and

extrajudicial. Under Article 2028 of the Civil Code, a compromise is a contract whereby
the parties, by making reciprocal concessions, avoid a litigation or put an end to one
already commenced. Accordingly, a compromise is either judicial, if the objective is to
put an end to a pending litigation, or extrajudicial, if the objective is to avoid a litigation.
As a contract, a compromise is perfected by mutual consent. However, a judicial
compromise, while immediately binding between the parties upon its execution, is not
executory until it is approved by the court and reduced to a judgment. The validity of a
compromise is dependent upon its compliance with the requisites and principles of
contracts dictated by law. Also, the terms and conditions of a compromise must not be
contrary to law, morals, good customs, public policy and public order.Land Bank of the
Philippines vs. Heirs of Spouses Jorja Rigor Soriano and Magin Soriano; G.R. No.
178312. January 30, 2013

Contract; contract of suretyship; definition; nature of liability of surety; surety’s liability

is direct, primary and absolute as well as joint and several. A contract of suretyship is
defined as “an agreement whereby a party, called the surety, guarantees the performance
by another party, called the principal or obligor, of an obligation or undertaking in favor
of a third party, called the obligee. It includes official recognizances, stipulations, bonds
or undertakings issued by any company by virtue of and under the provisions of Act No.
536, as amended by Act No. 2206 (An Act Relative to Recognizances, Stipulations,
Bonds and Undertakings, and to AllowCertain Corporations to be Accepted as Surety
Thereon).” We have consistently held that a surety’sliability 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. It bears stressing,
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. The
Manila Insurance Company, Inc. vs. Spouses Roberto and Aida Amurao; G.R. No.
179628. January 16, 2013
Contract; law between the parties; rules on interpretation; easement of right of way; just
compensation; attorney’s fees; exception rather than the general rule. Indeed, the rule is
settled that a contract constitutes the law between the parties who are bound by its
stipulations which, when couched in clear and plain language, should be applied
according to their literal tenor. Courts cannot supply material stipulations, read into the
contract words it does not contain or, for that matter, read into it any other intention that
would contradict its plain import. Neither can they rewrite contracts because they operate
harshly or inequitably as to one of the parties, or alter them for the benefit of one party
and to the detriment of the other, or by construction, relieve one of the parties from the
terms which he voluntarily consented to, or impose on him those which he did not.
Where the right of way easement, as in this case, similarly involves transmission lines
which not only endangers life and limb but restricts as well the owner’s use of the land
traversed thereby, the ruling in Gutierrez remains doctrinal and should be applied. It has
been ruled that the owner should be compensated for the monetary equivalent of the land
if, as here, the easement is intended to perpetually or indefinitely deprive the owner of his
proprietary rights through the imposition of conditions that affect the ordinary use, free
enjoyment and disposal of the property or through restrictions and limitations that are
inconsistent with the exercise of the attributes of ownership, or when the introduction of
structures or objects which, by their nature, create or increase the probability of injury,
death upon or destruction of life and property found on the land is necessary. Measured
not by the taker’s gain but the owner’s loss, just compensation is defined as the full and
fair equivalent of the property taken from its owner by the expropriator.

The determination of just compensation in eminent domain proceedings is a judicial

function and no statute, decree, or executive order can mandate that its own
determination shall prevail over the court’s findings. Any valuation for just compensation
laid down in the statutes may serve only as a guiding principle or one of the factors in
determining just compensation, but it may not substitute the court’s own judgment as to
what amount should be awarded and how to arrive at such amount. Hence, Section 3A of
R.A. No. 6395, as amended (An Act Revising the Charter of the National Power
Corporation), is not binding upon this Court.
For want of a statement of the rationale for the award in the body of the RTC’s 14 March
2000 Decision, we are constrained, however, to disallow the grant of attorney’s fees in
favor of the Spouses Cabahug in an amount equivalent to 5% of the just compensation
due as well as the legal interest thereon. Considered the exception rather than the general
rule, the award of attorney’s fees is not due every time a party prevails in a suit because
of the policy that no premium should be set on the right to litigate. Jesus L. Cabahug and
Coronacion M. Cabahug vs.National Power Corporation; G.R. No. 186069. January 30,
2013

Contract; perfection of contracts; consent; offer and acceptance; contract of sale;

consensual in nature. Contracts are perfected by mere consent, which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The requisite acceptance of the offer is expressed in Article 1319
of the Civil Code which states:
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance constitutes a counter-offer.

In Palattao v. Court of Appeals, this Court held that if the acceptance of the offer was not
absolute, such acceptance is insufficient to generate consent that would perfect a contract.
Thus:

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and the acceptance
upon the subject matter, consideration, and terms of payment, a contract is produced. The
offer must be certain. To convert the offer into a contract, the acceptance must be
absolute and must not qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal, constitutes a counter-offer and is a
rejection of the original offer. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the
offer.
The acceptance must be identical in all respects with that of the offer so as to produce
consent or meeting of the minds. Where a party sets a different purchase price than the
amount of the offer, such acceptance was qualified which can be at most considered as a
counter-offer; a perfected contract would have arisen only if the other party had accepted
this counteroffer. In Villanueva v. Philippine National Bank this Court further elucidated
on the meaning of unqualified acceptance, as follows:

…While it is impossible to expect the acceptance to e c h o every nuance of the offer, it

is imperative that it assents to those points in the offer which, under the operative facts of
each contract, are not only material but motivating as well. Anything short of that level of
mutuality produces not a contract but a mere counter-offer awaiting acceptance.
Moreparticularly on the matter of the consideration of the contract, the offer and its
acceptance must be unanimous both on the rate of the payment and on its term.
Anacceptance of an offer which agrees to the rate but varies the term is ineffective.
(Emphasis supplied)

A contract of sale is consensual in nature and is perfected upon mere meeting of the
minds. When there is merely an offer by one party without acceptance of the other, there
is no contract. When the contract of sale is not perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation between the parties. Heirs of
Fausto C. Ignaciovs. Home Bankers Savings and Trust Co., et al.; G.R. No. 177783.
January 23, 2013

Damages; moral damages; requisites; granted when rights of individuals are violated;
exemplary damages; actual damages; nature; in the absence of proof, temperate damages
may be awarded; attorney’s fees; exception rather than the general rule. Moral damages
are awarded to compensate the claimant for physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation and similar injury. Jurisprudence has established the following requisites for
the award of moral damages: (1) there is an injury whether physical, mental or
psychological, which was clearly sustained by the claimant; (2) there is a culpable act or
omission factually established; (3) the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by
the claimant; and (4) the award of damages is predicated on any of the cases stated in
Article 2219 of the Civil Code.
Pertinent to the case at hand, Article 32 of the Civil Code provides for the award of moral
damages in cases where the rights of individuals, including the right against deprivation
of property without due process of law, are violated. In Quisumbing v. Manila Electric
Company, this Court treated the immediate disconnection of electricity without notice as
a form of deprivation of property without due process of law, which entitles the
subscriber aggrieved to moral damages. We stressed:

More seriously, the action of the defendant in maliciously disconnecting the electric
service constitutes a breach of public policy. For public utilities, broad as their powers
are, have a clear duty to see to it that they do not violate nor transgress the rights of the
consumers. Any act on their part that militates against the ordinary norms of justice and
fair play is considered an infraction that gives rise to an action for damages. Such is the
case at bar.

In addition to moral damages, exemplary damages are imposed by way of example or

correction for the public good. In this case, to serve as an example – that before
disconnection of electric supply can be effected by a public utility, the requisites of law
must be complied with – we sustain the award of exemplary damages to respondents.

Actual damages are compensation for an injury that will put the injured party in the
position where it was before the injury. They pertain to such injuries or losses that are
actually sustained and susceptible of measurement. Except as provided by law or by
stipulation, a party is entitled to adequate compensation only for such pecuniary loss as is
duly proven. Basic is the rule that to recover actual damages, not only must the amount of
loss be capable of proof; it must also be actually proven with a reasonable degree of
certainty premised upon competent proof or the best evidence obtainable.

Actual or compensatory damages cannot be presumed, but must be duly proved with a
reasonable degree of certainty. The award is dependent upon competent proof of the
damage suffered and the actual amount thereof. The award must be based on the evidence
presented, not on the personal knowledge of the court; and certainly not on flimsy,
remote,
speculative and unsubstantial proof.

Nonetheless, in the absence of competent proof on the amount of actual damages

suffered, a party is entitled to temperate damages. Temperate or moderate damages,
which are more than nominal but less than compensatory damages, may be recovered
when the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be proved with certainty. The amount thereof is usually left to
the discretion of the courts but the same should be reasonable, bearing in mind that
temperate damages should be more than nominal but less than compensatory.

An award of attorney’s fees has always been the exception rather than the rule.
Attorney’s fees are not awarded every time a party prevails in a suit. The policy of the
Court is that no premium should be placed on the right to litigate. The trial court must
make express findings of fact and law that bring the suit within the exception. What this
demands is that factual, legal or equitable justifications for the award must be set forth
not only in the fallo but also in the text of the decision, or else, the award should be
thrown out for being speculative and conjectural. Manila Electric Company (MERALCO)
vs. Atty. P.M. Castillo, doing business under thetrade name and style of Permanent Light
Manufacturing Enterprises, et al.; G.R. No. 182976. January14, 2013

Damages; moral damages; when awarded. The Court has awarded moral damages in
termination cases when bad faith, malice or fraud attend the employee’s dismissal or
where the act oppresses labor, or where it was done in a manner contrary to morals, good
customs or public policy. General Milling Corporation v s .Violeta L. Viajar; G.R. No.
181738. January 30, 2013

Effectivity of laws; generally, no retroactive effect; exception, when law is procedural.

As a general rule, laws shall have no retroactive effect. However, exceptions exist, and
one such exception concerns a law that is procedural in nature. The reason is that a
remedial statute or a statute relating to remedies or modes of procedure does not create
new rights or take away vested rights but only operates in furtherance of the remedy or
the confirmation of already
existing rights. A statute or rule regulating the procedure of the courts will be construed
as applicable to actions pending and undetermined at the time of its passage. All
procedural laws are retroactive in that sense and to that extent. The retroactive application
is not violative of any right of a person who may feel adversely affected, for, verily, no
vested right generally attaches to or arises from procedural laws. Spouses Augusto G.
Dacudao and Ofelia R.Dacudao vs. Secretary of Justice Raul M. Gonzales of the
Department of Justice; G.R. No. 188056.January 8, 2013

Ejectment; unlawful detainer; estoppel against tenants; conclusive presumption;

foreclosure of mortgage; title to land remains in the mortgagor until expiration of
redemption period; inchoate character of purchaser’s right. [T]he only question that the
courts resolve in ejectment proceedings is: who is entitled to the physical possession of
the premises, that is, to the possession de facto and not to the possession de jure. It does
not even matter if a party’s title to the property is questionable.
In an unlawful detainer case, the sole issue for resolution is the physical or material
possession of the property involved, independent of any claim of ownership by any of the
party litigants. Where the issue of ownership is raised by any of the parties, the courts
may pass upon the same in order to determine who has the right to possess the property.
The adjudication is, however, merely provisional and would not bar or prejudice an
action between the same parties involving title to the property.

[I]n unlawful detainer, one unlawfully withholds possession thereof after the expiration
or termination of his right to hold possession under any contract, express or implied. In
such case, the possession was originally lawful but became unlawful by the expiration or
termination of the right to possess; hence, the issue of rightful possession is decisive for,
in such action, the defendant is in actual possession and the plaintiff’s cause of action is
the termination of the defendant’s right to continue in possession.

The conclusive presumption found in Section 2 (b), Rule 131 of the Rules of Court,
known as estoppel against tenants, provides as follows:
Sec. 2.Conclusive presumptions. – The following are instances of conclusive
presumptions:

(b) The tenant is not permitted to deny the title of his landlord at the time of the
commencement ofthe relation of landlord and tenant between them. (Emphasis supplied).

It is clear from the abovequoted provision that what a tenant is estopped from denying is
the title of his landlord at the time of the commencement of the landlord-tenant relation.
If the title asserted is one that is alleged to have been acquired subsequent to the
commencement of that relation, the presumption will not apply. Hence, the tenant may
show that the landlord’s title has expired or been conveyed to another or himself; and he
is not estopped to deny a claim for rent, if he has been ousted or evicted by title
paramount.

It is settled that during the period of redemption, it cannot be said that the mortgagor is no
longer the owner of the foreclosed property, since the rule up to now is that the right of a
purchaser at a foreclosure sale is merely inchoate until after the period of redemption has
expired without the right being exercised. The title to land sold under mortgage
foreclosure remains in the mortgagor or his grantee until the expiration of the redemption
period and conveyance by the master’s deed. Indeed, the rule has always been that it is
only upon the expiration of the redemption period, without the judgment debtor having
made use of his right of redemption, that the ownership of the land sold becomes
consolidated in the purchaser.

Stated differently, under Act. No. 3135 (An Act to Regulate the Sale of Property Under
SpecialPowers Inserted in or Annexed to Real Estate Mortgages), the purchaser in a
foreclosure sale has,during the redemption period, only an inchoate right and not the
absolute right to the property with all the accompanying incidents. He only becomes an
absolute owner of the property if it is not redeemed during the redemption period.
Juanita Ermitaño, represented by herAttorney-in-fact, Isabelo Ermitañov s .Lailanie M.
Paglas; G.R. No. 174436. January 23, 2013

Interest; 12% interest rate doctrine in Eastern Shipping Lines vs. CA. [T]he imposition of
12% interest is still warranted in the case at bar, not from the date of sale on November 9,
1994, as the respondents insist; but from the finality of the decision up to the satisfaction
of
judgment in line with the doctrine laid down in Eastern Shipping Lines, Inc. v. Court
ofAppeals. … [T]he payment of 12% interest from the finality of judgment is in order
pursuantto Eastern Shippings Lines, Inc. where the Court held that:
When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally adjudged.

When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit. Spouses Ricardo and
Elena Golez v s .SpousesCarlos and Amelita Navarro; G.R. No. 192532. January 30,
2013

Legal Compensation; mode of extinguishing obligations; difference with conventional

compensation; requisites. Compensation is a mode of extinguishing to the concurrent
amount the obligations of persons who in their own right and as principals are
reciprocally debtors and creditors of each other. Legal compensation takes place by
operation of law when all the requisites are present, as opposed to conventional
compensation which takes place when the parties agree to compensate their mutual
obligations even in the absence of some requisites. Legal compensation requires the
concurrence of the following conditions:
(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. Mondragon Personal Sales, Inc.
vs.Victoriano S. Sola, Jr.; G.R. No. 174882. January 21, 2013

Marriage; essential and formal requisites; marriage license; certification of non-issuance

by civil registrar; diligent search requirement compared to presumption of regularity in
performance of official duties; effect of absence of marriage license. As the marriage of
Gloria and Syed was solemnized on January 9, 1993, Executive Order No. 209, or the
Family Code of the Philippines, is the applicable law. The pertinent provisions that would
apply to this particular case are Articles 3, 4 and 35(3), which read as follows:
Art. 3. The formal requisites of marriage are:

(1) Authority of the solemnizing officer;

(2) A valid marriage license except in the cases provided for in Chapter 2 of this Title;
and

(3) A marriage ceremony which takes place with the appearance of the contracting parties
before the solemnizing officer and their personal declaration that they take each other as
husband and wife in the presence of not less than two witnesses of legal age.

Art. 4. The absence of any of the essential or formal requisites shall render the marriage
voidab initio, except as stated in Article 35(2).

A defect in any of the essential requisites shall render the marriage voidable as provided
in Article 45.
An irregularity in the formal requisites shall not affect the validity of the marriage but the
party or parties responsible for the irregularity shall be civilly, criminally and
administratively liable.

Art. 35. The following marriages shall be void from the beginning:

xxxx

(3) Those solemnized without a license, except those covered by the preceding Chapter.

Under Sec. 3(m), Rule 131 of the Rules of Court, it is a disputable presumption that an
official duty has been regularly performed, absent contradiction or other evidence to the
contrary. We held, “The presumption of regularity of official acts may be rebutted by
affirmative evidence of irregularity or failure to perform a duty.” No such affirmative
evidence was shown that the Municipal Civil Registrar was lax in performing her duty of
checking the records of their office, thus the presumption must stand. In fact, proof does
exist of a diligent search having been conducted, as Marriage License No. 996967 was
indeed located and submitted to the court. The fact that the names in said license do not
correspond to those of Gloria and Syed does not overturn the presumption that the
registrar conducted a diligent search of the records of her office.

In the case of Cariño v. Cariño, following the case of Republic, it was held that the
certification of the Local Civil Registrar that their office had no record of a marriage
license was adequate to prove the non-issuance of said license. The case of Cariño
further held that the presumed validity of the marriage of the parties had been overcome,
and that it became the burden of the party alleging a valid marriage to prove that the
marriage was valid, and that the required marriage license had been secured.

Article 4 of the Family Code is clear when it says, “The absence of any of the essential or
formal requisites shall render the marriage void ab initio, except as stated in Article
35(2).” Article 35(3) of the Family Code also provides that a marriage solemnized
without a license is void from the beginning, except those exempt from the license
requirement under Articles
27 to 34, Chapter 2, Title I of the same Code. Syed Azhar Abbas vs. Gloria Goo Abbas;
G.R. No. 183896. January 30, 2013

Marriage; psychological incapacity; definition; burden of proof; sexual infidelity and

abandonment do not necessarily constitute psychological incapacity; psychological
fitness as a wife not equated with professional relationship; doubts are resolved in favor
of marriage. Article 36 of the Family Code governs psychological incapacity as a ground
for declaration of nullity of marriage. It provides that “[a] marriage contracted by any
party who, at the time of the celebration, was psychologically incapacitated to comply
with the essential marital obligations of marriage, shall likewise be void even if such
incapacity becomes manifest only after its solemnization.” In interpreting this provision,
we have repeatedly stressed that psychological incapacity contemplates “downright
incapacity or inability totake cognizance of and to assume the basic marital
obligations”; not merely therefusal, neglect or difficulty, much less ill will, on the part of
the errant spouse. The plaintiff bears the burden of proving the juridical antecedence (i.e.,
the existence at the time of the celebration of marriage), gravity and incurability of the
condition of the errant spouse.
In any event, sexual infidelity and abandonment of the conjugal dwelling, even if true, do
not necessarily constitute psychological incapacity; these are simply grounds for legal
separation. To constitute psychological incapacity, it must be shown that the
unfaithfulness and abandonment are manifestations of a disordered personality that
completely prevented the erring spouse from discharging the essential marital
obligations.

Aside from the time element involved, a wife’s psychological fitness as a spouse cannot
simply be equated with her professional/work relationship; workplace obligations and
responsibilities are poles apart from their marital counterparts. While both spring from
human relationship, their relatedness and relevance to one another should be fully
established for them to be compared or to serve as measures of comparison with one
another.

Once again, we stress that marriage is an inviolable social institution protected by the
State. Any doubt should be resolved in favor of its existence its existence and
continuation and
against its dissolution and nullity. It cannot be dissolved at the whim of the parties nor by
transgressions made by one party to the other during the marriage. Republic of the
Philippines vs.Cesar Encelan; G.R. No. 170022. January 9, 2013

Possession;de jurevs.de factonature of possession; elements of forcible entry. Ownership

carries the right of possession, but the possession contemplated by the concept of
ownership is not exactly the same as the possession in issue in a forcible entry case.
Possession in forcible entry suits refers only to possession de facto, or actual or material
possession, and not possession flowing out of ownership; these are different legal
concepts for which the law provides different remedies for recovery of possession. As the
court explained in Pajuyo v. Court of Appeals, and again in the more recent cases of
Gonzaga v. Court ofAppeals, De Grano v. Lacaba, and Lagazo v. Soriano, the word
“possession” in forcible entrysuits refers to nothing more than prior physical possession
or possession de facto, not possession de jure or legal possession in the sense
contemplated in civil law. Title is not the issue, and its absence “is not a ground for the
courts to withhold relief from the parties in an ejectment case.” Thus, in a forcible entry
case, “a party who can prove prior possession can recover such possession even against
the owner himself.
Whatever may be the character of his possession, if he has in his favor prior possession in
time, he has the security that entitles him to remain on the property until a person with a
better right lawfully ejects him.” He cannot be ejected by force, violence or terror — not
even by its owners. For these reasons, an action for forcible entry is summary in nature
aimed only at providing an expeditious means of protecting actual possession. Ejectment
suits are intended to “prevent breach of x x x peace and criminal disorder and to compel
the party out of possession to respect and resort to the law alone to obtain what he claims
is his.” Thus, lest the purpose of these summary proceedings be defeated, any discussion
or issue of ownership is avoided unless it is necessary to resolve the issue of de facto
possession.

Under Section 1, Rule 70 of the Rules of Court, for a forcible entry suit to prosper, the
plaintiff must allege and prove: (1) prior physical possession of the property; and (2)
unlawful deprivation of it by the defendant through force, intimidation, strategy, threat or
stealth. As in any civil case, the burden of proof lies with the complainants (the
respondents
in this case) who must establish their case by preponderance of evidence. Nenita Quality
FoodsCorporation vs. Crisostomo Galabo, et al.;G.R. No. 174191. January 30, 2013

Quasi-contracts; definition; requisites ofsolutio indebiti. A quasi-contract involves a

juridical relation that the law creates on the basis of certain voluntary, unilateral and
lawful acts of a person, to avoid unjust enrichment. The Civil Code provides an
enumeration of quasi-contracts, but the list is not exhaustive and merely provides
examples.
Article 2154 embodies the concept “solutio indebiti” which arises when something is
delivered through mistake to a person who has no right to demand it. It obligates the
latter to return what has been received through mistake. Solutio indebiti, as defined in
Article 2154 of the Civil Code, has two indispensable requisites: first, that something has
been unduly delivered through mistake; andsecond, that something was received when
there was no right to demand it. Metropolitan Bank & Trust Company vs. Absolute
Management Corporation; G.R. No. 170498. January 9, 2013

Torts; abuse of rights; elements; award of damages. While the Court mindfully notes that
damages may be recoverable due to an abuse of right under Article 21 in conjunction
with Article 19 of the Civil Code of the Philippines, the following elements must,
however, obtain: (1) there is a legal right or duty; (2) exercised in bad faith; and (3) for
the sole intent of prejudicing or injuring another. Records reveal that none of these
elements exists in the case at bar and thus, no damages on account of abuse of right may
he recovered. Eleazar S.Padillo vs. Rural Bank of Nabunturan, Inc., et al.; G.R. No.
199338. January 21, 2013

Torts; proximate cause; vicarious liability is not applicable in the absence of employer-
employee or principal-agent relationship; contracts; requisites of stipulation pour autrui;
Lease; act of parking a vehicle in a garage upon payment of a fixed amount, is a lease;
obligations of lessor; contracts of adhesion; actual damages must be proved with
reasonable degree of certainty. Proximate cause has been defined as that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening cause, produces
the injury or loss, and without which the result would not have occurred.
Neither will the vicarious liability of an employer under Article 2180 of the Civil Code
apply
in this case. It is uncontested that Peña and Gaddi were assigned as security guards by
AIB to BSP pursuant to the Guard Service Contract. Clearly, therefore, no employer-
employee relationship existed between BSP and the security guards assigned in its
premises. Consequently, the latter’s negligence cannot be imputed against BSP but
should be attributed to AIB, the true employer of Peña and Gaddi. In the case of Soliman,
Jr. v. Tuazon, the Court enunciated thus:

It is settled that where the security agency, as here, recruits, hires and assigns the work of
its watchmen or security guards, the agency is the employer of such guards and
watchmen. Liability for illegal or harmful acts committed by the security guards attaches
to the employer agency, and not to the clients or customers of such agency. As a general
rule, a client or customer of a security agency has no hand in selecting who among the
pool of security guards or watchmen employed by the agency shall be assigned to it; the
duty to observe the diligence of a good father of a family in the selection of the guards
cannot, in the ordinary course of events, be demanded from the client whose premises or
property are instructions or directions to the security guards assigned to it, does not, by
itself, render the client responsible as an employer of the security guards concerned and
liable for their wrongful acts or omissions. Those instructions or directions are ordinarily
no more than requests commonly envisaged in the contract for services entered into with
the security agency.

Nor can it be said that a principal-agent relationship existed between BSP and the
security guards Peña and Gaddi as to make the former liable for the latter’s complained
act. Article 1868 of the Civil Code states that “[b]y the contract of agency, a person binds
himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter.” The basis for agency therefore is
representation, which element is absent in the instant case. Records show that BSP
merely hired the services of AIB, which, in turn, assigned security guards, solely for the
protection of its properties and premises. Nowhere can it be inferred in the Guard Service
Contract that AIB was appointed as an agent of BSP. Instead, what the parties intended
was a pure principal-client relationship whereby for a consideration, AIB rendered its
security services to BSP.
[I]n order that a third person benefited by the second paragraph of Article 1311, referred
to as a stipulation pour autrui, may demand its fulfillment, the following requisites must
concur:
(1) There is a stipulation in favor of a third person; (2) The stipulation is a part, not the
whole, of the contract; (3) The contracting parties clearly and deliberately conferred a
favor to the third person – the favor is not merely incidental; (4) The favor is
unconditional and uncompensated; (5) The third person communicated his or her
acceptance of the favor before its revocation; and (6) The contracting parties do not
represent, or are not authorized, by the third party.

It has been held that the act of parking a vehicle in a garage, upon payment of a fixed
amount, is a lease. Even in a majority of American cases, it has been ruled that where a
customer simply pays a fee, parks his car in any available space in the lot, locks the car
and takes the key with him, the possession and control of the car, necessary elements in
bailment, do not pass to the parking lot operator, hence, the contractual relationship
between the parties is one of lease.

Article 1654 of the Civil Code provides that “[t]he lessor (BSP) is obliged: (1) to deliver
the thing which is the object of the contract in such a condition as to render it fit for the
use intended; (2) to make on the same during the lease all the necessary repairs in order
to keep it suitable for the use to which it has been devoted, unless there is a stipulation to
the contrary; and (3) to maintain the lessee in the peaceful and adequate enjoyment of the
lease for the entire duration of the contract.” In relation thereto, Article 1664 of the same
Code states that “[t]he lessor is not obliged to answer for a mere act of trespass which a
third person may cause on the use of the thing leased; but the lessee shall have a direct
action against the intruder.”

[C]ontracts of adhesion are not void per se. It is binding as any other ordinary contract
and a party who enters into it is free to reject the stipulations in its entirety. If the terms
thereof are accepted without objection, as in this case, where plaintiffs-appellants have
been leasing BSP’s parking space for more or less 20 years, then the contract serves as
the law between them.
It is axiomatic that actual damages must be proved with reasonable degree of certainty
and a party is entitled only to such compensation for the pecuniary loss that was duly
proven. Thus, absent any competent proof of the amount of damages sustained, the CA
properly deleted the said awards. Spouses Benjamin C. Mamaril and Sonia P. Mamaril
vs. The Boy Scout of thePhilippines, et al.; G.R. No. 179382. January 14, 2013

Special laws

Usury Law; CB Circular No. 905; suspension of ceilings for interest rates does not
authorize excessive and unconscionable interest rates; effect of void stipulation of
usurious interest. The power of the Central Bank to effectively suspend the Usury Law
pursuant to P.D. No. 1684(Amending Further Act No. 2655, as amended, Otherwise
Known As “The UsuryLaw) has long been recognized and upheld in many cases. As the
Court explained in thelandmark case of Medel v. CA, citing several cases, CB Circular
No. 905 (Amendment of Books Ito IV of the Manual of Regulations for Banks and Other
Financial Intermediaries) “did not repeal norin anyway amend the Usury Law but simply
suspended the latter’s effectivity;” that “a [CB] Circular cannot repeal a law, [for] only a
law can repeal another law;” that “by virtue of CB Circular No. 905, the Usury Law has
been rendered ineffective;” and “Usury has been legally non-existent in our jurisdiction.
Interest can now be charged as lender and borrower may agree upon.” … [B]y lifting the
interest ceiling, CB Circular No. 905 merely upheld the parties’ freedom of contract to
agree freely on the rate of interest. It cited Article 1306 of the New Civil Code, under
which the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.
It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority
to raise interest rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets. As held in Castro v. Tan:

The imposition of an unconscionable rate of interest on a money debt, even if knowingly

and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation
and an iniquitous deprivation of property, repulsive to the common sense of man. It has
no
support in law, in principles of justice, or in the human conscience nor is there any reason
whatsoever which may justify such imposition as righteous and as one that may be
sustained within the sphere of public or private morals.

Stipulations authorizing iniquitous or unconscionable interests have been invariably

struck down for being contrary to morals, if not against the law. Indeed, under Article
1409 of the Civil Code, these contracts are deemed inexistent and void ab initio, and
therefore cannot be ratified, nor may the right to set up their illegality as a defense be
waived.

Nonetheless, the nullity of the stipulation of usurious interest does not affect the lender’s
right to recover the principal of a loan, nor affect the other terms thereof. Thus, in a
usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right
can be exercised by the creditor upon failure by the debtor to pay the debt due. The debt
due is considered as without the stipulated excessive interest, and a legal interest of 12%
perannum will be added in place of the excessive interest formerly imposed, following
theguidelines laid down in the landmark case ofEastern Shipping Lines, Inc. v. Court of
Appeals, regarding the manner of computing legal interest. Advocates for Truth in
Lending, Inc. vs. BangkoSentral Monetary Board, Represented by its Chairman,
Governor Armando M. Tatangco, Jr., etc.; G.R.No. 192986. January 15, 2013

Civil Code

Common Carrier; requisite before presumption of negligence arises; bill of lading;

interpretation thereof; inherent nature of the subject shipment or its packaging as ground
for exempting common carrier from liability; failure to prove negligence does not entitle
claimant for damages. Though it is true that common carriers are presumed to have been
at fault or to have acted negligently if the goods transported by them are lost, destroyed,
or deteriorated, and that the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption, the plaintiff must still, before the burden
is shifted to the defendant, prove that the subject shipment suffered actual shortage. This
can only be done if the weight of the shipment at the port of origin and its subsequent
weight at the port of arrival have been proven by a preponderance of evidence, and it can
be seen that
the former weight is considerably greater than the latter weight, taking into consideration
the exceptions provided in Article 1734 of the Civil Code.
The Berth Term Grain Bill of Lading states that the subject shipment was carried with
the qualification “Shipper’s weight, quantity and quality unknown,” meaning that it was
transported with the carrier having been oblivious of the weight, quantity, and quality of
the cargo. This interpretation of the quoted qualification is supported by Wallem
PhilippinesShipping, Inc. v. Prudential Guarantee & Assurance, Inc., a case involving
an analogous stipulationin a bill of lading, wherein the Supreme Court held that:

Indeed, as the bill of lading indicated that the contract of carriage was under a “said
to weigh” clause, the shipper is solely responsible for the loading while the
carrier isoblivious of the contents of the shipment. (Emphasis supplied)

Hence, the weight of the shipment as indicated in the bill of lading is not conclusive
as to the actual weight of the goods. Consequently, the respondent must still prove the
actual weight of the subject shipment at the time it was loaded at the port of origin so
that a conclusion may be made as to whether there was indeed a shortage for which
petitioner must be liable.

The shortage, if any, may have been due to the inherent nature of the subject shipment or its
packaging since the subject cargo was shipped in bulk and had a moisture content of 12.5%.

Considering that respondent was not able to establish conclusively that the subject
shipment weighed 3,300 metric tons at the port of loading, and that it cannot thereforle
be concluded that there was a shortage for which petitioner should be responsible;
bearing in mind that the subject shipment most likely lost weight in transit due to the
inherent nature of Soya Bean Meal; assuming that the shipment lost weight in transit due
to desorption, the shortage of 199.863 metric tons that respondent alleges is a minimal
6.05% of the weight of the entire shipment, which is within the allowable 10% allowance
for loss; and noting that the respondent was not able to show negligence on the part of
the petitioner and that the weighing methods which respondent relied upon to establish
the shortage it alleges is inaccurate, respondent cannot fairly claim damages against
petitioner for the subject
shipment’s alleged shortage. Asian Terminals, Inc. vs. Simon Enterprises, Inc.;G.R.
No. 177116. February 27, 2013

Contract; contract to sell; seller’s obligation to deliver the corresponding certificates of

title is simultaneous and reciprocal to the buyer’s full payment of the purchase price;
rescission; effects; requires mutual restitution; Subdivision and Condominium Buyers’
Protective Decree (PD 957); intent of PD 957 to protect the buyer against unscrupulous
developers, operators and/or sellers; damages; when moral damages may be awarded;
when exemplary damages may be awarded; propriety of award of attorney’s fees. It is
settled that in a contract to sell, the seller’s obligation to deliver the corresponding
certificates of title is simultaneous and reciprocal to the buyer’s full payment of the
purchase price. In this relation, Section 25 of PD 957 (Regulating the Sale of Subdivision
Lots and Condominiums, Providing Penalties forViolations Thereof), which regulates the
subject transaction, imposes on the subdivision owneror developer the obligation to cause
the transfer of the corresponding certificate of title to the buyer upon full payment, to wit:
Sec. 25.Issuance of Title.The owner or developer shall deliver the title of the lot or
unit tothe buyer upon full payment of the lot or unit. No fee, except those required for
theregistration of the deed of sale in the Registry of Deeds, shall be collected for the
issuance of such title. In the event a mortgage over the lot or unit is outstanding at the
time of the issuance of the title to the buyer, the owner or developer shall redeem the
mortgage or the corresponding portion thereof within six months from such issuance in
order that the title over any fully paid lot or unit may be secured and delivered to the
buyer in accordance herewith. (Emphasis supplied.)

The long delay in the performance of GPI’s obligation from date of demand on
September 16, 2002 was unreasonable and unjustified. It cannot therefore be denied
that GPI substantially breached its contract to sell with Sps. Fajardo which thereby
accords the latter the right to rescind the same pursuant to Article 1191 of the Code, viz:

ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

Rescission does not merely terminate the contract and release the parties from further
obligations to each other, but abrogates the contract from its inception and restores
the parties to their original positions as if no contract has been made. Consequently,
mutual restitution, which entails the return of the benefits that each party may have
received as a result of the contract, is thus required.

To be sure, it has been settled that the effects of rescission as provided for in Article
1385 of the Code are equally applicable to cases under Article 1191, to wit:

x x x Mutual restitution is required in cases involving rescission under Article

1191. This means bringing the parties back to their original status prior to the
inception of the contract. Article 1385 of the Civil Code provides, thus:

ART. 1385. Rescission creates the obligation to return the things which were
theobject of the contract, together with their fruits, and the price with its interest;
consequently, it can be carried out only when he who demands rescission can
return whatever he may be obligated to restore.

Neither shall rescission take place when the things which are the object of the contract
are legally in the possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person causing the loss.
The Court has consistently ruled that this provision applies to rescission
under Article 1191:

[S]ince Article 1385 of the Civil Code expressly and clearly states that “rescission
creates the obligation to return the things which were the object of the contract, together
with their fruits, and the price with its interest,” the Court finds no justification to
sustain petitioners’ position that said Article 1385 does not apply to rescission under
Article 1191. x x x (Emphasis supplied; citations omitted.)

As a necessary consequence, considering the propriety of the rescission as earlier

discussed, Sps. Fajardo must be able to recover the price of the property pegged at its
prevailing market value consistent with the Court’s pronouncement in Solid Homes, viz:

Indeed, there would be unjust enrichment if respondents Solid Homes, Inc. & Purita
Soliven are made to pay only the purchase price plus interest. It is definite that the value
of the subject property already escalated after almost two decades from the time the
petitioner paid for it.Equity and justice dictate that the injured party should be paid
the market value ofthe lot, otherwise, respondents Solid Homes, Inc. & Purita
Soliven would enrich themselves at the expense of herein lot owners when they sell
the same lot at the present market value. Surely, such a situation should not be
countenanced for to do sowould be contrary to reason and therefore, unconscionable.
Over time, courts have recognized with almost pedantic adherence that what is
inconvenient or contrary to reason is not allowed in law. (Emphasis supplied.)

On this score, it is apt to mention that it is the intent of PD 957 (Regulating the Sale
ofSubdivision Lots and Condominiums, Providing Penalties for Violations Thereof) to
protect the buyeragainst unscrupulous developers, operators and/or sellers who reneged
on their obligations. Thus, in order to achieve this purpose, equity and justice dictate that
the injured party should be afforded full recompense and as such, be allowed to recover
the prevailing market value of the undelivered lot which had been fully paid for.

Furthermore, the Court finds that there is proper legal basis to accord moral and
exemplary
damages and attorney’s fees, including costs of suit. Verily, GPI’s unjustified failure to
comply with its obligations as above discussed caused Sps. Fajardo serious anxiety,
mental anguish and sleepless nights, thereby justifying the award of moral damages. In
the same vein, the payment of exemplary damages remains in order so as to prevent
similarly minded subdivision developers to commit the same transgression. And finally,
considering that Sps. Fajardo were constrained to engage the services of counsel to file
this suit, the award of attorney’s fees must be likewise sustained. Gotesco Properties,
Inc., et al. vs. Sps. Eugenio andAngelina Fajardo; G.R. No. 201167. February 27, 2013

Contracts; interpretation thereof; intention of the parties; relativity of contracts; credit

line; definition; trust receipt; characteristics; coverage; contract of adhesion; generally
not a one-sided document; interest rate; parties have the right to agree on rate of
interest; interest rate must not be excessive, iniquitous, unconscionable and exorbitant;
attorney’s fees; award must rest on a factual basis and legal justification stated in the
body of the decision under review. If the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations
shall control. In determining their intention, their contemporaneous and subsequent acts
shall be principally considered. Under the notion of relativity of contracts embodied in
Article 1311 of the Civil Code, contracts take effect only between the parties, their
assigns and heirs. Hence, the farmer-participants, not being themselves parties to the
contractual documents signed by Gloria, were not to be thereby liable.

A credit line is really a loan agreement between the parties. According to Rosario
Textile MillsCorporation v. Home Bankers Savings and Trust Co.:

x x x [A] credit line is “that amount of money or merchandise which a banker, a

merchant, or supplier agrees to supply to a person on credit and generally agreed to in
advance.” It is a fixed limit of credit granted by a bank, retailer, or credit card issuer to a
customer, to the full extent of which the latter may avail himself of his dealings with the
former but which he must not exceed and is usually intended to cover a series of
transactions in which case, when the customer’s line of credit is nearly exhausted, he is
expected to reduce his indebtedness by
payments before making any further drawings.

A trust receipt is “a security transaction intended to aid in financing importers and retail
dealers who do not have sufficient funds or resources to finance the importation or
purchase of merchandise, and who may not be able to acquire credit except through
utilization, as collateral, of the merchandise imported or purchased.” It is a security
agreement that “secures an indebtedness and there can be no such thing as security
interest that secures no obligation.”

The contract, its label notwithstanding, was not a trust receipt transaction in legal
contemplation or within the purview of the Trust Receipts Law (Presidential Decree No.
115) such that its breach would render Gloria criminally liable for estafa. Under Section
4 of
the Trust Receipts Law, the sale of goods by a person in the business of selling goods for
profit who, at the outset of the transaction, has, as against the buyer, general property
rights in such goods, or who sells the goods to the buyer on credit, retaining title or other
interest as security for the payment of the purchase price, does not constitute a trust
receipt transaction and is outside the purview and coverage of the law.

In Land Bank v. Perez, the Court has elucidated on the coverage of Section 4 (of the
Trust Receipts Law), to wit:

There are two obligations in a trust receipt transaction. The first is covered by the
provision that refers to money under the obligation to deliver it (entregarla) to the owner
of the merchandise sold. The second is covered by the provision referring to
merchandise received under the obligation to return it (devolverla) to the owner. Thus,
under the Trust Receipts Law, intent to defraud is presumed when (1) the entrustee fails
to turn over the proceeds of the sale of goods covered by the trust receipt to the
entruster; or (2) when the entrustee fails to return the goods under trust, if they are not
disposed of in accordance with the terms of the trust receipts.

In all trust receipt transactions, both obligations on the part of the trustee exist in the
alternative – the return of the proceeds of the sale or the return or recovery of the goods,
whether raw or processed. When both parties enter into an agreement knowing that
thereturn of the goods subject of the trust receipt is not possible even without any
fault on the part of the trustee, it is not a trust receipt transaction penalized under
Section 13 of P.D. 115; the only obligation actually agreed upon by the parties would
be the return of the proceeds of the sale transaction. This transaction becomes a
mere loan, where the borrower is obligated to pay the bank the amount spent for the
purchase of the goods. (Bold emphasis supplied)

A contract of adhesion prepared by one party, usually a corporation, is generally not a

one-sided document as long as the signatory is not prevented from studying it before
signing. … At any rate, the social stature of the parties, the nature of the transaction, and
the amount involved were also factors to be considered in determining whether the
aggrieved party “exercised adequate care and diligence in studying the contract prior to
its execution.” Thus, “[u]nless a contracting party cannot read or does not understand the
language in which the agreement is written, he is presumed to know the import of his
contract and is bound thereby.”

The Usury Law allowed the parties in a loan agreement to exercise discretion on the
interest rate to be charged. Once a judicial demand for payment has been made,
however, Article 2212 of the Civil Code should apply, that is: “Interest due shall earn
legal interest from the time it is judicially demanded, although the obligation may be
silent upon this point.”

The Central Bank circulars on interest rates granted to the parties leeway on the
rate of interest agreed upon. In this regard, the Court has said:

The Usury Law had been rendered legally ineffective by Resolution No. 224 dated 3
December 1982 of the Monetary Board of the Central Bank, and later by Central Bank
Circular No. 905(Amendment of Books I to IV of the Manual of Regulations for Banks
and OtherFinancial Intermediaries) which took effect on 1 January 1983. These
circulars removed theceiling on interest rates for secured and unsecured loans regardless
of maturity. The effect of these circulars is to allow the parties to agree on any interest
that may be charged on a loan. The virtual repeal of the Usury Law is within the range of
judicial notice which courts are
bound to take into account. Although interest rates are no longer subject to a ceiling, the
lender does not have an unbridled license to impose increased interest rates. The lender
and the borrower should agree on the imposed rate, and such imposed rate should be in
writing.

Accordingly, the interest rate agreed upon should not be “excessive,

iniquitous, unconscionable and exorbitant;” otherwise, the Court may declare
the rate illegal.

The award of attorney’s fees must rest on a factual basis and legal justification stated in
the body of the decision under review. Absent the statement of factual basis and legal
justification, attorney’s fees are to be disallowed. In Abobon v. Abobon, the Court has
expounded on the requirement for factual basis and legal justification in order to warrant
the grant of attorney’s fees to the winning party, viz:

As to attorney’s fees, the general rule is that such fees cannot be recovered by a
successful litigant as part of the damages to be assessed against the losing party because
of the policy that no premium should be placed on the right to litigate. Indeed, prior to
the effectivity of the present Civil Code, such fees could be recovered only when there
was a stipulation to that effect. It was only under the present Civil Code that the right to
collect attorney’s fees in the cases mentioned in Article 2208 of the Civil Code came to
be recognized. Such fees are now included in the concept of actual damages.

Even so, whenever attorney’s fees are proper in a case, the decision rendered therein
should still expressly state the factual basis and legal justification for granting them.
Granting them in the dispositive portion of the judgment is not enough; a discussion of
the factual basis andlegal justification for them must be laid out in the body of the
decision. Sps. Dela Cruz
vs. Planters Products, Inc.; G.R. No. 158649. February 18, 2013

Contract; rescission under Article 1191; recognizes an implied resolutory condition in

reciprocal obligations; effects thereof. The action for the rescission of the deed of sale on
the ground that Advanced Foundation did not comply with its obligation actually seeks
one of the alternative remedies available to a contracting party under Article 1191 of the
Civil Code, to wit:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.

Article 1191 of the Civil Code recognizes an implied or tacit resolutory condition in
reciprocal obligations. The condition is imposed by law, and applies even if there is no
corresponding agreement thereon between the parties. The explanation for this is that in
reciprocal obligations a party incurs in delay once the other party has performed his part
of the contract; hence, the party who has performed or is ready and willing to perform
may rescind the obligation if the other does not perform, or is not ready and willing to
perform.

It is true that the rescission of a contract results in the extinguishment of the obligatory
relation as if it was never created, the extinguishment having a retroactive effect. The
rescission is equivalent to invalidating and unmaking the juridical tie, leaving things in
their status before the celebration of the contract. However, until the contract is
rescinded, the juridical tie and the concomitant obligations subsist. Teodoro A. Reyes vs.
Ettore Rossi; G.R. No. 159823. February 18, 2013.

Ejectment; distinction between a summary action of ejectment and a plenary action for
recovery of possession and/or ownership of the land; power of the inferior courts to rule
on the question of ownership in ejectment suits; partition; validity of oral partition; actual
possession and exercise of dominion over definite portions of the property are considered
strong proof of an oral partition; ownership; tax declarations and tax receipts alone are
not
conclusive evidence. It is well to be reminded of the settled distinction between a
summary action of ejectment and a plenary action for recovery of possession and/or
ownership of the land. What really distinguishes an action for unlawful detainer from a
possessory action (accion publiciana) and from a reinvindicatory action (accion
reinvindicatoria) is that the first is limited to the question of possession de facto.
Unlawful detainer suits (accion interdictal) together with forcible entry are the two
forms of ejectment suit that may be filed to recover possession of real property. Aside
from the summary action of ejectment, accion publiciana or the plenary action to
recover the right of possession and accion reinvindicatoria or the action to recover
ownership which also includes recovery of possession, make up the three kinds of
actions to judicially recover possession.
Under Section 3 of Rule 70 of the Rules of Court, the Summary Procedure governs the
two forms of ejectment suit, the purpose being to provide an expeditious means of
protecting actual possession or right to possession of the property. They are not processes
to determine the actual title to an estate. If at all, inferior courts are empowered to rule on
the question of ownership raised by the defendant in such suits, only to resolve the issue
of possession and its determination on the ownership issue is not conclusive.

The validity of an oral partition is well-settled in our jurisdiction. In Vda.de

Espina v.Abaya, this Court declared that an oral partition is valid:

Anent the issue of oral partition, We sustain the validity of said partition. “An agreement
of partition may be made orally or in writing. An oral agreement for the partition of the
property owned in common is valid and enforceable upon the parties. The Statute of
Frauds has no operation in this kind of agreements, for partition is not a conveyance of
property but simply a segregation and designation of the part of the property which
belong to the co-owners.”

In Maestrado v. CA, the Supreme Court upheld the partition after it found that it
conformed to the alleged oral partition of the heirs, and that the oral partition was
confirmed by the notarized quitclaims executed by the heirs subsequently. In Maglucot-
Aw v. Maglucot, the Supreme Court elaborated on the validity of parol partition:
On general principle, independent and in spite of the statute of frauds, courts of equity
have enforce [sic] oral partition when it has been completely or partly performed.

Regardless of whether a parol partition or agreement to partition is valid and enforceable

at law, equity will [in] proper cases[,] where the parol partition has actually been
consummated by the taking of possession in severalty and the exercise of ownership by
the parties of the respective portions set off to each, recognize and enforce such parol
partition and the rights of the parties thereunder. Thus, it has been held or stated in a
number of cases involving an oral partition under which the parties went into
possession, exercised acts of ownership, or otherwise partly performed the partition
agreement, that equity will confirm such partition and in a proper case decree title in
accordance with the possession in severalty.

In numerous cases it has been held or stated that parol partition may be sustained on the
ground of estoppel of the parties to assert the rights of a tenant in common as to parts of
land divided by parol partition as to which possession in severalty was taken and acts of
individual ownership were exercised. And a court of equity will recognize the agreement
and decree it to be valid and effectual for the purpose of concluding the right of the
parties as between each other to hold their respective parts in severalty.

A parol partition may also be sustained on the ground that the parties thereto have
acquiesced in and ratified the partition by taking possession in severalty, exercising acts
of ownership with respect thereto, or otherwise recognizing the existence of the partition.

A number of cases have specifically applied the doctrine of part performance, or have
stated that a part performance is necessary, to take a parol partition out of the operation
of the statute of frauds. It has been held that where there was a partition in fact between
tenants in common, and a part performance, a court of equity would have regard to and
enforce such partition agreed to by the parties.

It is settled that tax declarations and tax receipts alone are not conclusive evidence of
ownership. They are merely indicia of a claim of ownership,61 but when coupled with
proof of actual possession of the property, they can be the basis of claim of ownership
through
prescription. In the absence of actual, public and adverse possession, the declaration of
the land for tax purposes does not prove ownership. Casilang vs. Casilang-Dizon, et
al.; G.R. No. 180269. February 20, 2013

Mortgage; accommodation mortgage; sanctioned under Article 2085 of the Civil Code;
accommodation mortgagor is ordinarily not the recipient of the loan; reasonable
promptness in attacking the validity of a mortgage; unreasonable delay may delay may
amount to ratification. The validity of an accommodation mortgage is allowed under
Article 2085 of the Civil Code which provides that “[t]hird persons who are not parties to
the principal obligation may secure the latter by pledging or mortgaging their own
property.” An accommodation mortgagor, ordinarily, is not himself a recipient of the
loan, otherwise that would be contrary to his designation as such.
It bears stressing that an accommodation mortgagor, ordinarily, is not himself a recipient
of the loan, otherwise that would be contrary to his designation as such. We have held
that it is not always necessary that the accommodation mortgagor be apprised
beforehand of the entire amount of the loan nor should it first be determined before the
execution of the Special Power of Attorney in favor of the debtor. This is especially true
when the words used by the parties indicate that the mortgage serves as a continuing
security for credit obtained as well as future loan availments.

Mortgagors desiring to attack a mortgage as invalid should act with reasonable

promptness, and unreasonable delay may amount to ratification. Spouses Ramos vs. Raul
Obispo and Far EastBank and Trust Co.; G.R. No. 193804. February 27, 2013
Tort; Doctrine of Last Clear Chance; definition and characteristics; contributory negligence;
definition; effect; apportionment of damages between parties who are both negligent
involving banking transactions; highest degree of diligence is required for banks. The
doctrine of last clear chance, stated broadly, is that the negligence of the plaintiff does not
preclude a recovery for the negligence of the defendant where it appears that the defendant,
by exercising reasonable care and prudence, might have avoided injurious consequences to
the plaintiff notwithstanding the plaintiff’s negligence. The doctrine necessarily assumes
negligence on the part of the defendant and contributory negligence on the part of the
plaintiff, and does not apply except upon that assumption. Stated differently, the
antecedent negligence of the plaintiff does not preclude him from recovering damages
caused by the supervening negligence of the defendant, who had the last fair chance to
prevent the impending harm by the exercise of due diligence. Moreover, in situations
where the doctrine has been applied, it was defendant’s failure to exercise such ordinary
care, having the last clear chance to avoid loss or injury, which was the proximate cause
of the occurrence of such loss or injury.
A collecting bank is guilty of contributory negligence when it accepted for deposit a
post-dated check notwithstanding that said check had been cleared by the drawee
bank which failed to return the check within the 24-hour reglementary period.

In the cited case of Philippine Bank of Commerce v. Court of Appeals, while the Court
found petitioner bank as the culpable party under the doctrine of last clear chance since it
had, thru its teller, the last opportunity to avert the injury incurred

by its client simply by faithfully observing its own validation procedure, it nevertheless
ruled that the plaintiff depositor (private respondent) must share in the loss on account
of
itscontributory negligence. Thus:

The foregoing notwithstanding, it cannot be denied that, indeed, private respondent

was likewise negligent in not checking its monthly statements of account. Had it done
so, the company would have been alerted to the series of frauds being committed
against RMC by its secretary. The damage would definitely not have ballooned to such
an amount if only RMC, particularly Romeo Lipana, had exercised even a little
vigilance in their financial affairs. This omission by RMC amounts to contributory
negligence which shallmitigate the damages that may be awarded to the private
respondent under Article 2179 of the New Civil Code, to wit:

“x x x. When the plaintiff’s own negligence was the immediate and proximate cause of
his injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendant’s lack of due care,
the plaintiff may recoverdamages, but the courts shall mitigate the damages to be
awarded.”
In view of this, we believe that the demands of substantial justice are satisfied by
allocatingthe damage on a 60-40 ratio. Thus, 40% of the damage awarded by the
respondentappellate court, except the award of P25,000.00 attorney’s fees, shall be borne
by private respondent RMC; only the balance of 60% needs to be paid by the petitioners.
The award of attorney’s fees shall be borne exclusively by the petitioners. (Italics in the
original; emphasis supplied)

“Contributory negligence is conduct on the part of the injured party, contributing as a

legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection.” Admittedly, petitioner’s acceptance of the
subject check for deposit despite the one year postdate written on its face was a clear
violation of established banking regulations and practices. In such instances, payment
should be refused by the drawee bank and returned through the PCHC within the 24-hour
reglementary period. As aptly observed by the CA, petitioner’s failure to comply with
this basic policy regarding post-dated checks was “a telling sign of its lack of due
diligence in handling checks coursed through it.”

It bears stressing that “the diligence required of banks is more than that of a
Roman paterfamiliasor a good father of a family. The highest degree of diligence is
expected,” considering the nature of the banking business that is imbued with public
interest. While it is true that respondent’s liability for its negligent clearing of the check
is greater, petitioner cannot take lightly its own violation of the long-standing rule
against encashment of post-dated checks and the injurious consequences of allowing
such checks into the clearing system. Allied Banking Corporation vs. Bank of the
Philippine Islands; G.R. No. 188363. February 27, 2013
Special Laws

Torrens system; curtain principle; right to rely on the Torrens certificate of title; exception,
when the party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry; purchaser in good faith; definition. Under the
Torrens system of land registration, the registered owner of realty cannot be deprived of her
property through fraud, unless a transferee acquires the property as an innocent purchaser
for value. A transferee who acquires the property covered by a reissued owner’s copy of
the certificate of title without taking the ordinary precautions of honest persons in doing
business and examining the records of the proper Registry of Deeds, or who fails to pay
the full market value of the property is not considered an innocent purchaser for value.
Under the Torrens system of land registration, the State is required to maintain a register
of landholdings that guarantees indefeasible title to those included in the register. The
system has been instituted to combat the problems of uncertainty, complexity and cost
associated with old title systems that depended upon proof of an unbroken chain of title
back to a good root of title. The State issues an official certificate of title to attest to the
fact that the person named is the owner of the property described therein, subject to such
liens and encumbrances as thereon noted or what the law warrants or reserves.

One of the guiding tenets underlying the Torrens system is the curtain principle, in that
one does not need to go behind the certificate of title because it contains all the
information about the title of its holder. This principle dispenses with the need of
proving ownership by long complicated documents kept by the registered owner, which
may be necessary under a private conveyancing system, and assures that all the
necessary information regarding ownership is on the certificate of title. Consequently,
the avowed objective of the Torrens system is to obviate possible conflicts of title by
giving the public the right to rely upon the face of the Torrens certificate and, as a rule,
to dispense with the necessity of inquiring further; on the part of the registered owner,
the system gives him complete peace of mind that he would be secured in his ownership
as long as he has not voluntarily disposed of any right over the covered land.

The Philippines adopted the Torrens system through Act No. 496, also known as the
LandRegistration Act, which was approved on November 6, 1902 and took effect on
February 1,1903. In this jurisdiction, therefore, “a person dealing in registered land has
the right to rely on the Torrens certificate of title and to dispense with the need of
inquiring
further, except when the party has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such inquiry”.
Good faith is the honest intention to abstain from taking unconscientious advantage of
another. It means the “freedom from knowledge and circumstances which ought to put a
person on inquiry.” Given this notion of good faith, therefore, a purchaser in good faith is
one who buys the property of another without notice that some other person has a right
to, or interest in, such property and pays full and fair price for the same. Spouses Cusi v s
. Lilia V.De Vera, et al.; G.R. Nos. 195825/195871. February 27, 2013

Torrens System; right to rely on Torrens title. [It is a] settled principle that one who
deals with property registered under the Torrens System need not go beyond the same,
but only has to rely on the title. … Moreover, since the subject property was already
covered by a Torrens title at the time that respondents bought the same, the law does not
require them to go beyond what appears on the face of the title. The lot has, thus, passed
to respondents, who are presumed innocent purchasers for value, in the absence of any
allegation to the contrary. Mercado, et al. vs. Sps. Espina;G.R. No. 173987. February
25, 2013

Civil Code

Contracts; contract of sale; perfection; essential elements; stages. A contract of sale is

perfected at the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price. Thus, for a contract of sale to be valid, all of the
following essential elements must concur: a) consent or meeting of the minds; b)
determinate subject matter; and c) price certain in money or its equivalent.
As for the price, fixing it can never be left to the decision of only one of the contracting
parties. But a price fixed by one of the contracting parties, if accepted by the other, gives
rise to a perfected sale.

As regards consent, when there is merely an offer by one party without acceptance of the
other, there is no contract. The decision to accept a bidder’s proposal must be communicated
to the bidder. However, a binding contract may exist between the parties whose minds have
met, although they did not affix their signatures to any written document, as acceptance may
be expressed or implied. It can be inferred from the contemporaneous
and subsequent acts of the contracting parties. Thus, the Supreme Court has held:

x x x The rule is that except where a formal acceptance is so required, although the
acceptance must be affirmatively and clearly made and must be evidenced by some acts
or conduct communicated to the offeror, it may be made either in a formal or an informal
manner, and may be shown by acts, conduct, or words of the accepting party that clearly
manifest a present intention or determination to accept the offer to buy or sell. Thus,
acceptance may be shown by the acts, conduct, or words of a party recognizing the
existence of the contract of sale.

Contracts undergo three stages: (a) negotiation that begins from the time the prospective
contracting parties indicate interest in the contract and ends at the moment of their
agreement; (b) perfection or birth that which takes place when the parties agree upon all
the essential elements of the contract; and (c) consummation that occurs when the
parties fulfill or perform the terms agreed upon, culminating in the extinguishment
thereof. RobernDevelopment Corporation, et al. vs. People’s Landless Association
represented by Florida Ramos, et
al.; G.R. No. 173622. March 11, 2013

Contracts; obligatory nature of contracts; interpretation; Joint Affidavit of Undertaking

may be a contract in itself; due execution; default, elements; judicial demand;
computation of interest. Contracts are obligatory no matter what their forms may be,
whenever the essential requisites for their validity are present. In determining whether a
document is an affidavit or a contract, the Court looks beyond the title of the document,
since the denomination or title given by the parties in their document is not conclusive of
the nature of its contents. In the construction or interpretation of an instrument, the
intention of the parties is primordial and is to be pursued. If the terms of the document are
clear and leave no doubt on the intention of the contracting parties, the literal meaning of
its stipulations shall control. If the words appear to be contrary to the parties’ evident
intention, the latter shall prevail over the former.
A simple reading of the terms of the Joint Affidavit of Undertaking readily
discloses that it contains stipulations characteristic of a contract. The Joint
Affidavit ofUndertaking contained a stipulation where Cruz and Leonardo promised to
replace the
damaged car of Gruspe, 20 days from October 25, 1999 or up to November 15, 1999, of
the same model and of at least the same quality. In the event that they cannot replace the
car within the same period, they would pay the cost of Gruspe’s car in the total amount
of P350,000, with interest at 12% per month for any delayed payment after November
15, 1999, until fully paid.

An allegation of vitiated consent must be proven by preponderance of

evidence. Although the undertaking in the affidavit appears to be onerous and lopsided,
thisdoes not necessarily prove the alleged vitiation of consent. They, in fact, admitted the
genuineness and due execution of the Joint Affidavit and Undertaking when they said
that they signed the same to secure possession of their vehicle.

In order that the debtor may be in default, it is necessary that the following requisites be
present: (1) that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially and
extrajudicially. Default generally begins from the moment the creditor demands the
performance of the obligation. Rodolfo G. Cruz and Esperanza Ibias vs. Atty. Delfin
Gruspe; G.R. No. 191431. March 13, 2013

Contracts; parties may establish any agreement, term, and condition they may deem
advisable, provided they are not contrary to law, morals or public policy; if the language
used is clear, there is no need for construction; mortgage; court’s duty, merely to
interpret the intent of the parties; even if not expressly so stated, the mortgage extends to
the improvements; machineries and equipment are considered real properties. As held in
GatewayElectronics Corp. v. Land Bank of the Philippines,the rule in this jurisdiction is
that the contractingparties may establish any agreement, term, and condition they may
deem advisable, provided they are not contrary to law, morals or public policy. The right
to enter into lawful contracts constitutes one of the liberties guaranteed by the
Constitution.
It has been explained by the Supreme Court in Norton Resources and Development
Corporation v.All Asia Bank Corporation in reiteration of the ruling in Benguet
Corporation v. Cabildo that:
A court’s purpose in examining a contract is to interpret the intent of the contracting
parties, as objectively manifested by them. The process of interpreting a contract requires
the court to make a preliminary inquiry as to whether the contract before it is ambiguous.
A contract provision is ambiguous if it is susceptible of two reasonable alternative
interpretations. Where the written terms of the contract are not ambiguous and can only
be read one way, the court will interpret the contract as a matter of law.

Then till now the pronouncement has been that if the language used is as clear as day
and readily understandable by any ordinary reader, there is no need for construction.

Law and jurisprudence provide and guide that even if not expressly so stated, the
mortgage extends to the improvements.

Article 2127 of the Civil Code provides:

Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing
fruits, and the rents or income not yet received when the obligation becomes due, and to
the amount of the indemnity granted or owing to the proprietor from the insurers of the
property mortgaged, or in virtue of expropriation for public use, with the declarations,
amplifications and limitations established by law, whether the estate remains in the
possession of the mortgagor, or it passes into the hands of a third person.

In the early case of Bischoff v. Pomar and Cia. General de Tabacos, the Court ruled that
even if the machinery in question was not included in the mortgage expressly, Article
111 of the [old] Mortgage Law provides that chattels permanently located in a building,
either useful or ornamental, or for the service of some industry even though they were
placed there after the creation of the mortgage shall be considered as mortgaged with the
estate, provided they belong to the owner of said estate.

The real estate mortgage over the machineries and equipment is even in full accord with
the classification of such properties by the Civil Code of the Philippines as immovable
property. Thus:
Article 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil;

xxxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works. Star Two
(SPV-AMC), Inc. vs. Paper City Corporation of the Philippines; G.R. No. 169211. March
6, 2013

Property; encroachment on property; builder in bad faith; options available to owner of

the land; rules in the determining the reckoning period for valuing the property. Under
Article 448 pertaining to encroachments in good faith, as well as Article 450 referring
to encroachments in bad faith, the owner of the land encroached upon – petitioner
herein – has the option to require respondent builder to pay the price of the land.
Although these provisions of the Civil Code do not explicitly state the reckoning period
for valuing the property, Ballatan v. Court of Appeals already specifies that in the event
that the seller elects to sell the lot, “the price must be fixed at the prevailing market
value at the time of payment.”

More recently, Tuatis v. Spouses Escol illustrates that the present or current fair value of the
land is to be reckoned at the time that the landowner elected the choice, and not at the time
that the property was purchased. … In Sarmiento v. Agana, we reckoned the valuation of
the property at the time that the real owner of the land asked the builder to vacate the
property encroached upon. Moreover, the oft-cited case Depra v. Dumlao likewise ordered
the courts of origin to compute the current fair price of the land in cases of encroachment on
real properties. Vda.de Roxas v. Our Lady’s Foundation, Inc.; G.R. No. 182378. March 6,
2013

Special Laws
Agrarian Reform; land ownership; mere issuance of the Certificate of Land Transfer does
not vest full ownership on the holder and does not automatically operate to divest the
land owner of all of his rights over the landholding; requirements to effect a transfer of
ownership; agricultural lands; any sale or disposition of agricultural lands made after the
effectivity of R.A. No. 6657 which has been found contrary to its provisions shall be null
and void; procedures for the reallocation of farmholdings covered by P.D. No. 27 by
reason of abandonment or the refusal to become a beneficiary; requisites of
abandonment. The mere issuance of the Certificate of Land Transfer (“CLT”) does not
vest full ownership on the holder and does not automatically operate to divest the
landowner of all of his rights over the landholding. The holder must first comply with
certain mandatory requirements to effect a transfer of ownership. Under R.A. No. 6657
(Comprehensive Agrarian Reform Law of1988) in relation with P.D. No. 27 (Decreeing
the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them the
Ownership of the Land they Till and Providing the Instruments and Mechanism Therefor)
and E.O. No. 228 (Declaring Full Land Ownership to Qualified Farmer Beneficiaries
Covered by P.D. No. 27: Determining the Value of Remaining Unvalued Rice and Corn
Lands Subject to P.D. No. 27; and Providing for the Manner of Payment by the Farmer
Beneficiary and Mode of Compensation to the Landowner), the title to the landholding
shall be issued to thetenant-farmer only upon the satisfaction of the following
requirements: (1) payment in full of the just compensation for the landholding, duly
determined by final judgment of the proper court; (2) possession of the qualifications of a
farmer-beneficiary under the law; (3) full-pledged membership of the farmer-beneficiary
in a duly recognized farmers’ cooperative; and (4) actual cultivation of the landholding.
We explained in several cases that while a tenant with a CLT is deemed the owner of a
landholding, the CLT does not vest fullownership on him. The tenant-holder of a CLT
merely possesses an inchoate right that issubject to compliance with certain legal
preconditions for perfecting title and acquiring full ownership.
Pursuant to R.A. No. 6657 (Comprehensive Agrarian Reform Law of 1988) in relation
with P.D. No. 27(Decreeing the Emancipation of Tenants from the Bondage of the Soil,
Transferring to Them theOwnership of the Land they Till and Providing the
Instruments and Mechanism Therefor), any sale ordisposition of agricultural lands
made after the effectivity of R.A. No. 6657 which has been found contrary to its
provisions shall be null and void. The proper procedure for the
reallocation of the disputed lot must be followed to ensure that there indeed
existgrounds for the cancellation of the CLT or for forfeiture of rights under it, and that
the lot is subsequently awarded to a qualified farmer-tenant pursuant to the law.

Under Ministry Memorandum Circular No. 04-83 (Supplemental Guidelines to

Govern TransferAction of Areas Covered by P.D. 27 by Reason of Abandonment,
Waiver of Rights and Illegal Transactions) in relation with Ministry Memorandum
Circular No. 08-80 (Guidelines in the Disposition and Reallocation of Farmholdings
of Tenant-Farmers who Refuses to Become Beneficiaries of P.D. No. 27) and Ministry
Memorandum Circular No. 07-79 (Rules and Regulations Governing Transactions
Involving Lands Covered by P.D. No. 27), the following procedures must beobserved
for the reallocation of farmholdings covered by P.D. No. 27 by reason of abandonment
or the refusal to become a beneficiary, among others:

I. Investigation Procedure

1. The conduct of verification by the concerned Agrarian Reform Team Leader (ARTL)
to ascertain the reasons for the refusal. All efforts shall be exerted to convince the
tenant-farmer to become a beneficiary and to comply with his obligations as such
beneficiary.

2. If the tenant-farmer still refuses, the ARTL shall determine the substitute. The ARTL
shall first consider the immediate member of the tenant-farmer’s family who assisted in
the cultivation of the land, and who is willing to be substituted to all the rights and
obligations of the tenant-farmer. In the absence or refusal of such member, the ARTL
shall choose one from a list of at least three qualified tenants recommended by the
President of the Samahang Nayon or, in default, any organized farmer association,
subject to the award limits under P.D. No. 27.

3. Formal notice of the report shall be given to the concerned farmer-beneficiary

togetherwith all the pertinent documents and evidences.

4. The ARTL shall submit the records of the case with his report and recommendation
tothe District Officer within 5 days from the ARTL’s determination of the substitute.
The
District Officer shall likewise submit his report and recommendation to the Regional
Director and the latter to the Bureau of Agrarian Legal Assistance, for review,
evaluation, and preparation of the final draft decision for final approval.

5. The decision shall declare the cancellation of the CLT if issued.

In the event of the farmer-beneficiary’s death, the transfer or reallocation of his

landholding to his heirs shall be governed by Ministry Memorandum Circular No. 19-78
(Rules andRegulations In Case of Death of a Tenant-Beneficiary).

For abandonment to exist, the following requisites must concur: (1) a clear intent to
abandon; and (2) an external act showing such intent. The term is defined as the “willful
failure of the ARB, together with his farm household, to cultivate, till, or develop his land
to produce any crop, or to use the land for any specific economic purpose continuously
for a period of two calendar years.” It entails, among others, the relinquishment of
possession of the lot for at least two (2) calendar years and the failure to pay the
amortization for the same period. What is critical in abandonment is intent which must be
shown to be deliberate and clear. The intent must be established by the factual failure to
work on the landholding absent any valid reason as well as a clear intent, which is shown
as a separate element. Heirs ofLorenzo Buensuceso vs. Perez; G.R. No. 173926. March 6,
2013

General Banking Law and Act No. 3135; right of redemption; period; juridical entities;
General Banking Law of 2000 merely modified the time for the exercise of such right by
reducing the one-year period originally provided in Act No. 3135; right of redemption,
being statutory, it must be exercised in the manner prescribed by the statute, and within
the prescribed time limit to make it effective. The law governing cases of extrajudicial
foreclosure of mortgage is Act No. 3135 (An Act to Regulate the Sale of Property Under
SpecialPowers Inserted In or Annexed to Real-Estate Mortgages), as amended by Act
No. 4118 (An Act to Amend Act No. 3135). Section 6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors-in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property subsequent to
the mortgage or deed of trust under which the property is sold, may redeem the same at
any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundred and sixty-four
to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these
are not inconsistent with the provisions of this Act.

The one-year period of redemption is counted from the date of the registration of the
certificate of sale. In this case, the parties provided in their real estate mortgage contract
that upon petitioner’s default and the latter’s entire loan obligation becoming due,
respondent may immediately foreclose the mortgage judicially in accordance with the
Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended (An Act
to Regulate the Sale ofProperty Under Special Powers Inserted In or Annexed to Real-
Estate Mortgages).

However, Section 47 of R.A. No. 8791 otherwise known as “The General Banking Law of
2000” which took effect on June 13, 2000, amended Act No. 3135. Said provision reads:

SECTION 47.Foreclosure of Real Estate Mortgage. — In the event of foreclosure,

whether judicially or extrajudicially, of any mortgage on real estate which is security for
any loan or other credit accommodation granted, the mortgagor or debtor whose real
property has been sold for the full or partial payment of his obligation shall have the
right within one year after the sale of the real estate, to redeem the property by paying
the amount due under the mortgage deed, with interest thereon at the rate specified in the
mortgage, and all the costs and expenses incurred by the bank or institution from the sale
and custody of said property less the income derived therefrom. However, the purchaser
at the auction sale concerned whether in a judicial or extrajudicial foreclosure shall have
the right to enter upon and take possession of such property immediately after the date of
the confirmation of the auction sale and administer the same in accordance with law.
Any petition in court to enjoin or restrain the conduct of foreclosure proceedings
instituted pursuant to this provision shall be given due course only upon the filing by the
petitioner of a bond in an amount fixed by the court conditioned that he will pay all the
damages which the bank may suffer by the enjoining or the restraint of the foreclosure
proceeding.
Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to
anextrajudicial foreclosure, shall have the right to redeem the property in accordance
with this provision until, but not after, the registration of the certificate of
foreclosure sale with the applicable Register of Deeds which in no case shall be more
than three (3) monthsafter foreclosure, whichever is earlier. Owners of property that
has been sold in aforeclosure saleprior to the effectivity of this Act shall retain their
redemption rights until their expiration. (Emphasis supplied.)

Under the new law, an exception is thus made in the case of juridical persons which are
allowed to exercise the right of redemption only “until, but not after, the registration of
the certificate of foreclosure sale” and in no case more than three (3) months after
foreclosure, whichever comes first.

Section 47 (of the General Banking Law of 2000) did not divest juridical persons of the
right to redeem their foreclosed properties but only modified the time for the exercise of
such right by reducing the one-year period originally provided in Act No. 3135 (An Act
to Regulatethe Sale of Property Under Special Powers Inserted In or Annexed to Real-
Estate Mortgages). The newredemption period commences from the date of foreclosure
sale, and expires upon registration of the certificate of sale or three months after
foreclosure, whichever is earlier. There is likewise no retroactive application of the new
redemption period because Section 47 (of the General Banking Law of 2000) exempts
from its operation those properties foreclosed prior to its effectivity and whose owners
shall retain their redemption rights under Act No. 3135 (An Act to Regulate the Sale of
Property Under Special Powers Inserted In orAnnexed to Real-Estate Mortgages).

The right of redemption being statutory, it must be exercised in the manner prescribed
by the statute, and within the prescribed time limit, to make it effective. Furthermore,
as with other individual rights to contract and to property, it has to give way to police
power exercised for public welfare.Goldenway Merchandising Corporation vs.
Equitable PCI Bank; G.R. No. 195540. March 13, 2013
Contract; Rescission; effect. Rescission entails a mutual restitution of benefits received.
An injured party who has chosen rescission is also entitled to the payment of damages.
SandovalShipyards, Inc. v. Philippine Merchant Marine Academy (PMMA); G.R. No.
188633. April 10, 2013Obligation; Extinguishment of obligations; consignation; when
tender of payment not necessary; judicial in character; difference between consignation
and tender of
payment. Under Article 1256 of the Civil Code, the debtor shall be released from
responsibility by the consignation of the thing or sum due, without need of prior tender
of payment, when the creditor is absent or unknown, or when he is incapacitated to
receive the payment at the time it is due, or when two or more persons claim the same
right to collect, or when the title to the obligation has been lost.
Consignation is necessarily judicial. Article 1258 of the Civil Code specifically
provides that consignation shall be made by depositing the thing or things due at the
disposal
ofjudicialauthority. The said provision clearly precludes consignation in venues other
than the courts.

Elsewhere, what may be made is a valid tender of payment, but not consignation. The
two, however, are to be distinguished.

Tender of payment must be distinguished from consignation. Tender is the antecedent of

consignation, that is, an act preparatory to the consignation, which is the principal, and
from which are derived the immediate consequences which the debtor desires or seeks to
obtain. Tender of payment may be extrajudicial, while consignation is necessarily
judicial, and the priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. (8 Manresa 325).Sps. Cacayorin v. Armed
Forces and Police MutualBenefit Association, Inc.; G.R. No. 171298. April 15, 2013

Property; Ejectment; only issue is who is entitled to physical possession; forcible entry;
prior physical possession is vital; judgment conclusive between the parties and their
successors-in-interest; effects if prevailing party is a usufructuary; usufruct; death of
usufructuary extinguishes usufruct. Ejectment cases – forcible entry and unlawful
detainer – are summary proceedings designed to provide expeditious means to protect
actual possession or the right
to possession of the property involved. The only question that the courts resolve in
ejectment proceedings is: who is entitled to the physical possession of the premises, that
is, to the possession de facto and not to the possession de jure. It does not even matter if a
party’s title to the property is questionable. Thus, “an ejectment case will not necessarily
be decided in favor of one who has presented proof of ownership of the subject
property.”
Indeed, possession in ejectment cases “means nothing more than actual
physicalpossession, not legal possession in the sense contemplated in civil law.” In a
forcible entrycase, “prior physical possession is the primary consideration[.]” “A party
who can prove prior possession can recover such possession even against the owner
himself. Whatever may be the character of his possession, if he has in his favor prior
possession in time, he has the security that entitles him to remain on the property until a
person with a better right lawfully ejects him.” “[T]he party in peaceable, quiet
possession shall not be thrown out by a strong hand, violence, or terror.”

The judgment in an ejectment case is conclusive between the parties and their
successors-in interest by title subsequent to the commencement of the action; hence, it
is enforceable by or against the heirs of the deceased. This judgment entitles the
winning party to: (a) the restitution of the premises, (b) the sum justly due as arrears of
rent or as reasonable compensation for the use and occupation of the premises, and (c)
attorney’s fees and costs.

[T]he right to the usufruct is now rendered moot by the death of Wilfredo since death
extinguishes a usufruct under Article 603(1) of the Civil Code. This development
deprives the heirs of the usufructuary the right to retain or to reacquire possession of
the property even if the ejectment judgment directs its restitution.

Thus, what actually survives under the circumstances is the award of damages, by
way of compensation. Rivera-Calingasan v. Rivera; G.R. No. 171555. April 17,
2013

Property; Public property; public plaza forms part of the public dominion; cannot be the
object of appropriation, lease, any other contractual undertaking; void contracts. [Public
plaza is for] public use and thereby, forming part of the public dominion. Accordingly, it
cannot be the object of appropriation either by the State or by private persons. Nor can it
be
the subject of lease or any other contractual undertaking. In Villanueva v.
Castañeda, Jr., citing Espiritu v. Municipal Council of Pozorrubio, the Court
pronounced that:
x x x Town plazas are properties of public dominion, to be devoted to public use and to
be made available to the public in general. They are outside the commerce of man and
cannot be disposed of or even leased by the municipality to private parties.

In this relation, Article 1409(1) of the Civil Code provides that a contract whose
purpose is contrary to law, morals, good customs, public order or public policy is
considered void and as such, creates no rights or obligations or any juridical relations.
Land Bank of the Philippinesv. Cacayurin; G.R. No. 191667. April 17, 2013

Special Laws

Foreclosure of Mortgage pursuant to P.D. No. 385; when its purpose is served; when
hearing is necessary before issuance of writ of possession; foreclosure of mortgage
under Section 33, Rule 39 of the Rules on Civil Procedure; when issuance of writ of
possession is not ministerial. While the Supreme Court had already declared in
Philippine National Bank v.Adil that once the property of a debtor is foreclosed and
sold to a GFI, it would bemandatory for the court to place the GFI in the possession
and control of the property— pursuant to Section 4 of P.D. No. 385 (Requiring
Government Financial Institutions to ForecloseMandatorily All Loans with
Arrearages, Including Interest and Charges Amounting to at Least Twenty (20%) of
the Total Outstanding Obligation) — this rule should not be construed as absolute
orwithout exception.
The evident purpose underlying P.D. 385 is sufficiently served by allowing foreclosure
proceedings initiated by GFIs to continue until a judgment therein becomes final and
executory, without a restraining order, temporary or permanent injunction against it
being issued. But if a parcel of land is occupied by a party other than the judgment
debtor, the proper procedure is for the court to order a hearing to determine the nature
of said adverse possession before it issues a writ of possession. This is because a third
party, who is not privy to the debtor, is protected by the law. Such third party may be
ejected from the
premises only after he has been given an opportunity to be heard, to comply with the
time honored principle of due process.

In the same vein, under Section 33 of Rule 39 of the Rules on Civil Procedure, the
possession of a mortgaged property may be awarded to a purchaser in the
extrajudicial foreclosure, unless a third party is actually holding the property
adversely vis-à-vis the judgment debtor.

[T]he obligation of a court to issue a writ of possession in favor of the purchaser in

an extrajudicial foreclosure sale ceases to be ministerial, once it appears that there is
a third party who is in possession of the property and is claiming a right adverse to
that of the debtor/mortgagor. We explained in Philippine National Bank v. Austria
that the foregoing doctrinal pronouncements are not without support in substantive
law, to wit:

x x x. Notably, the Civil Code protects the actual possessor of a property, to wit:

Art. 433. Actual possession under claim of ownership raises a disputable presumption of
ownership. The true owner must resort to judicial process for the recovery of the property.

Under the aforequoted provision, one who claims to be the owner of a property
possessed by another must bring the appropriate judicial action for its physical
recovery. The term “judicial process” could mean no less than an ejectment suit or
reivindicatory action, in which the ownership claims of the contending parties may be
properly heard and adjudicated.

Royal Savings Bank v. Asia, et al.; G.R. No. 183658. April 10, 2013

Family Code; Declaration of Presumptive Death; judgment is immediately final and

executory; proper remedy is a special civil action for certiorari filed in the Court of
Appeals; decision of Court of Appeals reviewable by the Supreme Court via certiorari
under Rule 45. [It is improper to avail of] an ordinary appeal as a vehicle for questioning a
trial court’s
decision in a summary proceeding for the declaration of presumptive death under Article 41
of the Family Code.
As explained in Republic v. Tango, the remedy of a losing party in a summary
proceeding is not an ordinary appeal, but a petition for certiorari, to wit:

By express provision of law, the judgment of the court in a summary proceeding shall be
immediately final and executory. As a matter of course, it follows that no appeal can be
had of the trial court’s judgment in a summary proceeding for the declaration of
presumptive death of an absent spouse under Article 41 of the Family Code. It goes
without saying, however, that an aggrieved party may file a petition for certiorari to
question abuse of discretion amounting to lack of jurisdiction. Such petition should be
filed in the Court of Appeals in accordance with the Doctrine of Hierarchy of Courts. To
be sure, even if the Court’s original jurisdiction to issue a writ of certiorari is concurrent
with the RTCs and the Court of Appeals in certain cases, such concurrence does not
sanction an unrestricted freedom of choice of court forum. From the decision of the Court
of Appeals, the losing party may then file a petition for review oncertiorari under Rule
45 of the Rules of Court with the Supreme Court. This is because the errors which the
court may commit in the exercise of jurisdiction are merely errors of judgment which are
the proper subject of an appeal.

When the OSG filed its notice of appeal under Rule 42, it availed itself of the wrong
remedy. As a result, the running of the period for filing of a Petition for Certiorari
continued to run and was not tolled. Upon lapse of that period, the Decision of the RTC
could no longer be questioned. Republic of the Philippines v. Narceda; G.R. No. 182760.
April 10, 2013
The Subdivision and Condominium Buyers’ Protective Decree; contract to sell; validity
is not affected by lack of certificate of registration of subdivision developer and failure
to register the contract before the Register of Deeds; Maceda Law. In Spouses Co Chien
v. Sta.Lucia Realty and Development Corporation, Inc. this Court has already ruled that
the lack of acertificate 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.

Moreover, Flora 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 1730 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… [T]hus, non-registration of an
instrument of conveyance will not affect the validity of a contract to sell. It will remain
valid and effective between the parties thereto as under PD 1529 or The Property
Registration Decree, registration merely serves as a constructive notice to the whole
world to bind third parties.

Under the Maceda Law, the defaulting buyer who has paid at least two years of
installments has the right of either to avail of the grace period to pay or, the cash
surrender value of the payments made:

Section 3.In all transactions or contracts involving the sale or financing of real estate
oninstallment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight Hundred Forty-four, as amended by Republic Act Numbered Sixty-three
Hundred Eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at the rate of one month grace period for every
one year of installment payments made: Provided, That this right shall be exercised by the
buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty per cent of the total payments made,
and, after five years of installments, an additional five per cent every year but not to
exceed ninety
per cent of the total payments made: Provided, That the actual cancellation of the
contract shall take place 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 and upon full
payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation
of the total number of installment payments made.

Moldex Realty, Inc. v. Saberon; G.R. No. 176289. April 8, 2013

Civil Code

Contract; Rescission; effect. Rescission entails a mutual restitution of benefits received.

An injured party who has chosen rescission is also entitled to the payment of damages.
SandovalShipyards, Inc. v. Philippine Merchant Marine Academy (PMMA); G.R. No.
188633.April 10, 2013Obligation; Extinguishment of obligations; consignation; when
tender of payment not necessary; judicial in character; difference between consignation
and tender of payment.Under Article 1256 of the Civil Code,the debtor shall be released
from responsibility by the consignation of the thing or sum due, without need of prior
tender of payment, when the creditor is absent or unknown, or when he is incapacitated
to receive the payment at the time it is due, or when two or more persons claim the same
right to collect, or when the title to the obligation has been lost. Consignation is
necessarily judicial. Article 1258 of the Civil Code specifically provides that
consignation shall be made by depositing the thing or things due at the disposal
ofjudicialauthority. The said provision clearly precludes consignation in venues other
than the courts.

Elsewhere, what may be made is a valid tender of payment, but not consignation. The
two, however, must be distinguished.

Tender of payment must be distinguished from consignation. Tender is the antecedent of

consignation, that is, an act preparatory to the consignation, which is the principal, and
from which are derived the immediate consequences which the debtor desires or seeks to
obtain.
Tender of payment may be extrajudicial, while consignation is necessarily judicial,
and the priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. (8 Manresa 325).

Sps. Cacayorin v. Armed Forces and Police Mutual Benefit Association, Inc.; G.R. No.
171298. April15, 2013
Property; Ejectment; only issue is who is entitled to physical possession; forcible entry;
prior physical possession is vital; judgment conclusive between the parties and their
successors-in-interest; effects if prevailing party is a usufructuary; usufruct; death of
usufructuary extinguishes usufruct. Ejectment cases – forcible entry and unlawful
detainer – are summary proceedings designed to provide expeditious means to protect
actual possession or the right to possession of the property involved. The only question
that the courts resolve in ejectment proceedings is: who is entitled to the physical
possession of the premises, that is, to the possession de facto and not to the possession
de jure. It does not even matter if a party’s title to the property is questionable. Thus, “an
ejectment case will not necessarily be decided in favor of one who has presented proof of
ownership of the subject property.”
Indeed, possession in ejectment cases “means nothing more than actual
physicalpossession, not legal possession in the sense contemplated in civil law.” In a
forcible entrycase, “prior physical possession is the primary consideration[.]” “A party
who can prove prior possession can recover such possession even against the owner
himself. Whatever may be the character of his possession, if he has in his favor prior
possession in time, he has the security that entitles him to remain on the property until a
person with a better right lawfully ejects him.” “[T]he party in peaceable, quiet
possession shall not be thrown out by a strong hand, violence, or terror.”

The judgment in an ejectment case is conclusive between the parties and their
successors-in interest by title subsequent to the commencement of the action; hence, it
is enforceable by or against the heirs of the deceased. This judgment entitles the
winning party to: (a) the restitution of the premises, (b) the sum justly due as arrears of
rent or as reasonable compensation for the use and occupation of the premises, and (c)
attorney’s fees and costs.
[T]he right to the usufruct is now rendered moot by the death of Wilfredo since death
extinguishes a usufruct under Article 603(1) of the Civil Code. This development
deprives the heirs of the usufructuary the right to retain or to reacquire possession of
the property even if the ejectment judgment directs its restitution.

Thus, what actually survives under the circumstances is the award of damages, by
way of compensation. Rivera-Calingasan v. Rivera; G.R. No. 171555. April 17,
2013
Property; Public property; public plaza forms part of the public dominion; cannot be the
object of appropriation, lease, any other contractual undertaking; void contracts. A
pPublic plaza is for public use and therefore forms part of the public dominion.
Accordingly, it cannot be the object of appropriation either by the State or by private
persons. Nor can it be the subject of lease or any other contractual undertaking. In
Villanueva v. Castañeda, Jr.,
citingEspiritu v. Municipal Council of Pozorrubio, the Court pronounced that:
x x x Town plazas are properties of public dominion, to be devoted to public use and to
be made available to the public in general. They are outside the commerce of man and
cannot be disposed of or even leased by the municipality to private parties.

In this relation, Article 1409(1) of the Civil Code provides that a contract whose
purpose is contrary to law, morals, good customs, public order or public policy is
considered void and as such, creates no rights or obligations or any juridical relations.
Land Bank of the Philippinesv. Cacayurin; G.R. No. 191667. April 17, 2013

Special Laws

Foreclosure of Mortgage pursuant to P.D. No. 385; when its purpose is served; when
hearing is necessary before issuance of writ of possession; foreclosure of mortgage
under Section 33, Rule 39 of the Rules on Civil Procedure; when issuance of writ of
possession is not ministerial. Indeed, while the Court had already declared in
Philippine National Bank v.Adil that once the property of a debtor is foreclosed and
sold to a GFI, it would bemandatory for the court to place the GFI in the possession
and control of the property— pursuant to Section 4 of P.D. No. 385 (Requiring
Government Financial Institutions to Foreclose
Mandatorily All Loans with Arrearages, Including Interest and Charges Amounting to
at Least Twenty (20%) of the Total Outstanding Obligation) — this rule should not be
construed as absolute orwithout exception.
The evident purpose underlying P.D. 385 is sufficiently served by allowing foreclosure
proceedings initiated by GFIs to continue until a judgment therein becomes final and
executory, without a restraining order, temporary or permanent injunction against it
being issued. But if a parcel of land is occupied by a party other than the judgment
debtor, the proper procedure is for the court to order a hearing to determine the nature
of said adverse possession before it issues a writ of possession. This is because a third
party, who is not privy to the debtor, is protected by the law. Such third party may be
ejected from the premises only after he has been given an opportunity to be heard, to
comply with the time honored principle of due process.

In the same vein, under Section 33 of Rule 39 of the Rules on Civil Procedure, the
possession of a mortgaged property may be awarded to a purchaser in the
extrajudicial foreclosure, unless a third party is actually holding the property
adversely vis-à-vis the judgment debtor.

The obligation of a court to issue a writ of possession in favor of the purchaser in an

extrajudicial foreclosure sale ceases to be ministerial, once it appears that there is a
third party who is in possession of the property and is claiming a right adverse to that
of the debtor/mortgagor. The Supreme Court explained in Philippine National Bank v.
Austria that the foregoing doctrinal pronouncements are not without support in
substantive law:

x x x. Notably, the Civil Code protects the actual possessor of a property, to wit:

Art. 433. Actual possession under claim of ownership raises a disputable presumption of
ownership. The true owner must resort to judicial process for the recovery of the property.

Under the aforequoted provision, one who claims to be the owner of a property
possessed by another must bring the appropriate judicial action for its physical
recovery. The term “judicial process” could mean no less than an ejectment suit or
reivindicatory action, in
which the ownership claims of the contending parties may be properly heard
and adjudicated. Royal Savings Bank v. Asia, et al.; G.R. No. 183658. April
10, 2013

Family Code; Declaration of Presumptive Death; judgment is immediately final and

executory; proper remedy is a special civil action for certiorari filed in the Court of
Appeals; decision of Court of Appeals reviewable by the Supreme Court via certiorari
under Rule 45. It is improper to avail of an ordinary appeal as a vehicle for questioning a
trial court’s
decision in a summary proceeding for the declaration of presumptive death under Article
41 of the Family Code.
As explained in Republic v. Tango, the remedy of a losing party in a summary
proceeding is not an ordinary appeal, but a petition for certiorari, to wit:

By express provision of law, the judgment of the court in a summary proceeding shall be
immediately final and executory. As a matter of course, it follows that no appeal can be
had of the trial court’s judgment in a summary proceeding for the declaration of
presumptive death of an absent spouse under Article 41 of the Family Code. It goes
without saying, however, that an aggrieved party may file a petition for certiorari to
question abuse of discretion amounting to lack of jurisdiction. Such petition should be
filed in the Court of Appeals in accordance with the Doctrine of Hierarchy of Courts. To
be sure, even if the Court’s original jurisdiction to issue a writ of certiorari is concurrent
with the RTCs and the Court of Appeals in certain cases, such concurrence does not
sanction an unrestricted freedom of choice of court forum. From the decision of the Court
of Appeals, the losing party may then file a petition for review oncertiorari under Rule
45 of the Rules of Court with the Supreme Court. This is because the errors which the
court may commit in the exercise of jurisdiction are merely errors of judgment which are
the proper subject of an appeal.

When the OSG filed its notice of appeal under Rule 42, it availed itself of the wrong
remedy. As a result, the running of the period for filing of a Petition for Certiorari
continued to run and was not tolled. Upon lapse of that period, the Decision of the RTC
could no longer be questioned. Republic of the Philippines v. Narceda; G.R. No. 182760.
April 10, 2013.
Contract; contract of carriage; definition; common carrier; definition; breach of contract
of carriage; entitlement to damages; contract of services; standard of care required;
damages; when recoverable; quasi-delict; solidary liability of joint tortfeasors. A contract
of carriage is defined as one whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to another for a fixed
price. On its face, the airplane ticket is a valid written contract of carriage. This Court has
held that when an airline issues a ticket to a passenger confirmed on a particular flight, on
a certain date, a contract of carriage arises, and the passenger has every right to expect
that he would fly on that flight and on that date. If he does not, then the carrier opens
itself to a suit for breach of contract of carriage.
Under Article 1732 of the Civil Code, this “persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public”
is called a common carrier.

In contrast, the contractual relation between Sampaguita Travel and respondents is a

contract for services. … Since the contract between the parties is an ordinary one or
services, the standard of care required of respondent is that of a good father of a
family under Article 1173 of the Civil Code. This connotes reasonable care consistent
with that which an ordinarily prudent person would have observed when confronted
with a similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent act
use that reasonable care and caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of negligence.

For one to be entitled to actual damages, it is necessary to prove the actual amount of
loss with a reasonable degree of certainty, premised upon competent proof and the best
evidence obtainable by the injured party. To justify an award of actual damages, there
must be competent proof of the actual amount of loss. Credence can be given only to
claims which are duly supported by receipts.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in
breaches of contract, is in order upon a showing that the defendant acted fraudulently or
in bad faith. What the law considers as bad faith which may furnish the ground for an
award of moral damages would be bad faith in securing the contract and in the execution
thereof, as well as in the enforcement of its terms, or any other kind of deceit. In the
same vein, to warrant the award of exemplary damages, defendant must have acted in
wanton, fraudulent, reckless, oppressive, or malevolent manner.

Nominal damages are recoverable where a legal right is technically violated and must be
vindicated against an invasion that has produced no actual present loss of any kind or
where there has been a breach of contract and no substantial injury or actual damages
whatsoever have been or can be shown. Under Article 2221 of the Civil Code, nominal
damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, not for indemnifying
the plaintiff for any loss suffered.

The amount to be awarded as nominal damages shall be equal or at least commensurate

to the injury sustained by respondents considering the concept and purpose of such
damages. The amount of nominal damages to be awarded may also depend on certain
special reasons extant in the case. The amount of such damages is addressed to the
sound discretion of the court and taking into account the relevant circumstances, such as
the failure of some respondents to board the flight on schedule and the slight breach in
the legal obligations of the airline company to comply with the terms of the contract,
i.e., the airplane ticket and of the travel agency to make the correct bookings.

Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the
bookings which led to the erroneous cancellation of respondents’ bookings. Their negligence
is the proximate cause of the technical injury sustained by respondents. Therefore, they have
become joint tortfeasors, whose responsibility for quasi-delict, under Article 2194 of the
Civil Code, is solidary. Cathay Pacific Airways v. Juanita Reyes, et al., G.R. No. 185891,
June 26, 2013
Contract; contract of sale; disputable presumptions; failure to pay the price; effect of;
double sale; effect; registration in good faith; buyer in good faith; duty of a buyer when a
piece of land is in the actual possession of third persons. Under Section 3, Rule 131 of
the Rules of Court, the following are disputable presumptions: (1) private transactions
have been fair and regular; (2) the ordinary course of business has been followed; and (3)
there was sufficientconsideration for a contract. These presumptions operate against an
adversary who has notintroduced proof to rebut them. They create the necessity of
presenting evidence to rebut the prima facie case they created, and which, if no proof to
the contrary is presented and offered, will prevail. The burden of proof remains where it
is but, by the presumption, the one who has that burden is relieved for the time being
from introducing evidence in support of the averment, because the presumption stands in
the place of evidence unless rebutted. Granting that there was no delivery of the
consideration, the seller would have no right to sell again what he no longer owned. His
remedy would be to rescind the sale for failure on the part of the buyer to perform his
part of their obligation pursuant to Article 1191 of the New Civil Code. In the case of
Clara M. Balatbat v. Court Of Appeals and Spouses Jose Repuyanand Aurora Repuyan,
it was written:

The failure of the buyer to make good the price does not, in law, cause the
ownershipto revest to the seller unless the bilateral contract of sale is first rescinded or
resolvedpursuant to Article 1191 of the New Civil Code. Non-payment only creates a
right todemand the fulfillment of the obligation or to rescind the contract.
[Emphasessupplied]

[O]wnership of an immovable property which is the subject of a double sale shall be

transferred: (1) to the person acquiring it who in good faith first recorded it in the
Registry of Property; (2) in default thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who presents the oldest title,
provided there is good faith. The requirement of the law then is two-fold: acquisition in
good faith and registration in good faith. Good faith must concur with the registration. If
it would be shown that a buyer was in bad faith, the alleged registration they have made
amounted to no registration at all.
When a piece of land is in the actual possession of persons other than the seller, the
buyer must be wary and should investigate the rights of those in possession. Without
making suchinquiry, one cannot claim that he is a buyer in good faith. When a man
proposes to buy or deal withrealty, his duty is to read the public manuscript, that is, to
look and see who is there upon it and what his rights are. A want of caution and
diligence, which an honest man of ordinary prudence is accustomed to exercise in
making purchases, is in contemplation of law, a want of good faith. The buyer who has
failed to know or discover that the land sold to him is in adverse possession of another
is a buyer in bad faith.

[I]f a vendee in a double sale registers the sale after he has acquired knowledge of a
previous sale, the registration constitutes a registration in bad faith and does not confer
upon him any right. If the registration is done in bad faith, it is as if there is no
registration at all, and the buyer who has first taken possession of the property in good
faith shall be
preferred. Hospicio D. Rosaroso, et al. v. Lucila Laborte Soria, et al., G.R. No.
194846, June 19, 2013

Contract; contract of sale; elements; contract to sell; elements; difference between a

contract of sale and a contract to sell; effect of non-payment in a contract of sale; laches;
definition; Torrens system; exception to general rule that action to recover registered
land covered by the Torrens System may not be barred by laches. A contract of sale is
defined under Article 1458 of the Civil Code:
By the contract of sale, one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefore
a price certain in money or its equivalent.

The elements of a contract of sale are: (a) consent or meeting of the minds, that is,
consent to transfer ownership in exchange for the price; (b) determinate subject matter;
and (c) price certain in money or its equivalent.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:
[A] bilateral contract whereby the prospective seller, while expressly reserving the
ownership
of the subject property despite delivery thereof to the prospective buyer, binds himself
to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.

In a contract of sale, the title to the property passes to the buyer upon the delivery of the
thing sold, whereas in a contract to sell, the ownership is, by agreement, retained by the
seller and is not to pass to the vendee until full payment of the purchase price.

Even assuming, arguendo, that the petitioner was not paid, such non payment is
immaterial and has no effect on the validity of the contract of sale. A contract of sale is a
consensual contract and what is required is the meeting of the minds on the object and
the price for its perfection and validity. In this case, the contract was perfected the
moment the petitioner and the respondent agreed on the object of the sale – the two-
hectare parcel of land, and the price – Three Thousand Pesos (P3,000.00). Non-payment
of the purchase price merely gave rise to a right in favor of the petitioner to either
demand specific performance or rescission of the contract of sale.

Laches has been defined as the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence could or should have been
done earlier. It should be stressed that laches is not concerned only with the mere lapse
of time. As a general rule, an action to recover registered land covered by the Torrens
System may not be barred by laches. Neither can laches be set up to resist the
enforcement of an imprescriptible legal right. In exceptional cases, however, the Court
allowed laches as a bar to recover a titled property. Thus, inRomero v. Natividad, the
Court ruled that laches will bar recovery of the property even if the mode of transfer was
invalid. Likewise, in Vda.deCabrera v. CA, the Court ruled:

In our jurisdiction, it is an enshrined rule that even registered owners of property may
bebarred from recovering possession of property by virtue of laches. Under the
LandRegistration Act (now the Property Registration Decree), no title to registered land
in derogation to that of the registered owner shall be acquired by prescription or adverse
possession. The same is not true with regard to laches.
More particularly, laches will bar recovery of a property, even if the mode of transfer
used by an alleged member of a cultural minority lacks executive approval. Thus, in
Heirs of Dicman v.Cariño, the Court upheld the Deed of Conveyance of Part Rights and
Interests inAgricultural Land executed by Ting-el Dicman in favor of Sioco Cariño
despite lack of executive approval. The Court stated that “despite the judicial
pronouncement that the sale of real property by illiterate ethnic minorities is null and
void for lack of approval of competent authorities, the right to recover possession has
nonetheless been barred through the operation of the equitable doctrine of laches.” Ali
Akang v. Municipality of Isulan, SultanKudarat Province, G.R. No. 186014, June 26,
2013

Contract; contract of sale; disqualification of a lawyer to buy under Article 1491;

elements of a contract; autonomous nature; obligatory nature of contract; interpretation;
courts have no authority to alter a contract by construction or to make a new contract for
the parties; penal clause; generally substitutes the indemnity for damages and the
payment of interests in case of non-compliance. Admittedly, Article 1491 (5) of the Civil
Code prohibits lawyers from acquiring by purchase or assignment the property or rights
involved which are the object of the litigation in which they intervene by virtue of their
profession. The CA lost sight of the fact, however, that the prohibition applies only
during the pendency of the suit and generally does not cover contracts for contingent fees
where the transfer takes effect only after the finality of a favorable judgment.
Defined as a meeting of the minds between two persons whereby one binds himself,
with respect to the other to give something or to render some service, a contract
requires the concurrence of the following requisites: (a) consent of the contracting
parties; (b) object certain which is the subject matter of the contract; and, (c) cause of
the obligation which is established.

Viewed in the light of the autonomous nature of contracts enunciated under Article 1306
of the Civil Code, on the other hand, we find that the Kasunduan was correctly found by
the RTC to be a valid and binding contract between the parties.

Obligations arising from contracts, after all, have the force of law between the
contracting
parties who are expected to abide in good faith with their contractual commitments, not
weasel out of them. Moreover, when the terms of the contract are clear and leave no
doubt as to the intention of the contracting parties, the rule is settled that the literal
meaning of its stipulations should govern. In such cases, courts have no authority to alter
a contract by construction or to make a new contract for the parties. Since their duty is
confined to the interpretation of the one which the parties have made for themselves
without regard to its wisdom or folly, it has been ruled that courts cannot supply material
stipulations or read into the contract words it does not contain. Indeed, courts will not
relieve a party from the adverse effects of an unwise or unfavorable contract freely
entered into.

An accessory undertaking to assume greater liability on the part of the obligor in case of
breach of an obligation, the foregoing stipulation is a penal clause which serves to
strengthen the coercive force of the obligation and provides for liquidated damages for
such breach. “The obligor would then be bound to pay the stipulated indemnity without
the necessity of proof of the existence and the measure of damages caused by the
breach.”

In obligations with a penal clause, the penalty generally substitutes the indemnity for
damages and the payment of interests in case of non-compliance. Usually incorporated
to create an effective deterrent against breach of the obligation by making the
consequences of such breach as onerous as it may be possible, the rule is settled that a
penal clause is not limited to actual and compensatory damages. Heirs of Manuel Uy Ek
Liong v. Mauricia MeerCastillo, Heirs of Buenaflor C. Umali, represented by Nancy
Umali, et al., G.R. No. 176425, June 5,2013.

Contract; default of debtor; definition; requisites; liquidated damages; stipulation

therefor; double function; penalty clause; definition; function. Default or mora on the
part of the debtor is the delay in the fulfillment of the prestation by reason of a cause
imputable to the former. It is the nonfulfillment of an obligation with respect to time.
It is a general rule that one who contracts to complete certain work within a certain
time is liable for the damage for not completing it within such time, unless the delay is
excused or waived.
In this jurisdiction, the following requisites must be present in order that the debtor may
be in default: (1) that the obligation be demandable and already liquidated; (2) that the
debtor delays performance; and (3) that the creditor requires the performance judicially
or extrajudicially.

Liability for liquidated damages is governed by Articles 2226 to 2228 of the Civil
Code. A stipulation for liquidated damages is attached to an obligation in order to
ensure performance and has a double function: (1) to provide for liquidated damages,
and (2) to strengthen the coercive force of the obligation by the threat of greater
responsibility in the event of breach. The amount agreed upon answers for damages
suffered by the owner due to delays in the completion of the project. As a precondition
to such award, however, there must be proof of the fact of delay in the performance of
the obligation.

A penalty clause, expressly recognized by law, is an accessory undertaking to assume

greater liability on the part of the obligor in case of breach of an obligation. It functions to
strengthen the coercive force of obligation and to provide, in effect, for what could be the
liquidated damages resulting from such a breach. The obligor would then be bound to pay
the stipulated indemnity without the necessity of proof on the existence and on the measure
of damages caused by the breach. It is well-settled that so long as such stipulation does not
contravene law, morals, or public order, it is strictly binding upon the obligor. J Plus
AsiaDevelopment Corporation v. Utility Assurance Corporation, G.R. No. 199650, June 26,
2013

Contract; rescission under Article 1191; mutual restitution; contracts; definition. Mutual
restitution is required in cases involving rescission under Article 1191 of the Civil Code;
such restitution is necessary to bring back the parties to their original situation prior to
the inception of the contract.
As a general rule, a contract is a meeting of minds between two persons. The Civil Code
upholds the spirit over the form; thus, it deems an agreement to exist, provided the
essential requisites are present. A contract is upheld as long as there is proof of consent,
subject matter and cause. Moreover, it is generally obligatory in whatever form it may
have been entered into. From the moment there is a meeting of minds between the
parties, [the
contract] is perfected. Fil-Estate Gold and Development, Inc., et al. v. Vertex Sales and
Trading, Inc., G.R. No. 202079, June 10, 2013.

Contract; void contracts; effect. A void contract is equivalent to nothing; it produces no

civil effect; and it does not create, modify or extinguish a juridical relation. Joselito C.
Borromeo v.Juan T. Mina,G.R. No. 193747, June 5, 2013.

Credit; concurrence and preference of credit; tax clearance is not required for the
approval of a project of partition. The position of the BIR, insisting on prior compliance
with the tax clearance requirement as a condition for the approval of the project of
distribution of the assets of a bank under liquidation, is contrary to both the letter and
intent of the law on liquidation of banks by the PDIC.
The law expressly provides that debts and liabilities of the bank under liquidation are to be
paid in accordance with the rules on concurrence and preference of credit under the Civil
Code. Duties, taxes, and fees due the Government enjoy priority only when they are with
reference to a specific movable property, under Article 2241(1) of the Civil Code, or
immovable property, under Article 2242(1) of the same Code. However, with reference to
the other real and personal property of the debtor, sometimes referred to as “free property,”
the taxes and assessments due the National Government, other than those in Articles 2241(1)
and 2242(1) of the Civil Code, such as the corporate income tax, will come only in ninth
place in the order of preference. On the other hand, if the BIR’s contention that a tax
clearance be secured first before the project of distribution of the assets of a bank under
liquidation may be approved, then the tax liabilities will be given absolute preference in all
instances, including those that do not fall under Articles 2241(1) and 2242(1) of the Civil
Code. In order to secure a tax clearance which will serve as proof that the taxpayer had
completely paid off his tax liabilities, PDIC will be compelled to settle and pay first all tax
liabilities and deficiencies of the bank, regardless of the order of preference under the
pertinent provisions of the Civil Code. Following the BIR’s stance, therefore, only then may
the project of distribution of the bank’s assets be approved and the other debts and claims
thereafter settled, even though under Article 2244 of the Civil Code such debts and claims
enjoy preference over taxes and assessments due the National Government. Philippine
Deposit
Insurance Corporation v. Bureau of Internal Revenue, G.R. No. 172892, June 13, 2013

Damages; Attorney’s fees; dual concept of attorney’s fees; an award of attorney’s fees
under Article 2208 demands factual, legal, and equitable justification. Article 2208 of the
New Civil Code of the Philippines states the policy that should guide the courts when
awarding attorney’s fees to a litigant. As a general rule, the parties may stipulate the
recovery of attorney’s fees. In the absence of such stipulation, this article restrictively
enumerates the instances when these fees may be recovered.
In ABS-CBN Broadcasting Corp. v. CA, this Court had the occasion to expound on the
policy behind the grant of attorney’s fees as actual or compensatory damages:

(T)he law is clear that in the absence of stipulation, attorney’s fees may be recovered as
actual or compensatory damages under any of the circumstances provided for in Article
2208 of the Civil Code. The general rule is that attorney’s fees cannot be recovered as
part of damages because of the policy that no premium should be placed on the right to
litigate. They are not to be awarded every time a party wins a suit.

The power of the court to award attorney’s fees under Article 2208 demands factual,
legal, and equitable justification. Even when a claimant is compelled to litigate with third
persons or to incur expenses to protect his rights, still attorney’s fees may not be
awarded where no sufficient showing of bad faith could be reflected in a party’s
persistence in a case other than an erroneous conviction of the righteousness of his cause.

We have consistently held that an award of attorney’s fees under Article 2208 demands
factual, legal, and equitable justification to avoid speculation and conjecture surrounding
the grant thereof. Due to the special nature of the award of attorney’s fees, a rigid
standard is imposed on the courts before these fees could be granted. Hence, it is
imperative that they clearly and distinctly set forth in their decisions the basis for the
award thereof. It is not enough that they merely state the amount of the grant in the
dispositive portion of their decisions. It bears reiteration that the award of attorney’s fees
is an exception rather than the general rule; thus, there must be compelling legal reason
to bring the case within the exceptions provided under Article 2208 of the Civil Code to
justify the award. Philippine
National Construction Corporation v. Apac Marketing Corporation, represented
by Cesar M. Ong, Jr., G.R. No. 190957, June 5, 2013.

Damages; nominal damages; when warranted in labor cases. [W]hile Van Doorn has a
just and valid cause to terminate the respondents’ employment, it failed to meet the
requisite procedural safeguards provided under Article 283 of the Labor Code. In the
termination of employment under Article 283, Van Doorn, as the employer, is required to
serve a written notice to the respondents and to the DOLE of the intended termination of
employment at least one month prior to the cessation of its fishing operations. Poseidon
could have easily filed this notice, in the way it represented Van Doorn in its dealings in
the Philippines. While this omission does not affect the validity of the termination of
employment, it subjects the employer to the payment of indemnity in the form of
nominal damages. Poseidon InternationalMaritime Services, Inc. v. Tito R. Tamala, et
al.,G.R. No. 186475, June 26, 2013

Damages; temperate damages; when warranted. Article 2224 of the New Civil Code
provides that “(t)emperate or moderate damages, which are more than nominal but less
than compensatory damages may be recovered when the court finds that some pecuniary
loss has been suffered but its amount cannot, from the nature of the case, proved with
certainty.” People of the Philippines v. Reggie Bernardo, G.R. No. 198789, June 3, 2013.
Interest rates; a stipulated interest of 24% per annum is not unconscionable; surcharge
on principal loan; a surcharge of 1% per month on the principal loan is valid;
surcharge or penalty partakes of the nature of liquidated damages; different from
interest
payment. In Villanueva v. Court of Appeals, where the issue raised was whether the 24%
p.a. stipulated interest rate is unreasonable under the circumstances, we answered in the
negative and held:
In Spouses Zacarias Bacolor and Catherine Bacolor v. Banco Filipino Savings and
Mortgage Bank,Dagupan City Branch, this Court held that the interest rate of 24% per
annum on a loan ofP244,000.00, agreed upon by the parties, may not be considered as
unconscionable and excessive. As such, the Court ruled that the borrowers cannot
renege on their obligation to comply with what is incumbent upon them under the
contract of loan as the said contract is the law between the parties and they are bound by
its stipulations.
Also, in Garcia v. Court of Appeals, this Court sustained the agreement of the parties to
a 24%per annum interest on an P8,649,250.00 loan finding the same to be reasonable
and clearly evidenced by the amended credit line agreement entered into by the parties
as well as two promissory notes executed by the borrower in favor of the lender.

Based on the above jurisprudence, the Court finds that the 24% per annum interest rate,
provided for in the subject mortgage contracts for a loan of P225,000.00, may not be
considered unconscionable. Moreover, considering that the mortgage agreement was
freely entered into by both parties, the same is the law between them and they are
bound to comply with the provisions contained therein.

In Ruiz v. CA, we held:

The 1% surcharge on the principal loan for every month of default is valid. This
surcharge or penalty stipulated in a loan agreement in case of default partakes of the
nature of liquidated damages under Art. 2227 of the New Civil Code, and is separate and
distinct from interest payment. Also referred to as a penalty clause, it is expressly
recognized by law. It is an accessory undertaking to assume greater liability on the part
of an obligor in case of breach of an obligation. The obligor would then be bound to pay
the stipulated amount of indemnity without the necessity of proof on the existence and on
the measure of damages caused by the breach.

Spouses Florentino T. Mallari and Aurea V. Mallari v. Prudential Bank of the

Philippines, G.R. No.197861, June 5, 2013

Tort; collateral source rule; unjust enrichment; elements. As part of American personal injury
law, the collateral source rule was originally applied to tort cases wherein the defendant is
prevented from benefiting from the plaintiff’s receipt of money from other sources. Under
this rule, if an injured person receives compensation for his injuries from a source wholly
independent of the tortfeasor, the payment should not be deducted from the damages which
he would otherwise collect from the tortfeasor. In a recent Decision by the Illinois Supreme
Court, the rule has been described as “an established exception to the general rule that
damages in negligence actions must be compensatory.” The Court went on to explain
that although the rule appears to allow a double recovery, the collateral source will have
a lien or subrogation right to prevent such a double recovery. In Mitchell v. Haldar, the
collateral source rule was rationalized by the Supreme Court of Delaware:
The collateral source rule is ‘predicated on the theory that a tortfeasor has no interest in,
and therefore no right to benefit from monies received by the injured person from sources
unconnected with the defendant’. According to the collateral source rule, ‘a tortfeasor has
no right to any mitigation of damages because of payments or compensation received by
the injured person from an independent source.’ The rationale for the collateral source
rule is based upon the quasi-punitive nature of tort law liability. It has been explained as
follows:

The collateral source rule is designed to strike a balance between two competing
principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make him
whole, but no more; and (2) a defendant is liable for all damages that proximately result
from his wrong. A plaintiff who receives a double recovery for a single tort enjoys a
windfall; a defendant who escapes, in whole or in part, liability for his wrong enjoys a
windfall. Because the law must sanction one windfall and deny the other, it favors the
victim of the wrong rather than the wrongdoer.

Thus, the tortfeasor is required to bear the cost for the full value of his or her
negligent conduct even if it results in a windfall for the innocent plaintiff. (Citations
omitted)

As seen, the collateral source rule applies in order to place the responsibility for losses on
the party causing them. Its application is justified so that “‘the wrongdoer should not
benefit from the expenditures made by the injured party or take advantage of contracts or
other relations that may exist between the injured party and third persons.” Thus, it finds
no application to cases involving no-fault insurances under which the insured is
indemnified for losses by insurance companies, regardless of who was at fault in the
incident generating the losses.
To constitute unjust enrichment, it must be shown that a party was unjustly enriched in the
sense that the term unjustly could mean illegally or unlawfully. A claim for unjust
enrichment
fails when the person who will benefit has a valid claim to such benefit. Mitsubishi
MotorsPhilippines Salaried Employees Union v. Mitsubishi Motors Philippines
Corporation, G.R. No. 175773,June 17, 2013.

Unjust enrichment; definition; elements. Unjust enrichment is a term used to depict

result or effect of failure to make remuneration of or for property or benefits received
under circumstances that give rise to legal or equitable obligation to account for them.
To be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or
request. Unjust enrichment is not itself a theory of reconveyance. Rather, it is a
prerequisite for the enforcement of the doctrine of restitution. There is unjust
enrichment when:
1. A person is unjustly benefited; and

2. Such benefit is derived at the expense of or with damages to another.

Philippine Transmarine Carriers, Inc. v. Leandro Legaspi, G.R. No. 202791, June 10,
2013.

Special Laws

Family Code; support; in proportion to the resources or means of the giver and to the
needs of the recipient; support pendente lite in cases of legal separation and petitions for
declaration of nullity or annulment of marriage; judicial determination is guided by the
Rule on Provisional Orders; support in arrears; deductions from accrued support
pendente
lite;judgment for support does not become final.As a matter of law, the amount of
supportwhich those related by marriage and family relationship is generally obliged to
give each other shall be in proportion to the resources or means of the giver and to the
needs of the recipient. Such support comprises everything indispensable for sustenance,
dwelling, clothing, medical attendance, education and transportation, in keeping with
the financial capacity of the family.
Upon receipt of a verified petition for declaration of absolute nullity of void marriage or for
annulment of voidable marriage, or for legal separation, and at any time during the
proceeding, the court, motu proprio or upon verified application of any of the parties,
guardian or designated custodian, may temporarily grant support pendente lite prior to the
rendition of
judgment or final order. Because of its provisional nature, a court does not need to
delve fully into the merits of the case before it can settle an application for this relief.
All that a court is tasked to do is determine the kind and amount of evidence which
may suffice to enable it to justly resolve the application. It is enough that the facts be
established by affidavits or other documentary evidence appearing in the record.

Judicial determination of support pendente lite in cases of legal separation and petitions
for declaration of nullity or annulment of marriage are guided by the provisions of the
Rule on Provisional Orders.

On the issue of crediting of money payments or expenses against accrued support, we

find as relevant the following rulings by US courts.

In Bradford v. Futrell, appellant sought review of the decision of the Circuit Court which
found him in arrears with his child support payments and entered a decree in favor of
appellee wife. He complained that in determining the arrearage figure, he should have
been allowed full credit for all money and items of personal property given by him to the
children themselves, even though he referred to them as gifts. The Court of Appeals of
Maryland ruled that in the suit to determine amount of arrears due the divorced wife
under decree for support of minor children, the husband (appellant) was not entitled to
credit for checks which he had clearly designated as gifts, nor was he entitled to credit for
an automobile given to the oldest son or a television set given to the children. Thus, if the
children remain in the custody of the mother, the father is not entitled to credit for money
paid directly to the children if such was paid without any relation to the decree.

In Martin, Jr. v. Martin, the Supreme Court of Washington held that a father, who is
required by a divorce decree to make child support payments directly to the mother,
cannot claim credit for payments voluntarily made directly to the children. However,
special considerations of an equitable nature may justify a court in crediting such
payments on his indebtedness to the mother, when such can be done without injustice to
her.
Suffice it to state that the matter of increase or reduction of support should be submitted
to
the trial court in which the action for declaration for nullity of marriage was filed, as this
Court is not a trier of facts. The amount of support may be reduced or increased
proportionately according to the reduction or increase of the necessities of the recipient
and the resources or means of the person obliged to support. As we held in Advincula
v.Advincula:

Judgment for support does not become final. The right to support is of such nature that
its allowance is essentially provisional; for during the entire period that a needy party is
entitled to support, his or her alimony may be modified or altered, in accordance with his
increased or decreased needs, and with the means of the giver. It cannot be regarded as
subject to final determination.

Susan Lim-Lua v. Danilo Y. Lua, G.R. Nos. 175279-80, June 5, 2013.

Family Code; Rule on Declaration of Absolute Nullity of Void Marriages and

Annulment of Voidable Marriages; not applicable in an action for recognition of foreign
judgment; foreign judgment relating to the marital status of a person; special proceeding
for cancellation or correction of entries in the civil registry under Rule 108 of the Rules
of Court; the first husband has a right to file the petition; effect of a foreign divorce
decree to a Filipino spouse; Article 26 of the Family Code.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.”
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.

A petition to recognize a foreign judgment declaring a marriage void does not require
relitigation under a Philippine court of the case as if it were a new petition for declaration
of nullity of marriage. Philippine courts cannot presume to know the foreign laws under
which the foreign judgment was rendered. They cannot substitute their judgment on the
status, condition and legal capacity of the foreign citizen who is under the jurisdiction of
another state. Thus, Philippine courts can only recognize the foreign judgment as a fact
according to the rules of evidence.

Since the recognition of a foreign judgment only requires proof of fact of the judgment, it
may be made in a special proceeding for cancellation or correction of entries in the civil
registry under Rule 108 of the Rules of Court. Rule 1, Section 3 of the Rules of Court
provides that “[a] special proceeding is a remedy by which a party seeks to establish a
status, a right, or a particular fact.” Rule 108 creates a remedy to rectify facts of a
person’s life which are recorded by the State pursuant to the Civil Register Law or Act
No. 3753. These are facts of public consequence such as birth, death or marriage, which
the State has an interest in recording. There is no doubt that the prior spouse has a
personal and material interest in maintaining the integrity of the marriage he contracted
and the property relations arising from it. There is also no doubt that he is interested in
the cancellation of an entry of a bigamous marriage in the civil registry, which
compromises the public record of his marriage. The interest derives from the substantive
right of the spouse not only to preserve (or dissolve, in limited instances) his most
intimate human relation, but also to protect his property interests that arise by operation
of law the moment he contracts marriage. These property interests in marriage include the
right to be supported “in keeping with the financial capacity of the family” and
preserving the property regime of the marriage.
Section 2(a) of A.M. No. 02-11-10-SC does not preclude a spouse of a subsisting
marriage to question the validity of a subsequent marriage on the ground of bigamy. On
the contrary, when Section 2(a) states that “[a] petition for declaration of absolute nullity

of void marriage may be filedsolely by the husband or the wife” ―it refers to the
husband or the wife of the subsisting marriage. Under Article 35(4) of the Family Code,
bigamous marriages are void from the beginning. Thus, the parties in a bigamous
marriage are neither the husband nor the wife under the law. The husband or the wife of
the prior subsisting marriage is the one who has the personality to file a petition for
declaration of absolute nullity of void marriage under Section 2(a) of A.M. No. 02-11-
10-SC.

[A] Filipino citizen cannot dissolve his marriage by the mere expedient of changing his
entry of marriage in the civil registry. However, this does not apply in a petition for
correction or cancellation of a civil registry entry based on the recognition of a foreign
judgment annulling a marriage where one of the parties is a citizen of the foreign country.
There is neither circumvention of the substantive and procedural safeguards of marriage
under Philippine law, nor of the jurisdiction of Family Courts under R.A. No. 8369. A
recognition of a foreign judgment is not an action to nullify a marriage. It is an action for
Philippine courts to recognize the effectivity of a foreign judgment, which presupposes
a case which wasalready tried and decided under foreign law. The procedure in A.M.
No. 02-11-10-SCdoes not apply in a petition to recognize a foreign judgment annulling a
bigamous marriage where one of the parties is a citizen of the foreign country. Neither
can R.A. No. 8369 define the jurisdiction of the foreign court.

Article 26 of the Family Code confers jurisdiction on Philippine courts to extend the
effect of a foreign divorce decree to a Filipino spouse without undergoing trial to
determine the validity of the dissolution of the marriage. The second paragraph of Article
26 of the Family Code provides that “[w]here a marriage between a Filipino citizen and a
foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the
alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to
remarry under Philippine law.” The second paragraph of Article 26 of the Family Code
only authorizes Philippine courts to adopt the effects of a foreign divorce decree
precisely because the Philippines does
not allow divorce. Philippine courts cannot try the case on the merits because it is
tantamount to trying a case for divorce. Minoru Fujiki v. Maria Paz Galela Marinay, et
al., G.R.No. 196049, June 26, 2013.

Family Courts Act of 1997; Violence Against Women and Children Act of 2004; Family
Courts; jurisdiction; a special court of the same level as RTC; RTCs designated as family
courts remain possessed of authority as courts of general original jurisdiction. At the outset,
it must be stressed that Family Courts are special courts, of the same level as Regional Trial
Courts. Under R.A. 8369, otherwise known as the “Family Courts Act of 1997,” family
courts have exclusive original jurisdiction to hear and decide cases of domestic violence
against women and children. In accordance with said law, the Supreme Court designated
from among the branches of the Regional Trial Courts at least one Family Court in each of
several key cities identified. To achieve harmony with the first mentioned law, Section 7 of
R.A. 9262 now provides that Regional Trial Courts designated as Family Courts shall have
original and exclusive jurisdiction over cases of VAWC defined under the latter law. Inspite
of its designation as a family court, the RTC of Bacolod City remains possessed of authority
as a court of general original jurisdiction to pass upon all kinds of cases whether civil,
criminal, special proceedings, land registration, guardianship, naturalization, admiralty or
insolvency. It is settled that RTCs have jurisdiction to resolve the constitutionality of a
statute, “this authority being embraced in the general definition of the judicial power to
determine what are the valid and binding laws by the criterion of their conformity to the
fundamental law.” The Constitution vests the power of judicial review or the power to
declare the constitutionality or validity of a law, treaty, international or executive
agreement,
presidential decree, order, instruction, ordinance, or regulation not only in this Court,
but in all RTCs. Jesus C. Garcia v. The Hon. Ray Alan T. Drilon, et al.,G.R. No.
179267, June 25, 2013

Torrens system; purpose.Torrens title; generally conclusive evidence of the ownership

of the land; not subject to collateral attack; Land Registration Authority; functions. The
real purpose of the Torrens system is to quiet title to land and to stop forever any
question as to its legality. Once a title is registered, the owner may rest secure, without
the necessity of waiting in the portals of the court, or sitting on the “mirador su casa,”
to avoid the possibility
of losing his land. A Torrens title is generally a conclusive evidence of the ownership of
the land referred to therein. A strong presumption exists that Torrens titles are regularly
issued and that they are valid.
Section 48 of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, explicitly provides that “[a] certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or cancelled except in a direct
proceeding in accordance with law.”

The duty of LRA officials to issue decrees of registration is ministerial in the sense that
they act under the orders of the court and the decree must be in conformity with the
decision of the court and with the data found in the record. They have no discretion in the
matter. However, if they are in doubt upon any point in relation to the preparation and
issuance of the decree, these officials ought to seek clarification from the court. They act,
in this respect, as officials of the court and not as administrative officials, and their act is
the act of the court. They are specifically called upon to “extend assistance to courts in
ordinary and cadastral land registration proceedings.” Deogenes O. Rodriguez v. Hon.
Court of Appeals andPhilippine Chinese Charitable Association, Inc., G.R. No. 184589,
June 13, 2013

Civil Code

Agency; apparent authority of an agent based on estoppel; concept. In Woodchild

Holdings, Inc.v. Roxas Electric and Construction Company, Inc. the Court stated that
“persons dealing with anassumed agency, whether the assumed agency be a general or
special one, are bound at their peril, if they would hold the principal liable, to ascertain
not only the fact of agency but also the nature and extent of authority, and in case either
is controverted, the burden of proof is upon them to establish it.” In other words, when
the petitioner relied only on the words of respondent Alejandro without securing a copy
of the SPA in favor of the latter, the petitioner is bound by the risk accompanying such
trust on the mere assurance of Alejandro. The same Woodchild case stressed that
apparent authority based on estoppel can arise from the principal who knowingly permit
the agent to hold himself out with authority and from the principal who clothe the agent
with indicia of authority that would lead a reasonably
prudent person to believe that he actually has such authority. Apparent authority of an
agent arises only from “acts or conduct on the part of the principal and such acts or
conduct of the principal must have been known and relied upon in good faith and as a
result of the exercise of reasonable prudence by a third person as claimant and such must
have produced a change of position to its detriment.” In the instant case, the sale to the
Spouses Lajarca and other transactions where Alejandro allegedly represented a
considerable majority of the co-owners transpired after the sale to the petitioner; thus, the
petitioner cannot rely upon these acts or conduct to believe that Alejandro had the same
authority to negotiate for the sale of the subject property to him. Reman Recio v. Heirs of
Spouses Aguego and Maria Altamirano, G.R. No.182349, July 24, 2013.

Agency; definition under the Civil Code; form of contract. Article 1868 of the Civil
Code defines a contract of agency as a contract whereby a person “binds himself to
render some service or to do something in representation or on behalf of another, with
the consent or authority of the latter.” It 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.
As a general rule, a contract of agency may be oral.

However, it must be written when the law requires a specific form. Specifically, Article
1874 of the Civil Code provides that the contract of agency must be written for the
validity of the sale of a piece of land or any interest therein. Otherwise, the sale shall be
void. A related provision, Article 1878 of the Civil Code, states that special powers of
attorney are necessary to convey real rights over immovable properties. Sally Yoshizaki v.
Joy Training Center of Aurora,Inc., G.R. No. 174978, July 31, 2013.
Agency; general power of attorney; an agency couched in general terms comprises only
acts of administration. The certification is a mere general power of attorney which
comprises all of Joy Training’s business. Article 1877 of the Civil Code clearly states
that “[a]n agency couched in general terms comprises only acts of administration, even
if the principalshould state that he withholds no power or that the agent may
execute such acts as he may consider appropriate, or even though the agency
should authorize a general
and unlimited management.” Sally Yoshizaki v. Joy Training Center of Aurora, Inc.,
G.R. No.174978, July 31, 2013.

Agency; sale of property by a supposed agent is unenforceable if there is really no agency

to sell such property; persons dealing with an agent must ascertain not only the fact of
agency, but also the nature and extent of the agent’s authority. Necessarily, the absence
of a contract of agency renders the contract of sale unenforceable; Joy Training
effectively did not enter into a valid contract of sale with the spouses Yoshizaki. Sally
cannot also claim that she was a buyer in good faith. She misapprehended the rule that
persons dealing with a registered land have the legal right to rely on the face of the title
and to dispense with the need to inquire further, except when the party concerned has
actual knowledge of facts and circumstances that would impel a reasonably cautious man
to make such inquiry. This rule applies when the ownership of a parcel of land is disputed
and not when the fact of agency is contested. Sally Yoshizaki v. Joy Training Center of
Aurora, Inc., G.R. No. 174978, July 31, 2013.

Agency; special power of attorney; must express the powers of the agent in clear and
unmistakable language; when there is any reasonable doubt that the language so used
conveys such power, no such construction shall be given the document. We
unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals that a
special power of attorney mustexpress the powers of the agent in clear and
unmistakable language for the principalto confer the right upon an agent to sell real
estate. When there is any reasonable doubt that the language so used conveys such
power, no such construction shall be given the document. The purpose of the law in
requiring a special power of attorney in the disposition of immovable property is to
protect the interest of an unsuspecting owner from being prejudiced by the unwarranted
act of another and to caution the buyer to assure himself of the specific authorization of
the putative agent. Sally Yoshizaki v. Joy Training Center of Aurora,Inc., G.R. No.
174978, July 31, 2013.

Agency; special power of attorney for sale of property; must expressly mention a sale or
include a sale as a necessary ingredient of the authorized act. The special power of
attorney mandated by law must be one that expressly mentions a sale or that
includes a sale as
a necessary ingredient of the authorized act. We unequivocably declared
inCosmicLumber Corporation v. Court of Appealsthat a special power of attorneymust
express thepowers of the agent in clear and unmistakable language for the principal
to confer theright upon an agent to sell real estate. When there is any reasonable doubt
that the language so used conveys such power, no such construction shall be given the
document. The purpose of the law in requiring a special power of attorney in the
disposition of immovable property is to protect the interest of an unsuspecting owner
from being prejudiced by the unwarranted act of another and to caution the buyer to
assure himself of the specific authorization of the putative agent. Sally Yoshizaki v. Joy
Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013.

Agency; special power of attorney; required for an agent to sell an immovable property;
authority must be in writing, otherwise sale is void. In Alcantara v. Nido, the Court
emphasized the requirement of an SPA before an agent may sell an immovable property. In
the said case, Revelen was the owner of the subject land. Her mother, respondent Brigida
Nido accepted the petitioners’ offer to buy Revelen’s land at Two Hundred Pesos (P200.00)
per sq m. However, Nido was only authorized verbally by Revelen. Thus, the Court declared
the sale of the said land null and void under Articles 1874 and 1878 of the Civil Code.
RemanRecio v. Heirs of Spouses Aguego and Maria Altamirano, G.R. No.182349, July 24,
2013.

Arrastre operator; functions; duty to take good care of goods and to turn them over to
the party entitled to their possession. The functions of an arrastre operator involve the
handling of cargo deposited on the wharf or between the establishment of the consignee
or shipper and the ship’s tackle. Being the custodian of the goods discharged from a
vessel, an arrastre operator’s duty is to take good care of the goods and to turn them over
to the party entitled to their possession. Handling cargo is mainly the arrastre operator’s
principal work so its drivers/operators or employees should observe the standards and
measures necessary to prevent losses and damage to shipments under its custody. Asian
Terminals, Inc. v. PhilamInsurance Co., Inc. (now Chartis Philippines Insurance Inc.)/
Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v. Westwind
Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v.
Philam Insurance Co., Inc. and Asian Terminals, Inc., G.R. Nos.
181163/181262/181319, July 24, 2013.

Attorney’s fees; dual concept. In order to resolve the issues in this case, it is necessary
to discuss the two concepts of attorney’s fees – ordinary and extraordinary. In its
ordinary sense, it is the reasonable compensation paid to a lawyer by his client for legal
services rendered. In its extraordinary concept, it is awarded by the court to the
successful litigant to be paid by the losing party as indemnity for damages. Francisco L.
Rosario, Jr. v. Lellani DeGuzman, Arleen De Guzman, et al.,G.R. No. 191247, July 10,
2013.

Attorney’s fees for professional services rendered; may be claimed in the very action
itself or in a separate action; prescription for oral contract of attorney’s fees is 6 years;
concept of quantum meruit; guidelines under the Code of Professional Responsibility.
The Court now addresses two important questions: (1) How can attorney’s fees for
professional services be recovered? (2) When can an action for attorney’s fees for
professional services be filed? The case of Traders Royal Bank Employees Union-
Independent v. NLRC is instructive:
As an adjunctive episode of the action for the recovery of bonus differentials in NLRC-
NCR Certified Case No. 0466, private respondent’s present claim for attorney’s fees may
be filed before the NLRC even though or, better stated, especially after its earlier
decision had been reviewed and partially affirmed. It is well settled that a claim for
attorney’s fees may be asserted either in the very action in which the services of a lawyer
had been rendered or in a separate action.

With respect to the first situation, the remedy for recovering attorney’s fees as an
incident of the main action may be availed of only when something is due to the client.
Attorney’s fees cannot be determined until after the main litigation has been decided and
the subject of the recovery is at the disposition of the court. The issue over attorney’s
fees only arises when something has been recovered from which the fee is to be paid.
While a claim for attorney’s fees may be filed before the judgment is rendered, the
determination as to the propriety of the fees or as to the amount thereof will have to be
held in abeyance until the main case from which the lawyer’s claim for attorney’s fees
may arise has become final. Otherwise, the determination to be made by the courts will
be premature. Of course, a petition for
attorney’s fees may be filed before the judgment in favor of the client is satisfied or
the proceeds thereof delivered to the client.

It is apparent from the foregoing discussion that a lawyer has two options as to when to
file his claim for professional fees. Hence, private respondent was well within his rights
when he made his claim and waited for the finality of the judgment for holiday pay
differential, instead of filing it ahead of the award’s complete resolution. To declare that
a lawyer may file a claim for fees in the same action only before the judgment is
reviewed by a higher tribunal would deprive him of his aforestated options and render
ineffective the foregoing pronouncements of this Court.

In this case, petitioner opted to file his claim as an incident in the main action, which is
permitted by the rules. As to the timeliness of the filing, this Court holds that the
questioned motion to determine attorney’s fees was seasonably filed.

The records show that the August 8, 1994 RTC decision became final and executory on
October 31, 2007. There is no dispute that petitioner filed his Motion to Determine
Attorney’s Fees on September 8, 2009, which was only about one (1) year and eleven
(11) months from the finality of the RTC decision. Because petitioner claims to have had
an oral contract of attorney’s fees with the deceased spouses, Article 1145 of the Civil
Code16 allows him a period of six (6) years within which to file an action to recover
professional fees for services rendered. Respondents never asserted or provided any
evidence that Spouses de Guzman refused petitioner’s legal representation. For this
reason, petitioner’s cause of action began to run only from the time the respondents
refused to pay him his attorney’s fees, as similarly held in the case of Anido v. Negado.

With respect to petitioner’s entitlement to the claimed attorney’s fees, it is the Court’s
considered view that he is deserving of it and that the amount should be based on quantum
meruit. Quantum meruit – literally meaning as much as he deserves – is used as basis for
determining an attorney’s professional fees in the absence of an express agreement. The
recovery of attorney’s fees on the basis of quantum meruit is a device that prevents an
unscrupulous client from running away with the fruits of the legal services of counsel
without paying for it and also avoids unjust enrichment on the part of the attorney
himself. An attorney must show that he is entitled to reasonable compensation for the
effort in pursuing the client’s cause, taking into account certain factors in fixing the
amount of legal fees.

Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining
the proper amount of attorney fees, to wit:

Rule 20.1 – A lawyer shall be guided by the following factors in determining his fees:

a) The time spent and the extent of the services rendered or required;

b) The novelty and difficulty of the questions involved;

c) The importance of the subject matter;

d) The skill demanded;

e) The probability of losing other employment as a result of acceptance of the

proffered case;

f) The customary charges for similar services and the schedule of fees of the IBP
chapter to which he belongs;

g) The amount involved in the controversy and the benefits resulting to the client from
the service;

h) The contingency or certainty of compensation;

i) The character of the employment, whether occasional or established; and

j) The professional standing of the lawyer.

Francisco L. Rosario, Jr. v. Lellani De Guzman, Arleen De Guzman, et al., G.R. No.
191247, July
10, 2013.

Attorney’s fees; recoverable in actions for indemnity under workmen’s compensation

and employer’s liability laws. However, the Court finds that the petitioner is entitled to
attorney’s fees pursuant to Article 2208(8) of the Civil Code which states that the award
of attorney’s fees is justified in actions for indemnity under workmen’s compensation
and employer’s liability laws.Camilo A. Esguerra v. United Philippines Lines, Inc., et
al., G.R. No. 199932, July 3, 2013.

Attorney’s fees; when recoverable. The Court of Appeals rightfully upheld the NLRC’s
affirmance of the grant of attorney’s fees to San Miguel. Thereby, the NLRC did not
commit any grave abuse of its discretion, considering that San Miguel had been
compelled to litigate and to incur expenses to protect his rights and interest. In Producers
Bank of the Philippines v. Court of Appeals, the Court ruled that attorney’s fees could be
awarded to a party whom an unjustified act of the other party compelled to litigate or to
incur expenses to protect his interest. It was plain that petitioner’s refusal to reinstate San
Miguel with backwages and other benefits to which he had been legally entitled was
unjustified, thereby entitling him to recover attorney’s fees. Zuellig Freight and Cargo
Systems v. National Labor Relations Commission, etal., G.R. No. 157900, July 22, 2013

Attorney’s fees; when recoverable. With respect to the award of attorney’s fees, Article
2208 of the Civil Code provides, among others, that such fees may be recovered when
exemplary damages are awarded, when the defendant’s act or omission has compelled
the plaintiff to litigate with third persons or to incur expenses to protect his interest, and
where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs’ plainly valid, just and demandable claim. Joyce V. Ardiente v. Spouses Javier
and Ma. Theresa
Pastofide, G.R. No. 161921, July 17, 2013.

Common carriers; extraordinary diligence in vigilance of goods transported; cargoes

while being unloaded generally remain under the custody of the carrier. Common carriers,
from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them. Asian Terminals, Inc. v. Philam Insurance Co., Inc.
(now Chartis PhilippinesInsurance Inc.)/ Philam Insurance Co., Inc. (now Chartis
Philippines Insurance Inc.) v. Westwind Shipping Corporation and Asian Terminals,
Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and Asian Terminals,
Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.

Contract; absolutely simulated contracts; void from the beginning. The Court is in
accord with the observation and findings of the (RTC, Kalibo, Aklan) thus:
“The amplitude of foregoing undisputed facts and circumstances clearly shows that the
sale of the land in question was purely simulated. It is void from the very beginning
(Article 1346, New Civil Code). If the sale was legitimate, defendant Glenda should have
immediately taken possession of the land, declared in her name for taxation purposes,
registered the sale, paid realty taxes, introduced improvements therein and should not
have allowed plaintiff to mortgage the land. These omissions properly militated against
defendant Glenda’s submission that the sale was legitimate and the consideration was
paid. Dr. Lorna C.Formaran v. Dr. Glenda B. Ong and Solomon S. Ong, G.R. No.
186264, July 8, 2013.

Contract of sale; elements. A valid contract of sale requires: (a) a meeting of minds of
the parties to transfer ownership of the thing sold in exchange for a price; (b) the subject
matter, which must be a possible thing; and (c) the price certain in money or its
equivalent. RemanRecio v. Heirs of Spouses Aguego and Maria Altamirano, G.R.
No.182349, July 24, 2013.

Contract to sell; payment of the price; positive suspension condition; effect of failure to
pay. Clearly, the RTC arrived at the above-quoted conclusion based on its mistaken
premise that rescission is applicable to the case. Hence, its determination of whether
there was substantial
breach. As may be recalled, however, the CA, in its assailed Decision, found the contract
between the parties as a contract to sell, specifically of a real property on installment
basis, and as such categorically declared rescission to be not the proper remedy. This is
considering that 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 title to the supposed buyer. Also, and as correctly ruled by the
CA, Article 1191 cannot be applied to sales of real property on installment since they are
governed by the Maceda Law. There being no breach to speak of in case of non-payment
of the purchase price in a contract to sell, as in this case, the RTC’s factual finding that
Lourdes was willing and able to pay her obligation – a conclusion arrived at in
connection with the said court’s determination of whether the non-payment of the
purchase price in accordance with the terms of the contract was a substantial breach
warranting rescission – therefore loses significance. The spouses Bonrostro’s reliance on
the said factual finding is thus misplaced. They cannot invoke their readiness and
willingness to pay their obligation on November 24, 1993 as an excuse from being made
liable for interest beyond the said date. Sps. Nameal and LourdesBonrostro v. Sps. Juan
and Constacia Luna, G.R. No.172346, July 24, 2013.

Damages; damages for loss of earning capacity; must be duly proven by documentary
evidence; exceptions. The Supreme Court agrees with the Court of Appeals when it
removed the RTC’s award respecting the indemnity for the loss of earning capacity. As it
has already previously ruled that damages for loss of earning capacity is in the nature of
actual damages, which as a rule must be duly proven by documentary evidence, not
merely by the self-serving testimony of the widow.
By way of exception, damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when (1) the deceased is self-employed earning less
than the minimum wage under current labor laws, and judicial notice may be taken of the
fact that in the deceased’s line of work no documentary evidence is available; or (2) the
deceased is employed as a daily wage worker earning less than the minimum wage under
current labor laws. People of the Philippines v. Garry Vergara y Oriel and Joseph
Incencio y Paulino, G.R. No. 177763, July 3, 2013
Damages; exemplary damages; concept. As for exemplary damages, Article 2229
provides that exemplary damages may be imposed by way of example or correction for
the public good. Nonetheless, exemplary damages are imposed not to enrich one party or
impoverish another, but to serve as a deterrent against or as a negative incentive to curb
socially deleterious actions. In the instant case, the Court agrees with the CA in
sustaining the award of exemplary damages, although it reduced the amount granted,
considering that respondent spouses were deprived of their water supply for more than
nine (9) months, and such deprivation would have continued were it not for the relief
granted by the RTC. Joyce V.Ardiente v. Spouses Javier and Ma. Theresa Pastofide,
G.R. No. 161921, July 17, 2013.

Damages; exemplary damages; awarded if there is an aggravating circumstance, whether

ordinary or qualifying. Unlike the criminal liability which is basically a State concern,
the award of exemplary damages, however, is likewise, if not primarily, intended for the
offended party who suffers thereby. It would make little sense for an award of exemplary
damages to be due the private offended party when the aggravating circumstance is
ordinary but to be withheld when it is qualifying. Withal, the ordinary or qualifying
nature of an aggravating circumstance is a distinction that should only be of consequence
to the criminal, rather than to the civil, liability of the offender. In fine, relative to the
civil aspect of the case, an aggravating circumstance, whether ordinary or qualifying,
should entitle the offended party to an award of exemplary damages within the unbridled
meaning of Article 2230 of the Civil Code. People of the Philippines v. Garry Vergara y
Oriel and Joseph Incencio y Paulino, G.R. No. 177763, July 3, 2013.

Damages; interest thereon; where obligation does not constitute a loan or forbearance of
money.The CA erred in imposing an interest rate of 12% on the award of damages. Under
Article 2209 of the Civil Code, when an obligation not constituting a loan or forbearance of
money is breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. In the similar case of Belgian Overseas
Chartering and Shipping NV v. Philippine First Insurance Co., lnc., the Court reduced the
rate of interest on the damages awarded to the carrier therein to 6% from the time of the
filing of the complaint until the finality of the decision. Asian Terminals, Inc. v. Philam
InsuranceCo., Inc. (now Chartis Philippines Insurance Inc.)/ Philam Insurance Co., Inc.
(now Chartis Philippines Insurance Inc.) v. Westwind Shipping Corporation and Asian
Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and
Asian Terminals, Inc., G.R. Nos.181163/181262/181319, July 24, 2013.

Damages; moral damages; when recoverable. In Philippine National Bank v.

SpousesRocamora, the Supreme Court said that:
Moral damages are not recoverable simply because a contract has been breached. They
are recoverable only if the defendant acted fraudulently or in bad faith or in wanton
disregard of his contractual obligations. The breach must be wanton, reckless, malicious
or in bad faith, and oppressive or abusive. Likewise, a breach of contract may give rise to
exemplary damages only if the guilty party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. Carlos Lim, et al. v. Development Bank of the
Philippines, G.R. No. 177050, July 1, 2013.

Damages; moral damages; awarded where the victim of a crime suffered a violent death,
even in the absence of proof of mental and emotional suffering of the victim’s heirs. The
Supreme Court sustained the RTC’s award for moral damages in the amount of
P50,000.00 even in the absence of proof of mental and emotional suffering of the
victim’s heirs. As borne out by human nature and experience, a violent death invariably
and necessarily brings about emotional pain and anguish on the part of the victim’s
family. While no amount of damages may totally compensate the sudden and tragic loss
of a loved one it is nonetheless awarded to the heirs of the deceased to at least assuage
them. People of the Philippines v. GarryVergara y Oriel and Joseph Incencio y
Paulino, G.R. No. 177763, July 3, 2013

Damages; moral and exemplary damages in claims for disability benefits; not recoverable
where employer was not negligent in affording the employee with medical treatment, and
employer did not forsake employee during the period of disability. The CA correctly denied
an award of moral and exemplary damages. The respondents were not negligent in affording
the petitioner with medical treatment neither did they forsake him during his period of
disability. Camilo A. Esguerra v. United Philippines Lines, Inc., et al., G.R. No.
199932, July 3, 2013.

Human Relations; abuse of rights; Article 19 of the Civil Code; concept; damages as
reliefs. The principle of abuse of rights as enshrined in Article 19 of the Civil Code
provides that every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith.
In this regard, the Court’s ruling in Yuchengco v. The Manila Chronicle Publishing
Corporation is instructive, to wit:

xxxx

This provision of law sets standards which must be observed in the exercise of one’s
rights as well as in the performance of its duties, to wit: to act with justice; give
everyone his due; and observe honesty and good faith.

In Globe Mackay Cable and Radio Corporation v. Court of Appeals, it was elucidated that
while Article 19 “lays down a rule of conduct for the government of human relations and
for the maintenance of social order, it does not provide a remedy for its violation.
Generally, an action for damages under either Article 20 or Article 21 would be proper.”
The Court said:

One of the more notable innovations of the New Civil Code is the codification of “some
basic principles that are to be observed for the rightful relationship between human
beings and for the stability of the social order.” [REPORT ON THE CODE
COMMISSION ON THE PROPOSED CIVIL CODE OF THE PHILIPPINES, p. 39].
The framers of the Code, seeking to remedy the defect of the old Code which merely
stated the effects of the law, but failed to draw out its spirit, incorporated certain
fundamental precepts which were “designed to indicate certain norms that spring from
the fountain of good conscience” and which were also meant to serve as “guides for
human conduct [that] should run as golden threads through society, to the end that law
may approach its supreme ideal, which is the sway and dominance of justice.”
(Id.)Foremost among these principles is that pronounced in Article 19 x x x.
xxxx

This article, known to contain what is commonly referred to as the principle of abuse of
rights, sets certain standards which must be observed not only in the exercise of one’s
rights, but also in the performance of one’s duties. These standards are the following: to
act with justice; to give everyone his due; and to observe honesty and good faith. The
law, therefore, recognizes a primordial limitation on all rights; that in their exercise, the
norms of human conduct set forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such, may nevertheless become the
source of some illegality. When a right is exercised in a manner which does not conform
with the norms enshrined in Article 19 and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be held responsible. But while Article
19 lays down a rule of conduct for the government of human relations and for the
maintenance of social order, it does not provide a remedy for its violation. Generally, an
action for damages under either Article 20 or Article 21 would be proper. Joyce V.
Ardiente v. Spouses Javier and Ma. Theresa Pastofide, G.R. No. 161921, July 17, 2013.

Human Relations; civil case for fraud; Article 33 of the Civil Code provides that a civil
case for damages based on fraud may proceed independently of the criminal case
therefor; said civil case will not operate as a prejudicial question that will justify the
suspension of a criminal case. It is well settled that a civil action based on defamation,
fraud and physical injuries may be independently instituted pursuant to Article 33 of the
Civil Code, and does not operate as a prejudicial question that will justify the suspension
of a criminal case. This was precisely the Court’s thrust in G.R. No. 148193, thus:
Moreover, neither is there a prejudicial question if the civil and the criminal action can,
according to law, proceed independently of each other. Under Rule 111, Section 3 of the
Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and
2176 of the Civil Code, the independent civil action may be brought by the offended
party. It shall proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party recover
damages twice for the same act or omission charged in the criminal action.
In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account
of the alleged fraud committed by respondent and his mother in selling the disputed lot
to PBI is an independent civil action under Article 33 of the Civil Code. As such, it will
not operate as a prejudicial question that will justify the suspension of the criminal case
at bar. Rafael JoseConsing, Jr. v. People of the Philippines, G.R. No. 161075, July 15,
2013.

Letter of credit; definition; nature. A letter of credit is a financial device developed by

merchants as a convenient and relatively safe mode of dealing with sales of goods to
satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his
goods before he is paid, and a buyer, who wants to have control of his goods before
paying. However, letters of credit are employed by the parties desiring to enter into
commercial transactions, not for the benefit of the issuing bank but mainly for the benefit
of the parties to the original transaction, in these cases, Nichimen Corporation as the
seller and Universal Motors as the buyer. Hence, the latter, as the buyer of the Nissan
CKD parts, should be regarded as the person entitled to delivery of the goods.
Accordingly, for purposes of reckoning when notice of loss or damage should be given to
the carrier or its agent, the date of delivery to Universal Motors is controlling. Asian
Terminals, Inc. v. Philam Insurance Co., Inc. (now Chartis PhilippinesInsurance Inc.)/
Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v. Westwind
Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v.
Philam Insurance Co., Inc. and Asian Terminals, Inc., G.R. Nos.
181163/181262/181319, July 24, 2013.

Mortgage; includes all natural or civil fruits and improvements found on the mortgaged
property when the secured obligation becomes due; in case of non-payment of the
secured debt, foreclosure proceedings shall cover not only the hypothecated property but
all its accessions and accessories as well; indispensable requisite that mortgagor be the
absolute owner of the encumbered property. Rent, as an accessory, follows the principal.
In fact, when the principal property is mortgaged, the mortgage shall include all natural
or civil fruits and improvements found thereon when the secured obligation becomes due
as provided in Article 2127 of the Civil Code, viz:
Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing
fruits, and the rents or income not yet received when the obligation becomes due, and to
the
amount of the indemnity granted or owing to the proprietor from the insurers of the
property mortgaged, or in virtue of expropriation for public use, with the declarations,
amplifications and limitations established by law, whether the estate remains in the
possession of the mortgagor, or it passes into the hands of a third person.

Consequently, in case of non-payment of the secured debt, foreclosure proceedings

shall cover not only the hypothecated property but all its accessions and accessories as
well. This was illustrated in the early case of Cu Unjieng e Hijos v. Mabalacat Sugar
Co. where the Court held:

That a mortgage constituted on a sugar central includes not only the land on which it is
built but also the buildings, machinery, and accessories installed at the time the
mortgage was constituted as well as the buildings, machinery and accessories belonging
to the mortgagor, installed after the constitution thereof x x x [.]

Applying such pronouncement in the subsequent case of Spouses Paderes v. Court

ofAppeals, the Court declared that the improvements constructed by the mortgagor
on thesubject lot are covered by the real estate mortgage contract with the mortgagee
bank and thus included in the foreclosure proceedings instituted by the latter.

However, the rule is not without qualifications. In Castro, Jr. v. CA the Court explained
that Article 2127 is predicated on the presumption that the ownership of accessions and
accessories also belongs to the mortgagor as the owner of the principal. After all, it is
an indispensable requisite of a valid real estate mortgage that the mortgagor be the
absolute owner of the encumbered property. Philippine National Bank v. Sps. Bernard
and CresenciaMarañon, G.R.No. 189316, July 1, 2013.

Mortgage; mortgagee in good faith; right to have mortgage lien carried over and
annotated on the new certificate of title. The protection afforded to PNB as a mortgagee
in good faith refers to the right to have its mortgage lien carried over and annotated on
the new certificate of title issued to Spouses Marañon as so adjudged by the RTC.
Thereafter, to enforce such lien thru foreclosure proceedings in case of non- payment of
the secured debt, as PNB did
so pursue. The principle, however, is not the singular rule that governs real estate
mortgages and foreclosures attended by fraudulent transfers to the mortgagor. Philippine
National Bank v.Sps. Bernard and Cresencia Marañon, G.R.No. 189316, July 1, 2013.
Obligations; conditions; fulfillment thereof; deemed fulfilled when obligor voluntarily
prevents it fulfillment; requisites. The spouses Bonrostro want to be relieved from
paying interest on the amount of P214,492.62 which the spouses Luna paid to Bliss as
amortizations by asserting that they were prevented by the latter from fulfilling such
obligation. They invoke Art. 1186 of the Civil Code which provides that “the condition
shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.”
However, the Court finds Art. 1186 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, Constancia 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. Nameal and
Lourdes Bonrostro v. Sps. Juan and ConstaciaLuna, G.R. No.172346, July 24, 2013.

Obligations; constructive fulfillment; Article 1186 of the Civil Code; requisites. As aptly
pointed out by the CA, Article 1186 of the Civil Code, which states that “the condition
shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment,” does not
apply in this case, viz:
Article 1186 enunciates the doctrine of constructive fulfillment of suspensive conditions,
which applies when the following three (3) requisites concur, viz: (1) The condition is
suspensive; (2) The obligor actually prevents the fulfillment of the condition; and (3) He
acts voluntarily. Suspensive condition is one the happening of which gives rise to the
obligation. It will be irrational for any Bank to provide a suspensive condition in the
Promissory Note or the Restructuring Agreement that will allow the debtor-promissor to
be freed from the duty to pay the loan without paying it.
Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No. 177050, July 1,
2013.

Obligations; if an obligation consists of payment 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.
Under Article 2209 ofthe Civil Code, “[i]fthe 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, sh·agrellbedtheupon,paymentandinofthetheabsenceinterestof
stipulation,
the legal interest x x x.” There being no stipulation on interest in case ofdelay in the
payment ofamortization, the CA thus correctly imposed interest at the legal rate which is
now 12%per annum. Sps. Nameal and Lourdes Bonrostro v. Sps. Juan and Constacia
Luna, G.R. No.172346, July 24, 2013.

Penalties and interest rates; penalties and interest rates should be expressly stipulated in
writing. As to the imposition of additional interest and penalties not stipulated in the
Promissory Notes, this should not be allowed. Article 1956 of the Civil Code
specifically states that “no interest shall be due unless it has been expressly stipulated in
writing.” Thus, the payment of interest and penalties in loans is allowed only if the
parties agreed to it and reduced their agreement in writing. Carlos Lim, et al. v.
Development Bank of the Philippines, G.R. No. 177050, July 1, 2013.

Prescription; Article 1144 of the Civil Code. We concur with the CA’s ruling that
respondent’s action did not yet prescribe. The legal provision governing this case was
not Article 1146 of the Civil Code,but Article 1144 of the Civil Code, which states:
Article 1144. The following actions must be brought within ten years from the time
the cause of action accrues:

(1)Upon a written contract; (2) Upon an obligation created by law; (3)Upon a judgment.
Vector Shipping Corporation, et al. v. American Home Assurance Co., et al., G.R. No.
159213, July 3,2013.
Property; co-ownership; sale of co-owned property; if only one co-owner agreed to the
sale, said co-owner only sold his aliquot share in the subject property. But as held by the
appellate court, the sale between the petitioner and Alejandro is valid insofar as the
aliquot share of respondent Alejandro is concerned. Being a co-owner, Alejandro can
validly and legally dispose of his share even without the consent of all the other co-heirs.
Since the balance of the full price has not yet been paid, the amount paid shall represent
as payment to
hisaliquot share. This then leaves the sale of the lot of the Altamiranos to the
Spouses Lajarca valid only insofar as their shares are concerned, exclusive of the
aliquot part of Alejandro, as ruled by the CA. Reman Recio v. Heirs of Spouses
Aguego and MariaAltamirano, G.R. No.182349, July 24, 2013.

Property; patrimonial property and property of public dominion; patrimonial property of

the State may be the object of prescription, however, those intended for some public
service or the development of national wealth are property of public dominion, which are
not susceptible to acquisition by prescription; public domain lands become patrimonial
property only if there is a declaration that these are alienable or disposable, together with
an express government manifestation that the property is already patrimonial or no longer
retained for public service or the development of national wealth. Under Article 422 of
the Civil Code, public domain lands become patrimonial property only if there is a
declaration that these are alienable or disposable, together with an express government
manifestation that the property is already patrimonial or no longer retained for public
service or the development of national wealth. Only when the property has become
patrimonial can the prescriptive period for the acquisition of property of the public
dominion begin to run. Also under Section 14(2) of Presidential Decree (P.D.) No. 1529,
it is provided that before acquisitive prescription can commence, the property sought to
be registered must not only be classified as alienable and disposable, it must also be
expressly declared by the State that it is no longer intended for public service or the
development of the national wealth, or that the property has been converted into
patrimonial. Absent such an express declaration by the State, the land remains to be
property of public dominion. Dream Village Neighborhood Association, Inc.,represented
by its Incumbent President Greg Seriego v. Bases Conversion Development Authority,
G.R.No.192896, July 24, 2013.
Rent; civil fruit; rightful recipient. Rent is a civil fruit that belongs to the owner of the
property producing it by right of accession. The rightful recipient of the disputed rent in
this case should thus be the owner of the subject lot at the time the rent accrued.
PhilippineNational Bank v. Sps. Bernard and Cresencia Marañon, G.R.No. 189316, July
1, 2013.Subrogation; basis; definition. Consistent with the pertinent law and
jurisprudence, therefore, Exhibit I was already enough by itself to prove the payment of
P7,455,421.00 as the full settlement of Caltex’s claim. The payment made to Caltex as
the insured being thereby duly documented, respondent became subrogated as a matter of
course pursuant to Article 2207 of the Civil Code. In legal contemplation, subrogation is
the “substitution of another person in the place of the creditor, to whose rights he
succeeds in relation to the debt;” and is “independent of any mere contractual relations
between the parties to be affected by it, and is broad enough to cover every instance in
which one party is required to pay a debt for which another is primarily answerable, and
which in equity and conscience ought to be discharged by the latter.” Vector Shipping
Corporation, et al. v. American Home Assurance Co., et
al., G.R. No. 159213, July 3, 2013.

Subrogation in insurance cases; accrues simply upon payment by the insurance company
of the insurance claim; payment by the insurer to the insured operates as an equitable
assignment to the insurer of all remedies that the insured may have against the third party
whose negligence or wrongful act caused the loss. The Court holds that petitioner Philam
has adequately established the basis of its claim against petitioners ATI and Westwind.
Philam, as insurer, was subrogated to the rights of the consignee, Universal Motors
Corporation, pursuant to the Subrogation Receipt executed by the latter in favor of the
former. The right of subrogation accrues simply upon payment by the insurance
company of the insurance claim. Petitioner Philam’s action finds support in Article 2207
of the Civil Code, which provides as follows:
Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. x x x.
Yet, even with the exclusion of Marine Certificate No. 708-8006717-4, the Subrogation
Receipt, on its own, is adequate proof that petitioner Philam paid the consignee’s claim
on the damaged goods. Petitioners ATI and Westwind failed to offer any evidence to
controvert the same. In Malayan Insurance Co., Inc. v. Alberto, the Court explained the
effect of payment by the insurer of the insurance claim in this wise:

We have held that payment by the insurer to the insured operates as an equitable
assignment to the insurer of all the remedies that the insured may have against the third
party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract. It accrues simply upon
payment by the insurance company of the insurance claim. The doctrine of subrogation
has its roots in equity. It is designed to promote and accomplish justice; and is the mode
that equity adopts to compel the ultimate payment of a debt by one who, in justice,
equity, and good conscience, ought to pay. Asian Terminals, Inc. v. Philam Insurance
Co., Inc. (now ChartisPhilippines Insurance Inc.)/ Philam Insurance Co., Inc. (now
Chartis Philippines Insurance Inc.) v. Westwind Shipping Corporation and Asian
Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and
Asian Terminals, Inc., G.R. Nos. 181163/181262/181319, July 24, 2013.

Tender of payment; concept; tender of payment, if refused without just cause, will
discharge the debtor only after a valid consignation with the court; when 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. Tender of payment “is the manifestation by the debtor of a desire to comply
with or pay an obligation. 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.”
“Tender of payment, without more, produces no effect.” “[T]o 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.”

As to the effect of tender of payment on interest, noted civilist Arturo M.

Tolentino explained as follows:

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 ofpayment 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. x x x x (Emphasis supplied)Sps. Nameal
and Lourdes Bonrostro v. Sps.Juan and Constacia Luna, G.R. No.172346, July 24,
2013.
Special Laws

Act No. 3135; foreclosure sale; personal notice to the mortgagor in extrajudicial
foreclosure proceedings is necessary where there is a stipulation to this effect, and failure
to comply with the stipulated notice requirement is a contractual breach sufficient to
render the foreclosure sale null and void. It has been consistently held that unless the
parties stipulate, “personal notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary” because Section 3117 of Act 3135 only requires the
posting of the notice of sale in three public places and the publication of that notice in a
newspaper of general circulation.
In this case, the parties stipulated in paragraph 11 of the Mortgage that:

11. All correspondence relative to this mortgage, including demand letters, summons,
subpoenas, or notification of any judicial or extra-judicial action shall be sent to the
Mortgagor at xxx or at the address that may hereafter be given in writing by the
Mortgagor or the Mortgagee;

However, no notice of the extrajudicial foreclosure was sent by DBP to petitioners about the
foreclosure sale scheduled on July 11, 1994. The letters dated January 28, 1994 and March
11, 1994 advising petitioners to immediately pay their obligation to avoid the impending
foreclosure of their mortgaged properties are not the notices required in paragraph 11 of
the Mortgage. The failure of DBP to comply with their contractual agreement with
petitioners, i.e., to send notice, is a breach sufficient to invalidate the foreclosure sale.
Carlos Lim, et al. v.Development Bank of the Philippines,G.R. No. 177050, July 1, 2013.

Bases Conversion Development Authority (BCDA); BCDA holds title to Fort

Bonifacio; Dream Village sits on the abandoned C-5 Road, which lies outside the areas
declared in Proclamation Nos. 2476 and 172 as alienable and disposable. That the
BCDA has title to Fort Bonifacio has long been decided with finality. In Samahan ng
Masang Pilipino sa Makati,Inc. v. BCDA, it was categorically ruled as follows:
First, it is unequivocal that the Philippine Government, and now the BCDA, has title
and ownership over Fort Bonifacio. The case of Acting Registrars of Land Titles and
Deeds of PasayCity, Pasig and Makati is final and conclusive on the ownership of the
then Hacienda
deMaricaban estate by the Republic of the Philippines. Clearly, the issue on the
ownership ofthe subject lands in Fort Bonifacio is laid to rest. Other than their view that
the USA is still the owner of the subject lots, petitioner has not put forward any claim of
ownership or interest in them. Dream Village Neighborhood Association, Inc.,
represented by its Incumbent PresidentGreg Seriego v. Bases Conversion Development
Authority, G.R. No.192896, July 24, 2013.

Common Carrier; Carriage of Goods by Sea Act (COGSA); prescriptive period for
filing an action for loss or damage of goods. The prescriptive period for filing an action
for the loss or damage of the goods under the COGSA is found in paragraph (6), Section
3, thus:
(6) Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge before or at the time of
the removal of the goods into the custody of the person entitled to delivery thereof under
the contract of carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three days of the delivery. Said notice of loss
or damage maybe endorsed upon the receipt for the goods given by the person taking
delivery thereof. The notice in writing need not be given if the state of the goods has at
the time of their receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered: Provided, That if a notice of loss or
damage, either apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit within one year after
the delivery of the goods or the date when the goods should have been delivered. Asian
Terminals, Inc. v. PhilamInsurance Co., Inc. (now Chartis Philippines Insurance Inc.)/
Philam Insurance Co., Inc. (now Chartis Philippines Insurance Inc.) v. Westwind
Shipping Corporation and Asian Terminals, Inc./ Westwind Shipping Corporation v.
Philam Insurance Co., Inc. and Asian Terminals, Inc., G.R. Nos.181163/181262/181319,
July 24, 2013.

Common Carrier; Carriage of Goods by Sea Act (COGSA); prescriptive period for
filing an action for loss or damage of goods. The prescriptive period for filing an action
for the loss or damage of the goods under the COGSA is found in paragraph (6), Section
3, thus:
(6) Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge before or at the time of
the removal of the goods into the custody of the person entitled to delivery thereof under
the contract of carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three days of the delivery. Said notice of loss
or damage maybe endorsed upon the receipt for the goods given by the person taking
delivery thereof. The notice in writing need not be given if the state of the goods has at
the time of their receipt been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered: Provided, That if a notice of loss or
damage, either apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit within one year after
the delivery of the goods or the date when the goods should have been delivered. Asian
Terminals, Inc. v. PhilamInsurance Co., Inc. (now Chartis Philippines Insurance Inc.)/
Philam Insurance Co., Inc. (now Chartis
Philippines Insurance Inc.) v. Westwind Shipping Corporation and Asian
Terminals, Inc./ Westwind Shipping Corporation v. Philam Insurance Co., Inc. and
Asian Terminals, Inc., G.R. Nos.181163/181262/181319, July 24, 2013.

Family Code; marriage; void ab initio for lack of a marriage license; no inconsistency in
finding the marriage null and void ab initio and, at the same time, non-existent; contracts
which are absolutely simulated or fictitious are inexistent and void from the beginning.
There is no inconsistency in finding the marriage between Benjamin and Sally null and
void ab
initioand, at the same time, non-existent. Under Article 35 of the Family Code, a
marriagesolemnized without a license, except those covered by Article 34 where no
license is necessary, “shall be void from the beginning.” In this case, the marriage
between Benjamin and Sally was solemnized without a license. It was duly established
that no marriage license was issued to them and that Marriage License No. N-07568
did not match the marriage license numbers issued by the local civil registrar of Pasig
City for the month of February 1982. The case clearly falls under Section 3 of Article
3520 which made their marriage
voidab initio. The marriage between Benjamin and Sally was also non-existent.
Applying the general rules on void or inexistent contracts under Article 1409 of the
Civil Code, contracts which are absolutely simulated or fictitious are “inexistent and
void from the beginning.” Thus, the Court of Appeals did not err in sustaining the trial
court’s ruling that the marriage between Benjamin and Sally was null and void ab initio
and non-existent. Sally Go-Bangayan v.Benjamin Bangayan, Jr., G.R. No. 201061, July
3, 2013.

Family Code; marriage license; certification from the local civil registrar is adequate to
prove the non-issuance of a marriage license and, absent any suspicious circumstance,
the certification enjoys probative value. The certification from the local civil registrar is
adequate to prove the non-issuance of a marriage license and absent any suspicious
circumstance, the certification enjoys probative value, being issued by the officer
charged under the law to keep a record of all data relative to the issuance of a marriage
license. Sally Go-Bangayan v.Benjamin Bangayan, Jr., G.R. No. 201061, July 3, 2013.

Family Code; property relations in cases of cohabitation without the benefit of marriage;
rules. The Court of Appeals correctly ruled that the property relations of Benjamin and
Sally is governed by Article 148 of the Family Code which states:
Art. 148. In cases of cohabitation not falling under the preceding Article, only the
properties acquired by both of the parties through their actual joint contribution of
money, property, or industry shall be owned by them in common in proportion to their
respective contributions. In the absence of proof to the contrary, their contributions and
corresponding shares are presumed to be equal. The same rule and presumption shall
apply to joint deposits of money and evidences of credit.

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

The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.

Benjamin and Sally cohabitated without the benefit of marriage. Thus, only the
properties acquired by them through their actual joint contribution of money,
property, or industry shall be owned by them in common in proportion to their
respective contributions. SallyGo-Bangayan v. Benjamin Bangayan, Jr., G.R. No.
201061, July 3, 2013.

Land ownership; decree of registration for which an OCT was issued is accorded greater
weight as against tax declarations and tax receipts in the name of another; tax
declarations and tax receipts only become the basis of a claim of ownership when
coupled with proof of actual possession of property. In the case of Ferrer-Lopez v. CA,
the Court ruled that as against an array of proofs consisting of tax declarations and/or tax
receipts which are not conclusive evidence of ownership nor proof of the area covered
therein, an original certificate of title, which indicates true and legal ownership by the
registered owners over the disputed premises, must prevail. Accordingly, respondents’
Decree No. 98992 for which an original certificate of title was issued should be accorded
greater weight as against the tax declarations and tax receipts presented by petitioners in
this case. Besides, tax declarations and tax receipts may only become the basis of a claim
for ownership when they are coupled
with proof of actual possession of the property. Heirs of Alejandra Delfin, namely,
LeopoldoDelfin, et al. v. Avelina Rabadon, G.R. No. 165014, July 31, 2013.

Land registration; decree of registration bars all claims and rights which arose or may
have existed prior to the decree of registration. It is an elemental rule that a decree of
registration bars all claims and rights which arose or may have existed prior to the
decree of registration. By the issuance of the decree, the land is bound and title thereto
quieted, subject only to certain exceptions under the property registration decree. Heirs
of Alejandra Delfin, namely,Leopoldo Delfin, et al. v. Avelina Rabadon, G.R. No.
165014, July 31, 2013.
Republic Act No. 26; reconstitution of title; nature of proceeding; Torrens system;
sources of reconstitution; mandatory requirements of publication, posting, and notice. At
the outset, the Court notes that the present amended petition for reconstitution is
anchored on the owner’s duplicate copy of TCT No. 8240 – a source for reconstitution of
title under Section 3(a)29 of RA 26 which, in turn, is governed by the provisions of
Section 10 in relation to Section 9 of RA 26 with respect to the publication, posting, and
notice requirements. Section 10 reads:
SEC. 10. Nothing hereinbefore provided shall prevent any registered owner or person in
interest from filing the petition mentioned in section five of this Act directly with the
proper Court of First Instance, based on sources enumerated in sections 2(a), 2(b), 3(a),
3(b), and/or 4(a) of this Act: Provided, however, That the court shall cause a notice of
the petition, before hearing and granting the same, to be published in the manner stated
in section nine hereof: And, provided, further, That certificates of title reconstituted
pursuant to this section shall not be subject to the encumbrance referred to in section
seven of this Act.

Corollarily, Section 9 reads in part:

SEC. 9. x x x Thereupon, the court shall cause a notice of the petition to be published, at the
expense of the petitioner, twice in successive issues of the Official Gazette, and to be posted
on the main entrance of the provincial building and of the municipal building of the
municipality or city in which the land lies, at least thirty days prior to the date of hearing, and
after hearing, shall determine the petition and render such judgment as justice and
equity may require. x x x.

The foregoing provisions, therefore, clearly require that (a) notice of the petition should be
published in two (2) successive issues of the Official Gazette; and (b) publication should be
made at least thirty (30) days prior to the date of hearing. Substantial compliance with this
jurisdictional requirement is not enough; it bears stressing that the acquisition of jurisdiction
over a reconstitution case is hinged on a strict compliance with the requirements of the
law. Republic of the Philippines v. Ricordito N. De Asis, Jr., G.R. No. 193874, July 24,
2013.

Torrens system; the issue on the validity of title necessitates a remand of the case. The
Court recognizes the importance of protecting the country’s Torrens system from fake
land titles and deeds. Considering that there is an issue on the validity of the title of
petitioner VSD, which title is alleged to be traceable to OCT No. 994 registered on
April 19, 1917, which mother title was held to be inexistent in M a n o t o k R e a l t y , I
nc.v.CLTRealty
D e v e l o p m e n t C o r p o r a t i o n , in the interest of justice, and to safeguard the
correct titling ofproperties, a remand is proper to determine which of the parties derived
valid title from the legitimate OCT No. 994 registered on May 3, 1917. Since this Court is
not a trier of facts and not capacitated to appreciate evidence of the first instance, the Court
may remand this case to the Court of Appeals for further proceedings, as it has been
similarly tasked
inM a n o t o k R e a l t y , I n c . v . C L T R e a l t y D e v e l o p m e n t C o r p o r a t i
o n . VSD Realty &Development Corporation v. Uniwide Sales, Inc. and Dolores Baello
Tejada, G.R. No. 170677, July 31,2013

Torrens system; Torrens title; lands under a Torrens title cannot be acquired by prescription
or adverse possession. Moreover, it is a settled rule that lands under a Torrens title cannot be
acquired by prescription or adverse possession. Section 47 of P.D. No. 1529, the Property
Registration Decree, expressly provides that no title to registered land in derogation of the
title of the registered owner shall be acquired by prescription or adverse possession. And,
although the registered landowner may still lose his right to recover the possession of his
registered property by reason of laches, nowhere has Dream Village alleged or
provedlaches, which has been defined as such neglect or omission to assert a right,
taken in conjunction with lapse of time and other circumstances causing prejudice to an
adverse party, as will operate as a bar in equity. Put any way, it is a delay in the
assertion of a right which works disadvantage to another because of the inequity
founded on some change in the condition or relations of the property or parties. It is
based on public policy which, for the peace of society, ordains that relief will be denied
to a stale demand which otherwise could be a valid claim. Dream Village
Neighborhood Association, Inc., represented by its IncumbentPresident Greg Seriego
v. Bases Conversion Development Authority, G.R. No.192896, July 24, 2013.

Compensation; Concept; Requisites. Compensation is a mode of extinguishing to the

concurrent amount, the debts of persons who in their own right are creditors and debtors
of each other. The object of compensation is the prevention of unnecessary suits and
payments through the mutual extinction by operation of law of concurring debts. Article
1279 of the Civil Code provides for the requisites for compensation to take effect:
Article 1279. In order that compensation may be proper, it is necessary:

(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.

Adelaida Soriano v. People of the Philippines, G.R. No. 181692, August 14, 2013.

Compensation; when both debts are liquidated and demandable. A debt is liquidated
when
the amount is known or is determinable by inspection of the terms and conditions of
relevant documents. Adelaida Soriano v. People of the Philippines, G.R. No. 181692,
August 14, 2013.

Contracts; determination of nature of contract. In determining the nature of a contract,

courts are not bound by the title or name given by the parties. The decisive factor in
evaluating such agreement is the intention of the parties, as shown not necessarily by the
terminology used in the contract but by their conduct, words, actions and deeds prior to,
during and immediately after executing the agreement. As such, therefore, documentary
and parol evidence may be submitted and admitted to prove such intention. Hur Tin
Yang v.People of the Philippines, G.R. No. 195117, August 14, 2013.
Co-ownership; rights of co-owners. Having succeeded to the property as heirs of
Gregoria and Romana, petitioners and respondents became co-owners thereof. As co-
owners, they may use the property owned in common, provided they do so in accordance
with the purpose for which it is intended and in such a way as not to injure the interest of
the co-ownership or prevent the other co-owners from using it according to their rights.
They have the full ownership of their parts and of the fruits and benefits pertaining
thereto, and may alienate, assign or mortgage them, and even substitute another person
in their enjoyment, except when personal rights are involved. Each co-owner may
demand at any time the partition of the thing owned in common, insofar as his share is
concerned. Finally, no prescription shall run in favor of one of the co-heirs against the
others so long as he expressly or impliedly recognizes the co-ownership. Antipolo Ining
(deceased), survived by ManuelVillanueva, Teodora Villanueva-Francisco, Camilo
Francisco, Adolfo Francisco, Lucimo Francisco, Jr., Milagros Francisco,Celedonio
Francisco, Herminigildo Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad
Ining-Ibea (deceased) survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen
Ibea, Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores
Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon Gonzales and
Remedios Rimon Cordero; and Pedro Ining (deceased) survived by Elisa Tan Ining
(wife) and Pedro Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega, Restonilo
I. Vega, Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R.No. 174727,
August 12, 2013.
Co-ownership; prescription; for prescription to set in, the repudiation must be done by a
co-owner; requisites. 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.” In fine, since none of the co-owners made a valid repudiation of the
existing co-ownership, Leonardo could seek partition of the property at any
time.Antipolo Ining(deceased), survived by Manuel Villanueva, Teodora Villanueva-
Francisco, Camilo Francisco, Adolfo Francisco, Lucimo Francisco, Jr., Milagros
Francisco,Celedonio Francisco, Herminigildo Francisco; Ramon Tresvalles, Roberto
Tajonera, Natividad Ining-Ibea (deceased) survived by Edilberto Ibea, Josefa Ibea,
Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and
Pastor Ruiz; Dolores Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon
Gonzales and Remedios Rimon Cordero; and Pedro Ining (deceased) survived by Elisa
Tan Ining (wife) and Pedro Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega,
Restonilo I. Vega, Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R.
No. 174727, August 12, 2013.

Damages; actual damages; requires competent proof of the actual amount of loss. To
justify an award for actual damages, there must be competent proof of the actual amount
of loss. Credence can be given only to claims duly supported by receipts. Respondents
did not submit any documentary proof, like receipts, to support their claim for actual
damages. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella
Capistrano, G.R. No. 170942, August 28, 2013.

Damages; attorney’s fees; allowed when exemplary damages are awarded or where the
plaintiff has incurred expenses to protect his interest by reason of defendant’s act or
omission. Article 2208 of the Civil Code allows recovery of attorney’s fees when
exemplary damages are awarded or where the plaintiff has incurred expenses to protect
his interest by reason of defendant’s act or omission. Considering that exemplary
damages were properly awarded here, and that respondents hired a private lawyer to
litigate its cause, the Supreme
Court agrees with the RTC and CA that the P30,000.00 allowed as attorney’s fees were
appropriate and reasonable. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo
and EstrellaCapistrano, G.R. No. 170942, August 28, 2013.

Damages; Award of attorney’s fees and litigation expenses and costs; justified when
there is bad faith. Even granting that Atty. Sabitsana has ceased to act as the Muertegui
family’s lawyer, he still owed them his loyalty. The termination of attorney-client
relation provides no justification for a lawyer to represent an interest adverse to or in
conflict with that of the former client on a matter involving confidential information
which the lawyer acquired when he was counsel. The client’s confidence once reposed
should not be divested by mere expiration of professional employment. This is
underscored by the fact that Atty. Sabitsana obtained information from Carmen which he
used to his advantage and to the detriment of his client.
[F]rom the foregoing disquisition, it can be seen that petitioners are guilty of bad faith in
pursuing the sale of the lot despite being apprised of the prior sale in respondent’s favor.
Moreover, petitioner Atty. Sabitsana has exhibited a lack of loyalty toward his clients,
the Muerteguis, and by his acts, jeopardized their interests instead of protecting them.
Over and above the trial court’s and the CA’s findings, this provides further justification
for the award of attorney’s fees, litigation expenses and costs in favor of the respondent.
Spouses CelemencioC. Sabitsana, Jr. and Ma. Rosario M. Sabitsana v. Juanito F.
Muertegui, represented by his attorney-in-fact, Domingo A. Muertegui, Jr., G.R. No.
181359, August 5, 2013.

Damages; Attorney’s fees; what constitute bad faith. There was no gross and evident
bad faith on the part of Asian Construction in filing its complaint against Sumitomo
since it was merely seeking payment of its unpaid works done pursuant to the
Agreement. Neither can its subsequent refusal to accept Sumitomo’s offered
compromise be classified as a badge of bad faith since it was within its right to either
accept or reject the same owing to its contractual nature. Absent any other just or
equitable reason to rule otherwise, these incidents are clearly off-tangent with a finding
of gross and evident bad faith which altogether negates Sumitomo’s entitlement to
attorney’s fees. Asian Construction andDevelopment Corporation v. Sumitomo
Corporation / Sumitomo Corporation v. Asia Construction and
Development Corporation, G.R. No. 196723 / G.R. No. 196728, August 28, 2013.

Damages; Attorney’s fees; when awarded. Jurisprudence dictates that in the absence
of a governing stipulation, attorney’s fees may be awarded only in case the plaintiff’s
action or defendant’s stand is so untenable as to amount to gross and evident bad
faith. This is embodied in Article 2208 of the Civil Code which states:
Article 2208. In the absence of stipulation, attorney’s fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:

xxxx

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff’s plainly valid, just and demandable claim;

xxxx

Asian Construction and Development Corporation v. Sumitomo Corporation / Sumitomo

Corporation v. Asia Construction and Development Corporation, G.R. No. 196723 /
G.R. No. 196728, August 28,2013.

Damages; Exemplary damages; the law allows the grant of exemplary damages to set an
example for the public good. The law allows the grant of exemplary damages to set an
example for the public good. The business of a bank is affected with public interest; thus,
it makes a sworn profession of diligence and meticulousness ingiving irreproachable
service. For this reason, the bank should guard against injury attributable to negligence
or bad faith on its part. The banking sector must at all times maintain a high level of
meticulousness. The grant of exemplary damages is justified by the initial carelessness of
petitioner, aggravated by its lack of promptness in repairing its error. Comsavings Bank
(now GSIS Family Bank) v. Sps.Danilo and Estrella Capistrano, G.R. No. 170942,
August 28, 2013.

Damages; Moral damages; recoverable for acts or actions referred to in Article 20 of the
Civil Code. In their amended complaint, respondents claimed that the acts of GCB Builders
and Comsavings Bank had caused them to suffer sleepless nights, worries and anxieties.
The claim was well founded. Danilo worked in Saudi Arabia in order to pay the loan
used for the construction of their family home. His anxiety and anguish over the
incomplete and defective construction of their house, as well as the inconvenience he and
his wife experienced because of this suit were not easily probable. On her part, Estrella
was a mere housewife, but was the attorney-in-fact of Danilo in matters concerning the
loan transaction. With Danilo working abroad, she was alone in overseeing the house
construction and the progress of the present case. Given her situation, she definitely
experienced worries and sleepless nights. The award of moral damages of P100,000.00
awarded by the CA as exemplary damages is proper. Comsavings Bank (now GSIS
Family Bank) v. Sps. Danilo andEstrella Capistrano, G.R. No. 170942, August 28, 2013.

Damages; Temperate damages; may be recovered when the court finds that some
pecuniary loss was suffered but its amount cannot be proved with certainty.
Nonetheless, it cannot be denied that they had suffered substantial losses. Article 2224
of the Civil Code allows the recovery of temperate damages when the court finds that
some pecuniary loss was suffered but its amount cannot be proved with certainty. In lieu
of actual damages, therefore, temperate damages of P25,000.00 are awarded. Such
amount, in the court’s view, is reasonable under the circumstances. Comsavings Bank
(now GSIS Family Bank) v. Sps. Daniloand Estrella Capistrano, G.R. No. 170942,
August 28, 2013.

Damages; Interests; Eastern Shipping Lines guidelines as modified by BSP-MB Circular

No. 799. The Supreme Court set out the following guidelines on damages and interest
due:
1. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The
provisions under Title XVIII on “Damages” of the Civil Code govern in determining the
measure of recoverable damages.

2. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
(a) When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of of stipulation, the rate of interest shall be
6% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 the Civil Code.

(b) When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages, except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally adjudged.

(c) When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
Dario Nacar v. Gallery Framesand/or Felipe Borde, Jr., G.R. No. 189871, August 13,
2013.

Gross negligence; concept. Based on the provisions, a banking institution like

Comsavings Bank is obliged to exercise the highest degree of diligence as well as high
standards of integrity and performance in all its transactions because its business is
imbued with public interest. As aptly declared in Philippine National Bank v. Pike:
“[T]he stability of banks largely depends on the confidence of the people in the honesty
and efficiency of banks.” Gross negligence connotes want of care in the performance of
one’s duties; it is a negligence
characterized by the want of even slight care, acting or omitting to act in a situation
where there is duty to act, not inadvertently but willfully and intentionally, with a
conscious indifference to consequences insofar as other persons may be affected. It
evinces a thoughtless disregard of consequences without exerting any effort to avoid
them. ComsavingsBank (now GSIS Family Bank) v. Sps. Danilo and Estrella
Capistrano, G.R. No. 170942, August28, 2013.

Interest; Legal rate of interest effective July 1, 2013; pursuant to BSP Circular 799, series
of 2013, the legal rate of interest shall be 6% per annum. The Court held that “[P]ursuant
to Circular No. 799, series of 2013 of the Bangko Sentral ng Pilipinas which took effect
July 1, 2013, the amount of P6,000.00, erroneously paid by Petitioner to the bank, shall
earn interest at the rate of 6% per annum computed from the filing of the Petition in Civil
Case No. 5535 up to its full satisfaction.”Virginia M. Venzon v. Rural Bank of
Buenavista, Inc., represented byLourdesita E. Parajes, G.R. No. 178031, August 28,
2013.

Interest; legal rate of interest; interest at 6% per annum imposed on award in favor of
illegally dismissed employees. Interest at the rate of 6% per annum must be imposed on
the award for separation pay, back wages, and attorney’s fees to illegally dismissed
employees in accordance with Circular No. 799, Series of 2013 of the Bangko Sentral ng
Pilipinas which took effect July 1, 2013.Vicente Ang v. Seferino San Joaquin, Jr., and
Diosdado Fernandez,

Interest; legal interest; where obligation constitutes a loan or forbearance of money,

goods or credit; legal rate allowed in judgments. In the absence of an express stipulation
as to the rate of interest that would govern the parties, the rate of legal interest for loans
or forbearance of any money, goods or credits and the rate allowed in judgments shall no
longer be 12% per annum. As reflected in the case of Eastern Shipping Lines and
Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions,
before its amendment by BSP-MB Circular No. 799, the interest rate will now be 6% per
annum effective July 1, 2013. DarioNacar v. Gallery Frames and/or Felipe Borde, Jr.,
G.R. No. 189871, August 13, 2013.
Interest; Legal interest; prospective application. It should be noted that the new rate
could only be applied prospectively and not retroactively. Consequently, the 12% per
annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new
rate of 6% per annum shall be the prevailing rate of interest when applicable.
Nonetheless, with regard to those judgments that have become final and executory prior
to July 1, 2013, said judgments shall not be disturbed and shall continue to be
implemented applying the rate of interest fixed therein. Dario Nacar v. Gallery Frames
and/or Felipe Borde, Jr., G.R. No. 189871, August 13,2013.

Laches; definition. The Court observes that laches had already set in, thereby precluding
the Andrades from pursuing their claim. Case law defines laches as the “failure to assert
a right for an unreasonable and unexplained length of time, warranting a presumption
that the party entitled to assert it has either abandoned or declined to assert it.” Bobby
Tan v. Grace Andrade,et al./Grace Andrade, et al. v. Bobby Tan, G.R. Nos. 171904 &
172017, August 7, 2013.

Quasi-contracts;solutio indebiti; concept. In a controversy over payment made after the

foreclosure of the mortgaged property, the Court held: “Since respondent was not entitled
to receive the said amount, as it is deemed fully paid from the foreclosure of petitioner’s
property since its bid price at the auction sale covered all that petitioner owed it by way
of principal, interest, attorney’s fees and charges, it must return the same to petitioner. ‘If
something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.’” Virginia M. Venzon v. Rural Bank
ofBuenavista, Inc., represented by Lourdesita E. Parajes, G.R. No. 178031, August 28,
2013.

Sales; double sale involving unregistered land; Article 1544 of the Civil Code does not
apply; prior sale, even if made through an unnotarized deed of sale, prevails; registration of
second sale is unavailing as registration does not vest title; Under Act 3344, registration if
instruments affecting unregistered lands is without prejudice to a third party with a better
right; actual and prior knowledge of the first sale makes the subsequent buyers purchasers in
bad faith. Article 1544 of the Civil Code does not apply to sales involving unregistered land.
Both the trial court and the CA are, however, wrong in applying Article 1544 of the Civil
Code. Both courts seem to have forgotten that the provision does not apply to sales
involving unregistered land. Suffice it to state that the issue of the buyer’s good or bad
faith is relevant only where the subject of the sale is registered land, and the purchaser
is buying the same from the registered owner whose title to the land is clean. In such
case, the purchaser who relies on the clean title of the registered owner is protected if he
is a purchaser in good faith for value.
The sale to respondent Juanito was executed on September 2, 1981 via an unnotarized
deed of sale, while the sale to petitioners was made via a notarized document only on
October 17, 1991, or ten years thereafter. Thus, Juanito who was the first buyer has a
better right to the lot, while the subsequent sale to petitioners is null and void, because
when it was made, the seller Garcia was no longer the owner of the lot. Nemo dat quod
non habet.

The fact that the sale to Juanito was not notarized does not alter anything, since the sale
between him and Garcia remains valid nonetheless. Notarization, or the requirement of a
public document under the Civil Code, is only for convenience, and not for validity or
enforceability. And because it remained valid as between Juanito and Garcia, the latter no
longer had the right to sell the lot to petitioners, for his ownership thereof had ceased.

Nor can petitioners’ registration of their purchase have any effect on Juanito’s rights.
The mere registration of a sale in one’s favor does not give him any right over the land
if the vendor was no longer the owner of the land, having previously sold the same to
another even if the earlier sale was unrecorded. Neither could it validate the purchase
thereof by petitioners, which is null and void. Registration does not vest title; it is
merely the evidence of such title. Our land registration laws do not give the holder any
better title than what he actually has.

Under Act No. 3344, registration of instruments affecting unregistered lands is ‘without
prejudice to a third party with a better right.’ The aforequoted phrase has been held by
the Court to mean that the mere registration of a sale in one’s favor does not give him
any right over the land if the vendor was not anymore the owner of the land having
previously sold the same to somebody else even if the earlier sale was unrecorded.
Petitioners’ defense of prescription, laches and estoppel are unavailing since their claim
is based on a null and void deed of sale. The fact that the Muerteguis failed to interpose
any objection to the sale in petitioners’ favor does not change anything, nor could it give
rise to a right in their favor; their purchase remains void and ineffective as far as the
Muerteguis are concerned. Spouses Celemencio C. Sabitsana, Jr. and Ma. Rosario M.
Sabitsana v. Juanito F.Muertegui, represented by his attorney-in-fact, Domingo A.
Muertegui, Jr., G.R. No. 181359, August 5,2013.

Sales; actual and prior knowledge of the first sale makes the subsequent buyers
purchasers in bad faith. Petitioners’ actual and prior knowledge of the first sale to Juanito
makes them purchasers in bad faith. It also appears that petitioner Atty. Sabitsana was
remiss in his duties as counsel to the Muertegui family. Instead of advising the
Muerteguis to register their purchase as soon as possible to forestall any legal
complications that accompany unregistered sales of real property, he did exactly the
opposite: taking advantage of the situation and the information he gathered from his
inquiries and investigation, he bought the very same lot and immediately caused the
registration thereof ahead of his clients, thinking that his purchase and prior registration
would prevail. The Court cannot tolerate this mercenary attitude. Instead of protecting his
client’s interest, Atty. Sabitsana practically preyed on
him. Spouses Celemencio C. Sabitsana, Jr. and Ma. Rosario M. Sabitsana v. Juanito F.
Muertegui,represented by his attorney-in-fact, Domingo A. Muertegui, Jr., G.R. No.
181359, August 5, 2013.

Succession; siblings are heirs of decedent who died without issue. Since Leon died
without issue, his heirs are his siblings, Romana and Gregoria, who thus inherited the
property in equal shares. In turn, Romana’s and Gregoria’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. Antipolo
Ining (deceased), survived byManuel Villanueva, Teodora Villanueva-Francisco,
Camilo Francisco, Adolfo Francisco, Lucimo Francisco, Jr., Milagros
Francisco,Celedonio Francisco, Herminigildo Francisco; Ramon Tresvalles, Roberto
Tajonera, Natividad Ining-Ibea (deceased) survived by Edilberto Ibea, Josefa Ibea,
Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and
Pastor Ruiz; Dolores Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon
Gonzales and Remedios Rimon Cordero; and Pedro
Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro Ining, Jr. v. Leonardo
R. Vega, substituted by Lourdes Vega, Restonilo I. Vega, Crispulo M. Vega, Milbuena
Vega-Restituto and Lenard
Vega, G.R. No. 174727, August 12, 2013.

Special Laws

Correction of name; adversary proceeding; impleading and notice to affected and

interested parties; when failure to implead and notify is cured by publication of notice of
hearing; strict compliance with the Rules of Court mandated when petition involves
substantial and controversial alterations. Respondent’s birth certificate shows that her
full name is Anita Sy, that she is a Chinese citizen and a legitimate child of Sy Ton and
Sotera Lugsanay. In filing the petition, however, she seeks the correction of her first
name and surname, her status from “legitimate” to “illegitimate” and her citizenship
from “Chinese” to “Filipino.” Thus, respondent should have impleaded and notified not
only the Local Civil Registrar but also her parents and siblings as the persons who have
interest and are affected by the changes or corrections respondent wanted to make.
The fact that the notice of hearing was published in a newspaper of general circulation
and notice thereof was served upon the State will not change the nature of the
proceedings taken. A reading of Sections 4 and 5, Rule 108 of the Rules of Court shows
that the Rules mandate two sets of notices to different potential oppositors: one given to
the persons named in the petition and another given to other persons who are not named
in the petition but nonetheless may be considered interested or affected parties.
Summons must, therefore, be served not for the purpose of vesting the courts with
jurisdiction but to comply with the requirements of fair play and due process to afford
the person concerned the opportunity to protect his interest if he so chooses.

While there may be cases where the Court held that the failure to implead and notify
the affected or interested parties may be cured by the publication of the notice of
hearing, earnest efforts were made by petitioners in bringing to court all possible
interested parties. Such failure was likewise excused where the interested parties
themselves initiated the corrections proceedings; when there is no actual or presumptive
awareness of the existence
of the interested parties; or when a party is inadvertently left out.

It is clear from the foregoing discussion that when a petition for cancellation or
correction of an entry in the civil register involves substantial and controversial
alterations, including those on citizenship, legitimacy of paternity or filiation, or
legitimacy of marriage, a strict compliance with the requirements of Rule 108 ofthe
Rules of Court is mandated. If the entries in the civil register could be corrected or
changed through mere summary proceedings and not through appropriate action
wherein all parties who may be affected by the entries are notified or represented, the
door to fraud or other mischief would be set open, the consequence of which might be
detrimental and far reaching. Republic of thePhilppines v. Dr. Norma S. Lugsanay Uy,
G.R. No. 198010, August 12, 2013.

Correction of name; Appropriate adversary proceeding; definition. What is meant by

“appropriate adversary proceeding?” Black’s Law Dictionary defines “adversary
proceeding” as follows:
One having opposing parties; contested, as distinguished from an ex parte application,
one of which the party seeking relief has given legal warning to the other party, and
afforded the latter an opportunity to contest it. Excludes an adoption proceeding.
Republic of the Philppinesv. Dr. Norma S. Lugsanay Uy, G.R. No. 198010, August 12,
2013.

Correction of name; errors in a civil registry and facts established in an appropriate

adversary proceeding. It has been settled in a number of cases starting with Republic v.
Valencia that even substantial errors in a civil registry may be corrected and the true facts
established provided the parties aggrieved by the error avail themselves of the
appropriate adversary proceeding. The pronouncement of the Court in that case is
illuminating:
“It is undoubtedly true that if the subject matter of a petition is not for the correction of
clerical errors of a harmless and innocuous nature, but one involving nationality or
citizenship, which is indisputably substantial as well as controverted, affirmative relief
cannot be granted in a proceeding summary in nature. However, it is also true that a right
in law may be enforced and a wrong may be remedied as long as the appropriate remedy
is used. This Court adheres to the principle that even substantial errors in a civil registry
may be
corrected and the true facts established provided the parties aggrieved by the error avail
themselves of the appropriate adversary proceeding.” Republic of the Philppines v. Dr.
Norma S.Lugsanay Uy, G.R. No. 198010, August 12, 2013.

Family Relations; Conjugal property; presumption that all property of the marriage is
presumed to belong to the conjugal partnership, unless it be proved that it pertains
exclusively to the husband or to the wife; for presumption to apply, party invoking the
same must preliminarily prove that the property was indeed acquired during the
marriage; presumption cannot apply where there is no showing as to when the property
alleged to be conjugal was acquired. Pertinent to the resolution of this second issue is
Article 160 of the Civil Code which states that “[a]ll property of the marriage is
presumed to belong to the conjugal partnership, unless it be proved that it pertains
exclusively to the husband or to the wife.” For this presumption to apply, the party
invoking the same must, however, preliminarily prove that the property was indeed
acquired during the marriage. As held in Go v. Yamane:
x x As a condition sine qua non for the operation of [Article 160] in favor of the
conjugal partnership, the party who invokes the presumption must first prove that the
property was acquired during the marriage.

In other words, the presumption in favor of conjugality does not operate if there is no
showing of when the property alleged to be conjugal was acquired. Moreover, the
presumption may be rebutted only with strong, clear, categorical and convincing
evidence. There must be strict proof of the exclusive ownership of one of the spouses,
and the burden of proof rests upon the party asserting it.

In this case, there is no evidence to indicate when the property was acquired by
petitioner Josefina. Thus, we agree with petitioner Josefina’s declaration in the deed
of absolute sale she executed in favor of the respondent that she was the absolute and
sole owner of the property. Bobby Tan v. Grace Andrade, et al./Grace Andrade, et al.
v. Bobby Tan,G.R. Nos.171904 & 172017, August 7, 2013.
Family relations. Under the Family Code, family relations, which is the primary basis for
succession, exclude relations by affinity. Antipolo Ining (deceased), survived by Manuel
Villanueva,Teodora Villanueva-Francisco, Camilo Francisco, Adolfo Francisco,
Lucimo Francisco, Jr., Milagros Francisco,Celedonio Francisco, Herminigildo
Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea (deceased)
survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-
Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores Ining-Rimon (deceased)
survived by Jesus Rimon, Cesaria Rimon Gonzales and Remedios Rimon Cordero; and
Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro Ining, Jr. v.
Leonardo R. Vega, substituted by Lourdes Vega, Restonilo I. Vega, Crispulo M. Vega,
Milbuena Vega-Restituto and Lenard Vega, G.R. No. 174727, August12, 2013.

Land titles; indefeasibility of certificate of title to public land issued pursuant to a grant
or patent; false statement exception; reversion of land. The certificate of title issued
pursuant to any grant or patent involving public lands is as conclusive and indefeasible as
any other certificate of title issued to private lands in the ordinary or cadastral
registration proceedings. It is not subject to collateral attack. However, Section 91 of
Commonwealth Act No. 141 (The Public Land Act) provides for the cancellation of the
concession, title or permit granted for any false statement in the application or omission
of facts in the application. Once a patent is registered and the corresponding certificate of
title is issued, the land covered by it ceases to be part of the public domain and becomes
private property, and the Torrens Title issued pursuant to the patent becomes indefeasible
upon the expiration of one year from the date of issuance of such patent. However, as
held in The Director of Lands v. DeLuna, et al., even after the lapse of one year, the State
may still bring an action under Section101 of Commonwealth Act No. 141 for the
reversion to the public domain of land which has been fraudulently granted to private
individuals. The burden of proof rests on the party who asserts the affirmative of an
issue. Republic of the Philippines v. Angeles Bellate, and SpousesJesus Cabanto and
Marieta Juanerio, G.R. No. 175685, August 7, 2013.

Land titles; Fraud in an application for grant of title to public land or patent; definition.
It was held on Libudan v. Gil that “[t]he fraud must consist in an intentional omission
of facts required by law to be stated in the application or a willful statement of a claim
against the
truth. It must show some specific acts intended to deceive and deprive another of his
right. The fraud must be actual and extrinsic, not merely constructive or intrinsic; the
evidence thereof must be clear, convincing and more than merely preponderant, because
the proceedings which are assailed as having been fraudulent are judicial proceedings
which by law, are presumed to have been fair and regular.”Republic of the Philippines v.
Angeles Bellate, andSpouses Jesus Cabanto and Marieta Juanerio, G.R. No. 175685,
August 7, 2013.

Trust receipts; purpose. To emphasize, the Trust Receipts Law was created to “to aid
in financing importers and retail dealers who do not have sufficient funds or
resources to finance the importation or purchase of merchandise, and who may not be
able to acquire credit except through utilization, as collateral, of the merchandise
imported or purchased. Hur Tin Yang v. People of the Philippines, G.R. No. 195117,
August 14, 2013.

Trust receipts; when not a trust receipts transaction. Nonetheless, when both parties enter
into an agreement knowing fully well that the return of the goods subject of the trust
receipt is not possible even without any fault on the part of the trustee, it is not a trust
receipt transaction penalized under Sec. 13 of PD 115 in relation to Art. 315, par. 1(b) of
the RPC, as the only obligation actually agreed upon by the parties would be the return
of the proceeds of the sale transaction. This transaction becomes a mere loan, where the
borrower is obligated to pay the bank the amount spent for the purchase of the goods.
Hur Tin Yang v.People of the Philippines, G.R. No. 195117, August 14, 2013.

CIVIL CODE

Civil registry; nature of civil register books; books making up the civil register and all
documents relating thereto are public documents and shall be prima facie evidence of
the facts therein contained; as public documents, they are admissible in evidence even
without further proof of their due execution and genuineness.There is no question that
the documentary evidence submitted by petitioner are all public documents. As
provided in the Civil Code:
ART. 410. The books making up the civil register and all documents relating thereto
shall be
considered public documents and shall be prima facie evidence of the facts therein
contained.

As public documents, they are admissible in evidence even without further proof of their due
execution and genuineness. Thus, the RTC erred when it disregarded said documents on the
sole ground that the petitioner did not present the records custodian of the NSO who issued
them to testify on their authenticity and due execution since proof of authenticity and due
execution was not anymore necessary. Moreover, not only are said documents admissible,
they deserve to be given evidentiary weight because they constitute prima
facieevidence of the facts stated therein. And in the instant case, the facts stated
thereinremain unrebutted since neither the private respondent nor the public prosecutor
presented evidence to the contrary. In Yasuo Iwasawa v. Felisa Custodio Gangan
(a.k.a. “Felisa GanganArambulo” and “Felisa Gangan Iwasawa”), et al., G.R. No.
204169, September 11, 2013.

Contracts; contract to sell distinguished from contract of sale; in a contract to sell,

ownership remains with the vendor and does not pass to the vendee until full payment of
the purchase price; a deed of sale is absolute when there is no stipulation in the contract
that title to the property remains with the seller until the full payment of the purchase
price. In a conditional sale, as in a contract to sell, ownership remains with the vendor
and does not pass to the vendee until full payment of the purchase price. The full
payment of the purchase price partakes of a suspensive condition, and non-fulfillment of
the condition prevents the obligation to sell from arising. To differentiate, a deed of sale
is absolute when there is no stipulation in the contract that title to the property remains
with the seller until full payment of the purchase price. Ramos v. Heruela held that
Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale, while R.A.
No. 6552 applies to contracts to sell. Manuel Uy &Sons, Inc. v. Valbueco, Incorporated,
G.R. No. 179594, September 11, 2013.

Contracts; lease contracts; lease contracts survive the death of the parties and continue
to bind the heirs except if the contract states otherwise; the provision in the lease
contract stating that “this contract is nontransferable unless prior written consent of the
lessor is obtained in writing” refers to transfers inter vivos and not transmissions
mortis causa. The Supreme Court has previously ruled that lease contracts, by their
nature, are not personal.
The general rule, therefore, is lease contracts survive the death of the parties and continue
to bind the heirs except if the contract states otherwise. In Sui Man Hui Chan v. Court of
Appeals, we held that: “A lease contract is not essentially personal in character. Thus, the
rights and obligations therein are transmissible to the heirs. The general rule, therefore, is
that heirs are bound by contracts entered into by their predecessors-in-interest except
when the rights and obligations arising therefrom are not transmissible by (1) their nature,
(2) stipulation or (3) provision of law. In the subject Contract of Lease, not only were
there no stipulations prohibiting any transmission of rights, but its very terms and
conditions explicitly provided for the transmission of the rights of the lessor and of the
lessee to their respective heirs and successors. The contract is the law between the parties.
The death of a party does not excuse nonperformance of a contract, which involves a
property right, and the rights and obligations thereunder pass to the successors or
representatives of the deceased. Similarly, nonperformance is not excused by the death of
the party when the other party has a property interest in the subject matter of the
contract.” Section 6 of the lease contract provides that “[t]his contract is nontransferable
unless prior consent of the lessor is obtained in writing.” Section 6 refers to transfers
inter vivos and not transmissions mortis causa. What Section 6 seeks to avoid is for the
lessee to substitute a third party in place of the lessee without the lessor’s consent.
Manuel Uy & Sons, Inc. v. Valbueco, Incorporated, G.R. No. 179594, September 11,
2013.

Contracts; lease contracts; sublease arrangement; concept. Assignment or transfer of

lease, which is covered by Article 1649 of the Civil Code, is different from a sublease
arrangement, which is governed by Article 1650 of the same Code. In a sublease, the
lessee becomes in turn a lessor to a sub-lessee. The sub-lessee then becomes liable to pay
rentals to the original lessee. However, the juridical relation between the lessor and
lessee is not dissolved. The parties continue to be bound by the original lease contract.
Thus, in a sublease arrangement, there are at least three parties and two distinct juridical
relations. Manuel Uy & Sons, Inc. v.Valbueco, Incorporated, G.R. No. 179594,
September 11, 2013.
Contracts; lease contracts; lessee’s right upon the termination of the lease to (a) claim
reimbursement from the lessor for half the value of the useful improvements introduced by
the lessee in good faith, or to (b) demolish of such improvements. The CA erred in not
applying Article 1678 of the Civil Code which provides: “Art. 1678. If the lessee makes,
in good faith, useful improvements which are suitable to the use for which the lease is
intended, without altering the form or substance of the property leased, the lessor upon
the termination of the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to reimburse said amount, the lessee
may remove the improvements, even though the principal thing may suffer damage
thereby. He shall not, however, cause any more impairment upon the property leased
than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to
any reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by paying
their value at the time the lease is extinguished.”
The foregoing provision applies if the improvements were: (1) introduced in good faith;
(2) useful; and (3) suitable to the use for which the lease is intended, without altering
the form and substance. We find that the aforementioned requisites are satisfied in this
case. The buildings were constructed before German’s demise, during the subsistence
of a valid contract of lease. It does not appear that HDSJ prohibited German from
constructing the buildings. Thus, HDSJ should have reimbursed German (or his estate)
half of the value of the improvements as of 2001. If HDSJ is not willing to reimburse
the Inocencios, then the latter should be allowed to demolish the buildings.Manuel Uy
& Sons, Inc. v. Valbueco,Incorporated, G.R. No. 179594, September 11, 2013.

Contracts; tortious interference; elements; exception. As correctly pointed out by the

Inocencios, tortious interference has the following elements: (1) existence of a valid contract;
(2) knowledge on the part of the third person of the existence of the contract; and (3)
interference of the third person without legal justification or excuse. In So Ping Bun v.
Court ofAppeals, we held that there was no tortious interference if the intrusion was
impelled bypurely economic motives. In So Ping Bun, we explained that: “Authorities
debate on whether interference may be justified where the defendant acts for the sole
purpose of furthering his own financial or economic interest. One view is that, as a
general rule, justification for interfering with the business relations of another exists
where the actor’s motive is to benefit
himself. Such justification does not exist where his sole motive is to cause harm to the
other. Added to this, some authorities believe that it is not necessary that the interferer’s
interest outweighs that of the party whose rights are invaded, and that an individual acts
under an economic interest that is substantial, not merely de minimis, such that wrongful
and malicious motives are negatived, for he acts in self-protection. Moreover,
justification for protecting one’s financial position should not be made to depend on a
comparison of his economic interest in the subject matter with that of others. It is
sufficient if the impetus of his conduct lies in a proper business interest rather than in
wrongful motives.” Analita P. Inocencion,substituting for Ramon Inocencion (deceased)
v. Hospicio de San Jose, G.R. No. 201787, September 25,2013.

Damages; loss of earning capacity; compensation for lost income is in the nature of
damages and as such requires due proof of the damages suffered; there must be unbiased
proof of the deceased’s income. In People v. Caraig, the Supreme Court had drawn two
exceptions to the rule that “documentary evidence should be presented to substantiate the
claim for damages for loss of earning capacity,” and have thus awarded damages where
there is testimony that the victim was either (1) self-employed earning less than the
minimum wage under current labor laws, and judicial notice may be taken of the fact that
in the victim’s line of work no documentary evidence is available; or (2) employed as a
daily-wage worker earning less than the minimum wage under current labor laws.” In
People of the Philippines v. Edwin Ibanez yAlbante, et al., G.R. No. 197813, September
25, 2013.

Estoppel; requisites. For estoppel to take effect, there must be knowledge of the real facts
by the party sought to be estopped and reliance by the party claiming estoppel on the
representation made by the former. In this case, petitioner cannot be estopped from
asking for the return of the vessel in the condition that it had been at the time it was
seized by respondent because he had not known of the deteriorated condition of the ship.
Ernesto Dy v.Hon. Gina M. Bibat-Palamos, in her capacity as Presiding Judge of the
RTC, Branch 64, Makati City, and Orix Metro Leasing and Finance Corporation, G.R.
No. 196200, September 11, 2013.
Interest; Judgment award; imposition of interests; under BSP Circular No. 799, effective
on
July 1, 2013, the interest rate to be imposed for a loan or forbearance of money, goods or
credits and the rate allowed in judgments in the absence of stipulation thereon, was
changed from 12% to 6%.Notice must be taken that in Resolution No. 796 dated May
16, 2013, the Monetary Board of the Bangko Sentral ng Pilipinas approved the revision
of the interest rate to be imposed for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments, in the absence of an express contract as to
such rate of interest. Thus, under BSP Circular No. 799, issued on June 21, 2013 and
effective on July 1, 2013, the said rate of interest is now back at six percent (6%), S.C.
Megaworld Construction and DevelopmentCorporation v. Engr. Luis U. Parada,
represented by Engr. Leonardo A. Parada of Genlite
Industries, G.R. No. 183804, September 11, 2013.

Laches; concept; the question of laches is addressed to the sound discretion of the court
and, being an equitable doctrine, its application is controlled by equitable considerations.
Laches has been defined as the failure or neglect for an unreasonable and unexplained
length of time to do that which, by exercising due diligence, could or should have been
done earlier, thus, giving rise to a presumption that the party entitled to assert it either has
abandoned or declined to assert it.
On this score, it is a well-settled principle of law that laches is a recourse in equity,
which is, applied only in the absence of statutory law. And though laches applies even
to imprescriptible actions, its elements must be proved positively. Ultimately, the
question of laches is addressed to the sound discretion of the court and, being an
equitable doctrine, its application is controlled by equitable considerations. Citibank,
N.A. and the Citigroup PrivateBank v. Ester H. Tanco-Gabaldon, et al./ Carol Lim v.
Ester H. Tanco-Gabaldon, et al., G.R. No.198444/G.R. No. 198469-70, September 4,
2013.

Obligations; novation; concept; elements. In novation, a subsequent obligation

extinguishes a previous one through substitution either by changing the object or
principal conditions, by substituting another in place of the debtor, or by subrogating a
third person into the rights of the creditor. Novation requires (a) the existence of a
previous valid obligation; (b) the agreement of all parties to the new contract; (c) the
extinguishment of the old contract; and
(d) the validity of the new one. There cannot be novation in this case since the proposed
substituted parties did not agree to the PRA’s supposed assignment of its obligations
under the contract for the electrical and light works at Heritage Park to the HPMC. The
latter definitely and clearly rejected the PRA’s assignment of its liability under that
contract to the HPMC. Philippine Reclamation Authority (formerly known as the Public
Estates Authority v. Romago,Inc./Romago, Inc. Vs. Philippine Reclamation
Authority,G.R. Nos. 174665 and 175221, September18, 2013.

Obligations; novation as a mode of extinguishing an obligation; concept; novation is

never presumed but must be clearly and unequivocally shown. Novation is a mode of
extinguishing an obligation by changing its objects or principal obligations, by
substituting a new debtor in place of the old one, or by subrogating a third person to the
rights of the creditor. It is “the substitution of a new contract, debt, or obligation for an
existing one between the same or different parties.” The settled rule is that novation is
never presumed, but must be clearly and unequivocally shown. In order for a new
agreement to supersede the old one, the parties to a contract must expressly agree that
they are abrogating their old contract in favor of a new one. Thus, the mere substitution
of debtors will not result in novation, and the fact that the creditor accepts payments from
a third person, who has assumed the obligation, will result merely in the addition of
debtors and not novation, and the creditor may enforce the obligation against both
debtors. If there is no agreement as to solidarity, the first and new debtors are considered
obligated jointly. Philippine Reclamation Authority (formerly known asthePublic Estates
Authority v. Romago, Inc./Romago, Inc. Vs. Philippine Reclamation Authority,G.R.Nos.
174665 and 175221, September 18, 2013.

SPECIAL LAWS

Land registration; an applicant who seeks to have a land registered in his name has
the burden of proving that he is its owner in fee simple. As held in Republic v. Lee:
The most basic rule in land registration cases is that “no person is entitled to have land
registered under the Cadastral or Torrens system unless he is the owner in fee simple of
the same, even though there is no opposition presented against such registration by third
persons. x x x In order that the petitioner for the registration of his land shall be
permitted to have the same registered, and to have the benefit resulting from the
certificate of title, finally, issued, the burden is upon him to show that he is the real and
absolute owner, in fee simple.

In First Gas Power Corporation v. Republic of the Philippines, Represented by the

Office of the SolicitorGeneral, G.R. No. 169461, September 2, 2013.

Land registration; Nature of land registration proceedings; land registration proceedings

are in rem in nature and, hence, by virtue of the publication requirement, all claimants
and occupants of the subject property are deemed to be notified of the existence of a
cadastral case involving the subject lots; parties are precluded from re-litigating the same
issues already determined by final judgment. In this case, records disclose that petitioner
itself manifested during the proceedings before the RTC that there subsists a decision in a
previous cadastral case, i.e., Cad. Case No. 37, which covers the same lots it applied
apprised of the existence of the foregoing decision even before the rendition of the RTC
Decision and Amended Order through the LRA Report dated as early as November 24,
1998 which, as above-quoted, states that the subject lots “were previously applied for
registration of title in the [c]adastral proceedings and were both decided under [Cad.
Case No. 37], GLRO Record No. 1969, and are subject to the following annotation x x x:
‘Lots 1298 (45-1) [and] 1315 (61-1) Pte. Nueva doc.’” Since it had been duly notified of
an existing decision which binds over the subject lots, it was incumbent upon petitioner
to prove that the said decision would not affect its claimed status as owner of the subject
lots in fee simple. In First Gas Power Corporation v.Republic of the Philippines,
Represented by the Office of the Solicitor General, G.R. No. 169461,September 2, 2013.

Land registration proceedings; nature; being a proceeding in rem, there is no need to

give personal notice to the owners or claimants of the land sought to be registered in
order to vest the courts with power and authority over the res. Since no issue was
raised as to Antonia Victorino’s compliance with the prerequisites of notice and
publication, she is deemed to have followed such requirements. As a consequence,
petitioner is deemed
sufficiently notified of the hearing of Antonia’s application. Hence, she cannot claim that
she is denied due process. In Crisanta Guido-Enriquez v. Alicia I. Victorino, et al., G.R.
No. 180427, September 30, 2013.

Land registration; requirement that the application for land registration must state the full
names and addresses of all occupants of the land and those of the adjoining owners, if
known, and if not known, it must state the extent of the search made to find them. As to
the alleged denial of petitioner’s right to due process due to Antonia Victorino’s failure to
identify petitioner as indispensable party in her application for registration, as well as to
serve her with actual and personal notice, Section 15 of Presidential Decree No. 1529
simply requires that the application for registration shall “state the full names and
addresses of all occupants of the land and those of the adjoining owners, if known, and, if
not known, it shall state the extent of the search made to find them.” A perusal of Antonia
Victorino’s Application shows that she enumerated the adjoining owners. She also
indicated therein that, to the best of her knowledge, no person has any interest or is in
possession of the subject land. The fact that she did not identify petitioner as an occupant
or an adjoining owner is not tantamount to denial of petitioner’s right to due process and
does not nullify the RTC Decision granting such application. In Crisanta Guido-Enriquez
v. Alicia I. Victorino, et al., G.R. No. 180427, September 30, 2013.

Land Registration; Torrens title; conclusive evidence of ownership of the land; the
phrase “married to” is merely descriptive of the civil status of the registered owner. A
Torrens title is generally a conclusive evidence of the ownership of the land referred to,
because there is a strong presumption that it is valid and regularly issued.25 The phrase
“married to” is merely descriptive of the civil status of the registered owner. In Juan
Sevilla Salas, Jr. v. Eden VillenaAguil, G.R. No. 202370, September 23, 2013.

Marriage; property regimes for marriages that are subsequently declared void under
Article 36 of the Family Code; property acquired during the marriage is presumed to
have been obtained through the couple’s joint efforts and governed by the rules on co-
ownership. In Diño v. Diño, the Supreme Court held that Article 147 of the Family Code
applies to the union of parties who are legally capacitated and not barred by any
impediment to contract marriage, but whose marriage is nonetheless declared void under
Article 36 of the Family Code, as in this case. Article 147 of the Family Code provides:
ART. 147. When a man and a woman who are capacitated to marry each other, live
exclusively with each other as husband and wife without the benefit of marriage or
under a void marriage, their wages and salaries shall be owned by them in equal shares
and theproperty acquired by both of them through their work or industry shall be
governed by the rules on coownership.

In the absence of proof to the contrary, properties acquired while they lived
together shall be presumed to have been obtained by their joint efforts, work or
industry, and shall be owned by them in equal shares. For purposes of this Article, a
party who did notparticipate in the acquisition by the other party of any property shall be
deemed to
have contributed jointly in the acquisition thereof if the former’s efforts consisted in the
care and maintenance of the family and of the household.

Neither party can encumber or dispose by acts inter vivos of his or her share in the
property acquired during cohabitation and owned in common, without the consent of the
other, until after the termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in
bad faith in the co-ownership shall be forfeited in favor of their common children. In case
of default of or waiver by any or all of the common children or their descendants, each
vacant share shall belong to the respective surviving descendants. In the absence of
descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall
take place upon termination of the cohabitation. (Emphasis supplied)

Under this property regime, property acquired during the marriage is prima facie
presumed to have been obtained through the couple’s joint efforts and governed by the
rules on co-ownership. InJuan Sevilla Salas, Jr. v. Eden Villena Aguil, G.R. No.
202370, September 23, 2013.
Marriage; nullity of marriage; a judicial declaration of nullity is required before a valid
subsequent marriage can be contracted, or else, what transpires is a bigamous marriage.
The Supreme Court has consistently held that a judicial declaration of nullity is required
before a valid subsequent marriage can be contracted; or else, what transpires is a
bigamous marriage, which is void from the beginning as provided in Article 35(4) of the
Family Code of the Philippines. In Yasuo Iwasawa v. Felisa Custodio Gangan (a.k.a.
“Felisa Gangan Arambulo”and “Felisa Gangan Iwasawa”), et al., G.R. No. 204169,
September 11, 2013.

Realty Installment Buyer Act; right of buyer to refund on installments in case he

defaults in the payments of succeeding installments accrues only when he has paid at
least two years of installments. Under R.A. No. 6552, the right of the buyer to refund
accrues only when he has paid at least two years of installments. In this case, respondent
has paid less than two years of installments; hence, it is not entitled to a refund. Manuel
Uy & Sons, Inc. v. Valbueco,Incorporated,G.R. No. 179594, September 11, 2013.

CIVIL CODE

Contracts; binding effect. It is hornbook doctrine in the law on contracts that the parties
are bound by the stipulations, clauses, terms and conditions they have agreed to provided
that such stipulations, clauses, terms and conditions are not contrary to law, morals,
public order or public policy. Consolidated Industrial Gases, Inc. v. Alabang Medical
Center, G.R. No. 181983, November 13, 2013.

Contracts; breach of; when moral damages may be awarded. In Francisco v.

Ferrer,this Court ruled that moral damages may be awarded on the following bases:
To recover moral damages in an action for breach of contract, the breach must be
palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.

Under the provisions of this law, in culpa contractual or breach of contract, moral damages
may be recovered when the defendant acted in bad faith or was guilty of gross negligence
(amounting to bad faith) or in wanton disregard of his contractual obligation and,
exceptionally, when the act of breach of contract itself is constitutive of tort
resulting in physical injuries.

Moral damages may be awarded in breaches of contracts where the defendant

acted fraudulently or in bad faith.

Bad faith does not simply connote bad judgment or negligence, it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of known
duty through some motive or interest or ill will that partakes of the nature of fraud.

The person claiming moral damages must prove the existence of bad faith by clear and
convincing evidence for the law always presumes good faith. It is not enough that one
merely suffered sleepless nights, mental anguish, serious anxiety as the result of the
actuations of the other party. Invariably such action must be shown to have been
willfully done in bad faith or will ill motive. Mere allegations of besmirched reputation,
embarrassment and sleepless nights are insufficient to warrant an award for moral
damages. It must be shown that the proximate cause thereof was the unlawful act or
omission of the [private respondent] petitioners.

An award of moral damages would require certain conditions to be met, to wit: (1) first,
there must be an injury, whether physical, mental or psychological, clearly sustained by
the claimant; (2) second, there must be culpable act or omission factually established; (3)
third, the wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) fourth, the award of damages is predicated on any of
the cases stated in Article 2219 of the Civil Code. Alejandro V. Tankeh v. Development
Bank of the Philippines, etal., G.R. No. 171428, November 11, 2013.

Contracts; breach of; damages; exemplary damages; concept. Exemplary

damages are discussed in Article 2229 of the Civil Code, as follows:
ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction
of the public good, in addition to moral, temperate, liquidated or compensatory damages.
Exemplary damages are further discussed in Articles 2233 and 2234, particularly
regarding the pre-requisites of ascertaining moral damages and the fact that it is
discretionary upon this Court to award them or not:

ART. 2233. Exemplary damages cannot be recovered as a matter of right; the court
will decide whether or not they should be adjudicated.

ART. 2234. While the amount of the exemplary damages need not be proven, the
plaintiff must show that he is entitled to moral, temperate or compensatory damages
before the court may consider the question of whether or not exemplary damages should
be awarded x x x

The purpose of exemplary damages is to serve as a deterrent to future and subsequent

parties from the commission of a similar offense. The case of People v. Rante citing
People v.Dalisay held that:
Also known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective damages are
intended to serve as a deterrent to serious wrong doings, and as a vindication of undue
sufferings and wanton invasion of the rights of an injured or a punishment for those
guilty of outrageous conduct. These terms are generally, but not always, used
interchangeably. In common law, there is preference in the use of exemplary damages
when the award is to account for injury to feelings and for the sense of indignity and
humiliation suffered by a person as a result of an injury that has been maliciously and
wantonly inflicted, the theory being that there should be compensation for the hurt
caused by the highly reprehensible conduct of the defendant—associated with such
circumstances as willfulness, wantonness, malice, gross negligence or recklessness,
oppression, insult or fraud or gross fraud—that intensifies the injury. The terms punitive
or vindictive damages are often used to refer to those species of damages that may be
awarded against a person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer and others like him from
similar conduct in the future.

To justify an award for exemplary damages, the wrongful act must be accompanied by bad
faith, and an award of damages would be allowed only if the guilty party acted in a
wanton, fraudulent, reckless or malevolent manner. Alejandro V. Tankeh v. Development
Bank of the
Philippines, et al., G.R. No. 171428, November 11, 2013.
Contracts; fraud; concept; dolo incidente distinguished from dolo causante. In
SolidbankCorporation v. Mindanao Ferroalloy Corporation, et al.,this Court elaborated
on the distinctionbetween dolo causante and dolo incidente: Fraud refers to all kinds of
deception — whether through insidious machination, manipulation, concealment or
misrepresentation — that would lead an ordinarily prudent person into error after taking
the circumstances into account. In contracts, a fraud known as dolo causante or causal
fraud is basically a deception used by one party prior to or simultaneous with the
contract, in order to secure the consent of the other. Needless to say, the deceit employed
must be serious. In contradistinction, only some particular or accident of the obligation is
referred to by incidental fraud or dolo incidente, or that which is not serious in character
and without which the other party would have entered into the contract
anyway.Alejandro V. Tankeh v. Development Bank of thePhilippines, et al., G.R. No.
171428, November 11, 2013.

Contracts; fraud; dolo incidente and dolo causante; effect on contracts.The distinction
between fraud as a ground for rendering a contract voidable or as basis for an award of
damages is provided in Article 1344: In order that fraud may make a contract voidable, it
should be serious and should not have been employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay damages. (1270) There are
two types of fraud contemplated in the performance of contracts: dolo incidente or
incidental fraud and dolo causante or fraud serious enough to render a contract voidable.
This fraud or dolo which is present or employed at the time of birth or perfection of a
contract may either be dolo causante or dolo incidente. The first, or causal fraud
referred to in Article 1338, are those deceptions or misrepresentations of a serious
character employed by one party and without which the other party would not have
entered into the contract. Dolo incidente, or incidental fraud which is referred to in
Article 1344, are those which are not serious in character and without which the other
party would still have entered into the contract. Dolo causante determines or is the
essential cause of the consent, while dolo incidente refers only to some particular or
accident of the obligation. The effects of dolo causante are the nullity of the contract
and the indemnification of damages, and dolo incidente also obliges the person
employing it to pay damages. Alejandro V. Tankeh v.
Development Bank of the Philippines, et al., G.R. No. 171428, November 11, 2013.
Contracts; fraud; quantum of evidence required to prove existence of; clear and
convincing evidence. Neither law nor jurisprudence distinguishes whether it is dolo
incidente or dolo causante that must be proven by clear and convincing evidence. It
stands to reason that both dolo incidente and dolo causante must be proven by clear and
convincing evidence. The only question is whether this fraud, when proven, may be the
basis for making a contract voidable (dolo causante), or for awarding damages (dolo
incidente), or both.
The standard of proof required is clear and convincing evidence. This standard of proof is
derived from American common law. It is less than proof beyond reasonable doubt (for
criminal cases) but greater than preponderance of evidence (for civil cases). The degree
of believability is higher than that of an ordinary civil case. Civil cases only require a
preponderance of evidence to meet the required burden of proof. However, when fraud is
alleged in an ordinary civil case involving contractual relations, an entirely different
standard of proof needs to be satisfied. The imputation of fraud in a civil case requires
the presentation of clear and convincing evidence. Mere allegations will not suffice to
sustain the existence of fraud. The burden of evidence rests on the part of the plaintiff or
the party alleging fraud. The quantum of evidence is such that fraud must be clearly and
convincingly shown. Alejandro V. Tankeh v. Development Bank of the Philippines, et al.,
G.R. No. 171428, November 11, 2013.

Contracts; Reciprocal obligations; concept; for failing to perform all its correlative
obligation under the reciprocal contract, a party cannot unilaterally demand performance
by the other party. Reciprocal obligations are those which arise from the same cause, and
in which each party is a debtor and a creditor of the other, such that the obligation of one
is dependent upon the obligation of the other. They are to be performed simultaneously,
so that the performance of one is conditioned upon the simultaneous fulfillment of the
other.” In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation, delay by the other begins.
In reciprocal obligations, before a party can demand the performance of the obligation of
the other, the former must also perform its own obligation. Consolidated Industrial
Gases, Inc. v.
Alabang Medical Center, G.R. No. 181983, November 13, 2013.
Contracts; rescission; grounds. Rescission of a contract will not be permitted for a slight
or casual breach, but only for such substantial and fundamental violations as would
defeat the very object of the parties in making the agreement. Whether a breach is
substantial is largely determined by the attendant circumstances. Consolidated Industrial
Gases, Inc. v. Alabang MedicalCenter, G.R. No. 181983, November 13, 2013.

Damages; actual damages; concept; when awarded. For damages to be recovered, the
best evidence obtainable by the injured party must be presented. Actual or
compensatory damages cannot be presumed, but must be proved with reasonable
degree of certainty. The Court cannot rely on speculation, conjecture or guesswork as to
the fact and amount of damages, but must depend upon competent proof that they have
been suffered and on evidence of the actual amount. If the proof is flimsy and
unsubstantial, no damages will be awarded. Consolidated Industrial Gases, Inc. v.
Alabang Medical Center, G.R. No. 181983, November 13, 2013.

Estoppel; cannot be made to apply against the government. Granting that the persons
representing the government was negligent, the doctrine of estoppel cannot be taken
against the Republic. It is a well-settled rule that the Republic or its government is not
estopped by mistake or error on the part of its officials or agents.
In any case, even granting that the said official was negligent, the doctrine of estoppel
cannot operate against the State. “It is a well-settled rule in our jurisdiction that the
Republic or its government is usually not estopped by mistake or error on the part of its
officials or agents (Manila Lodge No. 761 vs. CA, 73 SCRA 166, 186; Republic vs.
Marcos, 52 SCRA 238, 244; Luciano vs. Estrella, 34 SCRA 769). Republic of the
Philippines v. Antonio Bacas, et al., G.R. No. 182913, November 20, 2013.

Sales; sale of real property; authority of the agent must be in writing; otherwise the
sale is null and void. Articles 1874 of the Civil Code provides:
Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.
Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the
authority of the agent to sell a real property must be conferred in writing, to wit:

Art. 1878. Special powers of attorney are necessary in the following cases:

(1) x x x

xxx

(5) To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;

x x x.

The foregoing provisions explicitly require a written authority when the sale of a
piece of land is through an agent, whether the sale is gratuitously or for a valuable
consideration. Absent such authority in writing, the sale is null and void. Spouses
Eliseo R. Bautista andEmperatriz C. Bautista v. Spouses Mila Jalandoni and Antonio
Jalandoni and Manila Credit Corporation, G.R. No. 171464/G.R. No. 199341,
November 27, 2013.

Sales; sale of real property; buyer in good faith; conditions to prove good faith; failure to
verify extent and nature of agent’s authority. A buyer in good faith is one who buys the
property of another without notice that some other person has a right to or interest in such
property. He is a buyer for value if he pays a full and fair price at the time of the purchase
or before he has notice of the claim or interest of some other person in the property.
“Good faith connotes an honest intention to abstain from taking unconscientious
advantage of another.”To prove good faith, the following conditions must be present: (a)
the seller is the registered owner of the land; (b) the owner is in possession thereof; and
(3) at the time of the sale, the buyer was not aware of any claim or interest of some other
person in the property, or of any defect or restriction in the title of the seller or in his
capacity to convey title to the property. All these conditions must be present, otherwise,
the buyer is under obligation to exercise extra ordinary diligence by scrutinizing the
certificates of title and examining all
factual circumstances to enable him to ascertain the seller’s title and capacity to transfer
any interest in the property. Spouses Eliseo R. Bautista and Emperatriz C. Bautista v.
Spouses MilaJalandoni and Antonio Jalandoni and Manila Credit Corporation, G.R.
No. 171464/G.R. No.199341, November 27, 2013.

Sales; sale of real property on installment; grace period. Section 3(a) of R.A. 6552
provides that the total grace period corresponds to one month for every one year of
installment payments made, provided that the buyer may exercise this right only once in
every five years of the life of the contract and its extensions. The buyer’s failure to pay
the installments due at the expiration of the grace period allows the seller to cancel the
contract after 30 days from the buyer’s receipt of the notice of cancellation or demand
for rescission of the contract by a notarial act.

Sale of real property on installment; cash surrender value; when the buyer is entitled
thereto. Republic Act No. 6552, also known as the Maceda Law, or the Realty
Installment Buyer Protection Act, has the declared public policy of “protecting buyers of
real estate on installment payments against onerous and oppressive conditions.”
Section 3 of R.A. 6552 provides for the rights of a buyer who has paid at least two years
of installments but defaults in the payment of succeeding installments. Section 3
provides that in all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under R.A. No. 3844, as
amended by R.A. No. 6389, where the buyer has paid at least two years of installments,
the buyer is entitled to the following rights in case he defaults in the payment of
succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at the rate of one month grace period for every
one year of installment payments made: Provided, That this right shall be exercised by the
buyer only once in every five years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of
the payments on the property equivalent to fifty per cent of the total payments made, and,
after five years of installments, an additional five per cent every year but not to exceed
ninety per cent of the total payments made: Provided, That the actual cancellation of the
contract shall take place 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 and upon full
payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation
of the total number of installment payments made. Gatchalian Realty, Inc. v. Evelyn
Angeles, G.R. No. 202358, November 27, 2013.

Sales; sale of real property on installment; cancellation of; twin requirements of a

notarized notice of cancellation and a refund of the cash surrender value. The Court has
been consistent in ruling that a valid and effective cancellation under R.A. 6552 must
comply with the mandatory twin requirements of a notarized notice of cancellation and a
refund of the cash surrender value.
In Olympia Housing, Inc. v. Panasiatic Travel Corp., the Court ruled that the
notarial act of rescission must be accompanied by the refund of the cash surrender
value.
The actual cancellation of the contract can only be deemed to take place upon the expiry
of a 30-day period following the receipt by the buyer of the notice of cancellation or
demand for rescission by a notarial act and the full payment of the cash surrender value.

In Pagtalunan v. Dela Cruz Vda. De Manzano, the Court ruled that there is no valid
cancellation of the Contract to Sell in the absence of a refund of the cash surrender value. It
stated that “Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value of the
payments on the property to the buyer before cancellation of the contract. The provision does
not provide a different requirement for contracts to sell which allow possession of the
property by the buyer upon execution of the contract like the instant case. Hence, petitioner
cannot insist on compliance with the requirement by assuming that the cash surrender value
payable to the buyer had been applied to rentals of the property after respondent failed to pay
the installments due.” Gatchalian Realty, Inc. v. Evelyn Angeles,G.R. No. 202358, November
27,
2013.

SPECIAL LAWS
Land registration; application for land registration requires that the names and addresses
of all adjoining owners and occupants be stated, if known, and if not known, to state the
search made to find them; omission thereof constitutes fraud. The governing rule in the
application for registration of lands at that time was Section 21 of Act 496 which
provided for the form and content of an application for registration, and it provides that
the application shall be in writing, signed and sworn to by applicant, or by some person
duly authorized in his behalf. It shall also state the name in full and the address of the
applicant, and also the names and addresses of all adjoining owners and occupants, if
known; and, if not known, it shall state what search has been made to find them.
The reason behind the law was explained in the case of Fewkes vs. Vasquez,where it was
noted that under Section 21 of the Land Registration Act an application for registration of
land is required to contain, among others, a description of the land subject of the
proceeding, the name, status and address of the applicant, as well as the names and
addresses of all occupants of the land and of all adjoining owners, if known, or if
unknown, of the steps taken to locate them. When the application is set by the court for
initial hearing, it is then that notice (of the hearing), addressed to all persons appearing to
have an interest in the lot being registered and the adjoining owners, and indicating the
location, boundaries and technical description of the land being registered, shall be
published in the Official Gazette for two consecutive times. It is this publication of the
notice of hearing that is considered one of the essential bases of the jurisdiction of the
court in land registration cases, for the proceedings being in rem, it is only when there is
constructive seizure of the land, effected by the publication and notice, that jurisdiction
over the res is vested on the court. Furthermore, it is such notice and publication of the
hearing that would enable all persons concerned, who may have any rights or interests in
the property, to come forward and show to the court why the application for registration
thereof is not to be granted.Republic of thePhilippines v. Antonio Bacas, et al., G.R. No.
182913, November 20, 2013.
Land registration; any title to inalienable public land is void ab initio; all proceedings of
the
Land Registration Court involving the such property is without legal effect, hence
cannot attain finality. InCollado v. Court of Appeals and the Republic, the Court
declared that any title to an inalienable public land is void ab initio. Any procedural
infirmities attending the filing of the petition for annulment of judgment are immaterial
since the LRC never acquired jurisdiction over the property. All proceedings of the
LRC involving the property are null and void and, hence, did not create any legal effect.
A judgment by a court without jurisdiction can never attain finality. The Land
Registration Court has no jurisdiction over non-registrable properties, such as public
navigable rivers which are parts of the public domain, and cannot validly adjudge the
registration of title in favor of private
applicant. Republic of the Philippines v. Antonio Bacas, et al., G.R. No. 182913,
November 20, 2013.

Land registration; confirmation and registration of imperfect and incomplete title;

qualifications. C.A. No. 141 governs the classification and disposition of lands of the
public domain. Section 11 of C.A. No. 141 provides, as one of the modes of disposing
public lands that are suitable for agriculture, the “confirmation of imperfect or
incomplete titles.” Section 48, on the other hand, enumerates those who are considered to
have acquired an imperfect or incomplete title over public lands and, therefore, entitled
to confirmation and registration under the Land Registration Act.
As amended by P.D. No. 1073 on January 25, 1977, Section 48(b) of C.A. No. 141
provides:

Section 48. The following described citizens of the Philippines, occupying lands of the
public domain or claiming to own any such lands or an interest therein, but whose titles
have not been perfected or completed, may apply to the Court of First Instance [now
Regional Trial Court] of the province where the land is located for confirmation of their
claims and the issuance of a certificate of title therefor, under the Land Registration Act,
to wit:

xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of acquisition or ownership, since June 12, 1945, or
earlier, immediately preceding the filing of the application for confirmation of title
except when prevented by war or force majeure. These shall be conclusively
presumed to have performed all the conditions essential to a Government grant and
shall be entitled to a certificate of title under the provisions of this chapter.

Prior to the amendment introduced by P.D. No. 1073, Section 48(b) of C.A. No. 141, then
operated under the Republic Act (R.A.) No. 1942 (June 22, 1957) amendment, which reads:

(b) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of
the public domain, under a bona fide claim of acquisition or ownership, for at least thirty
years, immediately preceding the filing of the application for confirmation of title except
when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.

xxx

In relation to C.A. No. 141, Section 14 of Presidential Decree P.D.) No. 1529 or the
Property Registration Decree specifies those who are qualified to register their
incomplete title over an alienable and disposable public land under the Torrens system.
P.D. No. 1529, which was approved on June 11, 1978, superseded and codified all laws
relative to the registration of property.

The pertinent portion of Section 14 of P.D. No. 1529 reads:

Section 14. Who may apply. The following persons may file in the proper Court of
First Instance [now Regional Trial Court] an application for registration of title to land,
whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of alienable and disposable
lands of the public domain under a bona fide claim of ownership since June 12,
1945, or earlier.

Roman Catholic Archbishop of Manila v. Cresencia Sta. Teresa Ramos, assisted by her
husband, Ponciano Francisco, G.R. No. 179181, November 18, 2013.
Land registration; confirmation and registration of imperfect and incomplete title;
open, continuous, exclusive and notorious possession. The possession contemplated
by Section 48(b) of C.A. No. 141 is actual, not fictional or constructive. In Carlos v
Republic of thePhilippines,the Court explained the character of the required
possession, as follows:
The law speaks of possession and occupation. Since these words are separated by the
conjunction and, the clear intention of the law is not to make one synonymous with the
other. Possession is broader than occupation because it includes constructive possession.
When, therefore, the law adds the word occupation, it seeks to delimit the all-
encompassing effect of constructive possession. Taken together with the words open,
continuous, exclusive and notorious, the word occupation serves to highlight the fact that
for an applicant to qualify, his possession must not be a mere fiction. Actual possession
of a land consists in the manifestation of acts of dominion over it of such a nature as a
party would naturally exercise over his own property.

Proof of actual possession of the property at the time of the filing of the application is
required because the phrase adverse, continuous, open, public, and in concept of owner,”
the RCAM used to describe its alleged possession, is a conclusion of law,not an
allegation of fact. Possession is open when it is patent, visible, apparent [and] notorious
x x x continuous when uninterrupted, unbroken and not intermittent or occasional;
exclusive when [the possession is characterized by acts manifesting] exclusive dominion
over the land and an appropriation of it to [the applicant's] own use and benefit; and
notorious when it is so conspicuous that it is generally known and talked of by the public
or the people in the neighborhood.”Roman Catholic Archbishop of Manila v. Cresencia
Sta. Teresa Ramos, assisted by herhusband, Ponciano Francisco, G.R. No. 179181,
November 18, 2013.
Land registration; lands forming part of a military reservation are inalienable, hence not
registrable. The law governing the applications was Commonwealth Act (C.A.) No.
141,as amended by RA 1942, particularly Sec. 48(b) which provided that those who by
themselves or through their predecessors in interest have been in open, continuous,
exclusive and notorious possession and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition of ownership, for at least thirty years
immediately preceding the filing of the application for confirmation of title except when
prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.
As can be gleaned therefrom, the necessary requirements for the grant of an application
for land registration are the following:

1. The applicant must, by himself or through his predecessors-in-interest, have been

in possession and occupation of the subject land;

2. The possession and occupation must be open, continuous, exclusive and notorious;

3. The possession and occupation must be under a bona fide claim of ownership for at
least thirty years immediately preceding the filing of the application; and

4. The subject land must be an agricultural land of the public domain. As earlier stated,
in 1938, President Quezon issued Presidential Proclamation No. 265, which took effect
on March 31, 1938, reserving for the use of the Philippine Army parcels of the public
domain situated in the barrios of Bulua and Carmen, then Municipality of Cagayan,
Misamis Oriental. The subject parcels of land were withdrawn from sale or settlement or
reserved for military purposes, “subject to private rights, if any there be.”

Such power of the President to segregate lands was provided for in Section 64(e) of the old
Revised Administrative Code and C.A. No. 141 or the Public Land Act. Later, the power of
the President was restated in Section 14, Chapter 4, Book III of the 1987 Administrative
Code. When a property is officially declared a military reservation, it becomes inalienable
and outside the commerce of man.It may not be the subject of a contract or of a compromise
agreement. A property continues to be part of the public domain, not available for private
appropriation or ownership, until there is a formal declaration on the part of the
government to withdraw it from being such. In the case ofRepublic v. Court of Appeals
and De Jesus, it was even stated that
Lands covered by reservation are not subject to entry, and no lawful settlement on them
can be acquired.The claims of persons who have settled on, occupied, and improved a
parcel of public land which is later included in a reservation are considered worthy of
protection and are usually respected, but where the President, as authorized by law,
issues a proclamation reserving certain lands and warning all persons to depart
therefrom, this terminates any rights previously acquired in such lands by a person who
was settled thereon in order to obtain a preferential right of purchase. And patents for
lands which have been previously granted, reserved from sale, or appropriate, are void.
Republic of the Philippines v. Antonio Bacas,et al., G.R. No. 182913, November 20,
2013.

Trademark registration; not a mode of acquiring ownership but merely creates

presumption of the validity of the registration, of the registrant’s ownership of the
trademark and of the exclusive right to the use thereof. It must be emphasized that
registration of a trademark, by itself, is not a mode of acquiring ownership.If the
applicant is not the owner of the trademark, he has no right to apply for its registration.
Registration merely creates a prima facie presumption of the validity of the registration,
of the registrant’s ownership of the trademark, and of the exclusive right to the use
thereof. Such presumption, just like the presumptive regularity in the performance of
official functions, is rebuttable and must give way to evidence to the contrary.
Clearly, it is not the application or registration of a trademark that vests ownership
thereof, but it is the ownership of a trademark that confers the right to register the same.
A trademark is an industrial property over which its owner is entitled to property rights
which cannot be appropriated by unscrupulous entities that, in one way or another,
happen to register such trademark ahead of its true and lawful owner. The presumption
of ownership accorded to a registrant must then necessarily yield to superior evidence
of actual and real ownership of a trademark.
The Court’s pronouncement in Berris Agricultural Co., Inc. v. Abyadang is
instructive on this point:
The ownership of a trademark is acquired by its registration and its actual use by the
manufacturer or distributor of the goods made available to the purchasing public. x x x A
certificate of registration of a mark, once issued, constitutes prima facie evidence of the
validity of the registration, of the registrant’s ownership of the mark, and of the
registrant’s exclusive right to use the same in connection with the goods or services and
those that are related thereto specified in the certificate. x x x In other words, the prima
facie presumption brought about by the registration of a mark may be challenged and
overcome in an appropriate action, x x x by evidence of prior use by another person, i.e. ,
it will controvert a claim of legal appropriation or of ownership based on registration by a
subsequent user. This is because a trademark is a creation of use and belongs to one who
first used it in trade or commerce.

Birkenstock Orthopaedi GmBH and Co. Kg, etc. v. Philippine Shoe Expo Marketing
Corp., G.R. No.194307, November 20, 2013.

Civil Code
Contracts; concept of contracts. A contract is what the law defines it to be, taking into
consideration its essential elements, and not what the contracting parties call it. The real
nature of a contract may be determined from the express terms of the written agreement
and from the contemporaneous and subsequent acts of the contracting parties. However,
in the construction or interpretation of an instrument, the intention of the parties is
primordial and is to be pursued. The denomination or title given by the parties in their
contract is not conclusive of the nature of its contents. ACE Foods, Inc. v. Micro Pacific
Technologies Co.,
Ltd., G.R. No. 200602, December 11, 2013.

Contracts; contract of loan; interest stipulated; reduced for being iniquitous and
unconscionable. Parties to a loan contract 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, however, worth stressing that
interest rates
whenever unconscionable may still be declared illegal. There is nothing in the 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.In Menchavez v. Bermudez,
the interest rate of 5% per month, which when summed up would reach 60% per annum, is
null and void for being excessive, iniquitous, unconscionable and exorbitant, contrary to
morals, and the law. Florpina Benvidez v. Nestor Salvador, G.R. No. 173331, December 11,
2013.

Damages; award of costs; when entitled. Costs shall be allowed to the prevailing party as
a matter of course unless otherwise provided in the Rules of Court. The costs Ramirez
may recover are those stated in Section 10, Rule 142 of the Rules of Court. For instance,
Ramirez may recover the lawful fees he paid in docketing his action for annulment of
sale before the trial court. The court adds thereto the amount of P3,530 or the amount of
docket and lawful fees paid by Ramirez for filing this petition before this Court. 35(35)
The court deleted the award of moral and exemplary damages; hence, the restriction
under Section 7, Rule 142 of the Rules of Courtwould have prevented Ramirez to
recover any cost of suit. But the court certifies, in accordance with said Section 7, that
Ramirez’s action for annulment of sale involved a substantial and important right such
that he is entitled to an award of costs of suit. Needless to stress, the purpose of
paragraph N of the real estate mortgage is to apprise the mortgagor, Ramirez, of any
action that the mortgagee-bank might take on the subject properties, thus according him
the opportunity to safeguard his rights. Jose T. Ramirez v. TheManila Banking
Corporation, G.R. No. 198800, December 11, 2013.

Damages; exemplary damages; when entitled. No exemplary damages can be awarded

since there is no basis for the award of moral damages and there is no award of
temperate, liquidated or compensatory damages.Exemplary damages are imposed by way
of example for the public good, in addition to moral, temperate, liquidated or
compensatory damages. Jose T.Ramirez v. The Manila Banking Corporation, G.R. No.
198800, December 11, 2013.
Damages; moral damages; when entitled. Nothing supports the trial court’s award of
moral damages. There was no testimony of any physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and
similar injury suffered by Ramirez. The award of moral damages must be anchored on a
clear showing that Ramirez actually experienced mental anguish, besmirched reputation,
sleepless nights, wounded feelings or similar injury. Ramirez’s testimony is also wanting
as to the moral damages he suffered.Jose T. Ramirez v. The Manila Banking
Corporation, G.R. No. 198800, December 11, 2013.

Foreclosure; extrajudicial foreclosure; notice of extrajudicial foreclosure proceedings not

necessary unless stipulated by the parties. In Carlos Lim, et al. v. Development Bank of
thePhilippines, the court held that unless the parties stipulate, personal notice to the
mortgagor inextrajudicial foreclosure proceedings is not necessary because Section 3 of
Act No. 3135 only requires the posting of the notice of sale in three public places and the
publication of that notice in a newspaper of general circulation. In this case, the parties
stipulated in paragraph N of the real estate mortgage that all correspondence relative to
the mortgage including notifications of extrajudicial actions shall be sent to mortgagor
Ramirez at his given address. Respondent had no choice but to comply with this
contractual provision it has entered into with Ramirez. The contract is the law between
them. Hence, the court cannot agree with the bank that paragraph N of the real estate
mortgage does not impose an additional obligation upon it to provide personal notice of
the extrajudicial foreclosure sale to the mortgagor Ramirez. Jose T. Ramirez v. The
Manila Banking Corporation, G.R. No. 198800, December 11, 2013.

Foreclosure of mortgage; proceeds; obligations covered. The petitioner contends that

there was no excess or surplus that needs to be returned to the respondent because her
other outstanding obligations and those of her attorney-in-fact were paid out of the
proceeds. The relevant provision, Section 4 of Rule 68 of the Rules of Civil Procedure,
mandates that:

Section 4.Disposition of proceeds of sale. — The amount realized from the foreclosure
sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the
person foreclosing the mortgage, and when there shall be any balance or residue, after
paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the
order of their priority, to be ascertained by the court, or if there be no such
encumbrancers or there be a
balance or residue after payment to them, then to the mortgagor or his duly
authorized agent, or to the person entitled to it.
Thus, in the absence of any evidence showing that the mortgage also covers the other
obligations of the mortgagor, the proceeds from the sale should not be applied to
them. Philippine Bank of Communication v. Mary Ann O. Yeung, G.R. No. 179691,
December 4, 2013.

Laches; concept of. Well settled is the rule that the elements of laches must be proven
positively. Laches is evidentiary in nature, a fact that cannot be established by mere
allegations in the pleadings and cannot be resolved in a motion to dismiss. At this stage
therefore, the dismissal of the complaint on the ground of laches is premature. Those
issues must be resolved at the trial of the case on the merits, wherein both parties will be
given ample opportunity to prove their respective claims and defenses. Modesto
Sanchez v. AndrewSanchez, G.R. No. 187661, December 4, 2013.

Mortgage; redemption period; reckoning of the period of redemption by the mortgagor

or his successor-in-interest starts from the registration of the sale in the Register of
Deeds.The reckoning of the period of redemption by the mortgagor or his successor-in-
interest starts from the registration of the sale in the Register of Deeds. Although Section
6 of Act No. 3135, as amended, specifies that the period of redemption starts from and
after the date of the sale, jurisprudence has since settled that such period is more
appropriately reckoned from the date of registration.United Coconut Planters Bank v.
Christopher Lumbo and Milagros
Lumbo, G.R. No. 162757, December 11, 2013.

Obligations; force majeure; concept of force majeure. Anent petitioners’ reliance on

forcemajeure, suffice it to state that Peakstar’s breach of its obligations to Metro Concast
arisingfrom the MoA cannot be classified as a fortuitous event under jurisprudential
formulation. Fortuitous events by definition are extraordinary events not foreseeable or
avoidable. It is therefore, not enough that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one impossible to foresee or to
avoid. The mere difficulty to foresee the happening is not impossibility to foresee the
same.
To constitute a fortuitous event, the following elements must concur: (a) the cause of the
unforeseen and unexpected occurrence or of the failure of the debtor to comply with
obligations must be independent of human will; (b) it must be impossible to foresee the
event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to
avoid;
(c) the occurrence must be such as to render it impossible for the debtor to fulfill
obligations in a normal manner; and, (d) the obligor must be free from any participation
in the aggravation of the injury or loss. Metro Concast Steel Corp., Spouses Jose S.
Dychiao and Tiu OhYan, et al. v. Allied Bank Corporation, G.R. No. 177921, December
4, 2013.

Obligations; modes of extinguishment. Article 1231 of the Civil Code states that
obligations are extinguished either by payment or performance, the loss of the thing due,
the condonation or remission of the debt, the confusion or merger of the rights of
creditor and debtor, compensation or novation. Metro Concast Steel Corp., Spouses
Jose S. Dychiao and Tiu OhYan, et al. v. Allied Bank Corporation, G.R. No. 177921,
December 4, 2013.

Obligations; novation; extinctive novation distinguished from modificatory novation.To

be sure, novation, in its broad concept, may either be extinctive or modificatory. It is
extinctive when an old obligation is terminated by the creation of a new obligation that
takes the place of the former; it is merely modificatory when the old obligation subsists
to the extent it remains compatible with the amendatory agreement. In either case,
however, novation is never presumed, and the animus novandi, whether totally or
partially, must appear by express agreement of the parties, or by their acts that are too
clear and unequivocal to be
mistaken. ACE Foods, Inc. v. Micro Pacific Technologies Co., Ltd., G.R. No. 200602,
December 11, 2013.

Property; action for reconveyance; prescriptive period; exception. The Court likewise takes
note that Paraguya’s complaint is likewise in the nature of an action for reconveyance
because it also prayed for the trial court to order Sps. Crucillo to “surrender ownership and
possession of the properties in question to [Paraguya], vacating them altogether . . . .”
Despite this, Paraguya’s complaint remains dismissible on the same ground because the
prescriptive period for actions for reconveyance is ten (10) years reckoned from the date of
issuance of the certificate of title, except when the owner is in possession of the
property, in which case the action for reconveyance becomes imprescriptible. Laura F.
Paraguya v. Sps.Alma Escurel-Crucillo and Emeterio Crucillo and the Register of
Deeds of Sorsogon, G.R. No. 200265,December 2, 2013.

Property; possessor in good faith; reimbursement of necessary and useful expenses.

Dionisio was well aware that this temporary arrangement may be terminated at any time.
Respondents cannot now refuse to vacate the property or eventually demand
reimbursement of necessary and useful expenses under Articles 448 and 546 of the New
Civil Code, because the provisions apply only to a possessor in good faith, i.e., one who
builds on land with the belief that he is the owner thereof. Persons who occupy land by
virtue of tolerance of the owners are not possessors in good faith.Heirs of Cipriano
Trazona, et al. v. Heirs of Dionisio Cañada, et
al., G.R. No. 175874, December 11, 2013.

Property; Spanish titles can no longer be used as evidence of ownership after six (6)
months from the effectivity of PD 892. Based on Section 1 of PD 892, entitled
“Discontinuance of the Spanish Mortgage System of Registration and of the Use of
Spanish Titles as Evidence in Land Registration Proceedings,” Spanish titles can no
longer be used as evidence of ownership after six (6) months from the effectivity of the
law, or starting August 16,
1976. Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo and the
Register of Deedsof Sorsogon, G.R. No. 200265, December 2, 2013.

Property; waiver of interest; when absolute and unconditional.Lucila did not say, “to put
everything in proper order, I promise to waive my right” to the property, which is a
future undertaking, one that is demandable only when everything is put in proper order.
But she instead said, “to put everything in proper order, I hereby waive” etc. The phrase
“hereby waive” means that Lucila was, by executing the affidavit, already waiving her
right to the property, irreversibly divesting herself of her existing right to the same.
After he and his co-owner Emelinda accepted the donation, Isabelo became the owner
of half of the subject property having the right to demand its partition.Isabelo C. Dela
Cruz v. Lucila C. Dela
Cruz, G.R. No. 192383, December 4, 2013.
Quasi-contract; unjust enrichment; concept of; elements.In light of the foregoing, it is
unfair to deny petitioner a refund of all his contributions to the car plan. Under Article
22 of the Civil Code, “[e]very person who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.” Antonio Locsin II v.
Mekeni FoodCorporation, G.R. No. 192105, December 9, 2013.

Quasi-contract; concept of quasi-contract. Article 2142 of the same Code likewise

clarifies that there are certain lawful, voluntary and unilateral acts which give rise to
the juridical relation of quasi-contract, to the end that no one shall be unjustly enriched
or benefited at the expense of another. In the absence of specific terms and conditions
governing the car plan arrangement between the petitioner and Mekeni, a quasi-
contractual relation was created between them.Antonio Locsin II v. Mekeni Food
Corporation, G.R. No. 192105, December 9, 2013.

Quasi-delict; elements. Article 2176 of the Civil Code provides that “[w]hoever by act or
omission causes damage to another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is a quasi-delict.” Under this provision, the elements necessary to
establish a quasi-delict case are: (1) damages to the plaintiff; (2) negligence, by act or
omission, of the defendant or by some person for whose acts the defendant must respond,
was guilty; and (3) the connection of cause and effect between such negligence and the
damages. These elements show that the source of obligation in a quasi-delict case is the
breach or omission of mutual duties that civilized society imposes upon its members, or
which arise from non-contractual relations of certain members of society to others.Dra.
LeilaA. Dela Llana v. Rebecca Biong, doing business under the name and style of
Pongkay Trading,G.R. No.182356, December 4, 2013.

Quasi-delict; quantum of proof; preponderance of evidence.Based on these requisites,

Dra.dela Llana must first establish by preponderance of evidence the three elements of
quasi-
delict before we determine Rebecca’s liability as Joel’s employer. She should show the
chain of causation between Joel’s reckless driving and her whiplash injury. Only after
she has laid this foundation can the presumption — that Rebecca did not exercise the
diligence of a good father of a family in the selection and supervision of Joel —
arise.Once negligence, the damages and the proximate causation are established, this
Court can then proceed with the application and the interpretation of the fifth paragraph
of Article 2180 of the Civil Code. Under Article 2176 of the Civil Code, in relation with
the fifth paragraph of Article 2180, “an action predicated on an employee’s act or
omission may be instituted against the employer who is held liable for the negligent act
or omission committed by his employee.”The rationale for these graduated levels of
analyses is that it is essentially the wrongful or negligent act or omission itself which
creates the vinculum juris in extra-contractual obligations. Dra. Leila A. Dela Llana v.
Rebecca Biong, doing business under the nameand style of Pongkay Trading, G.R. No.
182356, December 4, 2013.
Sales; car plan benefit; contributions as installment payments distinguished from rental
payments. From the evidence on record, it is seen that the Mekeni car plan offered to
petitioner was subject to no other term or condition than that Mekeni shall cover one-half
of its value, and petitioner shall in turn pay the other half through deductions from his
monthly salary. Mekeni has not shown, by documentary evidence or otherwise, that there
are other terms and conditions governing its car plan agreement with petitioner. There is
no evidence to suggest that if petitioner failed to completely cover one-half of the cost of
the vehicle, then all the deductions from his salary going to the cost of the vehicle will be
treated as rentals for his use thereof while working with Mekeni, and shall not be
refunded. Indeed, there is no such stipulation or arrangement between them. Thus, the
CA’s reliance on EliscoTool is without basis, and its conclusions arrived at in the
questioned decision are manifestlymistaken. To repeat what was said in Elisco Tool,
“[P]etitioner does not deny that private respondent Rolando Lantan acquired the vehicle
in question under a car plan for executives of the Elizalde group of companies. Under a
typical car plan, the company advances the purchase price of a car to be paid back by the
employee through monthly deductions from his salary. The company retains ownership
of the motor vehicle until it shall have been fully paid for. However, retention of
registration of the car in the company’s name is only a form of a lien on the vehicle in the
event that the employee would abscond before he has fully
paid for it. There are also stipulations in car plan agreements to the effect that should the
employment of the employee concerned be terminated before all installments are fully
paid, the vehicle will be taken by the employer and all installments paid shall be
considered rentals per agreement.“
It was made clear in this pronouncement that installments made on the car plan may be
treated as rentals only when there is an express stipulation in the car plan agreement to
such effect. It was therefore patent error for the appellate court to assume that, even in
the absence of express stipulation, petitioner’s payments. Antonio Locsin II v. Mekeni
FoodCorporation, G.R. No. 192105, December 9, 2013.

Sales; contract of sale; elements; distinguished from contract to sell. Corollary thereto, a
contract of sale is classified as a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity. Upon perfection
of the contract, the parties may reciprocally demand performance, i.e., the vendee may
compel transfer of ownership of the object of the sale, and the vendor may require the
vendee to pay the thing sold.
In contrast, a contract to sell is defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the property despite delivery thereof to
the prospective buyer, binds himself to sell the property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, i.e., the full payment of the purchase
price. A contract to sell may not even be considered as a conditional contract of sale
where the seller may likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract of sale, the first
element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. ACE Foods, Inc. v. Micro Pacific
Technologies Co., Ltd., G.R. No.
200602, December 11, 2013.

Sales; contract to sell; concept of.Verily, in a contract to sell, the prospective seller binds
himself to sell the property subject of the agreement exclusively to the prospective buyer
upon fulfillment of the condition agreed upon which is the full payment of the purchase
price but reserving to himself the ownership of the subject property despite delivery thereof
to the prospective buyer.The full payment of the purchase price in a contract to sell is a
suspensive condition, the non-fulfillment of which prevents the prospective seller’s
obligation to convey title from becoming effective, as in this case. Optimum Development
Bankv. Spouses Benigno v. Jovellanos and Lourdes R. Jovellanos, G.R. No. 189145,
December 4, 2013.

Sales; contract to sell; real property in installments; covered by Realty Installment Buyer
Protection Act. Further, it is significant to note that given that the Contract to Sell in this
case is one which has for its object real property to be sold on an installment basis, the
said contract is especially governed by — and thus, must be examined under the
provisions of — RA 6552, or the “Realty Installment Buyer Protection Act”, which
provides for the rights of the buyer in case of his default in the payment of succeeding
installments. OptimumDevelopment Bank v. Spouses Benigno v. Jovellanos and Lourdes
R. Jovellanos, G.R. No. 189145,December 4, 2013.

SPECIAL LAWS
Property Registration Decree; alienable lands of public domain; proof of; 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. The burden of proof in overcoming
the presumption of State ownership of lands of the public domain is on the person
applying for registration, or in this case, for homestead patent. The applicant must show
that the land subject of the application is alienable or disposable. It must be stressed that
incontrovertible evidence must be presented to establish that the land subject of the
application is alienable or disposable.
As the court pronounced in Republic of the Phils. v. Tri-Plus Corporation, 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 may also
secure a certification from the Government that the lands applied for are alienable and
disposable. Republic of thePhilippines-Bureau of Forest Development v. Vicente
Roxas, et al./Provident Tree Farms, Inc. v. Vicente Roxas, et al., G.R. Nos.
157988/160640, December 11, 2013.
Property Registration Decree; estoppel; the principle of estoppel does not operate against
the Government for the act of its agents. Neither can respondent Roxas successfully
invoke the doctrine of estoppel against petitioner Republic. While it is true that
respondent Roxas was granted Homestead Patent No. 111598 and OCT No. P-5885 only
after undergoing appropriate administrative proceedings, the Government is not now
estopped from questioning the validity of said homestead patent and certificate of title. It
is, after all, hornbook law that the principle of estoppel does not operate against the
Government for the act of its agents. And while there may be circumstances when
equitable estoppel was applied against public authorities, i.e., when the Government did
not undertake any act to contest the title for an unreasonable length of time and the lot
was already alienated to innocent buyers for value, such are not present in this case. More
importantly, we cannot use the equitable principle of estoppel to defeat the law. Republic
of the Philippines-Bureau of ForestDevelopment v. Vicente Roxas, et al./Provident Tree
Farms, Inc. v. Vicente Roxas, et al., G.R. Nos.157988/160640, December 11, 2013.
Property Registration Decree; homestead patent; once registered, the certificate of title
issued by virtue of said patent has the force and effect of a Torrens title issued under said
registration laws; provided that the land covered by said certificate is a disposable public
land within the contemplation of the Public Land Law.It is true that once a homestead
patent granted in accordance with the Public Land Act is registered pursuant to Act 496,
otherwise known as The Land Registration Act, or Presidential Decree No. 1529,
otherwise known as The Property Registration Decree, the certificate of title issued by
virtue of said patent has the force and effect of a Torrens title issued under said
registration laws.We expounded in Ybañez v. Intermediate Appellate Court that:
The certificate of title serves as evidence of an indefeasible title to the property in favor
of the person whose name appears therein. After the expiration of the one (1) year period
from the issuance of the decree of registration upon which it is based, it becomes
incontrovertible. The settled rule is that a decree of registration and the certificate of title
issued pursuant thereto may be attacked on the ground of actual fraud within one (1) year
from the date of its entry and such an attack must be direct and not by a collateral
proceeding. The validity of the certificate of title in this regard can be threshed out only
in an action expressly filed for
the purpose.

It must be emphasized that a certificate of title issued under an administrative proceeding

pursuant to a homestead patent, as in the instant case, is as indefeasible as a certificate of
title issued under a judicial registration proceeding, provided the land covered by said
certificate is a disposable public land within the contemplation of the Public Land Law.
Republic of thePhilippines-Bureau of Forest Development v. Vicente Roxas, et
al./Provident Tree Farms, Inc. v. Vicente Roxas, et al.,G.R. Nos. 157988/160640,
December 11, 2013.

Property Registration Decree; reversion; nature of; grounds. We do not find evidence
indicating that respondent Roxas committed fraud when he applied for homestead patent
over the subject property. It does not appear that he knowingly and intentionally
misrepresented in his application that the subject property was alienable and disposable
agricultural land. Nonetheless, we recognized in Republic of the Phils. v. Mangotara that
there are instances when we granted reversion for reasons other than fraud:
Reversion is an action where the ultimate relief sought is to revert the land back to the
government under the Regalian doctrine. Considering that the land subject of the action
originated from a grant by the government, its cancellation is a matter between the
grantor and the grantee. In Estate of the Late Jesus S. Yujuico v. Republic (Yujuico
case), reversion was defined as an action which seeks to restore public land fraudulently
awarded and disposed of to private individuals or corporations to the mass of public
domain. It bears to point out, though, that the Court also allowed the resort by the
Government to actions for reversion to cancel titles that were void for reasons other than
fraud, i.e., violation by the grantee of a patent of the conditions imposed by law; and lack
of jurisdiction of the Director of Lands to grant a patent covering inalienable forest land
or portion of a river, even when such grant was made through mere oversight. In
Republic v. Guerrero, the Court gave a more general statement that the remedy of
reversion can be availed of “only in cases of fraudulent or unlawful inclusion of the land
in patents or certificates of title.”Republic of thePhilippines-Bureau of Forest
Development v. Vicente Roxas, et al./Provident Tree Farms, Inc. v. Vicente Roxas, et al.,
G.R. Nos. 157988/160640, December 11, 2013.
Property Registration Decree; Torrens certificate of title is not conclusive proof of
ownership. It is an established rule that a Torrens certificate of title is not conclusive
proof of ownership. Verily, a party may seek its annulment on the basis of fraud or
misrepresentation. However, such action must be seasonably filed, else the same would
be barred. Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo
and the Register ofDeeds of Sorsogon, G.R. No. 200265, December 2, 2013.

Property Registration Decree; Torrens certificate of title is not conclusive proof of

ownership becomes incontrovertible and indefeasible after one (1) year from the date of
its entry. In this relation, Section 32 of PD 1529 provides that the period to contest a
decree of registration shall be one (1) year from the date of its entry and that, after the
lapse of the said period, the Torrens certificate of title issued thereon becomes
incontrovertible and indefeasible, viz.:
Sec. 32.Review of decree of registration; Innocent purchaser for value.— The decree of
registration shall not be reopened or revised by reason of absence, minority, or other
disability of any person adversely affected thereby, nor by any proceeding in any court
for reversing judgments, subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or of any estate or interest therein
by such adjudication or confirmation of title obtained by actual fraud, to file in the proper
Court of First Instance a petition for reopening and review of the decree of registration
not later than one year from and after the date of the entry of such decree of registration,
but in no case shall such petition be entertained by the court where an innocent purchaser
for value has acquired the land or an interest therein, whose rights may be prejudiced.
Whenever the phrase “innocent purchaser for value” or an equivalent phrase occurs in
this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other
encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the
certificate of title issued shall become incontrovertible. Any person aggrieved by such
decree of registration in any case may pursue his remedy by action for damages against
the applicant or any other persons responsible for the fraud. (Emphases and underscoring
supplied) Laura F.Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio Crucillo and
the Register of Deeds of
Sorsogon, G.R. No. 200265, December 2, 2013.
Civil Code

Bad faith cannot be presumed; it is a question of fact that must be proven by clear and
convincing evidence. It is worth stressing at this point that bad faith cannot be presumed.
“It is a question of fact that must be proven” by clear and convincing evidence. “[T]he
burden of proving bad faith rests on the one alleging it.” Sadly, spouses Vilbar failed to
adduce the necessary evidence. Thus, this Court finds no error on the part of the CA
when it did not find bad faith on the part of Gorospe, Sr. Sps. Bernadette and Rodulfo
Vilbar v. Angelito L.Opinion, G.R. No. 176043. January 15, 2014.

Banks; exercise the highest degree of diligence, as well as to observe the high standards
of integrity and performance in all its transactions because its business was imbued with
public interest. Being a banking institution, DBP owed it to Guariña Corporation to
exercise the highest degree of diligence, as well as to observe the high standards of
integrity and performance in all its transactions because its business was imbued with
public interest. The high standards were also necessary to ensure public confidence in
the banking system, for, according to Philippine National Bank v. Pike: “The stability of
banks largely depends on the confidence of the people in the honesty and efficiency of
banks.” Development Bank of thePhilippines (DBP) v. Guariña Agricultural and Realty
Development Corporation, G.R. No. 160758.January 15, 2014

Common carrier; cargoes while being unloaded generally remain under the custody of
the carrier. It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. As hereinbefore found by the RTC and
affirmed by the CA based on the evidence presented, the goods were damaged even
before they were turned over to ATI. Such damage was even compounded by the
negligent acts of petitioner and ATI which both mishandled the goods during the
discharging operations. EasternShipping Lines, Inc. v. BPI/MS Insurance Corp., and
Mitsui Sumitomo Insurance Co., Ltd.,G.R. No.193986, January 15, 2014.
Common carrier; extraordinary diligence.Common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common carriers are responsible for
the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right
to receive them. Owing to this high degree of diligence required of them, common
carriers, as a general rule, are presumed to have been at fault or negligent if the goods
they transported deteriorated or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they
observed such high level of diligence.Eastern Shipping Lines, Inc. v. BPI/MS Insurance
Corp., and Mitsui SumitomoInsurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

Contracts; breach of contract; petitioner is guilty of breach of contract when it

unjustifiably refused to release respondents’ deposit despite demand; liable for damages.
In cases of breach of contract, moral damages may be recovered only if the defendant
acted fraudulently or in bad faith, or is “guilty of gross negligence amounting to bad
faith, or in wanton disregard of his contractual obligations.”
In this case, a review of the circumstances surrounding the issuance of the “Hold Out”
order reveals that petitioner issued the “Hold Out” order in bad faith. First of all, the
order was issued without any legal basis. Second, petitioner did not inform respondents
of the reason for the “Hold Out.” Third, the order was issued prior to the filing of the
criminal complaint. Records show that the “Hold Out” order was issued on July 31, 2003,
while the criminal complaint was filed only on September 3, 2003. All these taken
together lead us to conclude that petitioner acted in bad faith when it breached its contract
with respondents. As we see it then, respondents are entitled to moral damages.
Metropolitan Bank & Trust Company v. AnaGrace Rosales and Yo Yuk To, G.R. No.
183204, January 13, 2014.
Contracts; buyer in good faith. It is settled that a party dealing with a registered land
does not have to inquire beyond the Certificate of Title in determining the true owner
thereof, and in guarding or protecting his interest, for all that he has to look into and
rely on are the entries in the Certificate of Title.
Inarguably, Opinion acted in good faith in dealing with the registered owners of the
properties. He relied on the titles presented to him, which were confirmed by the
Registry of Deeds to be authentic, issued in accordance with the law, and without any
liens or encumbrances. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R.
No. 176043. January 15, 2014.

Contracts; Doctrine ofin pari delicto; exception. According to Article 1412 (1) of the
Civil Code, the guilty parties to an illegal contract cannot recover from one another and
are not entitled to an affirmative relief because they are in pari delicto or in equal fault.
The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in
equity or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or the money
agreed to be paid, or damages for its violation; and where the parties arein pari delicto,
no affirmative relief of any kind will be given to one against the other.
Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An
accepted exception arises when its application contravenes well-established public
policy. In this jurisdiction, public policy has been defined as “that principle of the law
which holds that no subject or citizen can lawfully do that which has a tendency to be
injurious to the public or against the public good.” Domingo Gonzalo v. John Tarnate,
Jr., G.R. No. 160600, January 15, 2014.

Contracts; 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.
Considering that respondent Rosales is not liable under any of the five sources of
obligation, there was no legal basis for petitioner to issue the “Hold Out” order.
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, petitioner failed to show
that respondents have an obligation to it under any law, contract, quasi-contract, delict, or
quasi-delict. And although a criminal case was filed by petitioner against respondent
Rosales, 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 respondent
Rosales. In fact, it is significant to note that at the time petitioner issued the “Hold Out”
order, the criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal basis
for petitioner to issue the “Hold Out” order. Metropolitan Bank & Trust Company v. Ana
Grace Rosales and Yo Yuk
To, G.R. No. 183204, January 13, 2014.

Contracts; Mortgage; nature of mortgage. It is true that loans are often secured by a
mortgage constituted on real or personal property to protect the creditor’s interest in case
of the default of the debtor. By its nature, however, a mortgage remains an accessory
contract dependent on the principal obligation, such that enforcement of the mortgage
contract will depend on whether or not there has been a violation of the principal
obligation. While a creditor and a debtor could regulate the order in which they should
comply with their reciprocal obligations, it is presupposed that in a loan the lender
should perform its obligation – the release of the full loan amount – before it could
demand that the borrower repay the loaned amount. Development Bank of the
Philippines (DBP) v. Guariña Agricultural andRealty Development Corporation, G.R.
No. 160758. January 15, 2014.

Contracts; mortgagee in good faith. Assuming arguendo that the Gorospes’ titles to the
subject properties happened to be fraudulent, public policy considers Opinion to still
have acquired legal title as a mortgagee in good faith. As held in Cavite Development
Bank v. SpousesLim:
There is, however, a situation where, despite the fact that the mortgagor is not the owner
of the mortgaged property, his title being fraudulent, the mortgage contract and any
foreclosure sale arising therefrom are given effect by reason of public policy. This is the
doctrine of ‘the mortgagee in good faith’ based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title, as buyers or mortgagees, are not
required to go beyond what
appears on the face of the title. The public interest in upholding the indefeasibility of a
certificate of title, as evidence of the lawful ownership of the land or of any
encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon
what appears on the face of the certificate of title. Sps. Bernadette and Rodulfo Vilbar v.
Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Sales; proof capacity of seller; difference when there is a special power of attorney and
when there is none.The strength of the buyer’s inquiry on the seller’s capacity or legal
authority to sell depends on the proof of capacity of the seller. If the proof of capacity
consists of a special power of attorney duly notarized, mere inspection of the face of such
public document already constitutes sufficient inquiry. If no such special power of
attorney is provided or there is one but there appears to be flaws in its notarial
acknowledgment, mere inspection of the document will not do; the buyer must show that
his investigation went beyond the document and into the circumstances of its
execution.The Heirs of Victorino Sarili,namely, Isabel A. Sarili, et al. v. Pedro F.
Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R.
No. 193517, January 15, 2014.

Contracts; Principle ofquantum merit; when allowed. Case law instructs that under this
principle (quantum meruit), a contractor is allowed to recover the reasonable value of the
thing or services rendered despite the lack of a written contract, in order to avoid unjust
enrichment. Quantum meruit means that, in an action for work and labor, payment shall
be made in such amount as the plaintiff reasonably deserves. The measure of recovery
should relate to the reasonable value of the services performed because the principle
aims to prevent undue enrichment based on the equitable postulate that it is unjust for a
person to retain any benefit without paying for it. Rivelisa Realty, Inc., represented by
Ricardo P. Venturina v.First Sta. Clara Builders Corporation, represented by Ramon A.
Pangilinan, as President, G.R. No.189618. January 15, 2014.

Contracts; rescission; proper when there is non-performance of obligation.Article 1191.

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him. The injured party may choose
between the
fulfillment and the rescission of the obligation, with payment of damages in either case.
He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible. Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. v. Spouses
Conrado and MariaVictoria Ronquillo, G.R. No. 185798, January 13, 2014.

Contracts; void contract; effects. Under Article 1409 (1) of the Civil Code, a contract whose
cause, object or purpose is contrary to law is a void or inexistent contract. As such, a void
contract cannot produce a valid one. To the same effect is Article 1422 of the Civil Code,
which declares that “a contract, which is the direct result of a previous illegal contract, is also
void and inexistent.”Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15,
2014.

Damages; moral damages; when awarded.[S]uffice it to say that the dispute over the
subject property had caused respondent serious anxiety, mental anguish and sleepless
nights, thereby justifying the aforesaid award. Likewise, since respondent was
constrained to engage the services of counsel to file this suit and defend his interests, the
awards of attorney’s fees and litigation expenses are also sustained. The Heirs of
Victorino Sarili, namely, Isabel A. Sarili, et al. v.Pedro F. Lagrosa, represented in this
act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No.193517, January 15, 2014.

Damages; moral damages; when awarded. Every person is entitled to the physical
integrity of his body. Although we have long advocated the view that any physical injury,
like the loss or diminution of the use of any part of one’s body, is not equatable to a
pecuniary loss, and is not susceptible of exact monetary estimation, civil damages should
be assessed once that integrity has been violated. The assessment is but an imperfect
estimation of the true value of one’s body. The usual practice is to award moral damages
for the physical injuries sustained. Dr. Encarnacion C. Lumantas v. Hanz Calapiz,
represented by his parents, Hilario Calapiz,Jr. and Helita Calapiz, G.R. No. 163753.
January 15, 2014.

Foreclosure; premature foreclosure; order of restoration of possession and payment of

reasonable rentals. Having found and pronounced that the extrajudicial foreclosure by
DBP was premature, and that the ensuing foreclosure sale was void and ineffectual, the
Court
affirms the order for the restoration of possession to Guarifia Corporation and the payment
of reasonable rentals for the use of the resort. The CA properly held that the premature and
invalid foreclosure had unjustly dispossessed Guarifia Corporation of its properties.
Consequently, the restoration of possession and the payment of reasonable rentals were
in accordance with Article 561 of the Civil Code, which expressly states that one who
recovers, according to law, possession unjustly lost shall be deemed for all purposes
which may redound to his benefit to have enjoyed it without interruption.Development
Bank of thePhilippines (DBP) v. Guariña Agricultural and Realty Development
Corporation,G.R. No. 160758.January 15, 2014.

Foreclosure; purchaser in foreclosure sale may take possession of the property even
before the expiration of the redemption period. A writ of possession is a writ of
execution employed to enforce a judgment to recover the possession of land. It
commands the sheriff to enter the land and give possession of it to the person entitled
under the judgment. It may be issued in case of an extrajudicial foreclosure of a real
estate mortgage under Section 7 of Act No. 3135, as amended by Act No. 4118.
Under said provision, the writ of possession may be issued to the purchaser in a
foreclosure sale either within the one-year redemption period upon the filing of a bond,
or after the lapse of the redemption period, without need of a bond.

We have consistently held that the duty of the trial court to grant a writ of possession is
ministerial. Such writ issues as a matter of course upon the filing of the proper motion
and the approval of the corresponding bond. No discretion is left to the trial court. Any
question regarding the regularity and validity of the sale, as well as the consequent
cancellation of the writ, is to be determined in a subsequent proceeding as outlined in
Section 8 of Act No. 3135. Such question cannot be raised to oppose the issuance of the
writ, since the proceeding is ex parte. The recourse is available even before the
expiration of the redemption period provided by law and the Rules of Court. LZK
Holdings and DevelopmentCorporation v. Planters Development Bank, G.R. No.
187973, January 20, 2014.

Interest; legal interest; interest rate pegged at 6% regardless of the source of obligation.
The
resulting modification of the award of legal interest is, also, in line with our recent ruling
in Nacar v. Gallery Frames, embodying the amendment introduced by the Bangko Sentral
ng
Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at
6% regardless of the source of obligation. Fil-Estate Properties, Inc. and Fil-Estate
Network, Inc. v.Spouses Conrado and Maria Victoria Ronquillo, G.R. No. 185798,
January 13, 2014.

Interest; legal interest; proper rate. In Eastern Shipping, it was observed that the
commencement of when the legal interest should start to run varies depending on the
factual circumstances obtaining in each case. As a rule of thumb, it was suggested that
“where the demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained).”
During the pendency of this case, however, the Monetary Board issued Resolution No. 796
dated May 16, 2013, stating that in the absence of express stipulation between the parties, the
rate of interest in loan or forbearance of any money, goods or credits and the rate allowed in
judgments shall be 6% per annum. Said Resolution is embodied in Bangko Sentral ng
Pilipinas Circular No. 799, Series of2013, which took effect on July 1, 2013. Hence, the 12%
annual interest mentioned above shall apply only up to June 30, 2013. Thereafter, or starting
July 1, 2013, the applicable rate of interest for both the debited amount and undocumented
withdrawals shall be 6% per annum compounded annually, until fully
paid. Land Bank of the Philippines v. Emmanuel C. Oñate, G.R. No. 192371, January 15,
2014. Interest; legal interest; rate. The legal interest rate to be imposed from February 11,
1993, the time of the extrajudicial demand by respondent, should be 6% per annum in the
absence of any stipulation in writing in accordance with Article 2209 of the Civil Code,
which provides: Article 2209. If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per cent per annum. First United
Constructors Corporation, et al. v. BayanihanAutomotive Corporation, G.R. No. 164985,
January 15, 2014.
Interest; legal interest; when awarded. Many years have gone by since Hanz suffered
the injury. Interest of 6% per annum should then be imposed on the award as a sincere
means of adjusting the value of the award to a level that is not only reasonable but just
and commensurate. Unless we make the adjustment in the permissible manner by
prescribing legal interest on the award, his sufferings would be unduly compounded.
For that purpose, the reckoning of interest should be from the filing of the criminal
information on April 1 7, 1997, the making of the judicial demand for the liability of the
petitioner. Dr. Encarnacion C.Lumantas v. Hanz Calapiz, represented by his parents,
Hilario Calapiz, Jr. and Helita Calapiz, G.R.No. 163753. January 15, 2014.

Obligations; default; borrower would not be in default without demand to pay.

Considering that it had yet to release the entire proceeds of the loan, DBP could not yet
make an effective demand for payment upon Guariña Corporation to perform its
obligation under the loan. According toDevelopment Bank of the Philippines v. Licuanan,
it would only be when a demand to pay had been made and was subsequently refused
that a borrower could be considered in default, and the lender could obtain the right to
collect the debt or to foreclose the mortgage. Development Bank of the Philippines
(DBP) v. Guariña Agricultural and RealtyDevelopment Corporation, G.R. No. 160758.
January 15, 2014.

Obligations; extinguishment of obligations; compensation; requisites. Compensation is

defined as a mode of extinguishing obligations whereby two persons in their capacity as
principals are mutual debtors and creditors of each other with respect to equally
liquidated and demandable obligations to which no retention or controversy has been
timely commenced and communicated by third parties.53 The requisites therefor are
provided under Article 1279 of the Civil Code which reads as follows:
Art. 1279. In order that compensation may be proper, it is necessary:

(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.

The rule on legal compensation is stated in Article 1290 of the Civil Code which provides
that “[w]hen all the requisites mentioned in Article 1279 are present, compensation takes
effect by operation of law, and extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the compensation.” Union Bank of
thePhilippines v. Development Bank of the Philippines, G.R. No. 191555, January 20,
2014.

Obligations; legal compensation; requisites. Legal compensation takes place when the
requirements set forth in Article 1278 and Article 1279 of the Civil Code are present, to
wit: Article 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other.”

Article 1279. In order that compensation may be proper, it is necessary:

(1) That each of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;

(2) That both debts consists 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.

First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation,

G.R. No. 164985,January 15, 2014.

Property; builder in good faith; concept of. To be deemed a builder in good faith, it is
essential that a person asserts title to the land on which he builds, i.e. , that he be a
possessor in concept of owner, and that he be unaware that there exists in his title or
mode of acquisition any flaw which invalidates it. Good faith is an intangible and
abstract quality with no technical meaning or statutory definition, and it encompasses,
among other things, an honest belief, the absence of malice and the absence of design to
defraud or to seek an unconscionable advantage. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry.
The Heirs of Victorino Sarili, namely,Isabel A. Sarili, et al. v. Pedro F. Lagrosa,
represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No.
193517, January 15, 2014.

Property; ownership; accession; accessory follows the principal; exception. While it is a

hornbook doctrine that the accessory follows the principal, that is, the ownership of the
property gives the right by accession to everything which is produced thereby, or which
is incorporated or attached thereto, either naturally or artificially, such rule is not without
exception. In cases where there is a clear and convincing evidence to prove that the
principal and the accessory are not owned by one and the same person or entity, the
presumption shall not be applied and the actual ownership shall be upheld. In a number
of cases, we recognized the separate ownership of the land from the building and brushed
aside the rule that accessory follows the principal. Magdalena T. Villasi v. Filomena
Garcia, substituted by hisheirs, namely, Ermelinda H. Garcia, et al., G.R. No. 190106,
January 15, 2014.

Quasi-contracts; Unjust enrichment. Unjust enrichment exists, according to Hulst v.

PRBuilders, Inc., “when a person unjustly retains a benefit at the loss of another, or when
aperson retains money or property of another against the fundamental principles of justice,
equity and good conscience.” The prevention of unjust enrichment is a recognized public
policy of the State, for Article 22 of the Civil Code explicitly provides that “[e]very person
who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return
the same to him.” Domingo Gonzalo v. John Tarnate, Jr., G.R. No. 160600, January 15,
2014.

Sales; Article 1599 of the Civil Code; recoupment; definition of; when entitled.
Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon
which one is sued by means of a legal or equitable right resulting from a counterclaim
arising out of the same transaction. It is the setting up of a demand arising from the same
transaction as the plaintiff’s claim, to abate or reduce that claim.
The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the
Civil Code, viz:

Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his
election:

(1) Accept or keep the goods and set up against the seller, the breach of warranty by
way of recoupment in diminution or extinction of the price;

xxxx

First United Constructors Corporation, et al. v. Bayanihan Automotive Corporation,

G.R. No. 164985,January 15, 2014.

Sales; sale of a piece of land or any interest therein is through an agent; authority of the
agent shall be in writing; otherwise, the sale shall be void. The due execution and
authenticity of the subject SPA are of great significance in determining the validity of the
sale entered into by Victorino and Ramon since the latter only claims to be the agent of
the purported seller (i.e., respondent). Article 1874 of the Civil Code provides that
“[w]hen a sale of a piece of land or any interest therein is through an agent, the authority
of the latter shall be in writing; otherwise, the sale shall be void.” In other words, if the
subject SPA was not proven to be duly executed and authentic, then it cannot be said that
the foregoing requirement had been
complied with; hence, the sale would be void. The Heirs of Victorino Sarili, namely,
Isabel A.Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-
Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

SPECIAL LAWS
Section 23 of Presidential Decree No. 957; non-forfeiture of payments. Section 23 of
Presidential Decree No. 957, the rule governing the sale of condominiums, which
provides: No installment payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop the subdivision or
condominium project according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be reimbursed the total amount
paid including amortization interests but excluding delinquency interests, with interest
thereon at the legal rate. Fil-EstateProperties, Inc. and Fil-Estate Network, Inc. v.
Spouses Conrado and Maria Victoria Ronquillo, G.R.No. 185798, January 13, 2014.
Section 6 of Presidential Decree No. 1594; right of assignment and subcontract. There is
no question that every contractor is prohibited from subcontracting with or assigning to
another person any contract or project that he has with the DPWH unless the DPWH
Secretary has approved the subcontracting or assignment. This is pursuant to Section 6
of Presidential Decree No. 1594, which provides that “[T]he contractor shall not assign,
transfer, pledge, subcontract or make any other disposition of the contract or any part or
interest therein except with the approval of the Minister of Public Works, Transportation
and Communications, the Minister of Public Highways, or the Minister of Energy, as the
case may be. Approval of the subcontract shall not relieve the main contractor from any
liability or obligation under his contract with the Government nor shall it create any
contractual relation between the subcontractor and the Government.” Domingo Gonzalo
v.John Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Family law; conjugal property; all property of the marriage is presumed to be conjugal,
unless
it is shown that it is owned exclusively by the husband or the wife. There is a
presumption that all property of the marriage is conjugal, unless it is shown that it is
owned exclusively by the husband or the wife; this presumption is not overcome by the
fact that the property is registered in the name of the husband or the wife alone; and the
consent of both spouses is required before a conjugal property may be mortgaged.
However, we find it iniquitous to apply the foregoing presumption especially since the
nature of the mortgaged property was never raised as an issue before the RTC, the CA,
and even before this Court. In fact, petitioner never alleged in his Complaint that the said
property was conjugal in nature. Hence, respondent had no opportunity to rebut the said
presumption. Francisco Lim v.Equitable PCI Bank, now known as Banco De Oro
Unibank, Inc., G.R. No. 183918. January 15,2014.

Family law; exclusive property of spouse; when the property is registered in the name of
a spouse only and there is no showing as to when the property was acquired by said
spouse, this is an indication that the property belongs exclusively to said spouse. Article
160 of the Civil Code provides as follows: All property of the marriage is presumed to
belong to the conjugal partnership, unless it be proved that it pertains exclusively to the
husband or to the wife.”
The presumption applies to property acquired during the lifetime of the husband and
wife. In this case, it appears on the face of the title that the properties were acquired by
Donata Montemayor when she was already a widow. When the property is registered in
the name of a spouse only and there is no showing as to when the property was acquired
by said spouse, this is an indication that the property belongs exclusively to said spouse.
And this presumption under Article 160 of the Civil Code cannot prevail when the title is
in the name of only one spouse and the rights of innocent third parties are involved.
Francisco Lim v.Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R.
No. 183918. January 15,2014.
Torrens system; certificate of title; a certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the person whose name
appears therein. “[A] certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein.”
Having no certificate of
title issued in their names, spouses Vilbar have no indefeasible and incontrovertible title
over Lot 20 to support their claim. Further, it is an established rule that “registration is
the operative act which gives validity to the transfer or creates a lien upon the land.”
“Any buyer or mortgagee of realty covered by a Torrens certificate of title x x x is
charged with notice only of such burdens and claims as are annotated on the title.”
Failing to annotate the deed for the eventual transfer of title over Lot 20 in their names,
the spouses Vilbar cannot claim a greater right over Opinion, who acquired the property
with clean title in good faith and registered the same in his name by going through the
legally required procedure. Sps.Bernadette and Rodulfo Vilbar v. Angelito L. Opinion,
G.R. No. 176043. January 15, 2014.

Torrens system; Torrens title; a person dealing with a registered land has a right to rely
upon the face of the Torrens certificate of title; exceptions. The well-known rule in this
jurisdiction is that a person dealing with a registered land has a right to rely upon the face
of the torrens certificate of title and to dispense with the need of inquiring further, except
when the party concerned has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry.
A torrens title concludes all controversy over ownership of the land covered by a final
decree of registration. Once the title is registered the owner may rest assured without
the necessity of stepping into the portals of the court or sitting in the mirador de su
casa to avoid the possibility of losing his land. Francisco Lim v. Equitable PCI Bank,
now known as Banco DeOro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens title; a person dealing with a registered land has a right to rely upon the face of
the Torrens certificate of title; exception in the case of a person who buys from a person
who is not the registered owner.The general rule is that every person dealing with
registered land may safely rely on the correctness of the certificate of title issued therefor
and the law will in no way oblige him to go beyond the certificate to determine the
condition of the property. Where there is nothing in the certificate of title to indicate any
cloud or vice in the ownership of the property, or any encumbrance thereon, the
purchaser is not required to explore further than what the Torrens Title upon its face
indicates in quest for any hidden defects or inchoate right that may subsequently defeat
his right thereto.
However, a higher degree of prudence is required from one who buys from a person
who is not the registered owner, although the land object of the transaction is registered.
In such a case, the buyer is expected to examine not only the certificate of title but all
factual circumstances necessary for him to determine if there are any flaws in the title of
the transferor. The buyer also has the duty to ascertain the identity of the person with
whom he is dealing with and the latter’s legal authority to convey the property. The
Heirs of VictorinoSarili, namely, Isabel A. Sarili, et al. v. Pedro F. Lagrosa,
represented in this act by his Attorney-in-Fact, Lourdes Labios Mojica, G.R. No.
193517, January 15, 2014.

Torrens system;even if the procurement of a certificate of title was tainted with fraud and
misrepresentation, such defective title may be the source of a completely legal and valid
title in the hands of an innocent purchaser for value. It is well-settled that even if the
procurement of a certificate of title was tainted with fraud and misrepresentation, such
defective title may be the source of a completely legal and valid title in the hands of an
innocent purchaser for value. Where innocent third persons, relying on the correctness of
the certificate of title thus issued, acquire rights over the property, the court cannot
disregard such rights and order the total cancellation of the certificate. The effect of such
an outright cancellation would be to impair public confidence in the certificate of title,
for everyone dealing with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly or irregularly issued. This is
contrary to the evident purpose of the law. The Heirs of Victorino Sarili, namely, Isabel
A. Sarili, et al. v. Pedro F.Lagrosa, represented in this act by his Attorney-in-Fact,
Lourdes Labios Mojica, G.R. No. 193517,January 15, 2014.

Torrens system; levy on attachment, duly registered, takes preference over a prior
unregistered sale.”[T]he 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 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.”Sps. Bernadette and Rodulfo
Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.