CIVIL-LAW-Updates-in-Civil-Law-Dean Eduardo J.F. Abella

UPDATES IN
CIVIL LAW
ACKNOWLEDGMENT, use different from JURAT –
Atty. Osorio committed another palpable error when he certified the Deed of
Absaloute (sic) Sale with a jurat instead of an acknowledgment. He demonstrated
lack of basic knowledge of the notarial acts in failing to distinguish one from the
other.
The language of the jurat avows that the document was subscribed and sworn to
before the notary public. On the other hand, an acknowledgment is the act of one
who has executed a deed, attesting the deed to be his own before some competent
officer. Too, the notary declares that the executor of the document has personally
attested before him or her the same to be the executor's free act.
Here, the Deed of Absaloute (sic) Sale required not just a jurat but an
acknowledgment by the parties themselves that the same is their voluntary act.
Atty. Osorio, however, erroneously certified the Deed of Absaloute (sic) Sale with
a jurat, not an acknowledgment.
Complainant asserts that Atty. Osorio performed notarial acts outside his notarial
jurisdiction since the Deed of Absaloute (sic) Sale was executed in Liboro Ragay,
Camarines Sur, but Atty. Osorio notarized it in Quezon City.
Nothing in the Deed of Absaloute (sic) Sale, however, indicated that Atty. Osorio
misrepresented himself to be a commissioned notary public in Camarines Sur
when he affixed his signature and notarial seal to this document. On the contrary,
the notarial details on the document itself indicated that his notarial commission
was "issued on/at 1-5-09/Q.C." It is not entirely remote that the deed was executed
in Camarines Sur but brought to Atty. Osorio for notarization in Quezon City.
This is not prohibited for so long as the parties to the deed personally appeared
before Atty. Osorio. As required under the Notarial Rules, "a notary public
should not notarize a document unless the signatory to the document is in the
notary's presence personally at the time of the notarization, and personally known
to the notary public or otherwise identified through competent evidence of identity.
(Librada A. Ladrera vs. Atty. Ramiro S. Osorio, 929 SCRA 319-322)
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Updates in Commercial Law
Dean Eduardo J.F. Abella
ACTION TO DECLARE NULLITY OF TITLE,

imprescriptible –
And while it is true that respondent has in her favor a Torrens title over the subject
property, she nonetheless acquired no right or title in her favor by virtue of the null
and void June 6, 2006 deed. "Verily, when the instrument presented is forged,
even if accompanied by the owner's duplicate certificate of title, the registered
owner does not thereby lose his title, and neither does the assignee in the forged
deed acquire any right or title to the property."
In sum, the fact that respondent has in her favor a certificate of title is of no
moment; her title cannot be used to validate the forgery or cure the void sale. As
has been held in the past:
Insofar as a person who fraudulently obtained a property is concerned,

the registration of the property in said person's name would not be
sufficient to vest in him or her the title to the property. A certificate of
title merely confirms or records title already existing and vested. The
indefeasibility of the Torrens title should not be used as a means to
perpetrate fraud against the rightful owner of real property. Good
faith must concur with registration because, otherwise, registration
would be an exercise in futility. A Torrens title does not furnish a
shield for fraud, notwithstanding the long-standing rule that
registration is a constructive notice of title binding upon the whole
world. The legal principle is that if the registration of the land is
fraudulent, the person in whose name the land is registered holds it as
a mere trustee.
Since respondent acquired no right over the subject property, the same remained in
the name of the original registered owners, Macario and Felicidad. Being heirs of
the owners, petitioners and respondent thus became, and remain co-owners - by
succession - of the subject property. As such, petitioners may exercise all
attributes of ownership over the same, including possession - whether de
facto or dejure; respondent thus has no right to exclude them from this right
through an action for ejectment.
With the Court's determination that respondent's title is null and void, the matter of
direct or collateral attack is a foregone conclusion as well. "An action to declare
the nullity of a void title does not prescribe and is susceptible to direct, as well as
to collateral, attack;" petitioners were not precluded from questioning the validity
of respondent's title in the ejectment case. (Consolacion Romero, et al. vs. Engracia
Singson, 764 SCRA 638-640)
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ACTIONS TO RECOVER POSSESSION –
Accion interdictal is a summary action that seeks the recovery of physical

possession where the dispossession has not lasted for more than one year, and is to
be exclusively brought in the proper inferior court. The issue involved is material
possession or possession de facto. The action is either forcible entry (detentacion)
or unlawful detainer (deshhucio). In forcible entry, the plaintiff is deprived of
physical possession of real property by means of force, intimidation, strategy,
threats, or stealth, but in unlawful detainer, the defendant illegally withholds
possession of real property after the expiration or termination of his right to hold
possession under any contract, express or implied. The two are distinguished from
each other in that in forcible entry, the possession of the defendant is illegal from
the beginning, and that the issue is which a party has prior de facto possession,
while in unlawful detainer, the possession of the defendant is originally legal but
becomes illegal because of the expiration or termination of the right to
possess. Both actions must be brought within one year from the date of actual
entry on the land by the defendant in case of forcible entry, and within one year
from the date of last demand in case of unlawful detainer.
The jurisdiction over these two summary actions lies in the proper Municipal Trial
Court of the municipality or city within whose territory the property in dispute is
located. Section 33 (2) of B.P. Blg. 129, as amended by Republic Act No. 7691,
provides:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial

Courts and Municipal Circuit Trial Courts in Civil Cases. —
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts shall exercise:
xxx xxx xxx
2. Exclusive original jurisdiction over cases of forcible entry and

unlawful detainer: Provided, That when, in such cases, the defendant
raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to determine
the issue of possession.
Accion publiciana is the second possessory action. It is a plenary action to recover

the right of possession (Bongato vs. Malvar, 387 SCRA 327), and the issue is which
party has the better right of possession (possession de jure) (Ross Rica Sales Center,
Inc. vs. Ong, 467 SCRA 35). It can be filed when the dispossession lasted for more
than one year.17 It is also used to refer to an ejectment suit where the cause of
dispossession is not among the grounds for forcible entry and unlawful detainer, or
when possession has been lost for more than one year and the action can no longer
be maintained under Rule 70 of the Rules of Court. The objective of the plaintiff
in accion publiciana is to recover possession only, not ownership. (Padilla vs.
Velasco, 576 SCRA 219)
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The last possessory action is accion reivindicatoria or accion de reivindicacion. It

is an action whereby the plaintiff alleges ownership of the parcel of land and seeks
recovery of its full possession. The issue involved in and determined
through accion reivindicatoria is the recovery of ownership of real property. This
action can be filed when the dispossession lasted for more than one year. (Bongato
vs. Malvar, 387 SCRA 327)
For purposes of determining the court that has exclusive original jurisdiction
over accion publiciana and accion reivindicatoria, Section 33 (3) of B.P. Blg.
129, as amended, expressly states:
“Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial

Courts and Municipal Circuit Trial Courts in Civil Cases. -
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts shall exercise:
xxx xxx xxx
(3) Exclusive original jurisdiction in all civil actions which involve

title to, or possession of, real property, or any interest therein where
the assessed value of the property or interest therein does not exceed
Twenty thousand pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty thousand
pesos (P50,000.00) exclusive of interest, damages of whatev er kind,
attorney's fees, litigation expenses and costs: Provided, That in cases
of land not declared for taxation purposes, the value of such property
shall be determined by the assessed value of the adjacent lots.
The determinant is the assessed value of the property subject of the dispute, not the
market or actual value thereof. The assessed value of real property is the fair
market value of the real property multiplied by the assessment level. It is
synonymous to taxable value. In contrast, the fair market value is the price at
which property may be sold by a seller, who is not compelled to sell, and may be
bought by a buyer, who is not compelled to buy.
xxx
We reiterate that a boundary dispute cannot be settled summarily through the

action for forcible entry covered by Rule 70 of the Rules of Court. In forcible
entry, the possession of the defendant is illegal from the very beginning, and the
issue centers on which between the plaintiff and the defendant had the prior
possession de facto. If the petitioner had possession of the disputed areas by
virtue of the same being covered by the metes and bounds stated and defined in her
Torrens titles, then she might not be validly dispossessed thereof through the
action for forcible entry. The dispute should be properly threshed out only
through accion reivindicatoria. Accordingly, the MCTC acted without jurisdiction
in taking cognizance of and resolving the dispute as one for forcible entry. (Jessica
Lio Martinez vs. Heirs of Remberto Lim, etc. 919 SCRA 310-322)
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AGENCY –
In Medrano v. Court of Appeals (452 SCRA 77), We held that "when there is a
close, proximate, and causal connection between the broker's efforts and the
principal's sale of his property - or joint venture agreement, in this case the broker
is entitled to a commission."
Here, as aptly ruled by the CA, the proximity in time between the meetings held by
the respondents and Woodridge and the subsequent execution of the joint venture
agreements leads to a logical conclusion that it was the respondents who brokered
it. Likewise, it is inconsequential that the authority of the respondents as brokers
had already expired when the joint venture agreements over the subject properties
were executed. The negotiation for these transactions began during the effectivity
of the authority of the respondents, and these were carried out through their efforts.
Thus, the respondents are entitled to a commission.
xxx
We, however, agree with the petitioners that the interest rate should be at the
prevailing rate of six percent (6%) per annum, and not twelve percent (12%) per
annum. In Nacar v. Gallery Frames, et al. (703 SCRA 439), We modified the
guidelines laid down in the case of Eastern Shipping Lines, Inc. v. Court of
Appeals (324 SCRA 78) to embody BSP-MB Circular No. 799, as follows:
I. 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.
II. 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:
1. 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 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 of the Civil
Code.
2. 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
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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 extra-judicially (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.
3. 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.
And, in addition to the above, judgments that have become final and executory
prior to July 1, 2013, shall not be disturbed and shall continue to be implemented
applying the rate of interest fixed therein.
It should be noted, however, that the rate of six percent (6%) per annum could only
be applied prospectively and not retroactively. Consequently, the twelve percent
(12%) per annum legal interest shall apply only until June 30, 2013. Starting July
1, 2013, the rate of six percent (6%) per annum shall be the prevailing rate of
interest when applicable. Thus, the need to determine whether the obligation
involved herein is a loan and forbearance of money nonetheless exists.
The term "forbearance," within the context of usury law, has been described as a
contractual obligation of a lender or creditor to refrain, during a given period of
time, from requiring the borrower or debtor to repay the loan or debt then due and
payable.
Forbearance of money, goods or credits, therefore, refers to arrangements other

than loan agreements, where a person acquiesces to the temporary use of his
money, goods or credits pending the happening of certain events or fulfilment of
certain conditions. Consequently, if those conditions are breached, said person is
entitled not only to the return of the principal amount paid, but also to
compensation for the use of his money which would be the same rate of legal
interest applicable to a loan since the use or deprivation of funds therein is similar
to a loan. (Roberto Ignacio, et al., etc. vs. Myrna Ragasa, et al. 930 SCRA 517-520)
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Arbitration Law –
The jurisdiction of the CIAC is provided in Section 4 of Executive Order No.

1008, or the Construction Industry Arbitration Law, viz.:
SECTION 4. Jurisdiction. — The CIAC shall have original and

exclusive jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in the
Philippines, whether the dispute arises before or after the completion of
the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board
to acquire jurisdiction, the parties to a dispute must agree to submit the
same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of
specifications for materials and workmanship; violation of the terms of
agreement; interpretation and/or application of contractual time and delays;
maintenance and defects; payment, default of employer or contractor and
changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-
employee relationships which shall continue to be covered by the Labor
Code of the Philippines.
This provision lays down three requisites for acquisition of jurisdiction by

the CIAC, first: a dispute arising from or connected with a construction
contract; second, such contract must have been entered into by parties
involved in construction in the Philippines; and third, an agreement by the
parties to submit their dispute to arbitration.
In Manila Insurance, the Court did state that "Section 4 of Executive Order (E.O.)
No. 1008, otherwise known as the Construction Industry Arbitration Law, is broad
enough to cover any dispute arising from, or connected with construction
contracts, whether these involve mere contractual money claims or execution of
the works." However, this pronouncement must be read within the context of the
factual circumstances in the case. Manila Insurance involved a collection suit filed
by a party to a construction agreement against the surety companies who put up the
performance bonds for the project, after the contractor failed to complete the
project. It was likewise established that the construction agreement therein
included an arbitration clause. Therefore, the three requisite elements of CIAC
jurisdiction were present; and the Court correctly held that "[t]he fact that
petitioner is not a party to the CCA cannot remove the dispute from the jurisdiction
of the CIAC because the issue of whether respondent-spouses are entitled to
collect on the performance bond, as we have said, is a dispute arising from or
connected to the CCA." The fact that the surety companies were not direct parties
to the construction contract is of no moment, because their obligations as sureties
are inseparable from the obligation of the contractor. The claim of the client
against the contractor's performance bond is obviously a dispute which arises from
and is connected with the construction contract which it is meant to secure. These
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factual matters distinguish the case from the present one, which involves no
contract whatsoever between respondents and the spouses Ang.
Both the trial court and the respondents further justify CIAC jurisdiction over the
case at bar by citing the construction tribunal's expertise in handling factual
circumstances involving construction matters. Such justification loses sight of the
fact that a trial court's main function is passing upon questions of fact. Time and
again, this Court has held that factual matters are best ventilated before the trial
court, as it has the power to receive and evaluate evidence first-hand. That the
dispute at bar involves technical matters does not automatically divest the trial
court of its jurisdiction. We remind the court a quo that it has ample means of
handling such technical matters, as it may utilize expert testimony or appoint
commissioners to handle the technical matters involved in the suit. The core issue
of this suit is whether or not the construction activities of respondents caused the
damage to the spouses Ang's house; and the resolution of this mixed question of
fact and law is well within the jurisdiction of the court a quo to decide. (Drs.
Reynaldo Ang and Susan Cucio-Ang vs. Rosita de Venecia, et al. , 932 SCRA 58-69)
ARTICLE 152 OF FAMILY CODE, not jurisdictional

–
The procedural issue of lack of attempts at compromise should be resolved in

respondent's favor. True, no suit between members of the same family shall
prosper unless it should appear from the verified complaint or petition that earnest
efforts toward a compromise have been made. However, the failure of a party to
comply with this condition precedent is not a jurisdictional defect. If the opposing
party fails to raise such defect in a motion to dismiss, such defect is deemed
waived. (Tribiana vs. Tribiana, 438 SCRA 216, cited in Romero vs. Singson, 764 SCRA
638)
ATTORNEY’S SUSPENSION –
Jurisprudence is replete with cases where the Court held that "the lifting of a
lawyer's suspension is not automatic upon the end of the period stated in the
Court's decision, and an order from the Court lifting the suspension at the end of
the period is necessary in order to enable him to resume the practice of his
profession." (Valentin C. Miranda vs. Atty. Macario D. Carpio, 928 SCRA 449)
BREACH OF CONTRACT vs. QUASI-DELICT–
Actions based on contractual negligence and actions based on quasi-delicts differ

in terms of conditions, defenses, and proof. They generally cannot co-exist. Once
a breach of contract is proved, the defendant is presumed negligent and must prove
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not being at fault. In a quasi-delict, however, the complaining party has the burden
of proving the other party's negligence. In Huang v. Phil. Hoteliers, Inc. (687
SCRA 162):
This Court finds it significant to take note of the following differences

between quasi-delict (culpa aquilina) and breach of contract (culpa
contractual). In quasi-delict, negligence is direct, substantive and
independent, while in breach of contract, negligence is merely
incidental to the performance of the contractual obligation; there is a
pre-existing contract or obligation, In quasi-delict, the defense of
"good father of a family" is a complete and proper defense insofar as
parents, guardians and employers are concerned, while in breach of
contract, such is not a complete and proper defense in the selection
and supervision of employees. In quasi-delict, there is no presumption
of negligence and it is incumbent upon the injured party to prove the
negligence of the defendant, otherwise, the former's complaint will be
dismissed, while in breach of contract, negligence is presumed so long
as it can be proved that there was breach of the contract and the
burden is on the defendant to prove that there was no negligence in the
carrying out of the terms of the contract; the rule of respondeat
superior is followed.
However, there are instances when Article 2176 may apply even when there is a
pre-existing contractual relation. A party may still commit a tort or quasi-delict
against another, despite the existence of a contract between them.
In Cangco v. Manila Railroad (38 Phil. 768), this Court explained why a party may
be held liable for either a breach of contract or an extra-contractual obligation for a
negligent act:
It is evident, therefore, that in its decision in the Yamada case, the

court treated plaintiff's action as though founded in tort rather than as
based upon the breach of the contract of carriage, and an examination
of the pleadings and of the briefs shows that the questions of law were
in fact discussed upon this theory. Viewed from the standpoint of the
defendant the practical result must have been the same in any event.
The proof disclosed beyond doubt that the defendant's servant was
grossly negligent and that his negligence was the proximate cause of
plaintiff's injury. It also affirmatively appeared that defendant had
been guilty of negligence in its failure to exercise proper discretion in
the direction of the servant. Defendant was, therefore, liable for the
injury suffered by plaintiff, whether the breach of the duty were to be
regarded as constituting culpa aquilina or culpa contractual. As
Manresa points out . . . whether negligence occurs as an incident in
the course of the performance of a contractual undertaking or is itself
(he source of an extra-contractual obligation, its essential
characteristics are identical. There is always an act or omission
productive of damage due to carelessness or inattention on the part of
the defendant. Consequently, when the court holds that a defendant is
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liable in damages for having failed to exercise due care, either

directly, or in failing to exercise proper care in the selection and
direction of his servants, the practical result is identical in either case.
The true explanation of such cases is to be found by directing the

attention to the relative spheres of contractual and extra-contractual
obligations. The field of non-contractual obligation is much more
broader [sic] than that of contractual obligation, comprising, as it
does, the whole extent of juridical human relations. These two fields,
figuratively speaking, concentric; that is to say, the mere fact that a
person is bound to another by contract does not relieve him from
extra-contractual liability to such person. When such a contractual
relation exists the obligor may break the contract under such
conditions that the same act which constitutes a breach of the contract
would have constituted the source of an extra-contractual obligation
had no contract existed between the parties. (38 Phil. 779)
If a contracting party's act that breaches the contract would have given rise to an
extra-contractual liability had there been no contract, the contract would be
deemed breached by a tort, and the party may be held liable under Article 2176 and
its related provisions. (Orient Freight International, Inc. vs. Keihin-Everett Forwarding
Co., Inc. 836 SCRA 134)
BUILDER IN GOOD FAITH –
(a) The records, however, do not show that the spouses Yu was in bad faith when
they possessed the disputed portion of Topacio's land. Spouses Yu were honestly
convinced of the validity of their right to possess the disputed property on the basis
of their valid title to it. Clearly, spouses Yu were in good faith when they built a
house and fence on Lot No. 7402-E, since they honestly believed that it was
covered by their TCT No. T-490552. Indeed, the essence of good faith lies in an
honest belief in the validity of one's right, ignorance of a superior claim and
absence of intention to overreach another. Applied to possession, one is
considered in good faith if he is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.
Since spouses Yu had introduced improvements on the said portion of land in good
faith, Topacio as owner thereof, may exercise his option of choosing between
appropriating as his own the structures constructed thereon by spouses Yu by
paying the proper indemnity or value; or obliging spouses Yu to pay the price of
the said lot if its value is considerably not more than that of the improvements.
Otherwise, reasonable rent must be paid by spouses Yu if Topacio did not choose
to appropriate the improvements, pursuant to Article 448 of the Civil Code, which
provides:
ART. 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as
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his own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or
trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.
The choice belongs to the owner of the land, a rule that accords with the principle
of accession that the accessory follows the principal and not the other way around.
Topacio must choose only one. (Sps. Ernesto and Elsie Yu vs. Eulogio Topacio, 920
SCRA93-94)
(b) On the issue of being a builder in had faith, there is no question that
petitioners should be held liable to respondent for their obstinate refusal to abide
by the latter's repeated demands to cease and desist from continuing their
construction upon the encroached area. Petitioners' sole defense is that they
purchased their property in good faith and for value; but this does not squarely
address the issue of encroachment or overlapping. To repeat, while petitioners
may have been innocent purchasers for value with respect to their land, this does
not prove that they are equally innocent of the claim of encroachment upon
respondent's lands. The evidence suggests otherwise: despite being apprised of
the encroachment, petitioners turned a blind eye and deaf ear and continued to
construct on the disputed area. They did not bother to conduct their own survey to
put the issue to rest, and to avoid the possibility of being adjudged as builders in
bad faith upon land that did not belong to them.
Under the Civil Code,
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to
indemnity.
Art. 450. Tue owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work,
or that the planting or sowing be removed, in order to replace things in
their former condition at the expense of the person who built, planted
or sowed; or he may compel the builder or planter to pay the price of
the land, and the sower the proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is
entitled to damages from the builder planter or sower.
Moreover, it has been declared that:
The right of the owner of the land to recover damages from a builder
in bad faith is clearly provided for in Article 451 of the Civil Code.
Although said Article 451 does not elaborate on the basis for damages,
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the Court perceives that it should reasonably correspond with the

value of the properties lost or destroyed as a result of the occupation
in bad faith, as well as the fruits (natural, industrial or civil) from
those properties that the owner of the land reasonably expected to
obtain. x x x
For their part, petitioners are not entitled to reimbursement for necessary
expenses. Indeed, under Article 452 of the Civil Code, the builder, planter or
sower in bad faith is entitled to reimbursement for the necessary expenses of
preservation of the land. However, in this case, respondent's lands were not
preserved: petitioners' construction and use thereof in fact caused dan1age, which
must be undone or simply endured by respondent by force of law and
circumstance. Respondent did not in any way benefit from petitioners'
occupation of its lands. (Pen Dev. Corp., et al. vs.. Martinez Leyba, Inc., 836 SCRA
574)
(c) A builder in good faith is a builder who was not aware of a defect or flaw in
his or her title when he or she introduced improvements on a lot that turns out to
be owned by another.
Philippine National Bank v. De Jesus (411 SCRA 557) explains that

the essence of good faith is an honest belief of the strength and validity
of one's right while being ignorant of another's superior claim at the
same time:
Good faith, here understood, 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.
An individual's personal good faith is a concept of his own mind and,
therefore, may not conclusively be determined by his protestations
alone. It implies honesty of intention, and freedom from knowledge of
circumstances which ought to put the holder upon inquiry. The essence
of good faith lies in an honest belief in the validity of one's right,
ignorance of a superior claim, and absence of intention to overreach
another.
The following provisions of the Civil Code are relevant as regards the remedies
available to a landowner and builder in good faith:
Article 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as his
own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land
if its value is considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity.
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The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
Article 546. Necessary expenses shall be refunded to every possessor;

but only the possessor in good faith may retain the thing until he has
been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith

with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses
or of paying the increase in value which the thing may have acquired
by reason thereof.
Article 548. Expense for pure luxury or mere pleasure shall not be
refunded to the possessor in good faith; but he may remove the
ornaments with which he has embellished the principal thing if it
suffers no injury thereby, and if his successors in the possession do not
prefer to refund the amount expended.
Article 448 of the Civil Code gives a builder in good faith the right to compel the
landowner to choose between two (2) options: (1) to appropriate the building by
paying the indemnity required by law; or (2) to sell the land to the builder.
Ignacio v. Hilario (76 Phil. 605) summarized the respective rights of the landowner
and builder in good faith as follows:
The owner of the building erected in good faith on a land owned by

another, is entitled to retain the possession of the land until he is paid
the value of his building, under article [546]. The owner of the land,
upon the other hand, has the option, under article [448], either to pay
for the building or to sell his land to the owner of the building. But he
cannot, as respondents here did, refuse both to pay for the building and
to sell the land and compel the owner of the building to remove it from
the land where it is erected. He is entitled to such remotion only when,
after having chosen to sell his land, the other party fails to pay for the
same.
Rosales v. Castelltort (472 SCRA 144) has emphasized that the choice belongs to
the landowner, but the landowner must choose from the two (2) available options:
The choice belongs to the owner of the land, a rule that accords with
the principle of accession, i.e., that the accessory follows the principal
and not the other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. The landowner
cannot refuse to exercise either option and compel instead the owner of
the building to remove it from the land.
As builders in bad faith, respondents have no right to recover their expenses over
the improvements they have introduced to petitioners' lot under Article 449 of the
Civil Code, which provides:
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Article 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
Under Article 452 of the Civil Code, a builder in bad faith is entitled to recoup the
necessary expenses incurred for the preservation of the land. However,
respondents neither alleged nor presented evidence to show that they introduced
improvements for the preservation of the land.
Therefore, petitioners as landowners became the owners of the improvements on

the lot, including the residential buildings constructed by respondents, if they
chose to appropriate the accessions. However, they could instead choose the
demolition of the improvements at respondents' expense or compel respondents to
pay the price of the land under Article 450 of the Civil Code, which provides:
Article 450. The owner of the land on which anything has been built,
Whether petitioners choose to appropriate the improvements, compel their

demolition, or compel respondents to pay the price of the land, they are entitled to
damages under Article 451 of the Civil Code.
Heirs of Durano v. Spouses Uy (344 SCRA 238) has summarized the remedies
available to the landowner:
The Civil Code provides:
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right of indemnity.
Art. 450. The owner of the land on which anything has been built,
Art. 451. In the cases of the two preceding articles, the landowner is
entitled to damages from the builder, planter or sower.
Based on, these provisions, the owner of the land has three alternative rights:
(1) to appropriate what has been built without any obligation to pay
indemnity therefor, or (2) to demand that the builder remove what he had
built, or (3) to compel the-builder to pay the value of the land. In any case,
the landowner is entitled to damages under Article 451, above cited.
Considering that petitioners pray for the reinstatement of the Regional Trial Court
Decision ordering respondents to vacate the lot and surrender its possession to
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them, petitioners are deemed to have chosen to appropriate the improvements built
on their lot without any obligation to pay indemnity to respondents. (Pablo Padilla,
et al. vs. Leopoldo Malicsi, et al., 804 SCRA 28-38)
BUYER IN GOOD FAITH INCLUDES

MORTGAGEE –
Individuals who rely on a clean certificate of title in making the decision to

purchase the real property are often referred to as 'innocent purchasers for
value' and 'in good faith."' (Register of Deeds of Negros Occidental vs. Anglo, Sr.,
765 SCRA 168)
"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.
(Aboitiz vs. Po, 825 SCRA 457)
Notably, the term "innocent purchaser for value" may also refer to an innocent
mortgagee who had no knowledge of any defects in the title of the mortgagor of
the property, such as in this case. (Stilianopoulos vs. Register of Deeds for Legaspi City, 870
SCRA 237)
CO-OWNERSHIP –
As to the DMRP (Deed of Mortgage of Real Property), the CA recognized Zenaida

as a co-owner of the mortgaged property and as such, she could validly convey
through sale or mortgage the portion belonging to her. Thus, the CA ruled that
"the Real Estate Mortgage in favor of [Atty. Bulatao] is not entirely rendered void
as its validity is limited only to the portion belonging to [Zenaida]."
In Bailon-Casilao v. Court of Appeals (160 SCRA 738), the Court observed:
The rights of a co-owner of a certain property are clearly specified in Article 493
of the Civil Code. Thus:
Art. 493. Each co-owner shall have the full ownership of his part and
of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it and even substitute another
person in its enjoyment, except when personal rights are involved. But
the effect of the alienation or mortgage, with respect to the co-owners,
shall be limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership. x x x
As early as 1923, this Court has ruled that even if a co-owner sells the whole
property as his, the sale will affect only his own share but not those of the other co-
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owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)].
This is because under the aforementioned codal provision, the sale or other
disposition affects only his undivided share and the transferee gets only what
would correspond to his grantor in the partition of the thing owned in common.
[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made
by Rosalia and Gaudencio Bailon which are valid with respect to their
proportionate shares, and the subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable thereby became a co-owner of
the disputed parcel of land as correctly held by the lower court since the sales
produced the effect of substituting the buyers in the enjoyment thereof [Mainit v.
Bandoy 14 Phil. 730 (1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to sell his
undivided share, a sale of the entire property by one co-owner without the consent
of the other co-owners is not null and void. However, only the rights of the co-
owner-seller are transferred, thereby making the buyer a co-owner of the property.
This ruling was reiterated in Paulmitan v. Court of Appeals (215 SCRA 866), where
the Court therein ruled that the sale of the property owned in common by one co-
owner without the consent of the others did not give to the buyer ownership over
the entire land but merely transferred to the buyer the undivided share of the seller,
making the buyer the co-owner of the land in question.
COMMON CARRIERS –
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 that does not happen,
then the carrier opens itself to a suit for breach of contract of carriage. In an action
based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All he has to prove is
the existence of the contract and the fact of its non-performance by the carrier,
through the latter's failure to carry the passenger to its destination.
It is beyond question in the case at bar that petitioners had an existing contract of
air carriage with China Southern Airlines as evidenced by the airline tickets issued
by Active Travel. When they showed up at the airport and after they went through
the routine security check including the checking in of their luggage and the
payment of the corresponding terminal fees, petitioners were not allowed by China
Southern Airlines to board on the plane. The airlines' claim that petitioners do not
have confirmed reservations cannot be given credence by the Court. The
petitioners were issued two-way tickets with itineraries indicating the date and
time of their return flight to Manila. These are binding contracts of carriage. China
Southern Airlines allowed petitioners to check in their luggage and issued the
necessary claim stubs showing that they were part of the flight. It was only after
petitioners went through all the required check-in procedures that they were
informed by the airlines that they were merely chance passengers. Airlines
companies do not, as a practice, accept pieces of luggage from passengers without
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confirmed reservations. Quite tellingly, all the foregoing circumstances lead us to

the inevitable conclusion that petitioners indeed were bumped off from the flight.
We cannot from the records of this case deduce the true reason why the airlines
refused to board petitioners back to Manila. What we can be sure of is the
unacceptability of the proffered reason that rightfully gives rise to the claim for
damages.
In Japan Airlines v. Simangan (552 SCRA 341), the Court took the occasion to
expound on the meaning of bad faith in a breach of contract of carriage that merits
the award of moral damages:
"Clearly, JAL is liable for moral damages. It is firmly settled that

moral damages are recoverable in suits predicated on breach of a
contract of carriage where it is proved that the carrier was guilty of
fraud or bad faith, as in this case. Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles
the passenger to an award of moral damages. 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." (Alfredo S. Ramos, et al. vs. China Southern Airlines
Co. Ltd., 804 SCRA 123)
COMPROMISE AGREEMENT –
Nevertheless, in implementing a compromise agreement, the "courts cannot

modify, impose terms different from the terms of agreement, or set aside the
compromises and reciprocal concessions made in good faith by the parties
without gravely abusing their discretion. (Cathay Land, Inc., et al. vs. Ayala Land,
Inc., et al. 836 SCRA 502)
CONDOMINIUM CORPORATIONS, taxability of

dues -
The creation of the condominium corporation is sanctioned by Republic Act No.

4726 (RA 4726) (The Condominium Act). Under the law, a condominium is an
interest in real property consisting of a separate interest in a unit in a residential,
industrial or commercial building and an undivided interest in common, directly or
indirectly, in the land on which it is located and in other common areas of the
building. To enable the orderly administration over these common areas which the
unit owners jointly own, RA 4726 permits the creation of a condominium
corporation for the purpose of holding title to the common areas. The unit owners
shall in proportion to the appurtenant interests of their respective units
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automatically be members or shareholders of the condominium corporation to the

exclusion of others.
Sections 10 and 22 of RA 4726 focus on the non-profit purpose of a condominium

corporation. Under Section 10, the corporate purposes of a condominium
corporation are limited to holding the common areas, either in ownership or any
other interest in real property recognized by law; management of the project; and
to such other purposes necessary, incidental, or convenient to the accomplishment
of these purposes. Additionally, Section 10 prohibits the articles of incorporation
or by-laws of the condominium corporation from containing any provisions
contrary to the provisions of RA 4726, the enabling or master deed, or the
declaration of restrictions of the condominium project.
Also, under Section 22, the condominium corporation, as the management body,
may only act for the benefit of the condominium owners in disposing tangible and
intangible personal property by sale or otherwise in proportion to the
condominium owners' respective interests in the common areas.
xxx
Section 9 allows a condominium corporation to provide for the means by which it

should be managed. Specifically, it authorizes a condominium corporation to
collect association dues, membership fees, and other assessments/charges for: (a)
maintenance of insurance policies; (b) maintenance, utility, gardening and other
services benefiting the common areas, for the employment of personnel necessary
for the operation of the building, and legal, accounting and other professional and
technical services; (c) purchase of materials, supplies and the like needed by the
common areas; (d) reconstruction of any portion or portions of any damage to or
destruction of the project; and (e) reasonable assessments to meet authorized
expenditures.
In fine, the collection of association dues, membership fees, and other

assessments/charges is purely for the benefit of the condominium owners. It is a
necessary incident to the purpose to effectively oversee, maintain, or even improve
the common areas of the condominium as well as its governance.
As held in Yamane (474 SCRA 258) "[t]he profit motive in such cases is hardly the
driving factor behind such improvements, if it were contemplated at all. Any
profit that would be derived under such circumstances would merely be incidental,
if not accidental." More, a condominium corporation is especially formed for the
purpose of holding title to the common area and exists only for the benefit of the
condominium owners.
xxx
Association dues, membership fees, and other assessments/charges are not subject
to income tax because they do not constitute profit or gain. To repeat, they are
collected purely for the benefit of the condominium owners and are the incidental
consequence of a condominium corporation's responsibility to effectively oversee,
maintain, or even improve the common areas of the condominium as well as its
governance.
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xxx
Association dues, membership fees, and other assessments/charges do not arise

from transactions involving the sale, barter, or exchange of goods or property. Nor
are they generated by the performance of services. As such, they are not subject to
value-added tax per Section 105 of RA 8424, viz.: Section 105. Persons Liable. -
Any person who, in the course of trade or business, sells, barters, exchanges,
leases goods or properties, renders services, and any person who imports goods
shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of
this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or
passed on to the buyer, transferee or lessee of the goods, properties or services.
This rule shall likewise apply to existing contracts of sale or lease of goods,
properties or services at the time of the effectivity of Republic Act No. 7716. The
phrase "in the course of trade or business" means the regular conduct or pursuit of
a commercial or an economic activity including transactions incidental thereto, by
any person regardless of whether or not the person engaged therein is a non-stock,
non-profit private organization (irrespective of the disposition of its net income
and whether or not it sells exclusively to members or their guests), or government
entity.
Both under RA 8424 (Sections 106, 107, and 108) and the TRAIN Law, there, too,
is no mention of association dues, membership fees, and other assessments/charges
collected by condominium corporations being subject to VAT. And rightly so.
For when a condominium corporation manages, maintains, and preserves the
common areas in the building, it does so only for the benefit of the condominium
owners. It cannot be said to be engaged in trade or business, thus, the collection of
association dues, membership fees, and other assessments/charges is not a result of
the regular conduct or pursuit of a commercial or an economic activity, or any
transactions incidental thereto.
Neither can it be said that a condominium corporation is rendering services to the

unit owners for a fee, remuneration or consideration. Association dues,
membership fees, and other assessments/charges form part of a pool from which a
condominium corporation must draw funds in order to bear the costs for
maintenance, repair, improvement, reconstruction expenses and other
administrative expenses.
Indisputably, the nature and purpose of a condominium corporation negates

the carte blanche application of our value-added tax provisions on its transactions
and activities.
xxx
ANPC v. BIR, (906 SCRA 331) held that membership fees, assessment dues, and
the like collected by recreational clubs are not subject to value-added tax "because
in collecting such fees, the club is not selling its service to the members.
Conversely, the members are not buying services from the club when dues
are paid; hence, there is no economic or commercial activity to speak of as these
dues are devoted for the operations/maintenance of the facilities of the
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organization. As such, there could be no 'sale, barter or exchange of goods or

properties, or sale of a service' to speak of, which would then be subject to VAT
under the 1997 NIRC." This principle equally applies to condominium
corporations which are similarly situated with recreational clubs insofar as
membership fees, assessment dues, and other fees of similar nature collected from
condominium owners are devoted to the operations and maintenance of the
facilities of the condominium. In sum, RMC No. 65-2012 illegally imposes value-
added tax on association dues, membership fees, and other assessments/charges
collected and received by condominium corporations.
xxx
Petitioner resorted to judicial consignation of its alleged tax payments in the court,
thus, reckons with the requirements of judicial consignation, viz.: (1) a debt due;
(2) the creditor to whom tender of payment was made refused without just cause
to accept the payment, or the creditor was absent, unknown or incapacitated, or
several persons claimed the same right to collect, or the title of the obligation was
lost; (3) the person interested in the performance of the obligation was given
notice before consignation was made; (4) the amount was placed at the disposal
of the court; and (5) the person interested in the performance of the obligation
was given notice after the consignation was made. (In the Matter of Declaratory Relief on the
Validity of BIR Revenue Memorandum Circular No. 65-2012, 928 SCRA 581)
CONTRACTS –
1. Consent - A contract is a meeting of minds between two persons whereby

one binds himself, with respect to the other, to give something or to render some
service. There can be no contract unless all of the following requisites concur: (1)
consent of the contracting parties; (2) object certain which is the subject matter of
the contract; and (3) the cause of the obligation which is established. When one of
the elements is wanting, no contract can be perfected.
Consent, in turn, is the acceptance by one of the offer made by the other. It is the
meeting of the minds of the parties on the object and the cause which constitutes
the contract. The area of agreement must extend to all points that the parties deem
material or there is no consent at all. As a contract is consensual in nature, it is
perfected upon the concurrence of the offer and the acceptance. The offer must be
certain and the acceptance must be absolute, unconditional and without variance of
any sort from the proposal.
Hence, where the contracting parties do not agree as to the subject matter of the
contract, consent is absent, making the contract null and void.
In Go v. Intermediate Appellate Court (183 SCRA 82), when the contracting parties
were made to sign a compromise agreement not comprehending whatsoever that
they were actually relinquishing their rights over their homestead, the Court held
that "[i]nnocuous-looking documents [that] were foisted on the simple-minded
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homesteaders on the pretext that these were 'formalities'" were null and void as
there was no meeting of the minds. (Redentor Catapang, et al. vs. Lipa Bank, 930 SCRA
208-209)
2. Interpretation –
It will be oft-repeated in this disquisition that the cardinal rule in contract

interpretation is that a contract must be interpreted from the language of the
contract itself according to its plain meaning. The court's or tribunal's purpose in
examining a contract is to interpret the intent of the contracting parties, as
objectively manifested by them. It is not the province of the court or tribunal to
alter a contract by construction or to make a new contract for the parties; its duty is
confined to the interpretation of the one which they have made for themselves,
without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into the contract words which it does not contain.
We emphasize the fundamental rule in the interpretation of contracts that where

the language of a written contract is clear and unambiguous, the contract must be
taken to mean that which, on its face, it purports to mean, unless some good reason
can be assigned to show that the words should be understood in a different sense.
The intention of the parties must be gathered from the plain and literal language of
such agreement, and from that language alone.
True, jurisprudence holds that, in general, a check does not constitute legal tender,
and that the creditor may validly refuse it as payment. Conversely, a check may
still be a valid payment if the creditor does not refuse it as such (FEBTC vs. Diaz
Realty, Inc. 363 SCRA 659). In this case, VMC delivered written notices and checks
several times to East West Bank to exercise its option to pay/redeem. Records,
however, show no instance when East West Bank refused to accept the same for
not being a legal tender. (East West Banking Corp. vs. Victorias Milling Co., 927 SCRA
216-225)
3. Parol evidence –
When an agreement has been reduced to writing, the parties cannot be permitted to
adduce evidence to prove alleged practices which, to all purposes, would alter the
terms of the written agreement. Whatever is not found in the writing is understood
to have been waived and abandoned. (Danilo S. Ibanez vs. People of the Phil., 922
SCRA 487)
4. Interference with Contractual Relations –
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Fraud has been defined to include an inducement through insidious machination.

Insidious machination refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to deceive, conceals or omits to
state material facts and, by reason of such omission or concealment, the other party
was induced to give consent that would not otherwise have been given. These are
allegations of fact that demand clear and convincing proof. They are serious
accusations that can be so conveniently and casually invoked, and that is why they
are never presumed. Applying the doctrines to the case at bar, a judgment on fraud
requires allegation and proof of facts and circumstances by which undue and
unconscionable advantage is taken by Antonio Garcia.
The obligation of contracts is limited to the parties making them and, ordinarily,
only those who are parties to contracts are liable for their breach. Parties to a
contract cannot thereby impose any liability on one who, under its terms, is a
stranger to the contract, and, in any event, in order to bind a third person
contractually, an expression of assent by such person is necessary.
Under Article 1314 of the New Civil Code, however, any third person who induces
another to violate .his contract shall be liable for damages to the other contracting
party. The tort recognized in that provision is known as interference with
contractual relations. The interference is penalized because it violates the
property right of a party in a contract to reap the benefits that should result
therefrom.
The Court, in the case of So Ping Bun v. Court of Appeals, et al., (314 SCRA 751)
laid down the elements of tortious interference with contractual relations: (1)
existence of a valid contract; (2) knowledge on the part of the third person of the
existence of the contract and (3) interference on the part of the third person
without legal justification or excuse. (Ferro Chemicals vs. Antonio Garcia, et al. (804
SCRA 566)
COURT JURISDICTION IN ACTIONS TO

RECOVER DEPOSIT IN LEASES –
The CA was mistaken in appreciating the facts of the case. Contrary to its ruling, a
perusal of the complaint filed by petitioner makes out a case for collection of sum
of money and not for breach of contract. It is to be noted that the lease agreement
had already expired when petitioner filed an action for the return of the security
deposit. Since the lease had already expired, there is no more contract to breach.
The demand for the return of the security deposit was merely a collection suit.
What the petitioner prayed for before the MTCC was the return of the amount of
P90,000.00, and not to compel respondent to comply with his obligation under the
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lease agreement. As such, the CA erred when it held that the MTCC has no
jurisdiction over the case and dismissed the same for lack of jurisdiction. (Philppine-
Japan Active Carbon Corp. vs. Habib Borgaily, 928 SCRA 498-500)
DAMAGES –
(a) LIQUIDATED –
When the contracting parties, by their own free acts of will, agreed on what these
damages ought to be, they established the law between themselves. Their
contemplation of the consequences proper in the event of a breach has been
articulated. When courts are, thereafter, confronted with the need to award
damages in tandem with rescission, courts must not lose sight of how the parties
have explicitly stated, in their own language, these consequences. To uphold both
Article 1191 of the Civil Code and the parties' will, contractually stipulated
liquidated damages must, as a rule, be maintained.
By definition, liquidated damages are a penalty, meant to impress upon defaulting

obligors the graver consequences of their own culpability. Liquidated damages
must necessarily make non-compliance more cumbersome than compliance.
Otherwise, contracts might as well make no threat of a penalty at all:
Liquidated damages are those that the parties agree to be paid in case of a
breach. As worded, the amount agreed upon answers for damages suffered
by the owner due to delays in the completion of the project. Under
Philippine laws, these damages take the nature of penalties. A penal clause
is an accessory undertaking to assume greater liability in case of a breach. It
is attached to an obligation in order to ensure performance. (Philippine
Economic Zone Authority vs. Pilhino Sales Corp. 804 SCRA 279-284)
(b) MORAL –
In order for moral damages to be awarded, the following circumstances must
concur: (1) there is an injury, whether physical, mental or psychological, 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.
In Delos Santos v. Papa (587 SCRA 385), the Court elucidated that the mere filing
of an unmeritorious complaint does not ipso facto warrant the award of moral
damages, to wit:
Assuming arguendo that the petitioner's case lacked merit, the award
of moral damages is not a legal consequence that automatically
followed. Moral damages are only awarded if the basis therefor, as
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provided in the law quoted above, is duly established. In the present

case, the ground the respondents invoked and failed to establish is
malicious prosecution. Crystal v. Bank of the Philippine Islands is
instructive on this point, as it tells us that the law never intended to
impose a penalty on the right to litigate so that the filing of an
unfounded suit does not automatically entitle the defendant to moral
damages:
The spouses’ complaint against BPI proved to be

unfounded, but it does not automatically entitle BPI to
moral damages. Although the institution of a clearly
unfounded civil suit can at times be a legal justification for
an award of attorney's fees, such filing, however, has almost
invariably been held not to be a ground for an award of
moral damages. The rationale for the rule is that the law
could not have meant to impose a penalty on the right to
litigate. Otherwise, moral damages must every time be
awarded in favor of the prevailing defendant against an
unsuccessful plaintiff.
Given this conclusion, we find it unnecessary to rule on

whether the respondents indeed suffered injuries for which
they should be awarded moral damages.
In other words, the mere fact that the courts a quo ultimately dismissed Odrada's
complaint and found Aseniero to be the lawful owner of the Range Rover would
not automatically entitle the latter to recover moral damages from the former. The
same would not necessarily amount to a malicious prosecution where moral
damages may be recovered.
Malicious prosecution, for purposes of recovering moral damages, has been

defined as "an action for damages brought by or against whom a criminal
prosecution, civil suit or other legal proceeding has been instituted maliciously and
without probable cause, after the termination of such prosecution, suit, or other
proceeding in favor of the defendant therein. (Noel M. Odrada vs. Virgilio Lazaro, et
al. 929 SCRA 187-194)
(c) Nominal damages, not due –
However, the award of nominal damages has no basis. It has been settled that
nominal damages cannot co-exist with actual damages. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him. Since respondent has
already been indemnified for the damages made on the leased premises, there is no
more reason to further grant nominal damages. (Philppine-Japan Active Carbon Corp. vs.
Habib Borgaily, 928 SCRA 498-500)
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DECLARATION OF PRESUMPTIVE DEATH –
Article 41 of the Family Code provides the requirements for a declaration of

presumptive death, thus:
ART. 41. A marriage contracted by any person during the subsistence of

a previous marriage shall be null and void, unless before the celebration
of the subsequent marriage, the prior spouse had been absent for four
consecutive years and the spouse present had a well-founded belief that
the absent spouse was already dead. In case of disappearance where
there is danger of death under the circumstances set forth in the
provisions of Article 391 of the Civil Code, an absence of only two years
shall be sufficient.
For the purpose of contracting the subsequent marriage under the preceding
paragraph, the spouse present must institute a summary proceeding as provided in
this Code for the declaration of presumptive death of the absentee, without
prejudice to the effect of reappearance of the absent spouse.
Culled from this provision, the essential requisites for a declaration of presumptive
death for the purpose of remarriage are:
1. that the absent spouse has been missing for four consecutive years, or
two consecutive years if the disappearance occurred where there is
danger of death under the circumstances laid down in Article 391, Civil
Code;
2. that the present spouse wishes to remarry;
3. that the present spouse has a well-founded belief that the absentee is
dead; and
4. that the present spouse files a summary proceeding for the declaration of
presumptive death of the absentee.
xxx
The law did not define what is meant by '"well-founded belief." It depends upon
the circumstances of each particular case. Its determination, so to speak, remains
on a case-to-case basis. To be able to comply with this requirement, the present
spouse must prove that his/her belief was the result of diligent and reasonable
efforts and inquiries to locate the absent spouse and that based on these efforts and
inquiries, he/she believes that under the circumstances, the absent spouse is
already dead. It requires exertion of active effort (not a mere passive one).
(Republic of the Phil. vs. Remar A. Quinonez, 928 SCRA 37-40)
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DELAY IN RECIPROCAL OBLIGATIONS –
Stated simply, the Contract of Sale between petitioner Ching, as buyer, and
respondent Manas, as seller, gave rise to a reciprocal obligation, wherein
petitioner Ching was obliged to pay the balance of the purchase price while
respondent Manas was obliged to make complete delivery of the objects of the sale
on or before January 15, 1998 and ensure complete installation, dry run-testing,
and satisfactory operations of all the equipment installed.
In a reciprocal obligation, the performance of one is conditioned on the

simultaneous fulfillment of the other obligation (Vermen Realty Dev. Corp. vs. CA,
224 SCRA 549). Neither party incurs in delay if the other does not comply or is not
ready to comply in a manner with what is incumbent upon him. As explained by
recognized Civil Law Commentator, former CA Justice Eduardo P. Caguioa, a
reciprocal obligation has been defined as that "where each of the parties is a
promissee of a prestation and promises another in return as a counterpart of
equivalent of the other. x x x The most salient feature of this obligation is
reciprocity."
In the instant case, it is not of serious dispute that respondent Manas reneged on his
obligations as seller, justifying petitioner Ching's refusal to pay the balance of the
purchase price. (Chua Ping Han, etc. vs. Silverio Manas, etc. et al., 924 SCRA 455)
DIVORCE –
1. Who should obtain –

In the recent case of Manalo (862 SCRA 580), the Court en banc extended the scope
of Article 26(2) to even cover instances where the divorce decree is
obtained solely by the Filipino spouse. The Court's ruling states, in part:
Paragraph 2 of Article 26 speaks of "a divorce x x x validly

obtained abroad by the alien spouse capacitating him or her to
remarry." Based on a clear and plain reading of the provision, it only
requires that there be a divorce validly obtained abroad. The letter of
the law does not demand that the alien spouse should be the one who
initiated the proceeding wherein the divorce decree was granted. It
does not distinguish whether the Filipino spouse is the petitioner or the
respondent in the foreign divorce proceeding. The Court is bound by
the words of the statute; neither can We put words in the mouths of the
lawmakers. "The legislature is presumed to know the meaning of the
words, to have used words advisedly, and to have expressed its intent
by the use of such words as are found in the statute. Verba legis non
est recedendum, or from the words of a statute there should be no
departure."
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Assuming, for the sake of argument, that the word "obtained" should
be interpreted to mean that the divorce proceeding must be actually
initiated by the alien spouse, still, the Court will not follow the letter of
the statute when to do so would depart from the true intent of the
legislature or would otherwise yield conclusions inconsistent with the
general purpose of the act. Laws have ends to achieve, and statutes
should be so construed as not to defeat but to carry out such ends and
purposes. As held in League of Cities of the Phils., et al. v.
COMELEC, et al.:
The legislative intent is not at all times accurately reflected

in the manner in which the resulting law is couched. Thus,
applying a verba legis or strictly literal interpretation of a
statute may render it meaningless and lead to inconvenience,
an absurd situation or injustice. To obviate this aberration,
and bearing in mind the principle that the intent or the spirit
of the law is the law itself, resort should be to the rule that
the spirit of the law controls its letter.
To reiterate, the purpose of paragraph 2 of Article 26 is to avoid the absurd

situation where the Filipino spouse remains married to the alien spouse who, after
a foreign divorce decree that is effective in the country where it was rendered, is
no longer married to the Filipino spouse. The provision is a corrective measure to
address an anomaly where the Filipino spouse is tied to the marriage while the
foreign spouse is free to marry under the laws of his or her country. Whether the
Filipino spouse initiated the foreign divorce proceeding or not, a favorable decree
dissolving the marriage bond and capacitating his or her alien spouse to remarry
will have the same result: the Filipino spouse will effectively be without a husband
or wife. A Filipino who initiated a foreign divorce proceeding is in the same place
and in like circumstance as a Filipino who is at the receiving end of an alien
initiated proceeding. Therefore, the subject provision should not make a
distinction. In both instance, it is extended as a means to recognize the residual
effect of the foreign divorce decree on Filipinos whose marital ties to their alien
spouses are severed by operation of the latter's national law.
Pursuant to the majority ruling in Manalo, Article 26(2) applies to mixed

marriages where the divorce decree is: (i) obtained by the foreign spouse; (ii)
obtained jointly by the Filipino and foreign spouse; and (iii) obtained solely by
the Filipino spouse.
Based on the records, Cynthia and Park obtained a divorce decree by mutual
agreement under the laws of South Korea. The sufficiency of the evidence
presented by Cynthia to prove the issuance of said divorce decree and the
governing national law of her husband Park was not put in issue. In fact, the CA
considered said evidence sufficient to establish the authenticity and validity of the
divorce in question:
x x x [T]he records show that [Cynthia] submitted, inter alia, the

original and translated foreign divorce decree, as well as the required
certificates proving its authenticity. She also offered into evidence a
copy of the Korean Civil Code, duly authenticated through a Letter of
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Confirmation with Registry No. 2013-020871, issued by the Embassy

of the Republic of Korea in the Philippines. These pieces of evidence
may have been sufficient to establish the authenticity and validity of
the divorce obtained by the estranged couple abroad but [the CA
agrees] with the OSG that the divorce cannot be recognized in this
jurisdiction insofar as [Cynthia] is concerned since it was obtained by
mutual agreement of a foreign spouse and a Filipino spouse.
In this light, it becomes unnecessary to delve into the admissibility and

probative value of Abigail's testimony claiming that Cynthia had been
constrained to consent to the divorce. As confirmed by Manalo, the divorce
decree obtained by Park, with or without Cynthia's conformity, falls within
the scope of Article 26(2) and merits recognition in this jurisdiction.
(Cynthia Galapon vs. Republic of the Phil., 930 SCRA 63-65)
2. Evidence required –
Here, what petitioner offered in evidence were mere printouts of pertinent portions
of the Japanese law on divorce and its English translation. There was no proof at
all that these printouts reflected the existing law on divorce in Japan and its correct
English translation. Indeed, our rules require more than a printout from a website
to prove a foreign law. In Racho, the Japanese law on divorce was duly proved
through a copy of the English Version of the Civil Code of Japan translated under
the authorization of the Ministry of Justice and the Code of Translation Committee.
At any rate, considering that the fact of divorce was duly proved in this case, the
higher interest of substantial justice compels that petitioner be afforded the chance
to properly prove the Japanese law on divorce, with the end view that petitioner
may be eventually freed from a marriage in which she is the only remaining party.
In Manalo, the Court, too, did not dismiss the case, but simply remanded it to the
trial court for reception of evidence pertaining to the existence of the Japanese law
on divorce. (Minuro Takahashi, etc. vs. Republic of the Phil. 927 SCRA 283)
DONATIONS INTER VIVOS –
1. Form –
In Spouses Salonga v. Spouses Concepcion (470 SCRA 291), it was held that the
notarization of a document does not guarantee its validity because it is not the
function of the notary public to validate an instrument that was never intended by
the parties to have any binding legal effect. Neither is the notarization of a
document conclusive as to the nature of the transaction, nor is it conclusive of the
true agreement of the parties thereto. Simply stated, the existence, veracity, and
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authenticity of a notarized written deed of sale do not conclusively determine

whether all the essential requisites of a contract are present.
According to Article 749 of the Civil Code, in order for a donation of an

immovable property to be considered valid, the donation must be made in a public
document, specifying therein the property donated and the value of the charges
which the donee must satisfy. In the instant case, as already explained, the Deed
of Absolute Sale was not properly notarized, making it a private document.
Hence, there was no donation made in a public document.
Moreover, Article 749 of the Civil Code additionally requires that the donee
manifests his/her acceptance of the donation of the immovable property in either
the same public instrument or in a separate instrument. If the donee accepts the
donation in a separate instrument, the donor should be notified thereof in an
authentic form, and this step shall be noted in both instruments. In the instant case,
there was no acceptance of any donation manifested by the respondents Heirs of
Julita in the unilaterally executed Deed of Absolute Sale. There was also no
separate instrument that was executed by the respondents Heirs of Julita for the
purpose of accepting any donation from their grandmother. Simply stated, the
formalities of making and accepting a donation of an immovable property required
under Article 749 of the Civil Code were not observed. The donation of real
property is void without the formalities stated in Article 749. (Pablo Uy, etc. vs. Heirs
of Julita Uy Rosales, 927 SCRA 257-263)
2. Revocability –
The issue here on the validity and propriety of the revocation by the Province of
the Deed of Donation, which will entitle it physical possession of the donated
property, rests on whether CASTEA's breach of the Deed of Donation, if any,
warrants the automatic revocation thereof.
To recall, the provision under review is:
That the condition of this donation is that the DONEE shall use the
above described portion of land subject of the present donation for
no other purpose except the construction of its building to be owned
and to be constructed by the above-named DONEE to house its
offices to be used by the said Camarines Sur Teachers' Association,
Inc., in connection with its functions under its charter and by-laws
and the Naga City Teachers' Association as well as the Camarines
Sur High School Alumni Association, PROVIDED
FURTHERMORE, that the DONEE shall not sell, mortgage or
[e]ncumber the property herein donated including any and all
improvements thereon in favor of any party and Provided, lastly that
the construction of the building or buildings referred to above shall
be commenced within a period of one (1) year from and after the
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execution of this donation, otherwise, this donation shall be deemed

automatically revoked and voided and of no further force and effect.
The provision involves four aspects, namely:
(1) a prestation to do — "the DONEE shall use the above described portion of
[the] land subject of the present donation for no other purpose except the
construction of its building to be owned and to be constructed by the above-
named DONEE to house its offices to be used by the said Camarines Sur
Teachers' Association, Inc., in connection with its functions under its charter
and by-laws and the Naga City Teachers' Association as well as the
Camarines Sur High School Alumni Association;"
(2) a prestation not to do — "the DONEE shall not sell, mortgage or [e]ncumber
the property herein donated including any and all improvements thereon in
favor of any party;"
(3) a term or period for the prestation to do — "the construction of the building
or buildings referred to above shall be commenced within a period of one (1)
year from and after the execution of this Donation;" and
(4) effect of the non-compliance — "this donation shall be deemed automatically

revoked and voided and of no further force and effect."
The provision clearly imposes a burden on the donee which is onerous or

burdensome in character — CASTEA should use the donated property for the
construction of a building to be owned and to be constructed within one year from
September 28, 1966 (date of execution of the Deed of Donation) by CASTEA to
house the office to be used by it, in connection with its functions under its charter
and by-laws and the Naga City Teachers' Association as well as the Camarines Sur
High School Alumni Association.
Also, the provision imposes a restriction on the alienation and encumbrance by

CASTEA of the donated property — CASTEA should not sell, mortgage or
encumber the donated property including any and all improvements thereon in
favor of any party.
The provision further contains an automatic revocation of the donation upon non-
compliance thereof by CASTEA resulting in its nullity.
Given the different aspects of the donation, how should it be characterized?
Justice Eduardo P. Caguioa expounded on the different classifications of

donations, viz.:
x x x According to its effects[,] donation may be classified into pure,

conditional, with a term and onerous. Pure donations are those not
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subject to any future and uncertain event nor to a period.

Conditional donations are those subject to a future and uncertain
event which may either be suspensive or resolutory. Donations with
a term are those whose demandability [or termination] depends on
the arrival of a term which may also be either suspensive or
resolutory. Onerous donations are those where a burden inferior in
value to the property donated is imposed on the donee. This kind of
donations includes those improper donations where a burden equal
in value to the property donated is imposed; as well as mixed
donations and modal donations. Mixed donation (negotium mixtum
cum donatione) is one which contains an onerous transaction, e.g., a
sale of a thing for a price lower than its value, made in the nature of
a semi-donation. Modal donation is one which imposes on the
donee a prestation. In this connection the explanation of modal
institution in succession provided in Article 882 is applicable. The
prestation imposed on the donee may either be a burden or charge
inferior in value to the property donated or services to be performed
in the future.
From an obligation point of view, there are two prestations imposed

on CASTEA. One is to do, which is to use the donated property for
the purpose intended and to construct the required building, and the
other is not to do, which is not to sell, mortgage or encumber it to
any person. The prestation to construct a building is undoubtedly
modal in nature as it imposed a prestation or obligation on
CASTEA. Thus, the donation to CASTEA can properly be classified
as a modal donation (because of CASTEA's obligation to
construct the required building) with a prestation not to
alienate/encumber and an automatic revocation clause. The
donation may also be classified as an onerous donation because
there is a burden imposed on the donee in the absence of proof that
the burden or charge (cost of the building) is superior or greater than
the value of the donated 600 square meters lot at the time of the
donation in September, 1966.
Whether the donation in question is classified as modal or onerous, there is no

doubt that the rules governing contracts should prevail in the interpretation of the
Deed of Donation pursuant to Articles 732 and 733 of the Civil Code.
Article 732 provides that "[d]onations which are to take effect inter vivos shall be
governed by the general provisions on contracts and obligations in all that is not
determined in this Title [on Donation]" while Article 733 provides
that "[d]onations with an onerous cause shall be governed by the rules on
contracts, and remuneratory donations by the provisions of the present Title as
regards that portion which exceeds the value of the burden imposed." The
precursor of Article 733 is Article 622 of the Civil Code of Spain (Old Civil
Code), which provided: "[d]onations upon valuable consideration shall be
governed by the rules concerning contracts.
The Roman Catholic Archbishop of Manila v. CA (198 SCRA 300) (The Roman
Catholic Archbishop of Manila) likewise finds application in the present case.
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In the said case, Spouses Eusebio de Castro and Martina Rieta executed a deed of
donation on August 23, 1930 in favor of the Roman Catholic Archbishop of
Manila covering a parcel of land with an area of 964 square meters located in
Kawit, Cavite. The deed of donation provided that the donee shall not dispose or
sell the property within a period of 100 years from the execution of the deed of
donation, otherwise a violation of such condition would render ipso facto null and
void the deed of donation and the property would revert to the estate of the donors.
On June 30, 1980, or 50 years after the donation in 1930, the Roman Catholic
Bishop of Imus, in whose administration all the properties within the province of
Cavite owned by the Archdiocese of Manila was transferred, executed a deed of
sale of the donated property in favor of Florencio and Soledad Ignao, therein
petitioners. On November 29, 1984, the private respondents therein (the estate of
deceased spouses Eusebio de Castro and Martina Rieta, represented by Marina
Rieta Granados and Theresa Rieta Tolentino) filed a complaint for nullification of
the deed of donation, rescission of contract and reconveyance of the donated
property with damages.
The Court in The Roman Catholic Archbishop of Manila ruled in favor of the
validity of the automatic reversion clause, viz.:
The validity of such a stipulation in the deed of donation providing

for the automatic reversion of the donated property to the donor
upon non compliance of the condition was upheld in the recent case
of De Luna, et al. vs. Abrigo, et al. (181 SCRA 150). It was held
therein that said stipulation is in the nature of an agreement granting
a party the right to rescind a contract unilaterally [in] case of
breach, without need of going to court, and that, upon the happening
of the resolutory condition or non-compliance with the conditions of
the contract, the donation is automatically revoked without need of a
judicial declaration to that effect. While what was the subject of that
case was an onerous donation which, under Article 733 of the Civil
Code is governed by the rules on contracts, since the donation in the
case at bar is also subject to the same rules because of its provision
on automatic revocation upon the violation of a resolutory condition,
[for] parity of reasons said pronouncements in De Luna pertinently
apply.
The rationale for the foregoing is that in contracts providing for

automatic revocation, judicial intervention is necessary not for
purposes of obtaining a judicial declaration rescinding a
contract already deemed rescinded by virtue of an agreement
providing for rescission even without judicial intervention, but
in order to determine whether or not the rescission was proper.
When a deed of donation, as in this case, expressly provides for

automatic revocation and reversion of the property donated, the rules
on contract and the general rules on prescription should apply,
and not Article 764 of the Civil Code. Since Article 1306 of said
Code authorizes the parties to a contract to establish such
stipulations, clauses, terms and conditions not contrary to law,
morals, good customs, public order or public policy, we are of the
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opinion that, at the very least, that stipulation of the parties

providing for automatic revocation of the deed of donation, without
prior judicial action for that purpose, is valid subject to the
determination of the propriety of the rescission sought. Where such
propriety is sustained, the decision of the court will be merely
declaratory of the revocation, but it is not in itself the revocatory act.
On the foregoing ratiocinations, the Court of Appeals committed no

error in holding that the cause of action of herein private respondents
has not yet prescribed since an action to enforce a written contract
prescribes in ten (10) years. It is our view that Article 764 was
intended to provide a judicial remedy in case of non-fulfillment or
contravention of conditions specified in the deed of donation if and
when the parties have not agreed on the automatic revocation of
such donation upon the occurrence of the contingency contemplated
therein. That is not the situation in the case at bar.
While the legality of automatic revocation or rescission clauses in deeds of

donation has been upheld, the courts are not precluded from determining whether
their application or enforcement by the donors concerned are proper if the donees
contest the revocation or rescission. If the court sustains its propriety, the court's
decision is not the act that revokes the donation but would be merely declaratory of
the validity of the revocation.
The need for a judicial determination of the valid exercise of the automatic
revocation or rescission right granted to the donor is further explained in Dolar v.
Barangay Lublub (now P.D. Morifort North), Municipality of Dumangas (475
SCRA 458), viz.:
If the corresponding contract of donation expressly provides for automatic

rescission and/or reversion in case of breach of the condition therein, and the
donee violates or fails to comply with the condition, the donated property reverts
back automatically to the donor. Such provision, De Luna teaches, is in the nature
of an agreement granting a party the right to rescind a contract in case of breach,
without need of going to court and that upon the happening of the resolutory
condition or non-compliance with the conditions of the contract, the donation is
automatically revoked without need of a judicial declaration to that effect. Where,
however, the donee denies, as here, the rescission or challenges the propriety
thereof, then only the final award of the court can, to borrow from University of
the Philippines vs. de los Angeles, "conclusively settle whether the resolution is
proper or not." Or, in the language of Catholic Archbishop of Manila:
The rationale for the foregoing is that in contracts providing for

automatic revocation, judicial intervention is necessary not for
purposes of obtaining a judicial declaration rescinding a contract
already deemed rescinded by virtue of an agreement providing for
rescission even without judicial intervention, but in order to
determine whether or not the rescission was proper.
When a deed of donation, ... expressly provides for automatic

revocation and reversion of the property donated, the rules on
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contract and the general rules on prescription should apply, and not
Article 764 of the Civil Code. Since Article 1306 of said Code
authorizes the parties to a contract to establish such stipulations, .. .
not contrary to law, ... public order or public policy, we are of the
opinion that, at the very least, that stipulation of the parties
providing for automatic revocation of the deed of donation, without
prior judicial action for that purpose, is valid subject to the
determination of the propriety of the rescission sought. Where such
propriety is sustained, the decision of the court will be merely
declaratory of the revocation, but it is not in itself the revocatory act.
In this case, since CASTEA contests the propriety of the Province's revocation of
the Deed of Donation then the mere invocation by the Province of the automatic
revocation clause is insufficient. A judicial declaration of its propriety is,
therefore, required before the continued possession by CASTEA, as donee, can be
declared unlawful. Since the present case is an unlawful detainer, the
determination by the Court on this issue will be merely provisional. (Camarines
Sur Teachers and Employees Association, Inc. etc., vs. Province of Camarines Sur, 921
SCRA 548)
DOUBLE SALES –
(a) The rule on double sale is provided in Article 1544 of the Civil Code. It
reads:
ARTICLE 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should be movable
property.
Should it be immovable property, the ownership shall belong to the

person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person

who in good faith was first in the possession; and, in the absence thereof,
to the person who presents the oldest title, provided there is good faith.
It is readily apparent that the rules concerning double sale of movable properties
differ from that of immovable properties. In double sale of immovable sale, the
law provides for a three-pronged approach in determining ownership, to wit: (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. On the other hand, in case of double sale of a
movable property, ownership is simply transferred to the first who may have taken
possession thereof in good faith. Since the present case involves a sale of a motor
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vehicle, its ownership should then belong to the first possessor in good faith. (Noel
M. Odrada vs. Virgilio Lazaro, et al. 929 SCRA 187-194)
(b) The rule on double sales applies when the same thing is sold to multiple
buyers by one seller, but not to sales of the same thing by multiple sellers. (Manlan
vs. Beltran, 924 SCRA 619)
Generally, persons dealing with registered land may safely rely on the correctness
of the certificate of title, without having to go beyond it to determine the property's
condition. (Rufloe vs. Burgos, 577 SCRA 264)
However, when circumstances are present that should prompt a potential buyer to
be on guard, it is expected that they inquire first into the status of the land. One
such circumstance is when there are occupants or tenants on the property, or when
the seller is not in possession of it. In Spouses Vallido v. Spouses Pono (696 SCRA
381):
Moreover, although it is a recognized principle that a person dealing on a

registered land need not go beyond its certificate of title, it is also a
firmly settled rule that where there are circumstances which would put a
party on guard and prompt him to investigate or inspect the property
being sold to him, such as the presence of occupants/tenants thereon, it is
expected from the purchaser of a valued piece of land to inquire first into
the status or nature of possession of the occupants. As in the common
practice in the real estate industry, an ocular inspection of the premises
involved is a safeguard that a cautious and prudent purchaser usually
takes. Should he find out that the land he intends to buy is occupied by
anybody else other than the seller who, as in this case, is not in actual
possession, it would then be incumbent upon the purchaser to verify the
extent of the occupant's possessory rights. The failure of a prospective
buyer to take such precautionary steps would mean negligence on his
part and would preclude him from claiming or invoking the rights of a
"purchaser in good faith." It has been held that "the registration of a later
sale must be done in good faith to entitle the registrant to priority in
ownership over the vendee in an earlier sale."
To buy real property while having only a general idea of where it is and without
knowing the actual condition and identity of the metes and bounds of the land to be
bought, is negligent and careless. Failure to take such ordinary precautionary
steps, which could not have been difficult to undertake for respondents Santuyo
Spouses, as they were situated near where the property is located, precludes their
defense of good faith in the purchase.
The second buyer who has actual or constructive knowledge of the prior sale
cannot be a registrant in good faith. The totality of documents executed by all of
the respondents show that the respondents Santuyo Spouses knew or should have
known that there is some cloud or doubt over the seller's title. (Sps. Danilo and
Clarita German vs. Sps. Benjamin and Editha Santuyo, et al., etc. 929 SCRA 405 – 410)
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EASEMENT OF RIGHT OF WAY –
In several cases, the Court struck down reliance on Section 3A of RA 6395, as

amended by PD No. 938. True, an easement of a right of way transmits no rights
except the easement itself, and the respondents would retain full ownership of the
property taken. Nonetheless, the acquisition of such easement is not gratis. The
limitations on the use of the property taken for an indefinite period would deprive
its owner of the normal use thereof. For this reason, the latter is entitled to
payment of a just compensation, which must be neither more nor less than the
monetary equivalent of the land taken.
Citing the case of National Power Corporation v. Tiangco (514 SCRA 674), the
Court in National Power Corporation v. Sps. Asoque (802 SCRA 582) elucidated:
While the power of eminent domain results in the taking or

appropriation of title to, and possession of the expropriated property,
no cogent reason appears why said power may not be availed of to
impose only a burden upon the owner of the condemned property,
without loss of title and possession. However, if 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, then the owner should be compensated for the monetary
equivalent of the land. x x x. (National Transmission Corp., etc. vs. Sps.
Mariano S. Tiglao, et al. 930 SCRA 442-443)
ESTOPPEL IN PAIS –
(a) In GE Money Bank, Inc. v. Spouses Dizon (754 SCRA 74), the Court clarified
the meaning of this doctrine:
Estoppel in pais arises when one, by his acts, representations or

admissions, or by his own silence when he ought to speak out,
intentionally or through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and acts on such
belief, so that he will be prejudiced if the former is permitted to deny the
existence of such facts. The principle of estoppel would step in to
prevent one party from going back on his or her own acts and
representations to the prejudice of the other party who relied upon them.
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It is a principle of equity and natural justice, expressly adopted in Article

1431 of the New Civil Code and articulated as one of the conclusive
presumptions in Rule 131, Section 2 (a) of our Rules of Court.
For the principle to apply, certain elements must be present in respect of both the
party sought to be estopped and the party claiming estoppel:
The essential elements of estoppel in pais, in relation to the party sought

to be estopped, are: (1) a clear conduct amounting to false
representation or concealment of material facts or, at least, calculated to
convey the impression that the facts are otherwise than, and inconsistent
with, those which the party subsequently attempts to assert; (2) an
intent or, at least, an expectation, that this conduct shall influence, or be
acted upon by, the other party; and (3) the knowledge, actual or
constructive, by him of the real facts. With respect to the party claiming
the estoppel, the conditions he must satisfy are: (1) lack of knowledge
or of the means of knowledge of the truth as to the facts in question; (2)
reliance, in good faith, upon the conduct or statements of the party to be
estopped; and (3) action or inaction based thereon of such character as
to change his position or status calculated to cause him injury or
prejudice. It has not been shown that respondent intended to conceal the
actual facts concerning the property; more importantly, petitioner has
been shown not to be totally unaware of the real ownership of the subject
property. (Agnes V. Guison vs. Heirs of Loreno Terry, et al. 836 SCRA 111)
(b) Estoppel in pais arises when one, by his acts, representations or admissions,
or by his own silence when he ought to speak out, intentionally or through culpable
negligence , induces another to believe certain facts to exist and such other
rightfully relies on acts on such belief, so that he will be prejudiced if the former is
permitted to deny the existence of such facts. (GE Money Bank, Inc. (formerly Keppel
Bank Philippines, Inc. vs. Dizon, 754 SCRA 74)
(c) Estoppel by silence arises when a person, by force of circumstances,

otherwise obliged to speak, refrains from doing so and thereby induces the other to
believe in the existence of a state of facts in reliance on which he acts to his
prejudice. (NPC Drivers and Mechanics Association (NPC DAMA) vs. National Power
Corporation (NPC), 727 SCRA 363 (2014)
EXPROPRIATION –
(a) "Eminent domain or expropriation is the inherent right of the state to condemn
private property to public use upon payment of just compensation." This power is
exercised by the legislature and may be delegated to local governments, other
public entities, and public utilities.
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In exercising the power of eminent domain, the following requirements must

concur:
(1) the expropriator must enter a private property; (2) the entrance into
private property must be for more than a momentary period; (3) the
entry into the property should be under warrant or color of legal
authority; (4) the property must be devoted to a public purpose or
otherwise informally, appropriately or injuriously affected; and (5) the
utilization of the property for public use must be in such a way as to oust
the owner and deprive him of all beneficial enjoyment of the property.
Expropriation may be judicially claimed only by filing a complaint for

expropriation. Inverse expropriation is a claim for compensation by the deprived
landowner as a complaint or as a counterclaim. It seeks to recover the value of
property taken, even though there is no formal exercise of the power of eminent
domain. Normally, it is the expropriator-the State-that files the complaint.
An expropriation suit falls under the jurisdiction of the regional trial court because
it is a case incapable of pecuniary estimation. It deals with the government's
exercise of its authority and right to take property for public use.
The right of an expropriator to file a complaint for expropriation is not allowed in

an action such as a forcible entry or unlawful detainer suit. These actions are
summary in nature. Therefore, in this case, this Court cannot award expropriation.
(PLDT vs. Citi Appliance, 922 SCRA 526)
(b) Interest in Expropriation cases, accrual –
In Republic v. Macabagdal (850 SCRA 501), we had occasion to point out that
accrual of legal interest should begin "not from the date of the filing of the
complaint but from the date of the issuance of the Writ of Possession xxx, since it
is from this date that the fact of the deprivation of property can be established."
In Evergreen Manufacturing Corp. v. Republic (839 SCRA 200), the filing of the
expropriation complaint also preceded the actual taking of the property and we
ruled that "the just compensation shall be appraised as of [the date of filing of the
complaint]," and clarified that "no interest shall accrue as the government did not
take possession of the subject premises." We then held that the legal interest, on
the difference between the final amount adjudged by the Court and the initial
payment made, shall accrue from when the government was able to take
possession of the property. Here, it was established that the amount deposited by
NAPOCOR with PNB-Kabankalan caused it to be placed in possession of the
expropriated properties on August 3, 1999. Hence, it is from this date that legal
interest should begin to run.
As to the applicable interest rate specified by the CA-Cebu City as 12% p.a., this is
applicable only until June 30, 2013, in line with Secretary of the Department of
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Public Works and Highways v. Spouses Tecson 756 SCRA 389), which upheld the
applicability of Banko Sentral ng Pilipinas-Monetary Board Circular No. 799,
Series of 2013 to forbearances of money in expropriation cases. Accordingly, the
applicable legal interest is 6% per annum from July 1, 2013 until the finality of this
resolution. Thereafter, the total amount due shall earn legal interest of 6% per
annum from finality of the Court's resolution until full payment. (National Power
Corp. vs. Heirs of Salvador Serra, et al.929 SCRA 494-495)
EXTRA-JUDICIAL FORECLOSURES - when

ownership is transferred to buyer–
It is undisputed that Certificate of Sale was issued and registered on August 22,
2011. As such, the last day of the redemption period is on August 22, 2012. The
determination of such expiration date is relevant insofar as the ownership of the
subject properties is concerned. Case law dictates that the purchaser in an
extrajudicial foreclosure of real property becomes the absolute owner of the
property if no redemption is made within one year from the registration of the
Certificate of Sale by those entitled to redeem. The consolidation of ownership in
the name of the buyer and the issuance of the new certificate of title merely entitles
him to possession thereof as a matter of right. Nevertheless, upon the purchase of
the property and before the lapse of the redemption period, the buyer is already
considered as the owner. In fact, he can demand possession of the land even
during the redemption period except that he has to post a bond in accordance with
Section 7 of Act No. 3135, as amended.
Hence, in this case, the ownership of the subject properties was vested upon the
petitioner on August 22, 2012 as its registered owners failed to redeem the same.
Notably, such period precedes the filing of the petition for corporate rehabilitation
on October 18, 2012.
The effect of such sale is to release the debtor from its outstanding obligation. In
fact, petitioner issued a Certification stating that respondent fully paid the same by
virtue of the foreclosure sale. (Land Bank of the Phil. vs. Polillo Paradise Island Corp.,
927 SCRA 461-462)
FORCIBLE ENTRY, allegations in the Complaint –
In ejectment cases, the complaint must state and sufficiently show on its face the
essential facts laid down under Section 1, Rule 70 of the Rules of Court, to give
the court jurisdiction without resort to parol evidence.
The above-cited provision requires that in action for forcible entry, as in this case,
it must be alleged that the complainant was deprived of the possession of any land
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or building by force, intimidation, threat, strategy, or stealth, and that the action
was filed anytime within one year from the time the unlawful deprivation of
possession took place, except that when the entry is through stealth, the one-year
period is counted from the time the complainant learned of the dispossession. It is
not necessary, however, for the complainant to utilize the language of the statute.
It would suffice that the facts are set up. showing that complainant has prior
physical possession of the property in litigation and that he was dispossessed
thereof through defendant's unlawful act/s constituting force, intimidation, threat,
strategy, or stealth.
xxx
The only question that courts must resolve in an ejectment case is who between the
parties is entitled to the physical or material possession of the property in dispute.
The main issue is possession de facto, independent of any claim of ownership or
possession de jure. Thus, courts should base their decision on who had prior
physical possession of the premises under litigation.
As a rule, "possession" in forcible entry cases refers to nothing more than prior
physical possession or possession de facto, not possession de jure or that arising
from ownership. Title is not an issue. The Court has, however, consistently ruled
that possession can be acquired not only by material or actual occupation, but also
by the fact that a thing is subject to the action of one's will or by the proper acts
and legal formalities established for acquiring such right.
In Quizon v. Juan (554 SCRA 601), the Court explained:

Possession can be acquired by juridical acts. These are acts to which the
law gives the force of acts of possession. Examples of these are
donations, succession, execution and registration of public instruments,
inscription of possessory information titles and the like. The reason for
this exceptional rule is that possession in the eyes of the law does not
mean that a man has to have his feet on every square meter of ground
before it can be said that he is in possession. It is sufficient that
petitioner was able to subject the property to the action of his will.
In the case of Mangaser v. Ugay (744 SCRA 13), the Court also held that the
plaintiff therein, who is the registered owner of the property in dispute, acquired
possession thereof by juridical act, specifically, through the issuance of a free
patent under Commonwealth Act No. 141 and its subsequent registration with the
Register of Deeds. The Court ruled that if such juridical acts to obtain prior
possession would be disregarded, then it would create an absurd situation. It
would be putting premium in favor of land intruders against Torrens title holders,
who spent months or even years, in order to register their land, and who religiously
pay their taxes thereon.
Also cited in Mangaser is the case of Habagat Grill v. DMC-Urban Property
Developer, Inc. (454 SCRA 653), wherein the Court gave weight to the prior
possession of the registered owner's predecessor-in-interest as evidenced by the
execution and registration of public instruments for such purpose to rule in favor
of said registered owner's prior possession. (Patrick G. Madayag vs. Federico
Madayag, 929 SCRA 206-210)
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GARDEN LEAVE –
The practice of the employer directing an employee not to attend work during the
period of notice of resignation or termination of the employment is colloquially
known as "'garden leave" or "gardening leave." The employee might be given no
work or limited duties, or be required to be available during the notice period to,
for example, assist with the completion of work or ensure the smooth transition of
work to their successor. Otherwise, the employee is given no work and is directed
to have no contact with clients or continuing employees. During the period of
garden leave, employees continue to be paid their salary and any other contractual
benefits as if they were rendering their services to the employer. (Gertrudes Mejila
vs. Wrigley Phil., et al. (919 SCRA 109)
GENERAL LAW cannot repeal a special law -
We agree with the CTA-En Banc that Section 27 is a general law while Section 8
of RA 7227, as amended by RA 7917 is a special law. As a rule, a general law
cannot impliedly repeal a special law. (Commissioner of Internal Revenue vs. Bases
Conversion and Development Authority, 928 SCRA 657)
INDEPENDENT CONTRACTOR –
1. Jurisprudence has invariably ruled that an independent contractor carries on an
independent business and undertakes the contract work on his own account, under
his own responsibility, according to his own manner of his employer or principal
in all matters connected with the performance of the work except as to the results
thereof. (Chevron (Phils.), Inc. vs. Galit, 772 SCRA 145)
2. Article 1724 governs the recovery of costs for any additional work because of a
subsequent change in the original plans. The underlying purpose of the provision
is to prevent unnecessary litigation for additional costs incurred by reason of
additions or changes in the original plan. The provision was undoubtedly adopted
to serve as a safeguard or as a substantive condition precedent to recovery. As
such, added costs can only be allowed upon: (a) the written authority from the
developer or project owner ordering or allowing the changes in work; and (b) upon
written agreement of the parties on the increase in price or cost due to the change
in work or design modification. Compliance with the requisites is a condition
precedent for recovery; the absence of one requisite bars the claim for additional
costs. Notably, neither the authority for the changes made nor the additional price
to be paid therefor may be proved by any evidence other than the written authority
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and agreement as above-stated. (Shangri-la Properties, Inc. etc. vs. BF Corp., 924 SCRA
220-221)
INTEREST –
(a) Article 2209 of the Civil Code mandates that when a debtor incurs a delay in
obligations to pay a sum of money, the indemnity for damages shall be the
payment of the interest agreed upon. Article 2209 provides:
Art. 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 percent per annum.
Thus, if the rate of interest is stipulated, such stipulated interest shall apply and not
the legal interest, provided the stipulated interest is not excessive and
unconscionable. The stipulated interest shall be applied until full payment of
the obligation because that is the law between the parties. The legal interest
only applies in the absence of stipulated interest.
(b) Further, I note that unpaid health maintenance insurance dues, group premium
for hospitalization, and other payables are likewise not loans or forbearances of
money, goods, or credit. Hence, it is not subject to the BSP-prescribed interest rate
of 12% per annum (NAPOCOR vs. Angas, 208 SCRA 542). In addition, I find that no
compensatory interest under Article 2212 of the Civil Code (the last paragraph of
the dispositive portion) is due on the unpaid Health Maintenance Insurance dues,
group premium for hospitalization, and other payables as no interest has been
stipulated. The Court has held that "Article 2212 contemplates the presence of
stipulated or conventional interest, i.e., monetary interest, which has accrued when
demand was judicially made. In cases where no monetary interest had been
stipulated by the parties, no accrued monetary interest could further earn
compensatory interest upon judicial demand." (Gerry S. Mojica vs. Generali Pilipinas
Life Assurance Co., Inc. 920 SCRA 194)
(c) In the case of Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc.
(916 SCRA 1) this Court clarified the imposition of interest previously stated in the
case of Nacar v. Gallery Frames (703 SCRA 439). When the monetary obligation
does not constitute a loan or forbearance of money, goods, or credits and there is
no stipulation as to the payment of interest on the damages, a legal interest of
6% per annum under Article 2209 of the Civil Code shall be imposed. The
imposition of such legal interest shall be reckoned from the date of extrajudicial or
judicial demand and shall continue to run until full payment. In the case of Hun
Hyung Park v. Eung Won Choi (899 SCRA 90) this Court explained that such
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interest - called compensatory interest - will not be subject to the imposition of

further interest under Article 2212 of the Civil Code. (Ernesto P. Gutierrez vs.
NAWRAS Manpower Services, Inc., et al., 926 SCRA 218)
(d) The Court, nonetheless, modifies the interest rate imposed on the monetary
awards to conform with the guidelines laid down in Lara's Gift Shop & Decors,
Inc. v. Midtown Industrial Sales, Inc. (916 SCRA 1), viz:
xxx xxx xxx
2. In the absence of stipulated interest, in a loan or forbearance

of money, goods, credits or judgments, the rate of interest on the
principal amount shall be the prevailing legal interest
prescribed by the Bangko Sentral ng Pilipinas, which shall
be computed from default, i.e., from extrajudicial or judicial
demand in accordance with Article 1169 of the Civil Code, UNTIL
FULL PAYMENT, without compounding any interest unless
compounded interest is expressly stipulated by law or regulation.
Interest due on the principal amount accruing as of judicial
demand shall SEPARATELY earn legal interest at the
prevailing rate prescribed by the Bangko Sentral ng Pilipinas,
from the time of judicial demand UNTIL FULL PAYMENT.
xxx xxx xxx
In Estores v. Spouses Supangan (670 SCRA 95), the Court explained the meaning
of forbearance of money, viz:
Forbearance of money, good or credits should therefore refer to

arrangements other than loan agreements, where a person
acquiesces to the temporary use of his money, goods or
credits pending happening of certain events or fulfillment of certain
conditions. In this case, the respondent-spouses parted with their money
even before the conditions were fulfilled. They have therefore allowed
or granted forbearance to the seller (petitioner) to use their money
pending fulfillment of the conditions. They were deprived of the use of
their money for the period pending fulfillment of the conditions and
when those conditions were reached, they are entitled not only to the
return of the principal amount paid, but also to compensation for
the use of their money. And the compensation for the use of their
money, absent any stipulation, should be the same rate of legal interest
applicable to a loan since the use or deprivation of funds is similar to a
loan.
Here, respondent paid petitioner P85,000.00 conditioned upon the supposed

transfer of petitioner's franchise rights to operate ACLC's computer school. The
transfer, however, never took place albeit petitioner retained respondent's payment.
Respondent is thus entitled not only to the return of the principal amount she paid,
but also to compensation for the use of her money.
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Considering that respondent filed the complaint below against petitioner on

September 11, 1997, the legal interest rate of twelve percent (12%) per
annum applies here from judicial demand on September 11, 1997 until June 30,
2013. Beginning July 1, 2013, the effectivity of the Bangko Sentral ng Pilipinas-
Monetary Board Circular No. 799, the new legal interest rate of six percent
(6%) per annum must apply until full payment. (Oscar Ll. Arcinue vs. Alice Ilalo S.
Baun, 926 SCRA 496)
(e) In the consolidated cases of Rivera v. Sps. Chua and Sps. Chua v. Rivera (746
SCRA 1), the Court affirmed the finding of the CA that 5% per month or 60% per
annum interest rate is highly iniquitous and unreasonable; and since the interest
rate agreed upon is void, the rate of interest should be 12% per annum (the then
prevailing interest rate prescribed by the Central Bank of the Philippines for loans
or forbearances of money) from the date of judicial or extrajudicial demand.
Given that the agreement on the 5% monthly interest is void for being
unconscionable, the interest rate prescribed by the Bangko Sentral ng Pilipinas
(BSP) for loans or forbearances of money, credits or goods will be the surrogate or
substitute rate not only for the one-year interest period agreed upon but for the
entire period that the loan of Zenaida remains unpaid. (Bulatao vs. Estonactoc, 927
SCRA 549-557)
LACHES –
Laches is 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. (Oropeza vs. Allied Banking Corp. 899 SCRA 398) Essentially, it is
present in cases of unreasonable neglect to protect one's rights giving rise to the
presumption that the party entitled to assert it either has abandoned or declined to
assert it. In Heirs of Anacleto B. Nieto v. Municipality of Meycauayan, Bulacan
(540 SCRA 100), the Court had established the elements of laches, viz.:
(1) conduct on the part of the defendant, or of one under whom he

claims, giving rise to the situation of which complaint is made for which
the complaint seeks a remedy;
(2) delay in asserting the complainant's rights, the complainant having

had knowledge or notice, of the defendant's conduct and having been
afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and
(4) injury or prejudice to the defendant in the event relief is accorded to

the complainant, or the suit is not held to be barred. (Samuel Ang, et al. vs.
Cristeta Abaldonaro, 929 SCRA 165-166)
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LAND REGISTRATION –
(a) In the recent case of In Re: Application for Land Registration Suprema T.
Dumo v. Republic of the Philippines (Dumo) (865 SCRA 119), the Court reiterated
the requirement it set in Republic of the Philippines v. T.A.N. Properties, Inc. (555
SCRA 477) that there are TWO documents that must be presented to prove that the
land subject of the application for registration is alienable and disposable: (1) a
copy of the original classification approved by the DENR Secretary and certified
as a true copy by the legal custodian of the official records, and (2) a certificate
of land classification status issued by the CENRO or the Provincial Environment
and Natural Resources Office (PENRO) based on the land classification approved
by the DENR Secretary.
Dumo also stated that: "a CENRO or PENRO certification is not enough to prove
the alienable and disposable nature of the property sought to be registered because
the only way to prove the classification of the land is through the original
classification approved by the DENR Secretary or the President himself." This is
consistent with Republic of the Philippines v. Nicolas (841 SCRA 328), which
cited Republic of the Philippines v. Lualhati (754 SCRA 352), wherein the Court
rejected the attempt of the applicant to prove the alienable and disposable character
of the subject land through PENRO or CENRO certifications. (Samuel and Edgar
Buyco vs. Republic, 878 SCRA 404)
(b) FREE PATENT, Restrictions Removed –
The passage of Republic Act No. (RA) 11231 or the "Agricultural Free Patent
Reform Act" has rendered this issue moot and academic.
Pursuant to David v. Macapagal-Arroyo (489 SCRA 160), a moot and academic

case is one that ceases to present a justiciable controversy by virtue of supervening
events so that a declaration thereon would have no practical use or value.
Section 3 of RA 11231 provides:
SEC. 3. Agricultural public lands alienated or disposed in favor of

qualified public land applicants under Section 44 of Commonwealth
Act No. 141, as amended, shall not be subject to restrictions imposed
under Sections 118, 119 and 121 thereof regarding acquisitions,
encumbrances, conveyances, transfers, or dispositions. Agricultural
free patent shall now be considered as title in fee simple and shall
not be subject to any restriction on encumbrance or alienation.
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The removal of the restrictions imposed under Sections 118, 119 and 121 of
Commonwealth Act No. (CA) 141 was given retroactive effect under Section 4 of
RA 11231, which provides:
SEC. 4. This Act shall have retroactive effect and any restriction
regarding acquisitions, encumbrances, conveyances, transfers, or
dispositions imposed on agricultural free patents issued under Section
44 of Commonwealth Act No. 141, as amended, before the effectivity
of this Act shall be removed and are hereby immediately
lifted: Provided, that nothing in this Act shall affect the right of
redemption under Section 119 of Commonwealth Act No. 141, as
amended, for transactions made in good faith prior to the effectivity of
this Act. (Republic of the Phil. vs. Tanduay Lumber, Inc., et al. 924 SCRA
656)
MACEDA LAW –
(a) In Orbe v. Filinvest Land, Inc. (839 SCRA 72), the Court emphasized that "at
least two years of installments" means the "equivalent of the totality of
payments diligently or consistently made throughout a period of two (2) years,"
When Section 3 speaks of paying "at least two years of installments," it refers to
the equivalent of the totality of payments diligently or consistently made
throughout a period of two (2) years. Accordingly, where installments are to be
paid on a monthly basis, paying "at least two years of installments" pertains to the
aggregate value of 24 monthly installments. As explained in Gatchalian Realty v.
Angeles:
It should be noted that Section 3 of R.A. 6552 and paragraph six of

Contract Nos. 2271 and 2272, speak of "two years of installments." The
basis for computation of the term refers to the installments that
correspond to the number of months of payments, and not to the number
of months that the contract is in effect as well as any grace period that
has been given. Both the law and the contracts thus prevent any buyer
who has not been diligent in paying his monthly installments was unduly
claiming the rights provided in Section 3 of R.A. 6552.
The phrase "at least two years of installments" refers to value and time.
It does not only refer to the period when the buyer has been making
payments, with total disregard for the value that the buyer has actually
conveyed. It refers to the proportionate value of the installments made,
as well as payments having been made for at least two (2) years.
Laws should never be so interpreted as to produce results that are absurd

or unreasonable. Sustaining petitioner's contention that was falls within
Section 3's protection just because she has been paying for more than
two (2) years goes beyond a justified, liberal construction of the Maceda
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Law. It facilitates arbitrariness, as intermittent payments of fluctuating

amounts would become permissible, so long as they stretch for two (2)
years. Worse, it condones an absurdity. It sets a precedent that would
endorse minimal, token payments that extend for two (2) years. A buyer
could, then, literally pay loose change for two (2) years and still come
under Section 3's protection.”
In Ayala Life Assurance, Inc. v. Ray Burton Development Corporation (479 SCRA
462), the Court held that the payment by the buyer of purchase price is a positive
suspensive condition and the non-fulfillment of which is an event that prevents the
seller from conveying title to the buyer. Said non-payment of the purchase price
renders the contract to sell ineffective and without force and effect. Therefore, a
cause of action for specific performance does not arise.
Here, petitioners failed to realize that there could no longer be a performance, not
even partial, of the Deed the moment that they failed to pay the purchase price of
the subject land in accordance with the terms of the Deed. It is worthy to note that
at the time of the receipt by the respondent of the sum of P107,650.00, the Deed
was already without force and effect. Thus, there could have been no partial
performance, let alone a cause of action for specific performance. (Sps. Celia and
Danilo Francisco vs. Albina Battung, 925 SCRA 467-470)
(b) Republic Act (RA) No. 6552 recognizes in conditional sales of all kinds of
real estate (industrial, commercial, residential) the right of the seller to cancel the
contract upon non-payment of an installment by the buyer, which is simply an
event that prevents the obligation of the vendor to convey title from acquiring
binding force. (Manuel Uy & Sons, Inc. vs. Valbuesco, Incorporated, 705 SCRA 537)
NOTARIZATION, not a guaranty of validity –
In Spouses Salonga v. Spouses Concepcion (470 SCRA 291), it was held that the
notarization of a document does not guarantee its validity because it is not the
function of the notary public to validate an instrument that was never intended by
the parties to have any binding legal effect. Neither is the notarization of a
document conclusive as to the nature of the transaction, nor is it conclusive of the
true agreement of the parties thereto. Simply stated, the existence, veracity, and
authenticity of a notarized written deed of sale do not conclusively determine
whether all the essential requisites of a contract are present.
xxx
According to Article 749 of the Civil Code, in order for a donation of an

immovable property to be considered valid, the donation must be made in a public
document, specifying therein the property donated and the value of the charges
which the donee must satisfy. In the instant case, as already explained, the Deed of
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Absolute Sale was not properly notarized, making it a private document. Hence,
there was no donation made in a public document.
Moreover, Article 749 of the Civil Code additionally requires that the donee
manifests his/her acceptance of the donation of the immovable property in either
the same public instrument or in a separate instrument. If the donee accepts the
donation in a separate instrument, the donor should be notified thereof in an
authentic form, and this step shall be noted in both instruments. In the instant case,
there was no acceptance of any donation manifested by the respondents Heirs of
Julita in the unilaterally executed Deed of Absolute Sale. There was also no
separate instrument that was executed by the respondents Heirs of Julita for the
purpose of accepting any donation from their grandmother. Simply stated, the
formalities of making and accepting a donation of an immovable property required
under Article 749 of the Civil Code were not observed. The donation of real
property is void without the formalities stated in Article 749. (DECS vs. del Rosario,
449 SCRA 299) (Pablo Uy, etc. vs. Heirs of Julita Uy Renales, etc., 927 SCRA 257-263)
NOTARIAL IDENTIFICATION –
In Jorge v. Marcelo (897 SCRA 292), the Court allowed the non-presentation to
the notary public and non-indication in the verification and certification of non
forum shopping of the affiant's competent evidence of identity, because he/she was
personally known to the notary public, to wit:
The fact that it contained no details of her competent evidence of identity

is inconsequential simply because its presentation may be excused or
dispensed with. If it is not required for the affiant to show competent
evidence of identity in case he/she is personally known to the notary
public, with more reason that it is unnecessary to state the details of such
competent evidence of identity in the notarial certificate. (BF Citiland
Corp. vs. B.S.P. 924 SCRA 670-677)
NOTARIZED DOCUMENT, value of –
In Almeda v. Heirs of Ponciano Almeda (839 SCRA 630), the Court explained that
a notarized document enjoys a presumption that it was duly executed by the
parties, to wit:
A notarized Deed of Absolute Sale bas in its favor the presumption of regularity,
and it carries the evidentiary weight conferred upon it with respect to its due
execution. It is admissible in evidence without further proof of its authenticity and
is entitled to full faith and credit upon its face. Thus, a notarial document must be
sustained in full force and effect so long as he who impugns it does not present
strong, complete and conclusive proof of its falsity or nullity on account of some
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flaws or defects.
Absent evidence of falsity so clear, strong and convincing, and not merely
preponderant, the presumption of regularity must be upheld. The burden of proof
to overcome the presumption of due execution of a notarial document lies on the
party contesting the same.
The presumption of regularity accorded to notarized documents is not conclusive

as it can be refuted by clear and convincing evidence. In the present case,
respondents had presented clear and convincing evidence to overcome the
presumption of regularity of the Deed of Sal e between Basa and Transmix. (Noel
M. Odrada vs. Virgilio Lazaro, et al. 929 SCRA 187-194)
PERFORMANCE BONDS –
A performance bond is a kind of suretyship agreement. It is a “designed to afford

the project owner security that the … contractor, will faithfully comply with the
requirements of the contract … and make good (on the ) damages sustained by the
project owner in case of the contractor’s failure to so perform.”
A suretyship agreement is a contract of adhesion ordinarily prepared by the surety

or insurance company. (FGU Insurance Corporation vs. Roxas, 836 SCRA 16)
PRESCRIPTIVE PERIODS, in ejectment cases –
Relying on Philippine Overseas Telecommunications v. Gutierrez (507 SCRA 526),

it held that when unlawful entry was made clandestinely, the one-year prescriptive
period should be counted from the last demand to vacate.
xxx
The discussion on possession by tolerance, which is only applicable in unlawful

detainer cases, was a patent error. In cases of forcible entry through stealth, there
can be no possession by tolerance precisely because the owner could not have
known beforehand that someone else possessed his or her property; thus, he or she
could not have tolerated the possession of the intruder. As held in Canlas v. Tubil
(601 SCRA 147), possession by tolerance falls under unlawful detainer because it is
a possession that was initially lawful but later became unlawful when the possessor
by tolerance refuses to comply with the owner's demand to vacate. Thus, in Vda.
de Prieto (14 SCRA 430), the reckoning point for actions for forcible entry through
stealth should be the date of the discovery of the entry, not the date of demand to
vacate.
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In Spouses Barnachea v. Court of Appeals (559 SCRA 363), this Court ruled that in
forcible entry suits, "the law does not require a previous demand ... to vacate the
premises, and ... the action can be brought only within one-year from the date the
defendant actually and illegally entered the property."
In Dela Cruz v. Hermano (754 SCRA 231), this Court held that the prescriptive
period in a forcible entry case is generally counted from the date of actual entry
into the land-except when this entry was made through stealth, in which case, the
period is reckoned from the time of discovery. Similarly, in Diaz v. Spouses
Punzalan (787 SCRA 531):
[I]n an action for forcible entry, the following requisites are essential for
the MTC to acquire jurisdiction over the case: (1) the plaintiff must
allege prior physical possession of the property; (2) the plaintiff was
deprived of possession by force, intimidation, threat, strategy or stealth;
and (3) the action must be filed within one (1) year from the date of
actual entry on the land, except that when the entry is through stealth,
the one (1)-year period is counted from the time the plaintiff-owner or
legal possessor learned of the deprivation of the physical possession of
the property. It is not necessary, however, for the complaint to expressly
use the exact language of the law. For as long as it is shown that the
dispossession took place under said conditions, it is considered as
sufficient compliance with the requirements. (PLDT vs. Citi Appliance,
922 SCRA 548)
PROPERTY RELATIONS IN VOID MARRIAGES –
There is no quarrel that the marriage of the petitioner and the respondent had long
been declared an absolute nullity by reason of their psychological incapacity to
perform their marital obligations to each other. The property relations of parties to
a void marriage is governed either by Article 147 or 148 of the Family Code.
Since the petitioner and the respondent suffer no legal impediment and exclusively
lived with each other under a void marriage, their property relation is one of co-
ownership under Article 147 of the Family Code. The said provision finds
application in this case even if the parties were married before the Family Code
took effect by express provision of the Family Code on its retroactive effect for as
long as it does not prejudice or impair vested or acquired rights in accordance with
the Civil Code or other laws. Here, no vested rights will be impaired in the
application of the said provision given that Article 147 of the Family Code is
actually just a remake of Article 144 of the 1950 Civil Code.
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 the property acquired by
both of them through their work or industry shall be governed by the
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rules on co-ownership.
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 not participate 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.
In the construction of the term "acquired," this Court must be guided by the basic
rule in statutory construction that when the law does not distinguish, neither should
the court. A reading of Article 147 of the Family Code would show that the
provision did not make any distinction or make any qualification in terms of the
manner the property must be acquired before the presumption of co-ownership
shall apply. As such, the term "acquired" must be taken in its ordinary
acceptation. For as long as the property had been purchased, whether on
installment, financing or other mode of payment, during the period of cohabitation,
the disputable presumption that they have been obtained by the parties' joint
efforts, work or industry, and shall be owned by them in equal shares, shall arise.
Applied in this case, since the Ayala Alabang and Rockwell properties were
purchased while the petitioner and the respondent were living together, it is
presumed that both parties contributed in their acquisition through their joint
efforts (which includes one's efforts in the care and maintenance of the family and
of the household), work or industry. Thus, the properties must be divided between
them equally. (Simon Paterno VS. Dina Marie L. Parterno, 928 SCRA 254-261)
PUBLIC DOCUMENT, weight of –
A notarized Deed of Absolute Sale has in its favor the presumption of regularity,
and it carries the evidentiary weight conferred upon it with respect to its due
execution. It is admissible in evidence without further proof of its authenticity and
is entitled to full faith and credit upon its face. Thus, a notarial document must be
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sustained in full force and effect so long as he who impugns it does not present
strong, complete and conclusive proof of its falsity or nullity on account of some
flaws or defects.
Absent evidence of falsity so clear, strong and convincing, and not merely
preponderant, the presumption of regularity must be upheld. The burden of proof
to overcome the presumption of due execution of a notarial document lies on the
party contesting the same.
Mere forgetfulness, however, without evidence that the same has removed from a
person the ability to intelligently and firmly protect his property rights, will not by
itself incapacitate a person from entering into contracts.
In Mendezona v. Ozamiz (376 SCRA 482), the Court affirmed a vendor's capacity to
contract despite a doctor's revelation that the former was afflicted with certain
infirmities and was, at times, forgetful, holding that:
The revelation of Dr. Faith Go did not also shed light on the mental
capacity of Carmen Ozamiz on the relevant day – April 28, 1989 when
the Deed of Absolute Sale was executed and notarized. At best, she
merely revealed that Carmen Ozamiz was suffering from certain
infirmities in her body and at times, she was forgetful, but there was
no categorical statement that Carmen Ozamiz succumbed to what
respondents suggest as her alleged "second childhood" as early as
1987. The petitioners' rebuttal witness, Dr. William Buot, a doctor of
neurology, testified that no conclusion of mental incapacity at the time
the said deed was executed can be inferred from Dr. Faith Go's
clinical notes nor can such fact be deduced from the mere
prescription of a medication for episodic memory loss.
In this case, petitioners' claim that Venancio and Leonila were forgetful and at
times sickly was not even supported by medical evidence. It was based solely on
Emerlina's testimony, which failed to demonstrate that Venancio and Leonila's
mental state had prevented them from freely giving their consent to the 1978 Deed
or from understanding the nature and effects of their disposition.
It is settled that a person is not incapacitated to enter into a contract merely because
of advanced years or by reason of physical infirmities, unless such age and
infirmities impair his mental faculties to the extent that he is unable to properly,
intelligently and fairly understand the provisions of said contract, or to protect his
property rights.
"A person is presumed to be of sound mind at any particular time and the condition
is presumed to exist, in the absence of proof to the contrary." In this case,
petitioners failed to discharge their burden of proving, by clear and convincing
evidence, that their parents were mentally incompetent to execute the 1978 Deed in
favor of Ponciano.
Simulation has been defined as the declaration of a fictitious will, made

deliberately by mutual agreement of the parties, in order to produce the
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appearances of a juridical act which does not exist or is different from that which
was really executed, for the purpose of deceiving third persons. Accordingly,
simulation exists when: (a) there is an outward declaration of will different from
the will of the parties; (b) the false appearance was intended by mutual agreement
of the parties; and (c) their purpose is to deceive third persons. (Rafael Almeda, et
al. vs. Heirs of Ponciano Almeda, et al., 839 SCRA 644-652)
PUBLIC LANDS, how classified –
The classification and disposition of lands of the public domain are governed by
Commonwealth Act (C.A.) No. 141 or the Public Land Act, the country's primary
law on the matter.
Under Section 6 of C.A. No. 141, the President of theRepublic of the Philippines,
upon the recommendation of the Secretary of Agriculture and Natural Resources,
may, from time to time, classify lands of the public domain into alienable or
disposable, timber and mineral lands, and transfer these lands from one class to
another for purposes of their administration and disposition.
Under Section 7 of C.A. No. 141, the President may, from time to time, upon
recommendation of the Secretary of Agriculture and Natural Resources and for
purposes of the administration and disposition of alienable and disposable public
lands, declare what lands are open to disposition or concession under the Acts'
provisions.
Section 8 of C.A. No. 141 sets out the public lands open to disposition or
concession and the requirement that they have been officially delimited and
classified, and when practicable, surveyed. Section 8 excludes (by implication)
from disposition or concession, public lands which have been reserved for public
or quasi-public uses; appropriated by the Government; or in any manner have
become private property, or those on which a private right authorized and
recognized by the Act or any other valid law may be claimed. Further, Section 8
authorizes the President to suspend the concession or disposition of lands
previously declared open to disposition, until again declared open to disposition by
his proclamation or by act of Congress.
Lands of the public domain classified as alienable and disposable are further
classified, under Section 9 of C.A. No. 141, according to their use or purpose into:
(1) agricultural; (2) residential, commercial, industrial, or for similar productive
purposes; (3) educational, charitable, or other similar purposes; and (4)
reservations for townsites and for public and quasi-public uses. Section 9 also
authorizes the President to make the classifications and, at any time, transfer lands
from one class to another.
Section 83 of C.A. No. 141 defines public domain lands classified as

reservations for public and quasi-public uses as "any tract or tracts of land of
the public domain" which the President, by proclamation and upon
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recommendation of the Secretary of Agriculture and Natural Resources,

may designate " as reservations for the use of the Republic of the Philippines or
any of its branches, or of the inhabitants thereof or "for quasi-public uses or
purposes when the public interest requires it."34 Under Section 88 of the same
Act, these "reserved tract or tracts of lands shall be non-alienable and shall
not be subject to occupation, entry, sale, lease or other disposition until again
declared alienable under the provisions of [CA No. 141] or by proclamation of
the President."
As these provisions operate, the President may classify lands of the public domain
as alienable and disposable, mineral or timber land, and transfer such lands from
one class to another at any time.
Within the class of alienable and disposable lands of the public domain, the
President may further classify public domain lands, according to the use or
purpose to which they are destined, as agricultural: residential, commercial,
industrial, etc.; educational, charitable, etc.; and reservations for townsites and for
public and quasi-public uses; and, he may transfer such lands from one class to the
other at any time.
Thus, the President may, for example, transfer a certain parcel of land from its
classification as agricultural (under Section 9 [a]), to residential, commercial,
industrial, or for similar purposes (under Section 9 [b]) and declare it available for
disposition under any of the modes of disposition of alienable and disposable
public lands available under C.A. No. 141, as amended.
The modes of disposition of alienable and disposable lands available under C.A.
No. 141 include: (1) by homestead settlement (Chapter IV), by sale (Chapter V),
by lease (Chapter VI) and by confirmation of imperfect or incomplete titles
(Chapters VII and VIII) for agricultural lands under Title II of C.A. No. 141 as
amended; (2) by sale or by lease for residential, commercial, or industrial lands
under Title III of C.A. No. 141, as amended; (3) by donation, sale, lease,
exchange or any other form for educational and charitable lands under Title IV of
C.A. No. 141, as amended; and (4) by sale by public auction for townsite
reservations under Chapter XI, Title V of C.A. No. 141, as amended.
Once these parcels of lands are actually acquired by private persons, either by sale,
grant, or other modes of disposition, they are removed from the mass of land of the
public domain and become, by operation of law, their private property.
With particular regard, however, to parcels of land classified as reservations for

public and quasi-public uses (under Section 9 [d]), when the President transfers
them to the class of .alienable and disposable public domain lands destined for
residential, commercial, industrial, or for similar purposes (under Section 9 [b]), or
some other class under Section 9, these reserved public domain lands become
available for disposition under any of the available modes of disposition under
C.A. No. 141, as provided above. Once these re-classified lands (to residential
purposes from reservation for public and quasi-public uses) are actually acquired
by private persons, they become private property.
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In the meantime, however, and until the parcels of land are actually granted to,
acquired, or purchased by private persons, they remain lands of the public domain
which the President, under Section 9 of C.A. No. 141, may classify again as
reservations for public and quasi-public uses. The President may also, under
Section 8 of C.A. No. 141, suspend their concession or disposition.
If these parcels of land are re-classified as reservations before they are actually
acquired by private persons, or if the President suspends their concession or
disposition, they shall not be subject to occupation, entry, sale, lease, or other
disposition until again declared open for disposition by proclamation of the
President pursuant to Section 88 in relation with Section 8 of C.A. No. 141.
Thus, in a limited sense, parcels of land classified as reservations for public or

quasi-public uses under Section 9 (d) of C.A. No. 141 are still non-alienable and
non-disposable, even though they are, by the general classification under Section
6, alienable and disposable lands of the public domain. By specific declaration
under Section 88, in relation with Section 8, these lands classified as reservations
are non-alienable and non-disposable.
In short, parcels of land classified as reservations for public or quasi-public uses:

(1) are non-alienable and non-disposable in view of Section 88 (in relation with
Section 8) of CA No. 141 specifically declaring them as non-alienable and not
subject to disposition; and (2) they remain public domain lands until they are
actually disposed of in favor of private persons.
Complementing and reinforcing this interpretation - that lands designated as

reservations for public and quasi-public uses are non-alienable and non-disposable
and retain their character as land of the public domain is the Civil Code with its
provisions on Property that deal with lands in general. We find these provisions
significant to our discussion and interpretation as lands are property, whether they
are public lands or private lands.
In this regard, Article 419 of the Civil Code classifies property as either of public
dominion or of private ownership. Article 420 defines property of the public
dominion as those which are intended for public use or, while not intended for
public use, belong to the State and are intended for some public service. Article
421, on the other hand, defines patrimonial property as all other property of the
State which is not of the character stated in Article 420. While Article 422 states
that public dominion property which is no longer intended for public use or service
shall form part of the State's patrimonial property.
Thus, from the perspective of the general Civil Code provisions on Property, lands
which are intended for public use or public service such as reservations for public
or quasi-public uses are property of the public dominion and remain to be so as
long as they remain reserved.
As property of the public dominion, public lands reserved for public or quasi-
public uses are outside the commerce of man. They cannot be subject to sale,
disposition or encumbrance; any sale, disposition or encumbrance of such property
of the public dominion is void for being contrary to law and public policy.
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To be subject to sale, occupation or other disposition, lands of the public domain

designated as reservations must first be withdrawn, by act of Congress or by
proclamation of the President, from the public or quasi-public use for which it has
been reserved or otherwise positively declared to have been converted to
patrimonial property, pursuant to Sections 8 and 88 of C.A. No. 141 and Article
422 of the Civil Code. Without such express declaration or positive governmental
act, the reserved public domain lands remain to be public dominion property of the
State.
To summarize our discussion:
(1) Lands of the public domain classified as reservations for public or quasi-
public uses are non-alienable and shall not be subject to disposition, although they
are, by the general classification under Section 6 of C.A. No. 141, alienable and
disposable lands of the public domain, until declared open for disposition by
proclamation of the President; and
(2) Lands of the public domain classified as reservations are property of the
public dominion; they remain to be property of the public dominion until
withdrawn from the public or quasi-public use for which they have been reserved,
by act of Congress or by proclamation of the President, or otherwise positively
declared to have been converted to patrimonial property.
Based on these principles, we now examine the various issuances affecting the
property in order to determine the property's character and nature, i.e., whether the
property remains public domain property of the State or has become its private
property.
For easier reference, we reiterate the various presidential proclamations and

statutes affecting the property:
(1) Proclamation No. 423, series of 1957 - established the

FBMR, a military reservation; the property falls within the
FBMR;
(2) Proclamation No. 461, series of (September) 1965 -

segregated, from the FBMR, a portion of Parcel 3, plan Psd-
2031, which includes the property, for disposition in favor
of the AFPOVAI;
(3) Proclamation No. 478, series of (October) 1965 —

reserved the property in favor of the Veterans Rehabilitation
and Medical Training Center (VRMTC); and
(4) RA No. 7227 (1992), as implemented by EO No. 40,

series of 1992 - subject to certain specified exemptions,
transferred the military camps within Metro Manila, among
others, to the BCDA.
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As the property remains a reserved public domain land, it is outside the commerce
of man. Property which are intended for public or quasi- public use or for some
public purpose are public dominion property of the State and are outside the
commerce of man. NOVAI, therefore, could not have validly purchased the
property in 1991.
We reiterate and emphasize that property which has been reserved for public or
quasi-public use or purpose are non-alienable and shall not be subject to sale or
other disposition until again declared alienable by law or by proclamation of the
President. Any sale or disposition of property of the public dominion is void for
being contrary to law and public policy.
Since the sale of the property, in this case, is void, the title issued to NOVAI is
similarly void ab initio. It is a well-settled doctrine that registration under the
Torrens System does not, by itself, vest title as it is not a mode of acquiring
ownership; that registration under the Torrens System merely confirms the
registrant's already existing title.
Accordingly, the indefeasibility of a Torrens title does not apply in this case and
does not attach to NOVAI's title. The principle of indefeasibility does not apply
when the sale of the property and the title based thereon are null and void. Hence,
the Republic's action to declare the nullity of NOVAI's void title has not
prescribed.
NOVAI insists that the deed of sale carries the presumption of regularity in the
performance of official duties as it bears all the earmarks of a valid deed of sale
and is duly notarized.
While we agree that duly notarized deeds of sale carry the legal presumption of
regularity in the performance of official duties,73 the presumption of regularity in
the performance of official duties, like all other disputable legal presumptions,
applies only in the absence of clear and convincing evidence establishing the
contrary.
When, as in this case, the evidence on record shows not only that the property was
reserved for public use or purpose, and thus, non-disposable - a fact that on its own
defeats all the evidence which the petitioner may have had to support the validity
of the sale - but also shows that the sale and the circumstances leading to it are
void in form and in substance, the disputable presumption of regularity in the
performance of official duties certainly cannot apply.
Section 1 of Act No. 3038 authorizes the sale or lease only: (i) of land of the
private domain, not land of the public domain; and (ii) by the Secretary of
Agriculture and Natural Resources, not by the LMB Director. Section 2 of the said
Act, in fact, specifically exempts from its coverage "land necessary for the public
service." As the sale was executed by the LMB Director covering the property that
was reserved for the use of the VRMTC, it, therefore, clearly violated the
provisions of Act No. 3038.
Batas Pambansa (B.P.) Blg. 878 which, per the Deed of Sale, purportedly
authorized the Director of Lands, representing the Republic, to sell the property in
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favor of NOVAI, limits the authority of the Director of Lands to sign patents or
certificates covering lands to ten (10) hectares.
In this case, the subject deed of sale covers a total area of 475,009 square meters or
47.5009 hectares. Obviously, the area covered by the deed of sale and which
NOVAI purportedly purchased, far exceeds the area that the Director of Lands is
authorized to convey under B.P. Blg. 878. (Navy Officers Village Association, Inc. vs.
Republic of the Philippines, 764 SCRA 546-568)
PUBLIC LANDS, Homestead Patent –
A homestead patent is a gratuitous grant from the government "designed to

distribute disposable agricultural lots of the State to land-destitute citizens for their
home and cultivation." Being a gratuitous grant, a homestead patent applicant
must strictly comply with the requirements laid down by the law.
When Daquer filed Homestead Application No. 197317 on October 22, 1933, the
governing law was Act No. 2874 or the Public Land Act, which outlined the
procedure for the classification and disposition of lands of the public domain.
Lands of public domain which have been classified as alienable or disposable may
further be classified into: (1) agricultural; (2) commercial, industrial, or for
similar productive purposes; (3) educational, charitable and other similar
purposes; and (4) reservations for town sites, and for public and quasi-public
uses.
Once lands of public domain have been classified as public agricultural lands, they
may be disposed through any of the following means: (1) homestead settlement;
(2) sale; (3) lease; or (4) confirmation of imperfect or incomplete titles.
On the issue of land classification, this Court held that foreshore and submerged
areas belong to the public domain. Mere reclamation by PEA "does not convert
these inalienable natural resources of the State into alienable or disposable lands of
the public domain. There must be a law or presidential proclamation officially
classifying these reclaimed lands as alienable or disposable and open to disposition
or concession.
Tthe rule that "a certificate of title issued pursuant to a homestead patent becomes
indefeasible after one year, is subject to the proviso that 'the land covered by said
certificate is a disposable public land within the contemplation of the Public Land
Law." (Republic – Bureau of Forest Development, 712 SCRA 177)
When the property covered by a homestead patent is part of the inalienable land of
the public domain, the title issued pursuant to it is null and void, and the rule on
indefeasibility of title will not apply. (De Guzman vs. Agbagala, 546 SCRA 278)
In Republic v. Ramos (117 Phil. 45), this Court held that despite the registration of
the land and the issuance of a Torrens title, the State may still file an action for
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reversion of a homestead land that was granted in violation of the law. The action
is not barred by the statute of limitations, especially against the State:
Heirs of Spouses Vda. De Palanca v. Republic (500 SCRA 209) also held that the
State may recover non-disposable public lands registered under the Land
Registration Act "at any time and the defense of res judicata would not apply as
courts have no jurisdiction to dispose of such lands of the public domain.
As this Court ruled in that case, Lot No. H-19731, the land covered by Homestead
Patent No. V-67820, is still part of the inalienable lands of the public domain there
being no positive act declassifying it. Consequently, OCT No. G-3287, issued
pursuant to Homestead Patent No. V-67820, is null and void. Thus, the State is
not estopped from instituting an action for the reversion of Lot No. H-19731 into
the lands of the public domain.
Lands of the public domain can only be classified as alienable and disposable
through a positive act of the government. The State cannot be estopped by the
omission, mistake, or error of its officials or agents. It may revert the land at any
time, where the concession or disposition is void ab initio. (Republic of the Phil. vs.
Heirs of Ignacio Dacer, et al., 878 SCRA 650)
PURCHASE IN AUCTION SALE –
Finally, a purchaser in an execution sale only acquires such interest that which is
possessed by the debtor. As held in Leyson v. Tañada (109 SCRA 66):
Further, this Court had held in Pabico vs. Ong Pauco that purchasers at
execution sales should bear in mind that the rule of caveat
emptor applies to such sales, that the sheriff does not warrant the title to
real property sold by him as sheriff, and that it is not incumbent on him
to place the purchaser in possession of such property. The rationale for
this rule is:
At a sheriffs sale they do not sell the land advertised to sell,

although that is a common acceptation, but they simply sell
what interest in that land the judgment debtor has; and if you
buy his interest, and it afterwards develops that he has none,
you are still liable on your bid, because you have offered so
much for his interest in open market, and it is for you to
determine before you bid what his interest is worth. Now,
even if it should appear that at a sheriffs sale one has bought
the interest of the judgment debtor in a certain tract of land,
and paid his money for it, and then suit is brought to recover
the land, and he is defeated in the suit, he has no right to
recover his money back, because he has paid that much for the
interest that his particular judgment debtor had in that tract of
land.
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Spouses Virtudazo did not acquire the property itself by virtue of the levy on
execution but only such interest as judgment debtor Florentino Maurin had therein.
As such, all that spouses Virtudazo is entitled to, is the 330-sq m portion of the
property. (Engr. Felipe A. Virtudazo, et. al. vs. Sps. Alipio and Damiana Labuguen, 927
SCRA 512-513)
REAL ESTATE MORTGAGE –
The Court ruled in the recent of case of Mercene v. Government Service Insurance
System (850 SCRA 209), that the commencement of the prescriptive period for
REMs is crucial in determining the existence of cause of action. Prescription, in
turn, runs in a mortgage contract not from the time of its execution, but rather (a)
when the loan became due and demandable, for instances covered under the
exceptions set forth under Article 1169 of the New Civil Code, or (b) from the
date of demand.
A REM (real estate mortgage) is an accessory contract constituted to protect the

creditor's interest to ensure the fulfillment of the principal contract of loan. By its
nature, therefore, the enforcement of a mortgage contract is dependent on whether
or not there has been a violation of the principal obligation. Simply, it is the
debtor's failure to pay that sets the mortgage contract into operation. Prior to that,
the creditor-mortgagee has no right to speak of under the REM as it remains
contingent upon the debtor's failure to pay his or her loan obligation.
Thus, contrary to the opinion of the CA, for an action to foreclose REM to prosper,
it is crucial that the creditor-mortgagee establishes his right by alleging the terms
and conditions of the mortgage contract, particularly the maturity of the loan
which it secures. The respondents' failure to allege, much more prove these
information, renders the action dismissible for failure to prove their cause of
action.
In this controversy, the respondents pray for the cancellation of the encumbrances
on the TCTs which refer to the REMs constituted on the property. Consequently,
the cancellation of these annotations is dependent on whether the action for REM
has already prescribed. Therefore, an allegation of the date of maturity of the loan
is also vital in this case as it signifies the commencement of the running of the
period of prescription for an action for foreclosure REM.
Stated otherwise, the mortgagor would be unable to establish his or her right to
pray for the cancellation of the encumbrances without first establishing that the
debt has already become due, as it is only at that time that the debtor's right to
foreclose the property arise and the prescriptive period begins to run. (Phil. National
Bank vs. Elenita V. Abello, et al. 920 SCRA 414-416)
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REAL RIGHTS –
Rights over lands are indivisible. It is well-settled that the owner of a parcel of
land has rights not only to the land's surface, but also to everything underneath and
the airspace above it up to a reasonable height. Article 437 of the Civil Code
states:
ARTICLE 437. The owner of a parcel of land is the owner of its surface
and of everything under it, and he can construct thereon any works or
make any plantations and excavations which he may deem proper,
without detriment to servitudes and subject to special laws and
ordinances. He cannot complain of the reasonable requirements of aerial
navigation.
This principle is embodied in several rules pertaining to land rights. For instance,
Article 438 of the Civil Code determines that hidden treasure underground belongs
to the owner of the land, building, or property. Moreover, mining rights may be
given to a mining applicant despite the surface being titled to another by
government, subject only to compensation. In National Power Corporation v.
Ibrahim ( 526 SCRA 149):
Registered landowners may even be ousted of ownership and possession of their

properties in the event the latter are reclassified as mineral lands because real
properties are characteristically indivisible. For the loss sustained by such
owners, they are entitled to just compensation under the Mining Laws or in
appropriate expropriation proceedings. (PLDT vs. Citi Appliance, 922 SCRA 526)
RECOGNITION and SUPPORT –
Lim-Lua v. Lua (697 SCRA 237) echoed Article 201 of the Family Code and stated
that the "amount of support which 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." Article 202 of
the Family Code adds, however, that support may be adjusted and that it "shall 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
furnish the same."
Dolina v. Vallecera (638 SCRA 707) clarified that since an action for compulsory
recognition may be filed ahead of an action for support, the direct filing of an
action for support, "where the issue of compulsory recognition may be integrated
and resolved," is an equally valid alternative:
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To be entitled to legal support, petitioner must, in proper action, first

establish the filiation of the child, if the same is not admitted or
acknowledged. Since Dolina's demand for support for her son is based
on her claim that he is Vallecera's illegitimate child, the latter is not
entitled to such support if he had not acknowledged him, until Dolina
shall have proved his relation to him. The child's remedy is to file
through her mother a judicial action against Vallecera for compulsory
recognition. If filiation is beyond question, support follows as matter of
obligation. In short, illegitimate children are entitled to support and
successional rights but their filiation must be duly proved.
Dolina's remedy is to file for the benefit of her child an action against
Vallecera for compulsory recognition in order to establish filiation and
then demand support. Alternatively, she may directly file an action for
support, where the issue of compulsory recognition may be integrated
and resolved.
This Court added that an action to compel recognition could very well be
integrated with an action for support. This Court drew analogies with extant
jurisprudence that sustained the integration of an action to compel recognition with
an action to claim inheritance and emphasized that "the basis or rationale for
integrating them remains the same. (Richelle Abella vs. Policarpio Cabanero, 836
SCRA 464)
REDEMPTION RIGHT, manner of exercising –
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.
(Golden-way Merchandising Corporation vs. Equitable PCI Bank, 693 SCRA 439)
RELATIVES –
A relative is either a "kinsman" or "a person connected with another by

blood or affinity." Under the Civil Code, the degree of relationship is
determined as follows:
Relationship
ARTICLE 963. Proximity of relationship is determined by the number

of generations. Each generation forms a degree.
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ARTICLE 964. A series of degrees forms a line, which may be either

direct or collateral.
A direct line is that constituted by the series of degrees among

ascendants and descendants.
xxxx
ARTICLE 965. The direct line is either descending or ascending.
xxxx
ARTICLE 966. In the line, as many degrees are counted as there are
generations or persons, excluding the progenitor.
In the direct line, ascent is made to the common ancestor. Thus, the
child is one degree removed from the parent, two from the grandfather,
and three from the great-grandparent.
Pursuant to the foregoing, an illegitimate child is a relative within the first

civil degree of consanguinity of his biological mother. Unlike a nephew and
niece, an illegitimate child belongs to the direct maternal lineage, which is
never uncertain, and which is not as remote as the nephew and niece. The
word "child" referred to in Article 966 of the Civil Code is used in a general
term and is without qualification. This is so because the provision
contemplates blood relation, not status. When the provision does not
distinguish between legitimate and illegitimate relatives, we, too, must not.
Let us adhere to the Latin maxim that declares: ubi lex non distinguit, nec
nos distinguera debemus (where the law does not distinguish, nor the
interpreter must distinguish).
xxx
R.A. No. 8552 undoubtedly intended to include Jan Aurel, the biological child of
Mary Jane, in the term "relatives" under Section 7(b)(iii) because he was her
relative within the first civil degree. Finding otherwise would engender a situation
where the alien adopter would be able to undergo a speedy and less expensive
adoption process by being able to adopt, say, his Filipina spouse's nephew or niece
instead of the Filipino spouse's own child.
It is relevant to note that the Office of the Solicitor General (OSG) joins the
petitioners' position, and emphasizes that "if the law exempts the alien adopter
from residency and certification requirements if he/she will adopt the
brother/sister, nephew/niece or cousin of his/her Filipino spouse (who are within
the 4th civil degree of consanguinity or affinity), then there is no reason to exclude
the application of the said exemption if the adoptee is the illegitimate child of the
said Filipino spouse."
At any rate, had the legislators intended that only the legitimate children were
contemplated by Section 7(b)(i) and (iii), then Congress should have been written
the law as explicitly. Indeed, Congress did so in Section 7(b)(ii) by including the
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term "legitimate" to describe the children contemplated by that clause. Section

7(b)(i) and (iii) clearly covered both legitimate and illegitimate relatives as long as
they were within the fourth civil degree of consanguinity or affinity.
xxx
The courts of the Philippines are bound to take judicial notice of the existence of
the diplomatic relations between our country and Japan pursuant to both Section 1
and Section 2, supra. Diplomatic relations form part of the official acts of the
Executive Department of our Government. They are also matters of public
knowledge.
There is no dispute, indeed, that the Philippines and Japan have had a long history
of diplomatic relations. In 1888, Japan already established a diplomatic office in
Manila, and expanded it as a Consulate General in 1919. Eventually, Japan
declared its office in Manila an embassy in 1943 during the Japanese occupation of
the country. Both countries were also signatories to the Vienna Convention on
Diplomatic Relations, an indication that they wished to have a more prominent
diplomatic presence in each other by sending of diplomatic missions. This further
shows that both countries, being signatories to the Vienna Convention, aimed to
have the representation of the interests of the sending state and promoting friendly
relations with the receiving state. The countless efforts to maintain their
diplomatic relations no longer required the presentation of proof of the existence of
diplomatic relations. (In re: Peitition for Adoption, etc. Jan Aurel Maghanoy Bulayo
Kimura, 921 SCRA 223)
SALE BY A CO-OWNER –
This ruling was reiterated in Paulmitan v. Court of Appeals (215 SCRA 866), where
the Court therein ruled that the sale of the property owned in common by one co-
owner without the consent of the others did not give to the buyer ownership over
the entire land but merely transferred to the buyer the undivided share of the seller,
making the buyer the co-owner of the land in question. (Bulatao vs. Estonactoc, 927
SCRA 549-557)
SALES –
(a) Contract of –
For a deed of sale or any contract to be valid, Article 1318 of the Civil Code
provides that three requisites must concur, namely: (1) the consent of the
contracting parties; (2) the object; and (3) the consideration. All these elements
must be present to constitute a valid contract. The absence of one renders the
contract void. The 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. A
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contract of sale is consensual, as such it is perfected by mere consent. For consent

to be valid, the following requisites must concur: (a) it should be intelligent, or
with an exact notion of the matter to which it refers; (b) it should be free; and (c)
it should be spontaneous. Intelligence in consent is vitiated by error; freedom by
violence, intimidation or undue influence; and spontaneity by fraud.
There is no dispute that petitioner Gaudencio was unlettered and he did not know
the English language, the language the deed of sale was written. Thus, under
Article 1332 of the Civil Code, it is presumed that mistake or fraud attended the
execution of a contract by one — petitioner Gaudencio in this case, who did not
have the benefit of a good education. To overcome this presumption, it is
incumbent upon the respondent to show to the satisfaction of the court that he fully
explained to petitioner Gaudencio the contents of the deed of sale in the dialect
known to him. Unfortunately, there is no evidence that was presented to show that
respondent did so. As such, the presumption that the execution of the deed of sale
was attended by fraud stands. Respondent's failure to perform his obligation
dictated by law clearly establishes that petitioner Gaudencio's consent was not
intelligently given, and therefore, vitiated, when he signed the questioned deed as
he did not know the full import of the same. Respondent's failure to disclose the
consequences and significance of the deed of sale despite his clear duty to do so
constitutes fraud.
Under Article 1390 of the Civil Code, contracts where consent is vitiated by fraud
is voidable. Pursuant to Article 1391 of the same Code, the action for annulment
of contracts where consent is vitiated by fraud shall be brought within four years
from the time of discovery of the same. Applied in this case, the four-year period
shall be reckoned from May 17, 1994, the time petitioners gained knowledge of
the fraudulent deed of the respondent. As correctly found by the CA:
A careful scrutiny of the records reveal[s] that at the time Cesario,

Ciriaco and Domingo Oberes executed the Affidavits of Waiver in favor
of Gaudencio on May 17, 1994, they admitted to have already obtained
knowledge or information that [respondent] Adriano was claiming full
ownership over the subject land because he allegedly purchased the same
from Gaudencio way back February 21, 1973. During such time,
Adriano's vehement refusal to sign the affidavit of waiver and his
insistence that he already purchased the property was already an
indication of his commission of fraud. (Ciriaco Oberes, et al. vs. Adriano
Oberes, 924 SCRA 522)
(b) Double Sales –
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person

acquiring it who in good faith first recorded it in the Registry of Property.
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Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
In Cheng v. Genato (300 SCRA 722), the Court enumerated the requisites in order
for Article 1544 to apply, viz.:
(a) the two (or more) sales transactions in issue must pertain to exacty the
same subject matter, and must be valid sales transactions,
(b) the two (or more buyers) at odds over the rightful ownership of the
subject matte must each represent conflicting interests; and
(c) the two (or more) buyers at odds over the rightful ownership of the
subject matter must each have bought them from the very same seller.
In fine, there is double sale when the same thing is sold to different vendees by a
single vendor. It only means that Article 1544 has no application in cases where
the sales involved were initiated not just by one vendor but by several vendors.
Basic is the rule in civil law that the necessity of a public document for contracts
which transmit or extinguish real rights over immovable property, as mandated by
Article 1358 of the Civil Code, is only for convenience. It is not essential for its
validity or enforceability. In other words, the failure to follow the proper form
prescribed by Article 1358 of the Civil Code does not render the acts or contracts
invalid. Where a contract is not in the form prescribed by law, the parties can
merely compel each other to observe that form, once the contract has been
perfected.
In addition, it has been held, time and again, that a sale of a real property that is
not consigned in a public instrument is, nevertheless, valid and binding among the
parties. This is in accordance with the time-honored principle that even a verbal
contract of sale of real estate produces legal effects between the parties. Contracts
are obligatory, in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.
A defective notarization will merely strip the document of its public character and
reduce it to a private instrument. Consequently, when there is a defect in the
notarization of a document, the clear and convincing evidentiary standard normally
attached to a duly notarized document is dispensed with, and the measure to test
the validity of such document is preponderance of evidence. The document with a
defective notarization shall be treated as a private document and can be examined
under the parameters of Section 20, Rule 132 of the Rules of Court which provides
that, "before any private document offered as authentic is received in evidence, its
due execution and authenticity must be proved either: (a) by anyone who saw the
document executed or written; or (b) by evidence of the genuineness of the
signature or handwriting of the maker x x x."
In the instant case, Ricardo Beltran (Ricardo) positively testified that he personally
went to the Orbetas and that he was actually present when the Orbetas signed the
contract. He likewise testified that while the deed of sale was not signed by the
Orbetas before the notary public, they appeared before the latter and affirmed that
their signatures therein were authentic. Ricardo has personal knowledge of the
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fact that the Orbetas signed the questioned deed of sale. Beyond doubt,
respondents proved, by preponderant evidence, that they are the rightful owners of
the subject property.
Moreover, the non-appearance of the parties before the notary public who
notarized the document neither nullifies nor renders the parties' transaction void ab
initio. The failure of the Orbetas to appear before the notary public when they
signed the questioned deed of sale does not nullify the parties' transaction. (Sps.
Manlan vs. Sps. Beltran, 924 SCRA 628-632)
SOLIDARY LIABILITY –
In the instant case, on July 27, 2002 Llorente applied for and executed a Stop
Payment Order (SPO) on the subject demand/bank drafts on the pretext that the
said drafts which he issued/negotiated to SCPL (Star City Pty Ltd.) allegedly
exceeded the amount he was obliged to pay SCPL contrary to his position that
SCPL committed fraud and unfair gaming practices. The execution of the SPO by
Llorente did not discharge the liability of EPCIB, the drawer, to SCPL, the holder
of the subject demand/bank drafts. Given that an SPO was issued, the dishonor
and non-payment of the subject demand/bank drafts were to be expected,
triggering the immediate right of recourse of the holder to all parties secondarily
liable, including the drawer, pursuant to the NIL. As the RTC noted: "[Llorente
and EPCIB] could not seek refuge on the alleged lack of notice of dishonor to
them since they were responsible for the dishonor of the subject drafts aside from
the fact that it would be futile to require such notice since it was EPCIB who
countermanded the payment."
According to Article 1207 of the Civil Code, there is solidary liability only when
the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity. In this case, there is no contract or agreement wherein the
solidary liability of EPCIB is expressly provided. Under the NIL and the nature of
the liability of the drawer, solidary obligation is also not provided. Thus, EPCIB's
liability is not solidary but primary due to the SPO that Llorente issued against the
subject demand/bank drafts. (Quintin Artacho Llorente vs. Star City Pty. Ltd., etc., et
al. 928 SCRA 541-559)
SURETYSHIP –
(a) Through a contract of suretyship, one party called the surety, guarantees the
performance by another party, called the principal or obligor, of an obligation or
undertaking in favor of another party, called the obligee. As a result, the surety is
considered in law as being the same party as the debtor in relation to whatever is
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adjudged touching upon the obligation of the latter, and their liabilities are
interwoven as to be inseparable.
While the contract of surety stands secondary to the principal obligation, the
surety's liability is direct, primary and absolute, albeit limited to the amount for
which the contract of surety is issued. The surety's liability attaches the moment a
demand for payment is made by the creditor. The Court's ruling in Trade and
Investment Development Corporation of the Philippines v. Asia Paces
Corporation (716 SCRA 67) lends guidance:
x x x [S]ince the surety is a solidary debtor, it is not necessary that

the original debtor first failed to pay before the surety could be
made liable; it is enough that a demand for payment is made by the
creditor for the surety's liability to attach. Article 1216 of the Civil
Code provides that:
Article 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an obstacle

to those which may subsequently be directed against the
others, so long as the debt has not been fully collected.
xxx
A plain reading of Article 2080 indicates that the article applies to guarantors.
Mercantile's position that the provision applies with equal force to sureties fails to
appreciate the fundamental distinctions between the respective liabilities of a
guarantor and a surety.
A surety is an insurer of the debt, whereas a guarantor is an insurer of the

solvency of the debtor. A suretyship is an undertaking that the debt shall
be paid; a guaranty, an undertaking that the debtor shall pay. Stated
differently, a surety promises to pay the principal's debt if the principal
will not pay, while a guarantor agrees that the creditor, after proceeding
against the principal, may proceed against the guarantor if the principal
is unable to pay. A surety binds himself to perform if the principal
does not, without regard to his ability to do so. A guarantor, on the
other hand, does not contract that the principal will pay, but simply that
he is able to do so. In other words, a surety undertakes directly for
the payment and is so responsible at once if the principal debtor
makes default, while a guarantor contracts to pay if, by the use of
due diligence, the debt cannot be made out of the principal debtor.
x x x (288 SCRA 422)
In Bicol Savings & Loan Association v. Guinhawa (188 SCRA 642), the Court
unequivocally ruled that Article 2080 applies only with respect to the liability of a
guarantor. The Court reiterated this ruling in the subsequent case of Ang v.
Associated Bank (532 ACRA 244), where it held:
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As petitioner acknowledged it to be, the relation between an

accommodation party and the accommodated party is one of principal
and surety — the accommodation party being the surety. As such, he is
deemed an original promisor and debtor from the beginning; he is
considered in law as the same party as the debtor in relation to whatever
is adjudged touching the obligation of the latter since their liabilities are
interwoven as to be inseparable. Although a contract of suretyship is in
essence accessory or collateral to a valid principal obligation, the surety's
liability to the creditor is immediate, primary and absolute; he is
directly and equally bound with the principal. As an equivalent of a
regular party to the undertaking, a surety becomes liable to the debt
and duty of the principal obligor even without possessing a direct or
personal interest in the obligations nor does he receive any benefit
therefrom.
Contrary to petitioner's adamant stand, however, Article 2080 of the

Civil Code does not apply in a contract of suretyship. [Article] 2047
of the Civil Code states that if a person binds himself solidarily with the
principal debtor, the provisions of Section 4, Chapter 3, Title I, Book IV
of the Civil Code must be observed. Accordingly, Articles 1207 up to
1222 of the Code (on joint and solidary obligations) shall govern the
relationship of petitioner[-surety] with the bank.
Verily, a surety's liability stands without regard to the debtor's ability to perform
his obligations under the contract subject of the suretyship. (The Mercantile
Insurance Co., Inc. vs. DMCI-Laing Construction, Inc. 919 SCRA 438-450)
(b) Under Section 175 of Presidential Decree No. 612 or the Insurance Code, a
contract of suretyship is defined as an agreement where "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."
A performance bond is a kind of suretyship agreement. It is "designed to afford

the project owner security that the . . . contractor, will faithfully comply with the
requirements of the contract . . . and make good [on the] damages sustained by the
project owner in case of the contractor's failure to so perform."
A surety's liability is joint and several with the principal." Article 2047 of the
Civil Code provides that suretyship arises upon the solidary binding of a person
deemed the surety with the principal debtor for the purpose of fulfilling an
obligation."
Although the surety's obligation is merely secondary or collateral to the obligation

contracted by the principal, this Court has nevertheless characterized the surety's
liability to the creditor of the principal as "direct, primary, and absolute[;] [i]n
other words, the surety is directly and equally bound with the principal."
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While Article 1280 specifically pertains to a guarantor, the provision nonetheless

applies to a surety. Contracts of guaranty and surety are closely related in the
sense that In both, "there is a promise to answer for the debt or default of
another." The difference lies in that "a guarantor is the insurer of the solvency of
the debtor and thus binds himself to pay if the principal is unable to pay while a
surety is the insurer of the debt, and he obligates himself to pay if the
principal does not pay." (FGU Insurance Corp. vs. Sps. Roxas, 836 SCRA 44)
(b) Although the contract of a surety is in essence secondary only to a valid

principal obligation, his liability to the creditor or promisee of the principal is said
to be direct, primary and absolute in other words, he is directly and equally bound
with the principal. (Rizal Commercial Banking Corporation vs. Bernardino, 803 SCRA
586)
(c) A Surety is a contractual relation resulting from an agreement whereby one

person, the surety, engages to be answerable for the debt, default or miscarriage of
another known as the principal.
In Palmares v. Court of Appeals (288 SCRA 422), the Court had expounded on the
nature and extent of the liability of a surety, to wit:
A surety is an insurer of the debt, whereas a guarantor is an insurer of

the solvency of the debtor. A suretyship is an undertaking that the debt
shall be paid; a guaranty, an undertaking that the debtor shall pay.
Stated differently, a surety promises to pay the principal's debt if the
principal will not pay, while a guarantor agrees that the creditor, after
proceeding against the principal, may proceed against the guarantor if
the principal is unable to pay. A surety binds himself to perform if the
principal does not, without regard to his ability to do so. A guarantor,
on the other hand, does not contract that the principal will pay, but
simply that he is able to do so. In other words, a surety undertakes
directly for the payment and is so responsible at once if the principal
debtor makes default, while a guarantor contracts to pay if, by the use
of due diligence, the debt cannot be made out of the principal debtor.
xxx
A creditor's right to proceed against the surety exists independently of

his right to proceed against the principal. Under Article 1216 of the
Civil Code, the creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The rule, therefore, is
that if the obligation is joint and several, the creditor has the right to
proceed even against the surety alone. Since, generally, it is not
necessary for a creditor to proceed against a principal in order to hold
the surety liable, where, by the terms of the contract, the obligation of
the surety is the same as that of the principal, then as soon as the
principal is in default, the surety is likewise in default, and may be
sued immediately and before any proceedings are had against the
principal. Perforce, in accordance with the rule that, in the absence of
statute or agreement otherwise, a surety is primarily liable, and with
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the rule that his proper remedy is to pay the debt and pursue the
principal for reimbursement, the surety cannot at law, unless permitted
by statute and in the absence of any agreement limiting the application
of the security, require the creditor or obligee, before proceeding
against the surety, to resort to and exhaust his remedies against the
principal, particularly where both principal and surety are equally
bound.
As a surety of LLCI, the spouses Zapanta had independently and solidarity bound
themselves to pay in case the debt is not paid and not whether LLCI cannot pay.
As such, LBP may proceed against them even without first exhausting all available
remedies against LLCI pursuant to the PRA. (Land Bank of the Phil. vs. La Loma
Columbary, Inc., et al., 921 SCRA 613)
TRUSTS, Prescription –
Uy v. Court of Appeals (770 SCRA 513) remarkably explained the prescriptive

periods of an action for reconveyance depending on the ground relied upon, to wit:
The law creates the obligation of the trustee to reconvey the property and
its title in favor of the true owner. Correlating Section 53, paragraph 3
of PD No. 1529 and Article 1456 of the Civil Code with Article 1144 (2)
of the Civil Code, the prescriptive period for the reconveyance of
fraudulently registered real property is ten (10) years reckoned from the
date of the issuance of the certificate of title. This ten-year prescriptive
period begins to run from the date the adverse party repudiates the
implied trust, which repudiation takes place when the adverse party
registers the land. An exception to this rule is when the party seeking
reconveyance based on implied or constructive trust is in actual,
continuous and peaceful possession of the property involved.
Prescription does not commence to run against him because the action
would be in the nature of a suit for quieting of title, an action that is
imprescriptible.
The foregoing cases on the prescriptibility of actions for reconveyance

apply when the action is based on fraud, or when the contract used as
basis for the action is voidable. Under Article 1390 of the Civil Code, a
contract is voidable when the consent of one of the contracting parties is
vitiated by mistake, violence, intimidation, undue influence or fraud.
When the consent is totally absent and not merely vitiated, the contract is
void. An action for reconveyance may also be based on a void contract.
When the action for reconveyance is based on a void contract, as when
there was no consent on the part of the alleged vendor, the action is
imprescriptible. The property may be reconveyed to the true owner,
notwithstanding the TCTs already issued in another's name. The
issuance of a certificate of title in the latter's favor could not vest upon
him or her ownership of the property; neither could it validate the
purchase thereof which is null and void. Registration does not vest title;
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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. Being null and
void, the sale produces no legal effects whatsoever.
Whether an action for reconveyance prescribes or not is therefore

determined by the nature of the action, that is, whether it is founded on a
claim of the existence of an implied or constructive trust, or one based
on the existence of a void or inexistent contract. x x x
As discussed-above, when the action for reconveyance is based on an implied or

constructive trust, the prescriptive period is ten (10) years, or it is imprescriptible if
the movant is in the actual, continuous and peaceful possession of the property
involved. On the other hand, when the action for reconveyance is based on a void
deed or contract the action is imprescriptible under Article 1410 of the New Civil
Code.
In Cambridge Realty and Resources Corp. v. Eridanus Development, Inc. (557

SCRA 96), it was ruled that a case of overlapping of boundaries or encroachment
depends on a reliable, if not accurate, verification survey; barring one, no
overlapping or encroachment may be proved successfully, for obvious reasons.
The first step in the resolution of such cases is for the court to direct the proper
government agency concerned to conduct a verification or relocation survey and
submit a report to the court, or constitute a panel of commissioners for the purpose.
In that case, the Court lamented that the trial court therein did not order the
conduct of a verification survey and the appointment of geodetic engineers as
commissioners, to wit:
This is precisely the reason why the trial court should have officially
appointed a commissioner or panel of commissioners and not leave the
initiative to secure one to the parties: so that a thorough investigation,
study and analysis of the parties' titles could be made in order to provide,
in a comprehensive report, the necessary information that will guide it in
resolving the case completely, and not merely leave the determination of
the case to a consideration of the parties' more often than not self-serving
evidence.
Similarly, in Chua v. B.E. San Diego, Inc. (695 SCRA 408), the Court ruled that in
overlapping boundary disputes, the verification survey must be actually conducted
on the very land itself. In that case, the verification survey conducted it was
merely based on the technical description of the defective titles. The opinion of
the surveyor lacked authoritativeness because his verification survey was not made
on the land itself. (Yu Hwa Ping vs. Ayala Land, Inc., 832 SCRA 452)
UNJUST ENRICHMENT –
There is unjust enrichment "when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the
Page 72 of 7
PRE - BAR REVIEW
fundamental principles of justice, equity and good conscience." The principle of

unjust enrichment requires two conditions: (1) that a person is benefited without a
valid basis or justification, and (2) that such benefit is derived at the expense of
another. (NAPOCOR vs. Delta P, Inc. 294 SCRA 615)
Page 73 of 7

CIVIL-LAW-Updates-in-Civil-Law-Dean Eduardo J.F. Abella

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UPDATES IN

ACTION TO DECLARE NULLITY OF TITLE,

Insofar as a person who fraudulently obtained a property is concerned,

ACTIONS TO RECOVER POSSESSION –

Accion interdictal is a summary action that seeks the recovery of physical

Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial

xxx xxx xxx

2. Exclusive original jurisdiction over cases of forcible entry and

Accion publiciana is the second possessory action. It is a plenary action to recover

The last possessory action is accion reivindicatoria or accion de reivindicacion. It

“Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial

xxx xxx xxx

(3) Exclusive original jurisdiction in all civil actions which involve

We reiterate that a boundary dispute cannot be settled summarily through the

I. When an obligation, regardless of its source, i.e., law, contracts,

II. With regard particularly to an award of interest in the concept of

1. When the obligation is breached, and it consists in the

2. When an obligation, not constituting a loan or

interest, however, shall be adjudged on unliquidated

3. When the judgment of the court awarding a sum of

Forbearance of money, goods or credits, therefore, refers to arrangements other

The jurisdiction of the CIAC is provided in Section 4 of Executive Order No.

SECTION 4. Jurisdiction. — The CIAC shall have original and

This provision lays down three requisites for acquisition of jurisdiction by

ARTICLE 152 OF FAMILY CODE, not jurisdictional

The procedural issue of lack of attempts at compromise should be resolved in

BREACH OF CONTRACT vs. QUASI-DELICT–

Actions based on contractual negligence and actions based on quasi-delicts differ

This Court finds it significant to take note of the following differences

It is evident, therefore, that in its decision in the Yamada case, the

liable in damages for having failed to exercise due care, either

The true explanation of such cases is to be found by directing the

BUILDER IN GOOD FAITH –

Under the Civil Code,

Moreover, it has been declared that:

the Court perceives that it should reasonably correspond with the

Philippine National Bank v. De Jesus (411 SCRA 557) explains that

Good faith, here understood, is an intangible and abstract quality with

Article 546. Necessary expenses shall be refunded to every possessor;

Useful expenses shall be refunded only to the possessor in good faith

The owner of the building erected in good faith on a land owned by

Therefore, petitioners as landowners became the owners of the improvements on

Whether petitioners choose to appropriate the improvements, compel their

The Civil Code provides:

BUYER IN GOOD FAITH INCLUDES

Individuals who rely on a clean certificate of title in making the decision to

"Where innocent third persons, relying on the correctness of the certificate

As to the DMRP (Deed of Mortgage of Real Property), the CA recognized Zenaida

In Bailon-Casilao v. Court of Appeals (160 SCRA 738), the Court observed:

When an airline issues a ticket to a passenger confirmed on a particular flight, on a

confirmed reservations. Quite tellingly, all the foregoing circumstances lead us to

"Clearly, JAL is liable for moral damages. It is firmly settled that

Nevertheless, in implementing a compromise agreement, the "courts cannot

CONDOMINIUM CORPORATIONS, taxability of

The creation of the condominium corporation is sanctioned by Republic Act No.

automatically be members or shareholders of the condominium corporation to the

Sections 10 and 22 of RA 4726 focus on the non-profit purpose of a condominium

Section 9 allows a condominium corporation to provide for the means by which it

In fine, the collection of association dues, membership fees, and other

Association dues, membership fees, and other assessments/charges do not arise

Neither can it be said that a condominium corporation is rendering services to the

Indisputably, the nature and purpose of a condominium corporation negates

organization. As such, there could be no 'sale, barter or exchange of goods or

1. Consent - A contract is a meeting of minds between two persons whereby