CIVIL LAW CASE DIGESTS

Contract; contract of carriage; definition; common carrier; definition; breach of

contract of carriage; entitlement to damages; contract of services; standard of care
required; damages; when recoverable; quasi-delict; solidary liability of joint
tortfeasors. A contract of carriage is defined as one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news
from one place to another for a fixed price. On its face, the airplane ticket is a valid
written contract of carriage. This Court has held that when an airline issues a ticket
to a passenger confirmed on a particular flight, on a certain date, a contract of
carriage arises, and the passenger has every right to expect that he would fly on
that flight and on that date. If he does not, then the carrier opens itself to a suit for
breach of contract of carriage.

Under Article 1732 of the Civil Code, this “persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to the
public” is called a common carrier.

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

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

For one to be entitled to actual damages, it is necessary to prove the actual amount
of loss with a reasonable degree of certainty, premised upon competent proof and
the best evidence obtainable by the injured party. To justify an award of actual
damages, there must be competent proof of the actual amount of loss. Credence
can be given only to claims which are duly supported by receipts.

Under Article 2220 of the Civil Code of the Philippines, an award of moral damages,
in breaches of contract, is in order upon a showing that the defendant acted
fraudulently or in bad faith. What the law considers as bad faith which may furnish
the ground for an award of moral damages would be bad faith in securing the
contract and in the execution thereof, as well as in the enforcement of its terms, or
any other kind of deceit. In the same vein, to warrant the award of exemplary
damages, defendant must have acted in wanton, fraudulent, reckless, oppressive,
or malevolent manner.

pg. 1
Nominal damages are recoverable where a legal right is technically violated and
must be vindicated against an invasion that has produced no actual present loss of
any kind or where there has been a breach of contract and no substantial injury
or actual damages whatsoever have been or can be shown. Under Article 2221 of
the Civil Code, nominal damages may be awarded to a plaintiff whose right has
been violated or invaded by the defendant, for the purpose of vindicating or
recognizing that right, not for indemnifying the plaintiff for any loss suffered.

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

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

Cathay Pacific and Sampaguita Travel acted together in creating the confusion in
the bookings which led to the erroneous cancellation of respondents’ bookings.
Their negligence is the proximate cause of the technical injury sustained by
respondents. Therefore, they have become joint tortfeasors, whose responsibility for
quasi-delict, under Article 2194 of the Civil Code, is solidary. Cathay Pacific Airways
v. Juanita Reyes, et al., G.R. No. 185891, June 26, 2013

Contract; contract of sale; disputable presumptions; failure to pay the price; effect
of; double sale; effect; registration in good faith; buyer in good faith; duty of a buyer
when a piece of land is in the actual possession of third persons. Under Section 3,
Rule 131 of the Rules of Court, the following are disputable presumptions: (1)
private transactions have been fair and regular; (2) the ordinary course of business
has been followed; and (3) there was sufficient consideration for a contract. These
presumptions operate against an adversary who has not introduced proof to rebut
them. They create the necessity of presenting evidence to rebut the prima facie
case they created, and which, if no proof to the contrary is presented and offered,
will prevail. The burden of proof remains where it is but, by the presumption, the
one who has that burden is relieved for the time being from introducing evidence in
support of the averment, because the presumption stands in the place of evidence
unless rebutted.

Granting that there was no delivery of the consideration, the seller would have no
right to sell again what he no longer owned. His remedy would be to rescind the
sale for failure on the part of the buyer to perform his part of their obligation
pursuant to Article 1191 of the New Civil Code. In the case of Clara M. Balatbat v.
Court Of Appeals and Spouses Jose Repuyan and Aurora Repuyan, it was written:

The failure of the buyer to make good the price does not, in law, cause the
ownership to revest to the seller unless the bilateral contract of sale is first
rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-

pg. 2
payment only creates a right to demand the fulfillment of the obligation or
to rescind the contract. [Emphases supplied]

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

transferred: (1) to the person acquiring it who in good faith first recorded it in the
Registry of Property; (2) in default thereof, to the person who in good faith was first
in possession; and (3) in default thereof, to the person who presents the oldest title,
provided there is good faith. The requirement of the law then is two-fold: acquisition
in good faith and registration in good faith. Good faith must concur with the
registration. If it would be shown that a buyer was in bad faith, the alleged
registration they have made amounted to no registration at all.

When a piece of land is in the actual possession of persons other than the seller, the
buyer must be wary and should investigate the rights of those in possession.
Without making such inquiry, one cannot claim that he is a buyer in good faith.
When a man proposes to buy or deal with realty, his duty is to read the public
manuscript, that is, to look and see who is there upon it and what his rights are. A
want of caution and diligence, which an honest man of ordinary prudence is
accustomed to exercise in making purchases, is in contemplation of law, a want of
good faith. The buyer who has failed to know or discover that the land sold to him is
in adverse possession of another is a buyer in bad faith.

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

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

a contract of sale and a contract to sell; effect of non-payment in a contract of sale;
laches; definition; Torrens system; exception to general rule that action to recover
registered land covered by the Torrens System may not be barred by laches. A
contract of sale is defined under Article 1458 of the Civil Code:

By the contract of sale, one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefore
a price certain in money or its equivalent.

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

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:

[A] bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase price.
pg. 3
In a contract of sale, the title to the property passes to the buyer upon the delivery
of the thing sold, whereas in a contract to sell, the ownership is, by agreement,
retained by the seller and is not to pass to the vendee until full payment of the
purchase price.

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

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

In our jurisdiction, it is an enshrined rule that even registered owners of

property may be barred from recovering possession of property by virtue
of laches. Under the Land Registration Act (now the Property Registration Decree),
no title to registered land in derogation to that of the registered owner shall be
acquired by prescription or adverse possession. The same is not true with regard to
laches.

More particularly, laches will bar recovery of a property, even if the mode of transfer
used by an alleged member of a cultural minority lacks executive approval. Thus, in
Heirs of Dicman v. Cariño, the Court upheld the Deed of Conveyance of Part Rights
and Interests in Agricultural Land executed by Ting-el Dicman in favor of Sioco
Cariño despite lack of executive approval. The Court stated that “despite the judicial
pronouncement that the sale of real property by illiterate ethnic minorities is null
and void for lack of approval of competent authorities, the right to recover
possession has nonetheless been barred through the operation of the equitable
doctrine of laches.” Ali Akang v. Municipality of Isulan, Sultan Kudarat Province, G.R.
No. 186014, June 26, 2013

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

elements of a contract; autonomous nature; obligatory nature of contract;
interpretation; courts have no authority to alter a contract by construction or to
make a new contract for the parties; penal clause; generally substitutes the
indemnity for damages and the payment of interests in case of non-compliance.

pg. 4
Admittedly, Article 1491 (5) of the Civil Code prohibits lawyers from acquiring by
purchase or assignment the property or rights involved which are the object of the
litigation in which they intervene by virtue of their profession. The CA lost sight of
the fact, however, that the prohibition applies only during the pendency of the suit
and generally does not cover contracts for contingent fees where the transfer takes
effect only after the finality of a favorable judgment.

Defined as a meeting of the minds between two persons whereby one binds himself,
with respect to the other to give something or to render some service, a contract
requires the concurrence of the following requisites: (a) consent of the contracting
parties; (b) object certain which is the subject matter of the contract; and, (c) cause
of the obligation which is established.

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

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

An accessory undertaking to assume greater liability on the part of the obligor in

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

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

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

therefor; double function; penalty clause; definition; function. Default or mora on
the part of the debtor is the delay in the fulfillment of the prestation by reason of a
cause imputable to the former. It is the nonfulfillment of an obligation with respect
to time.

pg. 5
It is a general rule that one who contracts to complete certain work within a certain
time is liable for the damage for not completing it within such time, unless the delay
is excused or waived.

In this jurisdiction, the following requisites must be present in order that the debtor
may be in default: (1) that the obligation be demandable and already liquidated; (2)
that the debtor delays performance; and (3) that the creditor requires the
performance judicially or extrajudicially.

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

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

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

Contract; rescission under Article 1191; mutual restitution; contracts; definition.

Mutual restitution is required in cases involving rescission under Article 1191 of the
Civil Code; such restitution is necessary to bring back the parties to their original
situation prior to the inception of the contract.

As a general rule, a contract is a meeting of minds between two persons. The Civil
Code upholds the spirit over the form; thus, it deems an agreement to exist,
provided the essential requisites are present. A contract is upheld as long as there is
proof of consent, subject matter and cause. Moreover, it is generally obligatory in
whatever form it may have been entered into. From the moment there is a meeting
of minds between the parties, [the contract] is perfected. Fil-Estate Gold and
Development, Inc., et al. v. Vertex Sales and Trading, Inc., G.R. No. 202079, June 10,
2013.

Contract; void contracts; effect. A void contract is equivalent to nothing; it produces

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

Credit; concurrence and preference of credit; tax clearance is not required for the
approval of a project of partition. The position of the BIR, insisting on prior
compliance with the tax clearance requirement as a condition for the approval of

pg. 6
the project of distribution of the assets of a bank under liquidation, is contrary to
both the letter and intent of the law on liquidation of banks by the PDIC.

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

Damages; Attorney’s fees; dual concept of attorney’s fees; an award of attorney’s

fees under Article 2208 demands factual, legal, and equitable justification. Article
2208 of the New Civil Code of the Philippines states the policy that should guide the
courts when awarding attorney’s fees to a litigant. As a general rule, the parties
may stipulate the recovery of attorney’s fees. In the absence of such stipulation,
this article restrictively enumerates the instances when these fees may be
recovered.

In ABS-CBN Broadcasting Corp. v. CA, this Court had the occasion to expound on the
policy behind the grant of attorney’s fees as actual or compensatory damages:

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

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

pg. 7
in a party’s persistence in a case other than an erroneous conviction of the
righteousness of his cause.

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

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

Damages; temperate damages; when warranted. Article 2224 of the New Civil Code
provides that “(t)emperate or moderate damages, which are more than nominal but
less than compensatory damages may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the
case, proved with certainty.” People of the Philippines v. Reggie Bernardo, G.R. No.
198789, June 3, 2013.

Interest rates; a stipulated interest of 24% per annum is not unconscionable;

surcharge on principal loan; a surcharge of 1% per month on the principal loan is
valid; surcharge or penalty partakes of the nature of liquidated damages; different
from interest payment. In Villanueva v. Court of Appeals, where the issue raised was
whether the 24% p.a. stipulated interest rate is unreasonable under the
circumstances, we answered in the negative and held:

In Spouses Zacarias Bacolor and Catherine Bacolor v. Banco Filipino Savings and
Mortgage Bank, Dagupan City Branch, this Court held that the interest rate of 24%
per annum on a loan of P244,000.00, agreed upon by the parties, may not be
considered as unconscionable and excessive. As such, the Court ruled that the
borrowers cannot renege on their obligation to comply with what is incumbent upon
them under the contract of loan as the said contract is the law between the parties
and they are bound by its stipulations.

pg. 8
Also, in Garcia v. Court of Appeals, this Court sustained the agreement of the parties
to a 24% per annum interest on an P8,649,250.00 loan finding the same to be
reasonable and clearly evidenced by the amended credit line agreement entered
into by the parties as well as two promissory notes executed by the borrower in
favor of the lender.

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

In Ruiz v. CA, we held:

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

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

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

Tort; collateral source rule; unjust enrichment; elements. As part of American

personal injury law, the collateral source rule was originally applied to tort cases
wherein the defendant is prevented from benefiting from the plaintiff’s receipt of
money from other sources. Under this rule, if an injured person receives
compensation for his injuries from a source wholly independent of the tortfeasor,
the payment should not be deducted from the damages which he would otherwise
collect from the tortfeasor. In a recent Decision by the Illinois Supreme Court, the
rule has been described as “an established exception to the general rule that
damages in negligence actions must be compensatory.” The Court went on to
explain that although the rule appears to allow a double recovery, the collateral
source will have a lien or subrogation right to prevent such a double recovery. In
Mitchell v. Haldar, the collateral source rule was rationalized by the Supreme Court
of Delaware:

The collateral source rule is ‘predicated on the theory that a tortfeasor has no
interest in, and therefore no right to benefit from monies received by the injured
person from sources unconnected with the defendant’. According to the collateral
source rule, ‘a tortfeasor has no right to any mitigation of damages because of
payments or compensation received by the injured person from an independent
source.’ The rationale for the collateral source rule is based upon the quasi-punitive
nature of tort law liability. It has been explained as follows:

pg. 9
The collateral source rule is designed to strike a balance between two competing
principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make
him whole, but no more; and (2) a defendant is liable for all damages that
proximately result from his wrong. A plaintiff who receives a double recovery for a
single tort enjoys a windfall; a defendant who escapes, in whole or in part, liability
for his wrong enjoys a windfall. Because the law must sanction one windfall and
deny the other, it favors the victim of the wrong rather than the wrongdoer.

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

As seen, the collateral source rule applies in order to place the responsibility for
losses on the party causing them. Its application is justified so that “‘the wrongdoer
should not benefit from the expenditures made by the injured party or take
advantage of contracts or other relations that may exist between the injured party
and third persons.” Thus, it finds no application to cases involving no-fault
insurances under which the insured is indemnified for losses by insurance
companies, regardless of who was at fault in the incident generating the losses.

To constitute unjust enrichment, it must be shown that a party was unjustly

enriched in the sense that the term unjustly could mean illegally or unlawfully. A
claim for unjust enrichment fails when the person who will benefit has a valid claim
to such benefit. Mitsubishi Motors Philippines Salaried Employees Union v.
Mitsubishi Motors Philippines Corporation, G.R. No. 175773, June 17, 2013.

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

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

1. A person is unjustly benefited; and

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

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

Special Laws

Family Code; support; in proportion to the resources or means of the giver and to
the needs of the recipient; support pendente lite in cases of legal separation and
petitions for declaration of nullity or annulment of marriage; judicial determination
is guided by the Rule on Provisional Orders; support in arrears; deductions from
accrued support pendente lite; judgment for support does not become final. As a
matter of law, the amount of support which those related by marriage and family
pg. 10
relationship is generally obliged to give each other shall be in proportion to the
resources or means of the giver and to the needs of the recipient. Such support
comprises everything indispensable for sustenance, dwelling, clothing, medical
attendance, education and transportation, in keeping with the financial capacity of
the family.

Upon receipt of a verified petition for declaration of absolute nullity of void marriage
or for annulment of voidable marriage, or for legal separation, and at any time
during the proceeding, the court, motu proprio or upon verified application of any of
the parties, guardian or designated custodian, may temporarily grant support
pendente lite prior to the rendition of judgment or final order. Because of its
provisional nature, a court does not need to delve fully into the merits of the case
before it can settle an application for this relief. All that a court is tasked to do is
determine the kind and amount of evidence which may suffice to enable it to justly
resolve the application. It is enough that the facts be established by affidavits or
other documentary evidence appearing in the record.

Judicial determination of support pendente lite in cases of legal separation and

petitions for declaration of nullity or annulment of marriage are guided by the
provisions of the Rule on Provisional Orders.

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

we find as relevant the following rulings by US courts.

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

In Martin, Jr. v. Martin, the Supreme Court of Washington held that a father, who is
required by a divorce decree to make child support payments directly to the mother,
cannot claim credit for payments voluntarily made directly to the children. However,
special considerations of an equitable nature may justify a court in crediting such
payments on his indebtedness to the mother, when such can be done without
injustice to her.

Suffice it to state that the matter of increase or reduction of support should be

submitted to the trial court in which the action for declaration for nullity of marriage
was filed, as this Court is not a trier of facts. The amount of support may be reduced
or increased proportionately according to the reduction or increase of the

pg. 11
necessities of the recipient and the resources or means of the person obliged to
support. As we held in Advincula v. Advincula:

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

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

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

Annulment of Voidable Marriages; not applicable in an action for recognition of
foreign judgment; foreign judgment relating to the marital status of a person;
special proceeding for cancellation or correction of entries in the civil registry under
Rule 108 of the Rules of Court; the first husband has a right to file the petition;
effect of a foreign divorce decree to a Filipino spouse; Article 26 of the Family Code.
The Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages (A.M. No. 02-11-10-SC) does not apply in a petition to recognize
a foreign judgment relating to the status of a marriage where one of the parties is a
citizen of a foreign country. Moreover, in Juliano-Llave v. Republic, this Court held
that the rule in A.M. No. 02-11-10-SC that only the husband or wife can file a
declaration of nullity or annulment of marriage “does not apply if the reason behind
the petition is bigamy.”

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

A petition to recognize a foreign judgment declaring a marriage void does not

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

Since the recognition of a foreign judgment only requires proof of fact of the
judgment, it may be made in a special proceeding for cancellation or correction of
entries in the civil registry under Rule 108 of the Rules of Court. Rule 1, Section 3 of

pg. 12
the Rules of Court provides that “[a] special proceeding is a remedy by which a
party seeks to establish a status, a right, or a particular fact.” Rule 108 creates a
remedy to rectify facts of a person’s life which are recorded by the State pursuant to
the Civil Register Law or Act No. 3753. These are facts of public consequence such
as birth, death or marriage, which the State has an interest in recording. There is no
doubt that the prior spouse has a personal and material interest in maintaining the
integrity of the marriage he contracted and the property relations arising from it.
There is also no doubt that he is interested in the cancellation of an entry of a
bigamous marriage in the civil registry, which compromises the public record of his
marriage. The interest derives from the substantive right of the spouse not only to
preserve (or dissolve, in limited instances) his most intimate human relation, but
also to protect his property interests that arise by operation of law the moment he
contracts marriage. These property interests in marriage include the right to be
supported “in keeping with the financial capacity of the family” and preserving the
property regime of the marriage.

Section 2(a) of A.M. No. 02-11-10-SC does not preclude a spouse of a subsisting
marriage to question the validity of a subsequent marriage on the ground of bigamy.
On the contrary, when Section 2(a) states that “[a] petition for declaration of
absolute nullity of void marriage may be filed solely by the husband or the wife”
―it refers to the husband or the wife of the subsisting marriage. Under Article 35(4)
of the Family Code, bigamous marriages are void from the beginning. Thus, the
parties in a bigamous marriage are neither the husband nor the wife under the law.
The husband or the wife of the prior subsisting marriage is the one who has the
personality to file a petition for declaration of absolute nullity of void marriage
under Section 2(a) of A.M. No. 02-11-10-SC.

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

Article 26 of the Family Code confers jurisdiction on Philippine courts to extend the
effect of a foreign divorce decree to a Filipino spouse without undergoing trial to
determine the validity of the dissolution of the marriage. The second paragraph of
Article 26 of the Family Code provides that “[w]here a marriage between a Filipino
citizen and a foreigner is validly celebrated and a divorce is thereafter validly
obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino
spouse shall have capacity to remarry under Philippine law.” The second paragraph
of Article 26 of the Family Code only authorizes Philippine courts to adopt the effects

pg. 13
of a foreign divorce decree precisely because the Philippines does not allow divorce.
Philippine courts cannot try the case on the merits because it is tantamount to
trying a case for divorce. Minoru Fujiki v. Maria Paz Galela Marinay, et al., G.R. No.
196049, June 26, 2013.

Family Courts Act of 1997; Violence Against Women and Children Act of 2004;
Family Courts; jurisdiction; a special court of the same level as RTC; RTCs designated
as family courts remain possessed of authority as courts of general original
jurisdiction. At the outset, it must be stressed that Family Courts are special courts,
of the same level as Regional Trial Courts. Under R.A. 8369, otherwise known as the
“Family Courts Act of 1997,” family courts have exclusive original jurisdiction to
hear and decide cases of domestic violence against women and children. In
accordance with said law, the Supreme Court designated from among the branches
of the Regional Trial Courts at least one Family Court in each of several key cities
identified. To achieve harmony with the first mentioned law, Section 7 of R.A. 9262
now provides that Regional Trial Courts designated as Family Courts shall have
original and exclusive jurisdiction over cases of VAWC defined under the latter law.

Inspite of its designation as a family court, the RTC of Bacolod City remains
possessed of authority as a court of general original jurisdiction to pass upon all
kinds of cases whether civil, criminal, special proceedings, land registration,
guardianship, naturalization, admiralty or insolvency. It is settled that RTCs have
jurisdiction to resolve the constitutionality of a statute, “this authority being
embraced in the general definition of the judicial power to determine what are the
valid and binding laws by the criterion of their conformity to the fundamental law.”
The Constitution vests the power of judicial review or the power to declare the
constitutionality or validity of a law, treaty, international or executive agreement,
presidential decree, order, instruction, ordinance, or regulation not only in this
Court, but in all RTCs. Jesus C. Garcia v. The Hon. Ray Alan T. Drilon, et al., G.R. No.
179267, June 25, 2013

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

ownership of the land; not subject to collateral attack; Land Registration Authority;
functions. The real purpose of the Torrens system is to quiet title to land and to stop
forever any question as to its legality. Once a title is registered, the owner may rest
secure, without the necessity of waiting in the portals of the court, or sitting on the
“mirador su casa,” to avoid the possibility of losing his land. A Torrens title is
generally a conclusive evidence of the ownership of the land referred to therein. A
strong presumption exists that Torrens titles are regularly issued and that they are
valid.

Section 48 of Presidential Decree No. 1529, otherwise known as the Property

Registration Decree, explicitly provides that “[a] certificate of title shall not be
subject to collateral attack. It cannot be altered, modified, or cancelled except in a
direct proceeding in accordance with law.”

The duty of LRA officials to issue decrees of registration is ministerial in the sense
that they act under the orders of the court and the decree must be in conformity
with the decision of the court and with the data found in the record. They have no

pg. 14
discretion in the matter. However, if they are in doubt upon any point in relation to
the preparation and issuance of the decree, these officials ought to seek
clarification from the court. They act, in this respect, as officials of the court and not
as administrative officials, and their act is the act of the court. They are specifically
called upon to “extend assistance to courts in ordinary and cadastral land
registration proceedings.” Deogenes O. Rodriguez v. Hon. Court of Appeals and
Philippine Chinese Charitable Association, Inc., G.R. No. 184589, June 13, 2013

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

Holdings, Inc. v. Roxas Electric and Construction Company, Inc. the Court stated that
“persons dealing with an assumed agency, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to
establish it.” In other words, when the petitioner relied only on the words of
respondent Alejandro without securing a copy of the SPA in favor of the latter, the
petitioner is bound by the risk accompanying such trust on the mere assurance of
Alejandro.

The same Woodchild case stressed that apparent authority based on estoppel can
arise from the principal who knowingly permit the agent to hold himself out with
authority and from the principal who clothe the agent with indicia of authority that
would lead a reasonably prudent person to believe that he actually has such
authority. Apparent authority of an agent arises only from “acts or conduct on the
part of the principal and such acts or conduct of the principal must have been
known and relied upon in good faith and as a result of the exercise of reasonable
prudence by a third person as claimant and such must have produced a change of
position to its detriment.” In the instant case, the sale to the Spouses Lajarca and
other transactions where Alejandro allegedly represented a considerable majority of
the co-owners transpired after the sale to the petitioner; thus, the petitioner cannot
rely upon these acts or conduct to believe that Alejandro had the same authority to
negotiate for the sale of the subject property to him. Reman Recio v. Heirs of
Spouses Aguego and Maria Altamirano, G.R. No.182349, July 24, 2013.

Agency; definition under the Civil Code; form of contract. Article 1868 of the Civil
Code defines a contract of agency as a contract whereby a person “binds himself to
render some service or to do something in representation or on behalf of another,
with the consent or authority of the latter.” It may be express, or implied from the
acts of the principal, from his silence or lack of action, or his failure to repudiate the
agency, knowing that another person is acting on his behalf without authority.

As a general rule, a contract of agency may be oral.

However, it must be written when the law requires a specific form. Specifically,
Article 1874 of the Civil Code provides that the contract of agency must be written
for the validity of the sale of a piece of land or any interest therein. Otherwise, the
sale shall be void. A related provision, Article 1878 of the Civil Code, states that
special powers of attorney are necessary to convey real rights over immovable

pg. 15
properties. Sally Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978,
July 31, 2013.

Agency; general power of attorney; an agency couched in general terms comprises

only acts of administration. The certification is a mere general power of attorney
which comprises all of Joy Training’s business. Article 1877 of the Civil Code clearly
states that “[a]n agency couched in general terms comprises only acts of
administration, even if the principal should state that he withholds no power
or that the agent may execute such acts as he may consider appropriate,
or even though the agency should authorize a general and unlimited
management.” Sally Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No.
174978, July 31, 2013.

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

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

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

Agency; special power of attorney for sale of property; must expressly mention a
sale or include a sale as a necessary ingredient of the authorized act. The special
power of attorney mandated by law must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the authorized
act. We unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals
that a special power of attorney must express the powers of the agent in clear
and unmistakable language for the principal to confer the right upon an agent to

pg. 16
sell real estate. When there is any reasonable doubt that the language so used
conveys such power, no such construction shall be given the document. The
purpose of the law in requiring a special power of attorney in the disposition of
immovable property is to protect the interest of an unsuspecting owner from being
prejudiced by the unwarranted act of another and to caution the buyer to assure
himself of the specific authorization of the putative agent. Sally Yoshizaki v. Joy
Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013.

Agency; special power of attorney; required for an agent to sell an immovable

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

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

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

Attorney’s fees for professional services rendered; may be claimed in the very
action itself or in a separate action; prescription for oral contract of attorney’s fees
is 6 years; concept of quantum meruit; guidelines under the Code of Professional
Responsibility. The Court now addresses two important questions: (1) How can
attorney’s fees for professional services be recovered? (2) When can an action for
attorney’s fees for professional services be filed? The case of Traders Royal Bank
Employees Union-Independent v. NLRC is instructive:

pg. 17
As an adjunctive episode of the action for the recovery of bonus differentials in
NLRC-NCR Certified Case No. 0466, private respondent’s present claim for
attorney’s fees may be filed before the NLRC even though or, better stated,
especially after its earlier decision had been reviewed and partially affirmed. It is
well settled that a claim for attorney’s fees may be asserted either in the very
action in which the services of a lawyer had been rendered or in a separate action.

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

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

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

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

With respect to petitioner’s entitlement to the claimed attorney’s fees, it is the

Court’s considered view that he is deserving of it and that the amount should be
based on quantum meruit. Quantum meruit – literally meaning as much as he
deserves – is used as basis for determining an attorney’s professional fees in the

pg. 18
absence of an express agreement. The recovery of attorney’s fees on the basis of
quantum meruit is a device that prevents an unscrupulous client from running away
with the fruits of the legal services of counsel without paying for it and also avoids
unjust enrichment on the part of the attorney himself. An attorney must show that
he is entitled to reasonable compensation for the effort in pursuing the client’s
cause, taking into account certain factors in fixing the amount of legal fees.

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

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

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

b) The novelty and difficulty of the questions involved;

c) The importance of the subject matter;

d) The skill demanded;

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

proffered case;

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

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

h) The contingency or certainty of compensation;

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

j) The professional standing of the lawyer.

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

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

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

Attorney’s fees; when recoverable. The Court of Appeals rightfully upheld the
NLRC’s affirmance of the grant of attorney’s fees to San Miguel. Thereby, the NLRC
did not commit any grave abuse of its discretion, considering that San Miguel had

pg. 19
been compelled to litigate and to incur expenses to protect his rights and interest.
In Producers Bank of the Philippines v. Court of Appeals, the Court ruled that
attorney’s fees could be awarded to a party whom an unjustified act of the other
party compelled to litigate or to incur expenses to protect his interest. It was plain
that petitioner’s refusal to reinstate San Miguel with backwages and other benefits
to which he had been legally entitled was unjustified, thereby entitling him to
recover attorney’s fees. Zuellig Freight and Cargo Systems v. National Labor
Relations Commission, et al., G.R. No. 157900, July 22, 2013

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

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

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

Contract; absolutely simulated contracts; void from the beginning. The Court is in
accord with the observation and findings of the (RTC, Kalibo, Aklan) thus:

“The amplitude of foregoing undisputed facts and circumstances clearly shows that
the sale of the land in question was purely simulated. It is void from the very
beginning (Article 1346, New Civil Code). If the sale was legitimate, defendant
Glenda should have immediately taken possession of the land, declared in her name
for taxation purposes, registered the sale, paid realty taxes, introduced
improvements therein and should not have allowed plaintiff to mortgage the land.
These omissions properly militated against defendant Glenda’s submission that the
sale was legitimate and the consideration was paid.

Dr. Lorna C. Formaran v. Dr. Glenda B. Ong and Solomon S. Ong, G.R. No. 186264,
July 8, 2013.

pg. 20
Contract of sale; elements. A valid contract of sale requires: (a) a meeting of minds
of the parties to transfer ownership of the thing sold in exchange for a price; (b) the
subject matter, which must be a possible thing; and (c) the price certain in money
or its equivalent. Reman Recio v. Heirs of Spouses Aguego and Maria Altamirano,
G.R. No.182349, July 24, 2013.

Contract to sell; payment of the price; positive suspension condition; effect of failure
to pay. Clearly, the RTC arrived at the above-quoted conclusion based on its
mistaken premise that rescission is applicable to the case. Hence, its determination
of whether there was substantial breach. As may be recalled, however, the CA, in its
assailed Decision, found the contract between the parties as a contract to sell,
specifically of a real property on installment basis, and as such categorically
declared rescission to be not the proper remedy. This is considering that in a
contract to sell, payment of the price is a positive suspensive condition, failure of
which is not a breach of contract warranting rescission under Article 1191 of the
Civil Code but rather just an event that prevents the supposed seller from being
bound to convey title to the supposed buyer. Also, and as correctly ruled by the CA,
Article 1191 cannot be applied to sales of real property on installment since they
are governed by the Maceda Law.

There being no breach to speak of in case of non-payment of the purchase price in a

contract to sell, as in this case, the RTC’s factual finding that Lourdes was willing
and able to pay her obligation – a conclusion arrived at in connection with the said
court’s determination of whether the non-payment of the purchase price in
accordance with the terms of the contract was a substantial breach warranting
rescission – therefore loses significance. The spouses Bonrostro’s reliance on the
said factual finding is thus misplaced. They cannot invoke their readiness and
willingness to pay their obligation on November 24, 1993 as an excuse from being
made liable for interest beyond the said date. Sps. Nameal and Lourdes Bonrostro v.
Sps. Juan and Constacia Luna, G.R. No.172346, July 24, 2013.

Damages; damages for loss of earning capacity; must be duly proven by

documentary evidence; exceptions. The Supreme Court agrees with the Court of
Appeals when it removed the RTC’s award respecting the indemnity for the loss of
earning capacity. As it has already previously ruled that damages for loss of earning
capacity is in the nature of actual damages, which as a rule must be duly proven by
documentary evidence, not merely by the self-serving testimony of the widow.

By way of exception, damages for loss of earning capacity may be awarded despite
the absence of documentary evidence when (1) the deceased is self-employed
earning less than the minimum wage under current labor laws, and judicial notice
may be taken of the fact that in the deceased’s line of work no documentary
evidence is available; or (2) the deceased is employed as a daily wage worker
earning less than the minimum wage under current labor laws. People of the
Philippines v. Garry Vergara y Oriel and Joseph Incencio y Paulino, G.R. No. 177763,
July 3, 2013

Damages; exemplary damages; concept. As for exemplary damages, Article 2229

provides that exemplary damages may be imposed by way of example or correction

pg. 21
for the public good. Nonetheless, exemplary damages are imposed not to enrich
one party or impoverish another, but to serve as a deterrent against or as a
negative incentive to curb socially deleterious actions. In the instant case, the Court
agrees with the CA in sustaining the award of exemplary damages, although it
reduced the amount granted, considering that respondent spouses were deprived of
their water supply for more than nine (9) months, and such deprivation would have
continued were it not for the relief granted by the RTC. Joyce V. Ardiente v. Spouses
Javier and Ma. Theresa Pastofide, G.R. No. 161921, July 17, 2013.

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

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

Damages; interest thereon; where obligation does not constitute a loan or

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

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

Spouses Rocamora, the Supreme Court said that:

Moral damages are not recoverable simply because a contract has been breached.
They are recoverable only if the defendant acted fraudulently or in bad faith or in
wanton disregard of his contractual obligations. The breach must be wanton,
reckless, malicious or in bad faith, and oppressive or abusive. Likewise, a breach of
contract may give rise to exemplary damages only if the guilty party acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.

Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No. 177050, July 1,
2013.

pg. 22
Damages; moral damages; awarded where the victim of a crime suffered a violent
death, even in the absence of proof of mental and emotional suffering of the
victim’s heirs. The Supreme Court sustained the RTC’s award for moral damages in
the amount of P50,000.00 even in the absence of proof of mental and emotional
suffering of the victim’s heirs. As borne out by human nature and experience, a
violent death invariably and necessarily brings about emotional pain and anguish on
the part of the victim’s family. While no amount of damages may totally
compensate the sudden and tragic loss of a loved one it is nonetheless awarded to
the heirs of the deceased to at least assuage them. People of the Philippines v.
Garry Vergara y Oriel and Joseph Incencio y Paulino, G.R. No. 177763, July 3, 2013

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

Human Relations; abuse of rights; Article 19 of the Civil Code; concept; damages as
reliefs. The principle of abuse of rights as enshrined in Article 19 of the Civil Code
provides that every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.

In this regard, the Court’s ruling in Yuchengco v. The Manila Chronicle Publishing
Corporation is instructive, to wit:

xxxx

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

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

One of the more notable innovations of the New Civil Code is the codification of
“some basic principles that are to be observed for the rightful relationship between
human beings and for the stability of the social order.” [REPORT ON THE CODE
COMMISSION ON THE PROPOSED CIVIL CODE OF THE PHILIPPINES, p. 39]. The
framers of the Code, seeking to remedy the defect of the old Code which merely
stated the effects of the law, but failed to draw out its spirit, incorporated certain
fundamental precepts which were “designed to indicate certain norms that spring
from the fountain of good conscience” and which were also meant to serve as

pg. 23
“guides for human conduct [that] should run as golden threads through society, to
the end that law may approach its supreme ideal, which is the sway and dominance
of justice.” (Id.) Foremost among these principles is that pronounced in Article 19 x
x x.

xxxx

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

Human Relations; civil case for fraud; Article 33 of the Civil Code provides that a
civil case for damages based on fraud may proceed independently of the criminal
case therefor; said civil case will not operate as a prejudicial question that will
justify the suspension of a criminal case. It is well settled that a civil action based on
defamation, fraud and physical injuries may be independently instituted pursuant to
Article 33 of the Civil Code, and does not operate as a prejudicial question that will
justify the suspension of a criminal case. This was precisely the Court’s thrust in
G.R. No. 148193, thus:

Moreover, neither is there a prejudicial question if the civil and the criminal action
can, according to law, proceed independently of each other. Under Rule 111, Section
3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32,
33, 34 and 2176 of the Civil Code, the independent civil action may be brought by
the offended party. It shall proceed independently of the criminal action and shall
require only a preponderance of evidence. In no case, however, may the offended
party recover damages twice for the same act or omission charged in the criminal
action.

In the instant case, Civil Case No. 99-95381, for Damages and Attachment on
account of the alleged fraud committed by respondent and his mother in selling the
disputed lot to PBI is an independent civil action under Article 33 of the Civil Code.
As such, it will not operate as a prejudicial question that will justify the suspension
of the criminal case at bar. Rafael Jose Consing, Jr. v. People of the Philippines, G.R.
No. 161075, July 15, 2013.

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

Mortgage; includes all natural or civil fruits and improvements found on the
mortgaged property when the secured obligation becomes due; in case of non-
payment of the secured debt, foreclosure proceedings shall cover not only the
hypothecated property but all its accessions and accessories as well; indispensable
requisite that mortgagor be the absolute owner of the encumbered property. Rent,
as an accessory, follows the principal. In fact, when the principal property is
mortgaged, the mortgage shall include all natural or civil fruits and improvements
found thereon when the secured obligation becomes due as provided in Article 2127
of the Civil Code, viz:

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

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

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

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

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

of Appeals, the Court declared that the improvements constructed by the mortgagor
on the subject lot are covered by the real estate mortgage contract with the

pg. 25
mortgagee bank and thus included in the foreclosure proceedings instituted by the
latter.

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

Mortgage; mortgagee in good faith; right to have mortgage lien carried over and
annotated on the new certificate of title. The protection afforded to PNB as a
mortgagee in good faith refers to the right to have its mortgage lien carried over
and annotated on the new certificate of title issued to Spouses Marañon as so
adjudged by the RTC. Thereafter, to enforce such lien thru foreclosure proceedings
in case of non- payment of the secured debt, as PNB did so pursue. The principle,
however, is not the singular rule that governs real estate mortgages and
foreclosures attended by fraudulent transfers to the mortgagor. Philippine National
Bank v. Sps. Bernard and Cresencia Marañon, G.R.No. 189316, July 1, 2013.

Obligations; conditions; fulfillment thereof; deemed fulfilled when obligor voluntarily

prevents it fulfillment; requisites. The spouses Bonrostro want to be relieved from
paying interest on the amount of P214,492.62 which the spouses Luna paid to Bliss
as amortizations by asserting that they were prevented by the latter from fulfilling
such obligation. They invoke Art. 1186 of the Civil Code which provides that “the
condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment.”

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

Obligations; constructive fulfillment; Article 1186 of the Civil Code; requisites. As

aptly pointed out by the CA, Article 1186 of the Civil Code, which states that “the
condition shall be deemed fulfilled when the obligor voluntarily prevents its
fulfillment,” does not apply in this case, viz:

Article 1186 enunciates the doctrine of constructive fulfillment of suspensive

conditions, which applies when the following three (3) requisites concur, viz: (1) The
condition is suspensive; (2) The obligor actually prevents the fulfillment of the
condition; and (3) He acts voluntarily. Suspensive condition is one the happening of
which gives rise to the obligation. It will be irrational for any Bank to provide a

pg. 26
suspensive condition in the Promissory Note or the Restructuring Agreement that
will allow the debtor-promissor to be freed from the duty to pay the loan without
paying it.

Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No. 177050, July 1,
2013.

Obligations; if an obligation consists of payment of money, and the debtor incurs in

delay, the indemnity for damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the absence of stipulation, the
legal interest. Under Article 2209 ofthe Civil Code, “[i]fthe obligation consists in the
payment of a sum of money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the payment of the
interest· agreed upon, and in the absence of stipulation, the legal interest x x x.”
There being no stipulation on interest in case ofdelay in the payment
ofamortization, the CA thus correctly imposed interest at the legal rate which is now
12%per annum. Sps. Nameal and Lourdes Bonrostro v. Sps. Juan and Constacia
Luna, G.R. No.172346, July 24, 2013.

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

Prescription; Article 1144 of the Civil Code. We concur with the CA’s ruling that
respondent’s action did not yet prescribe. The legal provision governing this case
was not Article 1146 of the Civil Code, but Article 1144 of the Civil Code, which
states:

Article 1144. The following actions must be brought within ten years from the time
the cause of action accrues:

(1)Upon a written contract; (2) Upon an obligation created by law; (3)Upon a

judgment.

Vector Shipping Corporation, et al. v. American Home Assurance Co., et al., G.R. No.
159213, July 3, 2013.

Property; co-ownership; sale of co-owned property; if only one co-owner agreed to

the sale, said co-owner only sold his aliquot share in the subject property. But as
held by the appellate court, the sale between the petitioner and Alejandro is valid
insofar as the aliquot share of respondent Alejandro is concerned. Being a co-owner,
Alejandro can validly and legally dispose of his share even without the consent of all
the other co-heirs. Since the balance of the full price has not yet been paid, the
pg. 27
amount paid shall represent as payment to his aliquot share. This then leaves the
sale of the lot of the Altamiranos to the Spouses Lajarca valid only insofar as their
shares are concerned, exclusive of the aliquot part of Alejandro, as ruled by the CA.
Reman Recio v. Heirs of Spouses Aguego and Maria Altamirano, G.R. No.182349,
July 24, 2013.

Property; patrimonial property and property of public dominion; patrimonial

property of the State may be the object of prescription, however, those intended for
some public service or the development of national wealth are property of public
dominion, which are not susceptible to acquisition by prescription; public domain
lands become patrimonial property only if there is a declaration that these are
alienable or disposable, together with an express government manifestation that
the property is already patrimonial or no longer retained for public service or the
development of national wealth. Under Article 422 of the Civil Code, public domain
lands become patrimonial property only if there is a declaration that these are
alienable or disposable, together with an express government manifestation that
the property is already patrimonial or no longer retained for public service or the
development of national wealth. Only when the property has become patrimonial
can the prescriptive period for the acquisition of property of the public dominion
begin to run. Also under Section 14(2) of Presidential Decree (P.D.) No. 1529, it is
provided that before acquisitive prescription can commence, the property sought to
be registered must not only be classified as alienable and disposable, it must also
be expressly declared by the State that it is no longer intended for public service or
the development of the national wealth, or that the property has been converted
into patrimonial. Absent such an express declaration by the State, the land remains
to be property of public dominion. Dream Village Neighborhood Association, Inc.,
represented by its Incumbent President Greg Seriego v. Bases Conversion
Development Authority, G.R. No.192896, July 24, 2013.

Rent; civil fruit; rightful recipient. Rent is a civil fruit that belongs to the owner of the
property producing it by right of accession. The rightful recipient of the disputed
rent in this case should thus be the owner of the subject lot at the time the rent
accrued. Philippine National Bank v. Sps. Bernard and Cresencia Marañon, G.R.No.
189316, July 1, 2013.

Subrogation; basis; definition. Consistent with the pertinent law and jurisprudence,
therefore, Exhibit I was already enough by itself to prove the payment of
P7,455,421.00 as the full settlement of Caltex’s claim. The payment made to Caltex
as the insured being thereby duly documented, respondent became subrogated as a
matter of course pursuant to Article 2207 of the Civil Code. In legal contemplation,
subrogation is the “substitution of another person in the place of the creditor, to
whose rights he succeeds in relation to the debt;” and is “independent of any mere
contractual relations between the parties to be affected by it, and is broad enough
to cover every instance in which one party is required to pay a debt for which
another is primarily answerable, and which in equity and conscience ought to be
discharged by the latter.” Vector Shipping Corporation, et al. v. American Home
Assurance Co., et al., G.R. No. 159213, July 3, 2013.

pg. 28
Subrogation in insurance cases; accrues simply upon payment by the insurance
company of the insurance claim; payment by the insurer to the insured operates as
an equitable assignment to the insurer of all remedies that the insured may have
against the third party whose negligence or wrongful act caused the loss. The Court
holds that petitioner Philam has adequately established the basis of its claim
against petitioners ATI and Westwind. Philam, as insurer, was subrogated to the
rights of the consignee, Universal Motors Corporation, pursuant to the Subrogation
Receipt executed by the latter in favor of the former. The right of subrogation
accrues simply upon payment by the insurance company of the insurance claim.
Petitioner Philam’s action finds support in Article 2207 of the Civil Code, which
provides as follows:

Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. x
x x.

Yet, even with the exclusion of Marine Certificate No. 708-8006717-4, the
Subrogation Receipt, on its own, is adequate proof that petitioner Philam paid the
consignee’s claim on the damaged goods. Petitioners ATI and Westwind failed to
offer any evidence to controvert the same. In Malayan Insurance Co., Inc. v. Alberto,
the Court explained the effect of payment by the insurer of the insurance claim in
this wise:

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

Tender of payment; concept; tender of payment, if refused without just cause, will
discharge the debtor only after a valid consignation with the court; when tender of
payment is not accompanied by the means of payment, and the debtor did not take
any immediate step to make a consignation, then interest is not suspended from
the time of such tender. Tender of payment “is the manifestation by the debtor of a
desire to comply with or pay an obligation. If refused without just cause, the tender
of payment will discharge the debtor of the obligation to pay but only after a valid
consignation of the sum due shall have been made with the proper court.”
“Consignation is the deposit of the [proper amount with a judicial authority] in
accordance with rules prescribed by law, after the tender of payment has been

pg. 29
refused or because of circumstances which render direct payment to the creditor
impossible or inadvisable.”

“Tender of payment, without more, produces no effect.” “[T]o have the effect of
payment and the consequent extinguishment of the obligation to pay, the law
requires the companion acts of tender of payment and consignation.”

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

explained as follows:

When a tender of payment is made in such a form that the creditor could have
immediately realized payment if he had accepted the tender, followed by a prompt
attempt of the debtor to deposit the means of payment in court by way of
consignation, the accrual of interest on the obligation will be suspended from the
date of such tender. But when the tender of payment is not accompanied by
the means of payment, and the debtor did not take any immediate step to
make a consignation, then interest is not suspended from the time of such
tender. x x x x (Emphasis supplied) Sps. Nameal and Lourdes Bonrostro v. Sps.
Juan and Constacia Luna, G.R. No.172346, July 24, 2013.

Special Laws

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

In this case, the parties stipulated in paragraph 11 of the Mortgage that:

11. All correspondence relative to this mortgage, including demand letters,

summons, subpoenas, or notification of any judicial or extra-judicial action shall be
sent to the Mortgagor at xxx or at the address that may hereafter be given in
writing by the Mortgagor or the Mortgagee;

However, no notice of the extrajudicial foreclosure was sent by DBP to petitioners

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

Bases Conversion Development Authority (BCDA); BCDA holds title to Fort Bonifacio;
Dream Village sits on the abandoned C-5 Road, which lies outside the areas
pg. 30
declared in Proclamation Nos. 2476 and 172 as alienable and disposable. That the
BCDA has title to Fort Bonifacio has long been decided with finality. In Samahan ng
Masang Pilipino sa Makati, Inc. v. BCDA, it was categorically ruled as follows:

First, it is unequivocal that the Philippine Government, and now the BCDA, has title
and ownership over Fort Bonifacio. The case of Acting Registrars of Land Titles and
Deeds of Pasay City, Pasig and Makati is final and conclusive on the ownership of
the then Hacienda de Maricaban estate by the Republic of the Philippines. Clearly,
the issue on the ownership of the subject lands in Fort Bonifacio is laid to rest. Other
than their view that the USA is still the owner of the subject lots, petitioner has not
put forward any claim of ownership or interest in them. Dream Village
Neighborhood Association, Inc., represented by its Incumbent President Greg
Seriego v. Bases Conversion Development Authority, G.R. No.192896, July 24, 2013.

Common Carrier; Carriage of Goods by Sea Act (COGSA); prescriptive period for
filing an action for loss or damage of goods. The prescriptive period for filing an
action for the loss or damage of the goods under the COGSA is found in paragraph
(6), Section 3, thus:

(6) Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge before or at
the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as described in the bill of lading.
If the loss or damage is not apparent, the notice must be given within three days of
the delivery. Said notice of loss or damage maybe endorsed upon the receipt for the
goods given by the person taking delivery thereof. The notice in writing need not be
given if the state of the goods has at the time of their receipt been the subject of
joint survey or inspection.

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

Common Carrier; Carriage of Goods by Sea Act (COGSA); prescriptive period for
filing an action for loss or damage of goods. The prescriptive period for filing an
action for the loss or damage of the goods under the COGSA is found in paragraph
(6), Section 3, thus:

(6) Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge before or at

pg. 31
the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as described in the bill of lading.
If the loss or damage is not apparent, the notice must be given within three days of
the delivery. Said notice of loss or damage maybe endorsed upon the receipt for the
goods given by the person taking delivery thereof. The notice in writing need not be
given if the state of the goods has at the time of their receipt been the subject of
joint survey or inspection.

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

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

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

pg. 32
Family Code; property relations in cases of cohabitation without the benefit of
marriage; rules. The Court of Appeals correctly ruled that the property relations of
Benjamin and Sally is governed by Article 148 of the Family Code which states:

Art. 148. In cases of cohabitation not falling under the preceding Article, only the
properties acquired by both of the parties through their actual joint contribution of
money, property, or industry shall be owned by them in common in proportion to
their respective contributions. In the absence of proof to the contrary, their
contributions and corresponding shares are presumed to be equal. The same rule
and presumption shall apply to joint deposits of money and evidences of credit.

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

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

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

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

Land registration; decree of registration bars all claims and rights which arose or
may have existed prior to the decree of registration. It is an elemental rule that a
decree of registration bars all claims and rights which arose or may have existed
prior to the decree of registration. By the issuance of the decree, the land is bound
and title thereto quieted, subject only to certain exceptions under the property
registration decree. Heirs of Alejandra Delfin, namely, Leopoldo Delfin, et al. v.
Avelina Rabadon, G.R. No. 165014, July 31, 2013.

pg. 33
Republic Act No. 26; reconstitution of title; nature of proceeding; Torrens system;
sources of reconstitution; mandatory requirements of publication, posting, and
notice. At the outset, the Court notes that the present amended petition for
reconstitution is anchored on the owner’s duplicate copy of TCT No. 8240 – a source
for reconstitution of title under Section 3(a)29 of RA 26 which, in turn, is governed
by the provisions of Section 10 in relation to Section 9 of RA 26 with respect to the
publication, posting, and notice requirements. Section 10 reads:

SEC. 10. Nothing hereinbefore provided shall prevent any registered owner or
person in interest from filing the petition mentioned in section five of this Act
directly with the proper Court of First Instance, based on sources enumerated in
sections 2(a), 2(b), 3(a), 3(b), and/or 4(a) of this Act: Provided, however, That the
court shall cause a notice of the petition, before hearing and granting the same, to
be published in the manner stated in section nine hereof: And, provided, further,
That certificates of title reconstituted pursuant to this section shall not be subject to
the encumbrance referred to in section seven of this Act.

Corollarily, Section 9 reads in part:

SEC. 9. x x x Thereupon, the court shall cause a notice of the petition to be

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

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

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

pg. 34
Torrens system; Torrens title; lands under a Torrens title cannot be acquired by
prescription or adverse possession. Moreover, it is a settled rule that lands under a
Torrens title cannot be acquired by prescription or adverse possession. Section 47 of
P.D. No. 1529, the Property Registration Decree, expressly provides that no title to
registered land in derogation of the title of the registered owner shall be acquired by
prescription or adverse possession. And, although the registered landowner may
still lose his right to recover the possession of his registered property by reason of
laches, nowhere has Dream Village alleged or proved laches, which has been
defined as such neglect or omission to assert a right, taken in conjunction with lapse
of time and other circumstances causing prejudice to an adverse party, as will
operate as a bar in equity. Put any way, it is a delay in the assertion of a right which
works disadvantage to another because of the inequity founded on some change in
the condition or relations of the property or parties. It is based on public policy
which, for the peace of society, ordains that relief will be denied to a stale demand
which otherwise could be a valid claim. Dream Village Neighborhood Association,
Inc., represented by its Incumbent President Greg Seriego v. Bases Conversion
Development Authority, G.R. No.192896, July 24, 2013.

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

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

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

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

(2)That both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been stated;

(3)That the two debts be due;

(4)That they be liquidated and demandable;

(5)That over neither of them there be any retention or controversy, commenced by

third persons and communicated in due time to the debtor.

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

Compensation; when both debts are liquidated and demandable. A debt is

liquidated when the amount is known or is determinable by inspection of the terms
and conditions of relevant documents. Adelaida Soriano v. People of the Philippines,
G.R. No. 181692, August 14, 2013.

pg. 35
Contracts; determination of nature of contract. In determining the nature of a
contract, courts are not bound by the title or name given by the parties. The
decisive factor in evaluating such agreement is the intention of the parties, as
shown not necessarily by the terminology used in the contract but by their conduct,
words, actions and deeds prior to, during and immediately after executing the
agreement. As such, therefore, documentary and parol evidence may be submitted
and admitted to prove such intention. Hur Tin Yang v. People of the Philippines, G.R.
No. 195117, August 14, 2013.

Co-ownership; rights of co-owners. Having succeeded to the property as heirs of

Gregoria and Romana, petitioners and respondents became co-owners thereof. As
co-owners, they may use the property owned in common, provided they do so in
accordance with the purpose for which it is intended and in such a way as not to
injure the interest of the co-ownership or prevent the other co-owners from using it
according to their rights. They have the full ownership of their parts and of the fruits
and benefits pertaining thereto, and may alienate, assign or mortgage them, and
even substitute another person in their enjoyment, except when personal rights are
involved. Each co-owner may demand at any time the partition of the thing owned
in common, insofar as his share is concerned. Finally, no prescription shall run in
favor of one of the co-heirs against the others so long as he expressly or impliedly
recognizes the co-ownership. Antipolo Ining (deceased), survived by Manuel
Villanueva, Teodora Villanueva-Francisco, Camilo Francisco, Adolfo Francisco,
Lucimo Francisco, Jr., Milagros Francisco,Celedonio Francisco, Herminigildo
Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea (deceased)
survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-
Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores Ining-Rimon
(deceased) survived by Jesus Rimon, Cesaria Rimon Gonzales and Remedios Rimon
Cordero; and Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro
Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega, Restonilo I. Vega,
Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R. No. 174727,
August 12, 2013.

Co-ownership; prescription; for prescription to set in, the repudiation must be done
by a co-owner; requisites. Time and again, it has been held that “a co-owner cannot
acquire by prescription the share of the other co-owners, absent any clear
repudiation of the co-ownership. In order that the title may prescribe in favor of a
co-owner, the following requisites must concur: (1) the co-owner has performed
unequivocal acts of repudiation amounting to an ouster of the other co-owners; (2)
such positive acts of repudiation have been made known to the other co-owners;
and (3) the evidence thereof is clear and convincing.” In fine, since none of the co-
owners made a valid repudiation of the existing co-ownership, Leonardo could seek
partition of the property at any time. Antipolo Ining (deceased), survived by Manuel
Villanueva, Teodora Villanueva-Francisco, Camilo Francisco, Adolfo Francisco,
Lucimo Francisco, Jr., Milagros Francisco,Celedonio Francisco, Herminigildo
Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea (deceased)
survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-
Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores Ining-Rimon
(deceased) survived by Jesus Rimon, Cesaria Rimon Gonzales and Remedios Rimon
Cordero; and Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and Pedro
Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega, Restonilo I. Vega,
pg. 36
Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R. No. 174727,
August 12, 2013.

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

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

Damages; Award of attorney’s fees and litigation expenses and costs; justified when
there is bad faith. Even granting that Atty. Sabitsana has ceased to act as the
Muertegui family’s lawyer, he still owed them his loyalty. The termination of
attorney-client relation provides no justification for a lawyer to represent an interest
adverse to or in conflict with that of the former client on a matter involving
confidential information which the lawyer acquired when he was counsel. The
client’s confidence once reposed should not be divested by mere expiration of
professional employment. This is underscored by the fact that Atty. Sabitsana
obtained information from Carmen which he used to his advantage and to the
detriment of his client.

[F]rom the foregoing disquisition, it can be seen that petitioners are guilty of bad
faith in pursuing the sale of the lot despite being apprised of the prior sale in
respondent’s favor. Moreover, petitioner Atty. Sabitsana has exhibited a lack of
loyalty toward his clients, the Muerteguis, and by his acts, jeopardized their
interests instead of protecting them. Over and above the trial court’s and the CA’s
findings, this provides further justification for the award of attorney’s fees, litigation
expenses and costs in favor of the respondent. Spouses Celemencio C. Sabitsana, Jr.
and Ma. Rosario M. Sabitsana v. Juanito F. Muertegui, represented by his attorney-in-
fact, Domingo A. Muertegui, Jr., G.R. No. 181359, August 5, 2013.

Damages; Attorney’s fees; what constitute bad faith. There was no gross and
evident bad faith on the part of Asian Construction in filing its complaint against
Sumitomo since it was merely seeking payment of its unpaid works done pursuant
to the Agreement. Neither can its subsequent refusal to accept Sumitomo’s offered
compromise be classified as a badge of bad faith since it was within its right to
either accept or reject the same owing to its contractual nature. Absent any other

pg. 37
just or equitable reason to rule otherwise, these incidents are clearly off-tangent
with a finding of gross and evident bad faith which altogether negates Sumitomo’s
entitlement to attorney’s fees. Asian Construction and Development Corporation v.
Sumitomo Corporation / Sumitomo Corporation v. Asia Construction and
Development Corporation, G.R. No. 196723 / G.R. No. 196728, August 28, 2013.

Damages; Attorney’s fees; when awarded. Jurisprudence dictates that in the

absence of a governing stipulation, attorney’s fees may be awarded only in case the
plaintiff’s action or defendant’s stand is so untenable as to amount to gross and
evident bad faith. This is embodied in Article 2208 of the Civil Code which states:

Article 2208. In the absence of stipulation, attorney’s fees and expenses of

litigation, other than judicial costs, cannot be recovered, except:

xxxx

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

xxxx

Asian Construction and Development Corporation v. Sumitomo Corporation /

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

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

Damages; Moral damages; recoverable for acts or actions referred to in Article 20 of

the Civil Code. In their amended complaint, respondents claimed that the acts of
GCB Builders and Comsavings Bank had caused them to suffer sleepless nights,
worries and anxieties. The claim was well founded. Danilo worked in Saudi Arabia in
order to pay the loan used for the construction of their family home. His anxiety and
anguish over the incomplete and defective construction of their house, as well as
the inconvenience he and his wife experienced because of this suit were not easily
probable. On her part, Estrella was a mere housewife, but was the attorney-in-fact
of Danilo in matters concerning the loan transaction. With Danilo working abroad,
she was alone in overseeing the house construction and the progress of the present
case. Given her situation, she definitely experienced worries and sleepless nights.
The award of moral damages of P100,000.00 awarded by the CA as exemplary

pg. 38
damages is proper. Comsavings Bank (now GSIS Family Bank) v. Sps. Danilo and
Estrella Capistrano, G.R. No. 170942, August 28, 2013.

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

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

Circular No. 799. The Supreme Court set out the following guidelines on damages
and interest due:

1. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,

delicts or quasi-delicts is breached, the contravenor can be held liable for damages.
The provisions under Title XVIII on “Damages” of the Civil Code govern in
determining the measure of recoverable damages.

2. With regard particularly to an award of interest in the concept of actual and

compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:

(a) When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of of
stipulation, the rate of interest shall be 6% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of
Article 1169 the Civil Code.

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

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

pg. 39
(c) When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. Dario Nacar v. Gallery Frames and/or Felipe Borde, Jr., G.R. No. 189871,
August 13, 2013.

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

Comsavings Bank is obliged to exercise the highest degree of diligence as well as
high standards of integrity and performance in all its transactions because its
business is imbued with public interest. As aptly declared in Philippine National
Bank v. Pike: “[T]he stability of banks largely depends on the confidence of the
people in the honesty and efficiency of banks.” Gross negligence connotes want of
care in the performance of one’s duties; it is a negligence characterized by the want
of even slight care, acting or omitting to act in a situation where there is duty to act,
not inadvertently but willfully and intentionally, with a conscious indifference to
consequences insofar as other persons may be affected. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Comsavings
Bank (now GSIS Family Bank) v. Sps. Danilo and Estrella Capistrano, G.R. No.
170942, August 28, 2013.

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

Interest; legal rate of interest; interest at 6% per annum imposed on award in favor
of illegally dismissed employees. Interest at the rate of 6% per annum must be
imposed on the award for separation pay, back wages, and attorney’s fees to
illegally dismissed employees in accordance with Circular No. 799, Series of 2013 of
the Bangko Sentral ng Pilipinas which took effect July 1, 2013. Vicente Ang v.
Seferino San Joaquin, Jr., and Diosdado Fernandez, G.R. No. 185549, August 7, 2013.

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

goods or credit; legal rate allowed in judgments. In the absence of an express
stipulation as to the rate of interest that would govern the parties, the rate of legal
interest for loans or forbearance of any money, goods or credits and the rate
allowed in judgments shall no longer be 12% per annum. As reflected in the case of
Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations for
Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for
Non-Bank Financial Institutions, before its amendment by BSP-MB Circular No. 799,
the interest rate will now be 6% per annum effective July 1, 2013. Dario Nacar v.
Gallery Frames and/or Felipe Borde, Jr., G.R. No. 189871, August 13, 2013.

pg. 40
Interest; Legal interest; prospective application. It should be noted that the new rate
could only be applied prospectively and not retroactively. Consequently, the 12%
per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the
new rate of 6% per annum shall be the prevailing rate of interest when applicable.
Nonetheless, with regard to those judgments that have become final and executory
prior to July 1, 2013, said judgments shall not be disturbed and shall continue to be
implemented applying the rate of interest fixed therein. Dario Nacar v. Gallery
Frames and/or Felipe Borde, Jr., G.R. No. 189871, August 13, 2013.

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

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

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

Sales; double sale involving unregistered land; Article 1544 of the Civil Code does
not apply; prior sale, even if made through an unnotarized deed of sale, prevails;
registration of second sale is unavailing as registration does not vest title; Under Act
3344, registration if instruments affecting unregistered lands is without prejudice to
a third party with a better right; actual and prior knowledge of the first sale makes
the subsequent buyers purchasers in bad faith. Article 1544 of the Civil Code does
not apply to sales involving unregistered land. Both the trial court and the CA are,
however, wrong in applying Article 1544 of the Civil Code. Both courts seem to have
forgotten that the provision does not apply to sales involving unregistered land.
Suffice it to state that the issue of the buyer’s good or bad faith is relevant only
where the subject of the sale is registered land, and the purchaser is buying the
same from the registered owner whose title to the land is clean. In such case, the
purchaser who relies on the clean title of the registered owner is protected if he is a
purchaser in good faith for value.

The sale to respondent Juanito was executed on September 2, 1981 via an

unnotarized deed of sale, while the sale to petitioners was made via a notarized
document only on October 17, 1991, or ten years thereafter. Thus, Juanito who was
the first buyer has a better right to the lot, while the subsequent sale to petitioners

pg. 41
is null and void, because when it was made, the seller Garcia was no longer the
owner of the lot. Nemo dat quod non habet.

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

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

Under Act No. 3344, registration of instruments affecting unregistered lands is

‘without prejudice to a third party with a better right.’ The aforequoted phrase has
been held by the Court to mean that the mere registration of a sale in one’s favor
does not give him any right over the land if the vendor was not anymore the owner
of the land having previously sold the same to somebody else even if the earlier
sale was unrecorded.

Petitioners’ defense of prescription, laches and estoppel are unavailing since their
claim is based on a null and void deed of sale. The fact that the Muerteguis failed to
interpose any objection to the sale in petitioners’ favor does not change anything,
nor could it give rise to a right in their favor; their purchase remains void and
ineffective as far as the Muerteguis are concerned. Spouses Celemencio C.
Sabitsana, Jr. and Ma. Rosario M. Sabitsana v. Juanito F. Muertegui, represented by
his attorney-in-fact, Domingo A. Muertegui, Jr., G.R. No. 181359, August 5, 2013.

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

pg. 42
Succession; siblings are heirs of decedent who died without issue. Since Leon died
without issue, his heirs are his siblings, Romana and Gregoria, who thus inherited
the property in equal shares. In turn, Romana’s and Gregoria’s heirs – the parties
herein – became entitled to the property upon the sisters’ passing. Under Article
777 of the Civil Code, the rights to the succession are transmitted from the moment
of death. Antipolo Ining (deceased), survived by Manuel Villanueva, Teodora
Villanueva-Francisco, Camilo Francisco, Adolfo Francisco, Lucimo Francisco, Jr.,
Milagros Francisco,Celedonio Francisco, Herminigildo Francisco; Ramon Tresvalles,
Roberto Tajonera, Natividad Ining-Ibea (deceased) survived by Edilberto Ibea, Josefa
Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz
and Pastor Ruiz; Dolores Ining-Rimon (deceased) survived by Jesus Rimon, Cesaria
Rimon Gonzales and Remedios Rimon Cordero; and Pedro Ining (deceased) survived
by Elisa Tan Ining (wife) and Pedro Ining, Jr. v. Leonardo R. Vega, substituted by
Lourdes Vega, Restonilo I. Vega, Crispulo M. Vega, Milbuena Vega-Restituto and
Lenard Vega, G.R. No. 174727, August 12, 2013.

Special Laws

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

interested parties; when failure to implead and notify is cured by publication of
notice of hearing; strict compliance with the Rules of Court mandated when petition
involves substantial and controversial alterations. Respondent’s birth certificate
shows that her full name is Anita Sy, that she is a Chinese citizen and a legitimate
child of Sy Ton and Sotera Lugsanay. In filing the petition, however, she seeks the
correction of her first name and surname, her status from “legitimate” to
“illegitimate” and her citizenship from “Chinese” to “Filipino.” Thus, respondent
should have impleaded and notified not only the Local Civil Registrar but also her
parents and siblings as the persons who have interest and are affected by the
changes or corrections respondent wanted to make.

The fact that the notice of hearing was published in a newspaper of general
circulation and notice thereof was served upon the State will not change the nature
of the proceedings taken. A reading of Sections 4 and 5, Rule 108 of the Rules of
Court shows that the Rules mandate two sets of notices to different potential
oppositors: one given to the persons named in the petition and another given to
other persons who are not named in the petition but nonetheless may be
considered interested or affected parties. Summons must, therefore, be served not
for the purpose of vesting the courts with jurisdiction but to comply with the
requirements of fair play and due process to afford the person concerned the
opportunity to protect his interest if he so chooses.

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

pg. 43
It is clear from the foregoing discussion that when a petition for cancellation or
correction of an entry in the civil register involves substantial and controversial
alterations, including those on citizenship, legitimacy of paternity or filiation, or
legitimacy of marriage, a strict compliance with the requirements of Rule 108 ofthe
Rules of Court is mandated. If the entries in the civil register could be corrected or
changed through mere summary proceedings and not through appropriate action
wherein all parties who may be affected by the entries are notified or represented,
the door to fraud or other mischief would be set open, the consequence of which
might be detrimental and far reaching. Republic of the Philppines v. Dr. Norma S.
Lugsanay Uy, G.R. No. 198010, August 12, 2013.

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

“appropriate adversary proceeding?” Black’s Law Dictionary defines “adversary
proceeding” as follows:

One having opposing parties; contested, as distinguished from an ex parte

application, one of which the party seeking relief has given legal warning to the
other party, and afforded the latter an opportunity to contest it. Excludes an
adoption proceeding. Republic of the Philppines v. Dr. Norma S. Lugsanay Uy, G.R.
No. 198010, August 12, 2013.

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

adversary proceeding. It has been settled in a number of cases starting with
Republic v. Valencia that even substantial errors in a civil registry may be corrected
and the true facts established provided the parties aggrieved by the error avail
themselves of the appropriate adversary proceeding. The pronouncement of the
Court in that case is illuminating:

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

Family Relations; Conjugal property; presumption that all property of the marriage is
presumed to belong to the conjugal partnership, unless it be proved that it pertains
exclusively to the husband or to the wife; for presumption to apply, party invoking
the same must preliminarily prove that the property was indeed acquired during the
marriage; presumption cannot apply where there is no showing as to when the
property alleged to be conjugal was acquired. Pertinent to the resolution of this
second issue is Article 160 of the Civil Code which states that “[a]ll property of the
marriage is presumed to belong to the conjugal partnership, unless it be proved that
it pertains exclusively to the husband or to the wife.” For this presumption to apply,

pg. 44
the party invoking the same must, however, preliminarily prove that the property
was indeed acquired during the marriage. As held in Go v. Yamane:

x x As a condition sine qua non for the operation of [Article 160] in favor of the
conjugal partnership, the party who invokes the presumption must first prove that
the property was acquired during the marriage.

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

In this case, there is no evidence to indicate when the property was acquired by
petitioner Josefina. Thus, we agree with petitioner Josefina’s declaration in the deed
of absolute sale she executed in favor of the respondent that she was the absolute
and sole owner of the property. Bobby Tan v. Grace Andrade, et al./Grace Andrade,
et al. v. Bobby Tan, G.R. Nos. 171904 & 172017, August 7, 2013.

Family relations. Under the Family Code, family relations, which is the primary basis
for succession, exclude relations by affinity. Antipolo Ining (deceased), survived by
Manuel Villanueva, Teodora Villanueva-Francisco, Camilo Francisco, Adolfo
Francisco, Lucimo Francisco, Jr., Milagros Francisco,Celedonio Francisco,
Herminigildo Francisco; Ramon Tresvalles, Roberto Tajonera, Natividad Ining-Ibea
(deceased) survived by Edilberto Ibea, Josefa Ibea, Martha Ibea, Carmen Ibea,
Amparo Ibea-Fernandez, Henry Ruiz, Eugenio Ruiz and Pastor Ruiz; Dolores Ining-
Rimon (deceased) survived by Jesus Rimon, Cesaria Rimon Gonzales and Remedios
Rimon Cordero; and Pedro Ining (deceased) survived by Elisa Tan Ining (wife) and
Pedro Ining, Jr. v. Leonardo R. Vega, substituted by Lourdes Vega, Restonilo I. Vega,
Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, G.R. No. 174727,
August 12, 2013.

Land titles; indefeasibility of certificate of title to public land issued pursuant to a

grant or patent; false statement exception; reversion of land. The certificate of title
issued pursuant to any grant or patent involving public lands is as conclusive and
indefeasible as any other certificate of title issued to private lands in the ordinary or
cadastral registration proceedings. It is not subject to collateral attack. However,
Section 91 of Commonwealth Act No. 141 (The Public Land Act) provides for the
cancellation of the concession, title or permit granted for any false statement in the
application or omission of facts in the application.

Once a patent is registered and the corresponding certificate of title is issued, the
land covered by it ceases to be part of the public domain and becomes private
property, and the Torrens Title issued pursuant to the patent becomes indefeasible
upon the expiration of one year from the date of issuance of such patent. However,
as held in The Director of Lands v. De Luna, et al., even after the lapse of one year,
the State may still bring an action under Section 101 of Commonwealth Act No. 141
for the reversion to the public domain of land which has been fraudulently granted
to private individuals. The burden of proof rests on the party who asserts the

pg. 45
affirmative of an issue. Republic of the Philippines v. Angeles Bellate, and Spouses
Jesus Cabanto and Marieta Juanerio, G.R. No. 175685, August 7, 2013.

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

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

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

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

ART. 410. The books making up the civil register and all documents relating thereto
shall be considered public documents and shall be prima facie evidence of the facts
therein contained.

As public documents, they are admissible in evidence even without further proof of
their due execution and genuineness. Thus, the RTC erred when it disregarded said
documents on the sole ground that the petitioner did not present the records
custodian of the NSO who issued them to testify on their authenticity and due
pg. 46
execution since proof of authenticity and due execution was not anymore necessary.
Moreover, not only are said documents admissible, they deserve to be given
evidentiary weight because they constitute prima facie evidence of the facts stated
therein. And in the instant case, the facts stated therein remain unrebutted since
neither the private respondent nor the public prosecutor presented evidence to the
contrary. In Yasuo Iwasawa v. Felisa Custodio Gangan (a.k.a. “Felisa Gangan
Arambulo” and “Felisa Gangan Iwasawa”), et al., G.R. No. 204169, September 11,
2013.

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

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

Contracts; lease contracts; lease contracts survive the death of the parties and
continue to bind the heirs except if the contract states otherwise; the provision in
the lease contract stating that “this contract is nontransferable unless prior written
consent of the lessor is obtained in writing” refers to transfers inter vivos and not
transmissions mortis causa. The Supreme Court has previously ruled that lease
contracts, by their nature, are not personal. The general rule, therefore, is lease
contracts survive the death of the parties and continue to bind the heirs except if
the contract states otherwise. In Sui Man Hui Chan v. Court of Appeals, we held that:
“A lease contract is not essentially personal in character. Thus, the rights and
obligations therein are transmissible to the heirs. The general rule, therefore, is that
heirs are bound by contracts entered into by their predecessors-in-interest except
when the rights and obligations arising therefrom are not transmissible by (1) their
nature, (2) stipulation or (3) provision of law. In the subject Contract of Lease, not
only were there no stipulations prohibiting any transmission of rights, but its very
terms and conditions explicitly provided for the transmission of the rights of the
lessor and of the lessee to their respective heirs and successors. The contract is the
law between the parties. The death of a party does not excuse nonperformance of a
contract, which involves a property right, and the rights and obligations thereunder
pass to the successors or representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the other party has
a property interest in the subject matter of the contract.” Section 6 of the lease
contract provides that “[t]his contract is nontransferable unless prior consent of the
lessor is obtained in writing.” Section 6 refers to transfers inter vivos and not
transmissions mortis causa. What Section 6 seeks to avoid is for the lessee to
substitute a third party in place of the lessee without the lessor’s consent. Manuel
Uy & Sons, Inc. v. Valbueco, Incorporated, G.R. No. 179594, September 11, 2013.
pg. 47
Contracts; lease contracts; sublease arrangement; concept. Assignment or transfer
of lease, which is covered by Article 1649 of the Civil Code, is different from a
sublease arrangement, which is governed by Article 1650 of the same Code. In a
sublease, the lessee becomes in turn a lessor to a sub-lessee. The sub-lessee then
becomes liable to pay rentals to the original lessee. However, the juridical relation
between the lessor and lessee is not dissolved. The parties continue to be bound by
the original lease contract. Thus, in a sublease arrangement, there are at least three
parties and two distinct juridical relations. Manuel Uy & Sons, Inc. v. Valbueco,
Incorporated, G.R. No. 179594, September 11, 2013.

Contracts; lease contracts; lessee’s right upon the termination of the lease to (a)
claim reimbursement from the lessor for half the value of the useful improvements
introduced by the lessee in good faith, or to (b) demolish of such improvements.
The CA erred in not applying Article 1678 of the Civil Code which provides: “Art.
1678. If the lessee makes, in good faith, useful improvements which are suitable to
the use for which the lease is intended, without altering the form or substance of
the property leased, the lessor upon the termination of the lease shall pay the
lessee one-half of the value of the improvements at that time. Should the lessor
refuse to reimburse said amount, the lessee may remove the improvements, even
though the principal thing may suffer damage thereby. He shall not, however, cause
any more impairment upon the property leased than is necessary. With regard to
ornamental expenses, the lessee shall not be entitled to any reimbursement, but he
may remove the ornamental objects, provided no damage is caused to the principal
thing, and the lessor does not choose to retain them by paying their value at the
time the lease is extinguished.”

The foregoing provision applies if the improvements were: (1) introduced in good
faith; (2) useful; and (3) suitable to the use for which the lease is intended, without
altering the form and substance. We find that the aforementioned requisites are
satisfied in this case. The buildings were constructed before German’s demise,
during the subsistence of a valid contract of lease. It does not appear that HDSJ
prohibited German from constructing the buildings. Thus, HDSJ should have
reimbursed German (or his estate) half of the value of the improvements as of
2001. If HDSJ is not willing to reimburse the Inocencios, then the latter should
be allowed to demolish the buildings. Manuel Uy & Sons, Inc. v. Valbueco,
Incorporated, G.R. No. 179594, September 11, 2013.

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

the Inocencios, tortious interference has the following elements: (1) existence of a
valid contract; (2) knowledge on the part of the third person of the existence of the
contract; and (3) interference of the third person without legal justification or
excuse. In So Ping Bun v. Court of Appeals, we held that there was no tortious
interference if the intrusion was impelled by purely economic motives. In So Ping
Bun, we explained that: “Authorities debate on whether interference may be
justified where the defendant acts for the sole purpose of furthering his own
financial or economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actor’s motive is
to benefit himself. Such justification does not exist where his sole motive is to cause
harm to the other. Added to this, some authorities believe that it is not necessary

pg. 48
that the interferer’s interest outweighs that of the party whose rights are invaded,
and that an individual acts under an economic interest that is substantial, not
merely de minimis, such that wrongful and malicious motives are negatived, for he
acts in self-protection. Moreover, justification for protecting one’s financial position
should not be made to depend on a comparison of his economic interest in the
subject matter with that of others. It is sufficient if the impetus of his conduct lies in
a proper business interest rather than in wrongful motives.” Analita P. Inocencion,
substituting for Ramon Inocencion (deceased) v. Hospicio de San Jose, G.R. No.
201787, September 25, 2013.

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

Estoppel; requisites. For estoppel to take effect, there must be knowledge of the real
facts by the party sought to be estopped and reliance by the party claiming
estoppel on the representation made by the former. In this case, petitioner cannot
be estopped from asking for the return of the vessel in the condition that it had
been at the time it was seized by respondent because he had not known of the
deteriorated condition of the ship. Ernesto Dy v. Hon. Gina M. Bibat-Palamos, in her
capacity as Presiding Judge of the RTC, Branch 64, Makati City, and Orix Metro
Leasing and Finance Corporation, G.R. No. 196200, September 11, 2013.

Interest; Judgment award; imposition of interests; under BSP Circular No. 799,
effective on July 1, 2013, the interest rate to be imposed for a loan or forbearance
of money, goods or credits and the rate allowed in judgments in the absence of
stipulation thereon, was changed from 12% to 6%. Notice must be taken that in
Resolution No. 796 dated May 16, 2013, the Monetary Board of the Bangko Sentral
ng Pilipinas approved the revision of the interest rate to be imposed for the loan or
forbearance of any money, goods or credits and the rate allowed in judgments, in
the absence of an express contract as to such rate of interest. Thus, under BSP
Circular No. 799, issued on June 21, 2013 and effective on July 1, 2013, the said rate
of interest is now back at six percent (6%), S.C. Megaworld Construction and
Development Corporation v. Engr. Luis U. Parada, represented by Engr. Leonardo A.
Parada of Genlite Industries, G.R. No. 183804, September 11, 2013.

Laches; concept; the question of laches is addressed to the sound discretion of the
court and, being an equitable doctrine, its application is controlled by equitable
considerations. Laches has been defined as the failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising

pg. 49
due diligence, could or should have been done earlier, thus, giving rise to a
presumption that the party entitled to assert it either has abandoned or declined to
assert it.

On this score, it is a well-settled principle of law that laches is a recourse in equity,

which is, applied only in the absence of statutory law. And though laches applies
even to imprescriptible actions, its elements must be proved positively. Ultimately,
the question of laches is addressed to the sound discretion of the court and, being
an equitable doctrine, its application is controlled by equitable considerations.
Citibank, N.A. and the Citigroup Private Bank v. Ester H. Tanco-Gabaldon, et al./
Carol Lim v. Ester H. Tanco-Gabaldon, et al., G.R. No. 198444/G.R. No. 198469-70,
September 4, 2013.

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

extinguishes a previous one through substitution either by changing the object or
principal conditions, by substituting another in place of the debtor, or by
subrogating a third person into the rights of the creditor. Novation requires (a) the
existence of a previous valid obligation; (b) the agreement of all parties to the new
contract; (c) the extinguishment of the old contract; and (d) the validity of the new
one. There cannot be novation in this case since the proposed substituted parties
did not agree to the PRA’s supposed assignment of its obligations under the
contract for the electrical and light works at Heritage Park to the HPMC. The latter
definitely and clearly rejected the PRA’s assignment of its liability under that
contract to the HPMC. Philippine Reclamation Authority (formerly known as the
Public Estates Authority v. Romago, Inc./Romago, Inc. Vs. Philippine Reclamation
Authority, G.R. Nos. 174665 and 175221, September 18, 2013.

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

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

SPECIAL LAWS

Land registration; an applicant who seeks to have a land registered in his name has
the burden of proving that he is its owner in fee simple. As held in Republic v. Lee:

pg. 50
The most basic rule in land registration cases is that “no person is entitled to have
land registered under the Cadastral or Torrens system unless he is the owner in fee
simple of the same, even though there is no opposition presented against such
registration by third persons. x x x In order that the petitioner for the registration of
his land shall be permitted to have the same registered, and to have the benefit
resulting from the certificate of title, finally, issued, the burden is upon him to show
that he is the real and absolute owner, in fee simple.

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

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

Land registration; Nature of land registration proceedings; land registration

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

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

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

Land registration; requirement that the application for land registration must state
the full names and addresses of all occupants of the land and those of the adjoining
owners, if known, and if not known, it must state the extent of the search made to
find them. As to the alleged denial of petitioner’s right to due process due to
Antonia Victorino’s failure to identify petitioner as indispensable party in her
application for registration, as well as to serve her with actual and personal notice,

pg. 51
Section 15 of Presidential Decree No. 1529 simply requires that the application for
registration shall “state the full names and addresses of all occupants of the land
and those of the adjoining owners, if known, and, if not known, it shall state the
extent of the search made to find them.” A perusal of Antonia Victorino’s Application
shows that she enumerated the adjoining owners. She also indicated therein that, to
the best of her knowledge, no person has any interest or is in possession of the
subject land. The fact that she did not identify petitioner as an occupant or an
adjoining owner is not tantamount to denial of petitioner’s right to due process and
does not nullify the RTC Decision granting such application. In Crisanta Guido-
Enriquez v. Alicia I. Victorino, et al., G.R. No. 180427, September 30, 2013.

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

Marriage; property regimes for marriages that are subsequently declared void under
Article 36 of the Family Code; property acquired during the marriage is presumed to
have been obtained through the couple’s joint efforts and governed by the rules on
co-ownership. In Diño v. Diño, the Supreme Court held that Article 147 of the Family
Code applies to the union of parties who are legally capacitated and not barred by
any impediment to contract marriage, but whose marriage is nonetheless declared
void under Article 36 of the Family Code, as in this case. Article 147 of the Family
Code provides:

ART. 147. When a man and a woman who are capacitated to marry each other, live
exclusively with each other as husband and wife without the benefit of marriage or
under a void marriage, their wages and salaries shall be owned by them in equal
shares and the property acquired by both of them through their work or
industry shall be governed by the rules on coownership.

In the absence of proof to the contrary, properties acquired while they

lived together shall be presumed to have been obtained by their joint
efforts, work or industry, and shall be owned by them in equal shares. For
purposes of this Article, a party who did 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.

pg. 52
When only one of the parties to a void marriage is in good faith, the share of the
party in bad faith in the co-ownership shall be forfeited in favor of their common
children. In case of default of or waiver by any or all of the common children or their
descendants, each vacant share shall belong to the respective surviving
descendants. In the absence of descendants, such share shall belong to the
innocent party. In all cases, the forfeiture shall take place upon termination of the
cohabitation. (Emphasis supplied)

Under this property regime, property acquired during the marriage is prima facie
presumed to have been obtained through the couple’s joint efforts and governed by
the rules on co-ownership. In Juan Sevilla Salas, Jr. v. Eden Villena Aguil, G.R. No.
202370, September 23, 2013.

Marriage; nullity of marriage; a judicial declaration of nullity is required before a

valid subsequent marriage can be contracted, or else, what transpires is a bigamous
marriage. The Supreme Court has consistently held that a judicial declaration of
nullity is required before a valid subsequent marriage can be contracted; or else,
what transpires is a bigamous marriage, which is void from the beginning as
provided in Article 35(4) of the Family Code of the Philippines. In Yasuo Iwasawa v.
Felisa Custodio Gangan (a.k.a. “Felisa Gangan Arambulo” and “Felisa Gangan
Iwasawa”), et al., G.R. No. 204169, September 11, 2013.

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

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

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

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

Ferrer,this Court ruled that moral damages may be awarded on the following bases:

To recover moral damages in an action for breach of contract, the breach must be
palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.

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

pg. 53
Moral damages may be awarded in breaches of contracts where the defendant
acted fraudulently or in bad faith.

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

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

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

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

are discussed in Article 2229 of the Civil Code, as follows:

ART. 2229. Exemplary or corrective damages are imposed, by way of example or

correction of the public good, in addition to moral, temperate, liquidated or
compensatory damages.

Exemplary damages are further discussed in Articles 2233 and 2234, particularly
regarding the pre-requisites of ascertaining moral damages and the fact that it is
discretionary upon this Court to award them or not:

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

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

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

subsequent parties from the commission of a similar offense. The case of People v.
Rante citing People v. Dalisay held that:

pg. 54
Also known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective damages
are intended to serve as a deterrent to serious wrong doings, and as a vindication of
undue sufferings and wanton invasion of the rights of an injured or a punishment for
those guilty of outrageous conduct. These terms are generally, but not always, used
interchangeably. In common law, there is preference in the use of exemplary
damages when the award is to account for injury to feelings and for the sense of
indignity and humiliation suffered by a person as a result of an injury that has been
maliciously and wantonly inflicted, the theory being that there should be
compensation for the hurt caused by the highly reprehensible conduct of the
defendant—associated with such circumstances as willfulness, wantonness, malice,
gross negligence or recklessness, oppression, insult or fraud or gross fraud—that
intensifies the injury. The terms punitive or vindictive damages are often used to
refer to those species of damages that may be awarded against a person to punish
him for his outrageous conduct. In either case, these damages are intended in good
measure to deter the wrongdoer and others like him from similar conduct in the
future.

To justify an award for exemplary damages, the wrongful act must be accompanied
by bad faith, and an award of damages would be allowed only if the guilty party
acted in a wanton, fraudulent, reckless or malevolent manner. Alejandro V. Tankeh
v. Development Bank of the Philippines, et al., G.R. No. 171428, November 11,
2013.

Contracts; fraud; concept; dolo incidente distinguished from dolo causante. In

Solidbank Corporation v. Mindanao Ferroalloy Corporation, et al.,this Court
elaborated on the distinction between dolo causante and dolo incidente: Fraud
refers to all kinds of deception — whether through insidious machination,
manipulation, concealment or misrepresentation — that would lead an ordinarily
prudent person into error after taking the circumstances into account. In contracts,
a fraud known as dolo causante or causal fraud is basically a deception used by one
party prior to or simultaneous with the contract, in order to secure the consent of
the other. Needless to say, the deceit employed must be serious. In
contradistinction, only some particular or accident of the obligation is referred to by
incidental fraud or dolo incidente, or that which is not serious in character and
without which the other party would have entered into the contract anyway.
Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428,
November 11, 2013.

Contracts; fraud; dolo incidente and dolo causante; effect on contracts.The

distinction between fraud as a ground for rendering a contract voidable or as basis
for an award of damages is provided in Article 1344: In order that fraud may make a
contract voidable, it should be serious and should not have been employed by both
contracting parties. Incidental fraud only obliges the person employing it to pay
damages. (1270) There are two types of fraud contemplated in the performance of
contracts: dolo incidente or incidental fraud and dolo causante or fraud serious
enough to render a contract voidable.

This fraud or dolo which is present or employed at the time of birth or perfection of
a contract may either be dolo causante or dolo incidente. The first, or causal fraud

pg. 55
referred to in Article 1338, are those deceptions or misrepresentations of a serious
character employed by one party and without which the other party would not have
entered into the contract. Dolo incidente, or incidental fraud which is referred to in
Article 1344, are those which are not serious in character and without which the
other party would still have entered into the contract. Dolo causante determines or
is the essential cause of the consent, while dolo incidente refers only to some
particular or accident of the obligation. The effects of dolo causante are the nullity
of the contract and the indemnification of damages, and dolo incidente also obliges
the person employing it to pay damages. Alejandro V. Tankeh v. Development Bank
of the Philippines, et al., G.R. No. 171428, November 11, 2013.

Contracts; fraud; quantum of evidence required to prove existence of; clear and
convincing evidence. Neither law nor jurisprudence distinguishes whether it is dolo
incidente or dolo causante that must be proven by clear and convincing evidence. It
stands to reason that both dolo incidente and dolo causante must be proven by
clear and convincing evidence. The only question is whether this fraud, when
proven, may be the basis for making a contract voidable (dolo causante), or for
awarding damages (dolo incidente), or both.

The standard of proof required is clear and convincing evidence. This standard of
proof is derived from American common law. It is less than proof beyond reasonable
doubt (for criminal cases) but greater than preponderance of evidence (for civil
cases). The degree of believability is higher than that of an ordinary civil case. Civil
cases only require a preponderance of evidence to meet the required burden of
proof. However, when fraud is alleged in an ordinary civil case involving contractual
relations, an entirely different standard of proof needs to be satisfied. The
imputation of fraud in a civil case requires the presentation of clear and convincing
evidence. Mere allegations will not suffice to sustain the existence of fraud. The
burden of evidence rests on the part of the plaintiff or the party alleging fraud. The
quantum of evidence is such that fraud must be clearly and convincingly shown.
Alejandro V. Tankeh v. Development Bank of the Philippines, et al., G.R. No. 171428,
November 11, 2013.

Contracts; Reciprocal obligations; concept; for failing to perform all its correlative
obligation under the reciprocal contract, a party cannot unilaterally demand
performance by the other party. Reciprocal obligations are those which arise from
the same cause, and in which each party is a debtor and a creditor of the other,
such that the obligation of one is dependent upon the obligation of the other. They
are to be performed simultaneously, so that the performance of one is conditioned
upon the simultaneous fulfillment of the other.” In reciprocal obligations, neither
party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.

In reciprocal obligations, before a party can demand the performance of the

obligation of the other, the former must also perform its own obligation.
Consolidated Industrial Gases, Inc. v. Alabang Medical Center, G.R. No. 181983,
November 13, 2013.

pg. 56
Contracts; rescission; grounds. Rescission of a contract will not be permitted for a
slight or casual breach, but only for such substantial and fundamental violations as
would defeat the very object of the parties in making the agreement. Whether a
breach is substantial is largely determined by the attendant circumstances.
Consolidated Industrial Gases, Inc. v. Alabang Medical Center, G.R. No. 181983,
November 13, 2013.

Damages; actual damages; concept; when awarded. For damages to be recovered,

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

Estoppel; cannot be made to apply against the government. Granting that the
persons representing the government was negligent, the doctrine of estoppel
cannot be taken against the Republic. It is a well-settled rule that the Republic or its
government is not estopped by mistake or error on the part of its officials or agents.

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

Sales; sale of real property; authority of the agent must be in writing; otherwise the
sale is null and void. Articles 1874 of the Civil Code provides:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.

Likewise, Article 1878 paragraph 5 of the Civil Code specifically mandates that the
authority of the agent to sell a real property must be conferred in writing, to wit:

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

(1) x x x

xxx

(5) To enter into any contract by which the ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;

x x x.

pg. 57
The foregoing provisions explicitly require a written authority when the sale of a
piece of land is through an agent, whether the sale is gratuitously or for a valuable
consideration. Absent such authority in writing, the sale is null and void. Spouses
Eliseo R. Bautista and Emperatriz C. Bautista v. Spouses Mila Jalandoni and Antonio
Jalandoni and Manila Credit Corporation, G.R. No. 171464/G.R. No. 199341,
November 27, 2013.

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

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

Sale of real property on installment; cash surrender value; when the buyer is
entitled thereto. Republic Act No. 6552, also known as the Maceda Law, or the
Realty Installment Buyer Protection Act, has the declared public policy of “protecting
buyers of real estate on installment payments against onerous and oppressive
conditions.”

Section 3 of R.A. 6552 provides for the rights of a buyer who has paid at least two
years of installments but defaults in the payment of succeeding installments.
Section 3 provides that in all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential condominium
apartments but excluding industrial lots, commercial buildings and sales to tenants
under R.A. No. 3844, as amended by R.A. No. 6389, where the buyer has paid at
least two years of installments, the buyer is entitled to the following rights in case
he defaults in the payment of succeeding installments:

pg. 58
(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace
period for every one year of installment payments made: Provided, That this right
shall be exercised by the buyer only once in every five years of the life of the
contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent of the
total payments made, and, after five years of installments, an additional five per
cent every year but not to exceed ninety per cent of the total payments made:
Provided, That the actual cancellation of the contract shall take place after thirty
days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made. Gatchalian Realty,
Inc. v. Evelyn Angeles, G.R. No. 202358, November 27, 2013.

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

notarized notice of cancellation and a refund of the cash surrender value. The Court
has been consistent in ruling that a valid and effective cancellation under R.A. 6552
must comply with the mandatory twin requirements of a notarized notice of
cancellation and a refund of the cash surrender value.

In Olympia Housing, Inc. v. Panasiatic Travel Corp., the Court ruled that the notarial
act of rescission must be accompanied by the refund of the cash surrender value.

The actual cancellation of the contract can only be deemed to take place upon the
expiry of a 30-day period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and the full payment of the
cash surrender value.

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

Land registration; application for land registration requires that the names and
addresses of all adjoining owners and occupants be stated, if known, and if not
known, to state the search made to find them; omission thereof constitutes fraud.

pg. 59
The governing rule in the application for registration of lands at that time was
Section 21 of Act 496 which provided for the form and content of an application for
registration, and it provides that the application shall be in writing, signed and
sworn to by applicant, or by some person duly authorized in his behalf. It shall also
state the name in full and the address of the applicant, and also the names and
addresses of all adjoining owners and occupants, if known; and, if not known, it shall
state what search has been made to find them.

The reason behind the law was explained in the case of Fewkes vs. Vasquez,where it
was noted that under Section 21 of the Land Registration Act an application for
registration of land is required to contain, among others, a description of the land
subject of the proceeding, the name, status and address of the applicant, as well as
the names and addresses of all occupants of the land and of all adjoining owners, if
known, or if unknown, of the steps taken to locate them. When the application is set
by the court for initial hearing, it is then that notice (of the hearing), addressed to
all persons appearing to have an interest in the lot being registered and the
adjoining owners, and indicating the location, boundaries and technical description
of the land being registered, shall be published in the Official Gazette for two
consecutive times. It is this publication of the notice of hearing that is considered
one of the essential bases of the jurisdiction of the court in land registration cases,
for the proceedings being in rem, it is only when there is constructive seizure of the
land, effected by the publication and notice, that jurisdiction over the res is vested
on the court. Furthermore, it is such notice and publication of the hearing that would
enable all persons concerned, who may have any rights or interests in the property,
to come forward and show to the court why the application for registration thereof is
not to be granted.Republic of the Philippines v. Antonio Bacas, et al., G.R. No.
182913, November 20, 2013.

Land registration; any title to inalienable public land is void ab initio; all proceedings
of the Land Registration Court involving the such property is without legal effect,
hence cannot attain finality. In Collado v. Court of Appeals and the Republic, the
Court declared that any title to an inalienable public land is void ab initio. Any
procedural infirmities attending the filing of the petition for annulment of judgment
are immaterial since the LRC never acquired jurisdiction over the property. All
proceedings of the LRC involving the property are null and void and, hence, did not
create any legal effect. A judgment by a court without jurisdiction can never attain
finality. The Land Registration Court has no jurisdiction over non-registrable
properties, such as public navigable rivers which are parts of the public domain, and
cannot validly adjudge the registration of title in favor of private applicant. Republic
of the Philippines v. Antonio Bacas, et al., G.R. No. 182913, November 20, 2013.

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

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

pg. 60
As amended by P.D. No. 1073 on January 25, 1977, Section 48(b) of C.A. No. 141
provides:

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

xxxx

(b) Those who by themselves or through their predecessors-in-interest have been in

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

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

(b) Those who by themselves or through their predecessors-in-interest have been in

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

xxx

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

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

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

pg. 61
(1) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of alienable
and disposable lands of the public domain under a bona fide claim of ownership
since June 12, 1945, or earlier.

Roman Catholic Archbishop of Manila v. Cresencia Sta. Teresa Ramos, assisted by

her husband, Ponciano Francisco, G.R. No. 179181, November 18, 2013.

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

open, continuous, exclusive and notorious possession. The possession contemplated
by Section 48(b) of C.A. No. 141 is actual, not fictional or constructive. In Carlos v
Republic of the Philippines,the Court explained the character of the required
possession, as follows:

The law speaks of possession and occupation. Since these words are separated by
the conjunction and, the clear intention of the law is not to make one synonymous
with the other. Possession is broader than occupation because it includes
constructive possession. When, therefore, the law adds the word occupation, it
seeks to delimit the all-encompassing effect of constructive possession. Taken
together with the words open, continuous, exclusive and notorious, the word
occupation serves to highlight the fact that for an applicant to qualify, his
possession must not be a mere fiction. Actual possession of a land consists in the
manifestation of acts of dominion over it of such a nature as a party would naturally
exercise over his own property.

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

As can be gleaned therefrom, the necessary requirements for the grant of an

application for land registration are the following:

pg. 62
1. The applicant must, by himself or through his predecessors-in-interest, have been
in possession and occupation of the subject land;

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

notorious;

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

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

Such power of the President to segregate lands was provided for in Section 64(e) of
the old Revised Administrative Code and C.A. No. 141 or the Public Land Act. Later,
the power of the President was restated in Section 14, Chapter 4, Book III of the
1987 Administrative Code. When a property is officially declared a military
reservation, it becomes inalienable and outside the commerce of man.It may not be
the subject of a contract or of a compromise agreement. A property continues to be
part of the public domain, not available for private appropriation or ownership, until
there is a formal declaration on the part of the government to withdraw it from
being such. In the case of Republic v. Court of Appeals and De Jesus, it was even
stated that

Lands covered by reservation are not subject to entry, and no lawful settlement on
them can be acquired.The claims of persons who have settled on, occupied, and
improved a parcel of public land which is later included in a reservation are
considered worthy of protection and are usually respected, but where the President,
as authorized by law, issues a proclamation reserving certain lands and warning all
persons to depart therefrom, this terminates any rights previously acquired in such
lands by a person who was settled thereon in order to obtain a preferential right of
purchase. And patents for lands which have been previously granted, reserved from
sale, or appropriate, are void. Republic of the Philippines v. Antonio Bacas, et al.,
G.R. No. 182913, November 20, 2013.

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

presumption of the validity of the registration, of the registrant’s ownership of the
trademark and of the exclusive right to the use thereof. It must be emphasized that
registration of a trademark, by itself, is not a mode of acquiring ownership.If the
applicant is not the owner of the trademark, he has no right to apply for its
registration. Registration merely creates a prima facie presumption of the validity of
the registration, of the registrant’s ownership of the trademark, and of the exclusive
right to the use thereof. Such presumption, just like the presumptive regularity in
the performance of official functions, is rebuttable and must give way to evidence to
the contrary.

pg. 63
Clearly, it is not the application or registration of a trademark that vests ownership
thereof, but it is the ownership of a trademark that confers the right to register the
same. A trademark is an industrial property over which its owner is entitled to
property rights which cannot be appropriated by unscrupulous entities that, in one
way or another, happen to register such trademark ahead of its true and lawful
owner. The presumption of ownership accorded to a registrant must then
necessarily yield to superior evidence of actual and real ownership of a trademark.

The Court’s pronouncement in Berris Agricultural Co., Inc. v. Abyadang is instructive

on this point:

The ownership of a trademark is acquired by its registration and its actual use by
the manufacturer or distributor of the goods made available to the purchasing
public. x x x A certificate of registration of a mark, once issued, constitutes prima
facie evidence of the validity of the registration, of the registrant’s ownership of the
mark, and of the registrant’s exclusive right to use the same in connection with the
goods or services and those that are related thereto specified in the certificate. x x
x In other words, the prima facie presumption brought about by the registration of a
mark may be challenged and overcome in an appropriate action, x x x by evidence
of prior use by another person, i.e. , it will controvert a claim of legal appropriation
or of ownership based on registration by a subsequent user. This is because a
trademark is a creation of use and belongs to one who first used it in trade or
commerce.

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

Civil Code

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

Contracts; contract of loan; interest stipulated; reduced for being iniquitous and
unconscionable. Parties to a loan contract have wide latitude to stipulate on any
interest rate in view of the Central Bank Circular No. 905 s. 1982 which suspended
the Usury Law ceiling on interest effective January 1, 1983. It is, however, worth
stressing that interest rates whenever unconscionable may still be declared illegal.
There is nothing in the circular which grants lenders carte blanche authority to raise
interest rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets.In Menchavez v. Bermudez, the interest rate of 5% per
month, which when summed up would reach 60% per annum, is null and void for

pg. 64
being excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and
the law. Florpina Benvidez v. Nestor Salvador, G.R. No. 173331, December 11, 2013.

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

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

awarded since there is no basis for the award of moral damages and there is no
award of temperate, liquidated or compensatory damages.Exemplary damages are
imposed by way of example for the public good, in addition to moral, temperate,
liquidated or compensatory damages. Jose T. Ramirez v. The Manila Banking
Corporation, G.R. No. 198800, December 11, 2013.

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

Foreclosure; extrajudicial foreclosure; notice of extrajudicial foreclosure proceedings

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

pg. 65
impose an additional obligation upon it to provide personal notice of the
extrajudicial foreclosure sale to the mortgagor Ramirez. Jose T. Ramirez v. The
Manila Banking Corporation, G.R. No. 198800, December 11, 2013.

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

that there was no excess or surplus that needs to be returned to the respondent
because her other outstanding obligations and those of her attorney-in-fact were
paid out of the proceeds.

The relevant provision, Section 4 of Rule 68 of the Rules of Civil Procedure,

mandates that:

Section 4. Disposition of proceeds of sale. — The amount realized from the

foreclosure sale of the mortgaged property shall, after deducting the costs of the
sale, be paid to the person foreclosing the mortgage, and when there shall be any
balance or residue, after paying off the mortgage debt due, the same shall be paid
to junior encumbrancers in the order of their priority, to be ascertained by the court,
or if there be no such encumbrancers or there be a balance or residue after
payment to them, then to the mortgagor or his duly authorized agent, or to the
person entitled to it.

Thus, in the absence of any evidence showing that the mortgage also covers the
other obligations of the mortgagor, the proceeds from the sale should not be
applied to them. Philippine Bank of Communication v. Mary Ann O. Yeung, G.R. No.
179691, December 4, 2013.

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

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

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

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

force majeure, suffice it to state that Peakstar’s breach of its obligations to Metro
Concast arising from the MoA cannot be classified as a fortuitous event under
jurisprudential formulation.

pg. 66
Fortuitous events by definition are extraordinary events not foreseeable or
avoidable. It is therefore, not enough that the event should not have been foreseen
or anticipated, as is commonly believed but it must be one impossible to foresee or
to avoid. The mere difficulty to foresee the happening is not impossibility to foresee
the same.

To constitute a fortuitous event, the following elements must concur: (a) the cause
of the unforeseen and unexpected occurrence or of the failure of the debtor to
comply with obligations must be independent of human will; (b) it must be
impossible to foresee the event that constitutes the caso fortuito or, if it can be
foreseen, it must be impossible to avoid; (c) the occurrence must be such as to
render it impossible for the debtor to fulfill obligations in a normal manner; and, (d)
the obligor must be free from any participation in the aggravation of the injury or
loss. Metro Concast Steel Corp., Spouses Jose S. Dychiao and Tiu Oh Yan, et al. v.
Allied Bank Corporation, G.R. No. 177921, December 4, 2013.

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

Obligations; novation; extinctive novation distinguished from modificatory

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

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

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

Dionisio was well aware that this temporary arrangement may be terminated at any
time. Respondents cannot now refuse to vacate the property or eventually demand

pg. 67
reimbursement of necessary and useful expenses under Articles 448 and 546 of the
New Civil Code, because the provisions apply only to a possessor in good faith, i.e.,
one who builds on land with the belief that he is the owner thereof. Persons who
occupy land by virtue of tolerance of the owners are not possessors in good faith.
Heirs of Cipriano Trazona, et al. v. Heirs of Dionisio Cañada, et al., G.R. No. 175874,
December 11, 2013.

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

Property; waiver of interest; when absolute and unconditional.Lucila did not say, “to
put everything in proper order, I promise to waive my right” to the property, which
is a future undertaking, one that is demandable only when everything is put in
proper order. But she instead said, “to put everything in proper order, I hereby
waive” etc. The phrase “hereby waive” means that Lucila was, by executing the
affidavit, already waiving her right to the property, irreversibly divesting herself of
her existing right to the same. After he and his co-owner Emelinda accepted the
donation, Isabelo became the owner of half of the subject property having the right
to demand its partition.Isabelo C. Dela Cruz v. Lucila C. Dela Cruz, G.R. No. 192383,
December 4, 2013.

Quasi-contract; unjust enrichment; concept of; elements.In light of the foregoing, it

is unfair to deny petitioner a refund of all his contributions to the car plan. Under
Article 22 of the Civil Code, “[e]very person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him.”
Antonio Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9, 2013.

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

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

Quasi-delict; elements. Article 2176 of the Civil Code provides that “[w]hoever by
act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is a quasi-delict.” Under this
provision, the elements necessary to establish a quasi-delict case are: (1) damages
to the plaintiff; (2) negligence, by act or omission, of the defendant or by some
person for whose acts the defendant must respond, was guilty; and (3) the

pg. 68
connection of cause and effect between such negligence and the damages. These
elements show that the source of obligation in a quasi-delict case is the breach or
omission of mutual duties that civilized society imposes upon its members, or which
arise from non-contractual relations of certain members of society to others. Dra.
Leila A. Dela Llana v. Rebecca Biong, doing business under the name and style of
Pongkay Trading, G.R. No. 182356, December 4, 2013.

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

requisites, Dra. dela Llana must first establish by preponderance of evidence the
three elements of quasi-delict before we determine Rebecca’s liability as Joel’s
employer. She should show the chain of causation between Joel’s reckless driving
and her whiplash injury. Only after she has laid this foundation can the presumption
— that Rebecca did not exercise the diligence of a good father of a family in the
selection and supervision of Joel — arise.Once negligence, the damages and the
proximate causation are established, this Court can then proceed with the
application and the interpretation of the fifth paragraph of Article 2180 of the Civil
Code. Under Article 2176 of the Civil Code, in relation with the fifth paragraph of
Article 2180, “an action predicated on an employee’s act or omission may be
instituted against the employer who is held liable for the negligent act or omission
committed by his employee.”The rationale for these graduated levels of analyses is
that it is essentially the wrongful or negligent act or omission itself which creates
the vinculum juris in extra-contractual obligations. Dra. Leila A. Dela Llana v.
Rebecca Biong, doing business under the name and style of Pongkay Trading, G.R.
No. 182356, December 4, 2013.

Sales; car plan benefit; contributions as installment payments distinguished from

rental payments. From the evidence on record, it is seen that the Mekeni car plan
offered to petitioner was subject to no other term or condition than that Mekeni
shall cover one-half of its value, and petitioner shall in turn pay the other half
through deductions from his monthly salary. Mekeni has not shown, by documentary
evidence or otherwise, that there are other terms and conditions governing its car
plan agreement with petitioner. There is no evidence to suggest that if petitioner
failed to completely cover one-half of the cost of the vehicle, then all the deductions
from his salary going to the cost of the vehicle will be treated as rentals for his use
thereof while working with Mekeni, and shall not be refunded. Indeed, there is no
such stipulation or arrangement between them. Thus, the CA’s reliance on Elisco
Tool is without basis, and its conclusions arrived at in the questioned decision are
manifestly mistaken. To repeat what was said in Elisco Tool, “[P]etitioner does not
deny that private respondent Rolando Lantan acquired the vehicle in question under
a car plan for executives of the Elizalde group of companies. Under a typical car
plan, the company advances the purchase price of a car to be paid back by the
employee through monthly deductions from his salary. The company retains
ownership of the motor vehicle until it shall have been fully paid for. However,
retention of registration of the car in the company’s name is only a form of a lien on
the vehicle in the event that the employee would abscond before he has fully paid
for it. There are also stipulations in car plan agreements to the effect that should
the employment of the employee concerned be terminated before all installments
are fully paid, the vehicle will be taken by the employer and all installments paid
shall be considered rentals per agreement.“

pg. 69
It was made clear in this pronouncement that installments made on the car plan
may be treated as rentals only when there is an express stipulation in the car plan
agreement to such effect. It was therefore patent error for the appellate court to
assume that, even in the absence of express stipulation, petitioner’s payments.
Antonio Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9, 2013.

Sales; contract of sale; elements; distinguished from contract to sell. Corollary

thereto, a contract of sale is classified as a consensual contract, which means that
the sale is perfected by mere consent. No particular form is required for its validity.
Upon perfection of the contract, the parties may reciprocally demand performance,
i.e., the vendee may compel transfer of ownership of the object of the sale, and the
vendor may require the vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the

prospective seller, while expressly reserving the ownership of the property despite
delivery thereof to the prospective buyer, binds himself to sell the property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon,
i.e., the full payment of the purchase price. A contract to sell may not even be
considered as a conditional contract of sale where the seller may likewise reserve
title to the property subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which
may or may not occur. ACE Foods, Inc. v. Micro Pacific Technologies Co., Ltd., G.R.
No. 200602, December 11, 2013.

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

Sales; contract to sell; real property in installments; covered by Realty Installment

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

SPECIAL LAWS

Property Registration Decree; alienable lands of public domain; proof of; to prove
that the land subject of an application for registration is alienable, an applicant

pg. 70
must establish the existence of a positive act of the Government. The burden of
proof in overcoming the presumption of State ownership of lands of the public
domain is on the person applying for registration, or in this case, for homestead
patent. The applicant must show that the land subject of the application is alienable
or disposable. It must be stressed that incontrovertible evidence must be presented
to establish that the land subject of the application is alienable or disposable.

As the court pronounced in Republic of the Phils. v. Tri-Plus Corporation, to prove

that the land subject of an application for registration is alienable, an applicant
must establish the existence of a positive act of the Government such as a
presidential proclamation or an executive order, an administrative action,
investigation reports of Bureau of Lands investigators, and a legislative act or
statute. The applicant may also secure a certification from the Government that the
lands applied for are alienable and disposable. Republic of the Philippines-Bureau of
Forest Development v. Vicente Roxas, et al./Provident Tree Farms, Inc. v. Vicente
Roxas, et al., G.R. Nos. 157988/160640, December 11, 2013.

Property Registration Decree; estoppel; the principle of estoppel does not operate
against the Government for the act of its agents. Neither can respondent Roxas
successfully invoke the doctrine of estoppel against petitioner Republic. While it is
true that respondent Roxas was granted Homestead Patent No. 111598 and OCT No.
P-5885 only after undergoing appropriate administrative proceedings, the
Government is not now estopped from questioning the validity of said homestead
patent and certificate of title. It is, after all, hornbook law that the principle of
estoppel does not operate against the Government for the act of its agents. And
while there may be circumstances when equitable estoppel was applied against
public authorities, i.e., when the Government did not undertake any act to contest
the title for an unreasonable length of time and the lot was already alienated to
innocent buyers for value, such are not present in this case. More importantly, we
cannot use the equitable principle of estoppel to defeat the law. Republic of the
Philippines-Bureau of Forest Development v. Vicente Roxas, et al./Provident Tree
Farms, Inc. v. Vicente Roxas, et al., G.R. Nos. 157988/160640, December 11, 2013.

Property Registration Decree; homestead patent; once registered, the certificate of

title issued by virtue of said patent has the force and effect of a Torrens title issued
under said registration laws; provided that the land covered by said certificate is a
disposable public land within the contemplation of the Public Land Law.It is true that
once a homestead patent granted in accordance with the Public Land Act is
registered pursuant to Act 496, otherwise known as The Land Registration Act, or
Presidential Decree No. 1529, otherwise known as The Property Registration Decree,
the certificate of title issued by virtue of said patent has the force and effect of a
Torrens title issued under said registration laws.We expounded in Ybañez v.
Intermediate Appellate Court that:

The certificate of title serves as evidence of an indefeasible title to the property in

favor of the person whose name appears therein. After the expiration of the one (1)
year period from the issuance of the decree of registration upon which it is based, it
becomes incontrovertible. The settled rule is that a decree of registration and the
certificate of title issued pursuant thereto may be attacked on the ground of actual

pg. 71
fraud within one (1) year from the date of its entry and such an attack must be
direct and not by a collateral proceeding. The validity of the certificate of title in this
regard can be threshed out only in an action expressly filed for the purpose.

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

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

Property Registration Decree; reversion; nature of; grounds. We do not find evidence
indicating that respondent Roxas committed fraud when he applied for homestead
patent over the subject property. It does not appear that he knowingly and
intentionally misrepresented in his application that the subject property was
alienable and disposable agricultural land. Nonetheless, we recognized in Republic
of the Phils. v. Mangotara that there are instances when we granted reversion for
reasons other than fraud:

Reversion is an action where the ultimate relief sought is to revert the land back to
the government under the Regalian doctrine. Considering that the land subject of
the action originated from a grant by the government, its cancellation is a matter
between the grantor and the grantee. In Estate of the Late Jesus S. Yujuico v.
Republic (Yujuico case), reversion was defined as an action which seeks to restore
public land fraudulently awarded and disposed of to private individuals or
corporations to the mass of public domain. It bears to point out, though, that the
Court also allowed the resort by the Government to actions for reversion to cancel
titles that were void for reasons other than fraud, i.e., violation by the grantee of a
patent of the conditions imposed by law; and lack of jurisdiction of the Director of
Lands to grant a patent covering inalienable forest land or portion of a river, even
when such grant was made through mere oversight. In Republic v. Guerrero, the
Court gave a more general statement that the remedy of reversion can be availed
of “only in cases of fraudulent or unlawful inclusion of the land in patents or
certificates of title.” Republic of the Philippines-Bureau of Forest Development v.
Vicente Roxas, et al./Provident Tree Farms, Inc. v. Vicente Roxas, et al., G.R. Nos.
157988/160640, December 11, 2013.

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

ownership. It is an established rule that a Torrens certificate of title is not conclusive
proof of ownership. Verily, a party may seek its annulment on the basis of fraud or
misrepresentation. However, such action must be seasonably filed, else the same
would be barred. Laura F. Paraguya v. Sps. Alma Escurel-Crucillo and Emeterio
Crucillo and the Register of Deeds of Sorsogon, G.R. No. 200265, December 2, 2013.

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

ownership becomes incontrovertible and indefeasible after one (1) year from the
date of its entry. In this relation, Section 32 of PD 1529 provides that the period to
contest a decree of registration shall be one (1) year from the date of its entry and

pg. 72
that, after the lapse of the said period, the Torrens certificate of title issued thereon
becomes incontrovertible and indefeasible, viz.:

Sec. 32. Review of decree of registration; Innocent purchaser for value.— The
decree of registration shall not be reopened or revised by reason of absence,
minority, or other disability of any person adversely affected thereby, nor by any
proceeding in any court for reversing judgments, subject, however, to the right of
any person, including the government and the branches thereof, deprived of land or
of any estate or interest therein by such adjudication or confirmation of title
obtained by actual fraud, to file in the proper Court of First Instance a petition for
reopening and review of the decree of registration not later than one year from and
after the date of the entry of such decree of registration, but in no case shall such
petition be entertained by the court where an innocent purchaser for value has
acquired the land or an interest therein, whose rights may be prejudiced. Whenever
the phrase “innocent purchaser for value” or an equivalent phrase occurs in this
Decree, it shall be deemed to include an innocent lessee, mortgagee, or other
encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the
certificate of title issued shall become incontrovertible. Any person aggrieved by
such decree of registration in any case may pursue his remedy by action for
damages against the applicant or any other persons responsible for the fraud.
(Emphases and underscoring supplied) Laura F. Paraguya v. Sps. Alma Escurel-
Crucillo and Emeterio Crucillo and the Register of Deeds of Sorsogon, G.R. No.
200265, December 2, 2013.

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

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

Common carrier; cargoes while being unloaded generally remain under the custody
of the carrier. It is settled in maritime law jurisprudence that cargoes while being

pg. 73
unloaded generally remain under the custody of the carrier. As hereinbefore found
by the RTC and affirmed by the CA based on the evidence presented, the goods
were damaged even before they were turned over to ATI. Such damage was even
compounded by the negligent acts of petitioner and ATI which both mishandled the
goods during the discharging operations. Eastern Shipping Lines, Inc. v. BPI/MS
Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January
15, 2014.

Common carrier; extraordinary diligence.Common carriers, from the nature of their

business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The
extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to receive them. Owing to this
high degree of diligence required of them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for
any loss or damage, therefore, they have the burden of proving that they observed
such high level of diligence. Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp.,
and Mitsui Sumitomo Insurance Co., Ltd.,G.R. No. 193986, January 15, 2014.

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

unjustifiably refused to release respondents’ deposit despite demand; liable for
damages. In cases of breach of contract, moral damages may be recovered only if
the defendant acted fraudulently or in bad faith, or is “guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligations.”

In this case, a review of the circumstances surrounding the issuance of the “Hold
Out” order reveals that petitioner issued the “Hold Out” order in bad faith. First of
all, the order was issued without any legal basis. Second, petitioner did not inform
respondents of the reason for the “Hold Out.” Third, the order was issued prior to
the filing of the criminal complaint. Records show that the “Hold Out” order was
issued on July 31, 2003, while the criminal complaint was filed only on September 3,
2003. All these taken together lead us to conclude that petitioner acted in bad faith
when it breached its contract with respondents. As we see it then, respondents are
entitled to moral damages. Metropolitan Bank & Trust Company v. Ana Grace
Rosales and Yo Yuk To, G.R. No. 183204, January 13, 2014.

Contracts; buyer in good faith. It is settled that a party dealing with a registered
land does not have to inquire beyond the Certificate of Title in determining the true
owner thereof, and in guarding or protecting his interest, for all that he has to look
into and rely on are the entries in the Certificate of Title.

Inarguably, Opinion acted in good faith in dealing with the registered owners of the
properties. He relied on the titles presented to him, which were confirmed by the

pg. 74
Registry of Deeds to be authentic, issued in accordance with the law, and without
any liens or encumbrances. Sps. Bernadette and Rodulfo Vilbar v. Angelito L.
Opinion, G.R. No. 176043. January 15, 2014.

Contracts; Doctrine of in pari delicto; exception. According to Article 1412 (1) of the
Civil Code, the guilty parties to an illegal contract cannot recover from one another
and are not entitled to an affirmative relief because they are in pari delicto or in
equal fault. The doctrine of in pari delicto is a universal doctrine that holds that no
action arises, in equity or at law, from an illegal contract; no suit can be maintained
for its specific performance, or to recover the property agreed to be sold or
delivered, or the money agreed to be paid, or damages for its violation; and where
the parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An
accepted exception arises when its application contravenes well-established public
policy. In this jurisdiction, public policy has been defined as “that principle of the law
which holds that no subject or citizen can lawfully do that which has a tendency to
be injurious to the public or against the public good.” Domingo Gonzalo v. John
Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Contracts; Hold-out clause; applies only if there is a valid and existing obligation
arising from any of the sources of obligation enumerated in Article 1157.
Considering that respondent Rosales is not liable under any of the five sources of
obligation, there was no legal basis for petitioner to issue the “Hold Out” order.

The “Hold Out” clause applies only if there is a valid and existing obligation arising
from any of the sources of obligation enumerated in Article 1157 of the Civil Code,
to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law,
contract, quasi-contract, delict, or quasi-delict. And although a criminal case was
filed by petitioner against respondent Rosales, this is not enough reason for
petitioner to issue a “Hold Out” order as the case is still pending and no final
judgment of conviction has been rendered against respondent Rosales. In fact, it is
significant to note that at the time petitioner issued the “Hold Out” order, the
criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal
basis for petitioner to issue the “Hold Out” order. Metropolitan Bank & Trust
Company v. Ana Grace Rosales and Yo Yuk To, G.R. No. 183204, January 13, 2014.

Contracts; Mortgage; nature of mortgage. It is true that loans are often secured by a
mortgage constituted on real or personal property to protect the creditor’s interest
in case of the default of the debtor. By its nature, however, a mortgage remains an
accessory contract dependent on the principal obligation, such that enforcement of
the mortgage contract will depend on whether or not there has been a violation of
the principal obligation. While a creditor and a debtor could regulate the order in
which they should comply with their reciprocal obligations, it is presupposed that in
a loan the lender should perform its obligation – the release of the full loan amount
– before it could demand that the borrower repay the loaned amount. Development

pg. 75
Bank of the Philippines (DBP) v. Guariña Agricultural and Realty Development
Corporation, G.R. No. 160758. January 15, 2014.

Contracts; mortgagee in good faith. Assuming arguendo that the Gorospes’ titles to
the subject properties happened to be fraudulent, public policy considers Opinion to
still have acquired legal title as a mortgagee in good faith. As held in Cavite
Development Bank v. Spouses Lim:

There is, however, a situation where, despite the fact that the mortgagor is not the
owner of the mortgaged property, his title being fraudulent, the mortgage contract
and any foreclosure sale arising therefrom are given effect by reason of public
policy. This is the doctrine of ‘the mortgagee in good faith’ based on the rule that all
persons dealing with property covered by a Torrens Certificate of Title, as buyers or
mortgagees, are not required to go beyond what appears on the face of the title.
The public interest in upholding the indefeasibility of a certificate of title, as
evidence of the lawful ownership of the land or of any encumbrance thereon,
protects a buyer or mortgagee who, in good faith, relied upon what appears on the
face of the certificate of title.

Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January
15, 2014.

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

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

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

1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him. The injured party

pg. 76
may choose between the fulfillment and the rescission of the obligation, with
payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible. Fil-Estate Properties, Inc.
and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria Ronquillo, G.R.
No. 185798, January 13, 2014.

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

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

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

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

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

Foreclosure; purchaser in foreclosure sale may take possession of the property even
before the expiration of the redemption period. A writ of possession is a writ of
execution employed to enforce a judgment to recover the possession of land. It

pg. 77
commands the sheriff to enter the land and give possession of it to the person
entitled under the judgment. It may be issued in case of an extrajudicial foreclosure
of a real estate mortgage under Section 7 of Act No. 3135, as amended by Act No.
4118.

Under said provision, the writ of possession may be issued to the purchaser in a
foreclosure sale either within the one-year redemption period upon the filing of a
bond, or after the lapse of the redemption period, without need of a bond.

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

Interest; legal interest; interest rate pegged at 6% regardless of the source of

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

Interest; legal interest; proper rate. In Eastern Shipping, it was observed that the
commencement of when the legal interest should start to run varies depending on
the factual circumstances obtaining in each case. As a rule of thumb, it was
suggested that “where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).”

During the pendency of this case, however, the Monetary Board issued Resolution
No. 796 dated May 16, 2013, stating that in the absence of express stipulation
between the parties, the rate of interest in loan or forbearance of any money, goods
or credits and the rate allowed in judgments shall be 6% per annum. Said Resolution
is embodied in Bangko Sentral ng Pilipinas Circular No. 799, Series of2013, which
took effect on July 1, 2013. Hence, the 12% annual interest mentioned above shall
apply only up to June 30, 2013. Thereafter, or starting July 1, 2013, the applicable
rate of interest for both the debited amount and undocumented withdrawals shall
be 6% per annum compounded annually, until fully paid. Land Bank of the
Philippines v. Emmanuel C. Oñate, G.R. No. 192371, January 15, 2014.

pg. 78
Interest; legal interest; rate. The legal interest rate to be imposed from February 11,
1993, the time of the extrajudicial demand by respondent, should be 6% per annum
in the absence of any stipulation in writing in accordance with Article 2209 of the
Civil Code, which provides:

Article 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per cent per annum. First United
Constructors Corporation, et al. v. Bayanihan Automotive Corporation, G.R. No.
164985, January 15, 2014.

Interest; legal interest; when awarded. Many years have gone by since Hanz
suffered the injury. Interest of 6% per annum should then be imposed on the award
as a sincere means of adjusting the value of the award to a level that is not only
reasonable but just and commensurate. Unless we make the adjustment in the
permissible manner by prescribing legal interest on the award, his sufferings would
be unduly compounded. For that purpose, the reckoning of interest should be from
the filing of the criminal information on April 1 7, 1997, the making of the judicial
demand for the liability of the petitioner. Dr. Encarnacion C. Lumantas v. Hanz
Calapiz, represented by his parents, Hilario Calapiz, Jr. and Helita Calapiz, G.R. No.
163753. January 15, 2014.

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

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

Obligations; extinguishment of obligations; compensation; requisites. Compensation

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

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

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

(2) That both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

pg. 79
(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.

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

Obligations; legal compensation; requisites. Legal compensation takes place when

the requirements set forth in Article 1278 and Article 1279 of the Civil Code are
present, to wit:

Article 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other.”

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

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

(2) That both debts consists in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.

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

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

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

pg. 80
Property; ownership; accession; accessory follows the principal; exception. While it
is a hornbook doctrine that the accessory follows the principal, that is, the
ownership of the property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or
artificially, such rule is not without exception. In cases where there is a clear and
convincing evidence to prove that the principal and the accessory are not owned by
one and the same person or entity, the presumption shall not be applied and the
actual ownership shall be upheld. In a number of cases, we recognized the separate
ownership of the land from the building and brushed aside the rule that accessory
follows the principal. Magdalena T. Villasi v. Filomena Garcia, substituted by his
heirs, namely, Ermelinda H. Garcia, et al., G.R. No. 190106, January 15, 2014.

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

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

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

The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of
the Civil Code, viz:

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

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

xxxx

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

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

Sales; sale of a piece of land or any interest therein is through an agent; authority of
the agent shall be in writing; otherwise, the sale shall be void. The due execution
and authenticity of the subject SPA are of great significance in determining the
validity of the sale entered into by Victorino and Ramon since the latter only claims
to be the agent of the purported seller (i.e., respondent). Article 1874 of the Civil
Code provides that “[w]hen a sale of a piece of land or any interest therein is
pg. 81
through an agent, the authority of the latter shall be in writing; otherwise, the sale
shall be void.” In other words, if the subject SPA was not proven to be duly executed
and authentic, then it cannot be said that the foregoing requirement had been
complied with; hence, the sale would be void. The Heirs of Victorino Sarili, namely,
Isabel A. Sarili, et al. v. Pedro F. Lagrosa, represented in this act by his Attorney-in-
Fact, Lourdes Labios Mojica, G.R. No. 193517, January 15, 2014.

SPECIAL LAWS

Section 23 of Presidential Decree No. 957; non-forfeiture of payments. Section 23 of

Presidential Decree No. 957, the rule governing the sale of condominiums, which
provides: No installment payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited in favor of the
owner or developer when the buyer, after due notice to the owner or developer,
desists from further payment due to the failure of the owner or developer to
develop the subdivision or condominium project according to the approved plans
and within the time limit for complying with the same. Such buyer may, at his
option, be reimbursed the total amount paid including amortization interests but
excluding delinquency interests, with interest thereon at the legal rate. Fil-Estate
Properties, Inc. and Fil-Estate Network, Inc. v. Spouses Conrado and Maria Victoria
Ronquillo, G.R. No. 185798, January 13, 2014.

Section 6 of Presidential Decree No. 1594; right of assignment and subcontract.

There is no question that every contractor is prohibited from subcontracting with or
assigning to another person any contract or project that he has with the DPWH
unless the DPWH Secretary has approved the subcontracting or assignment. This is
pursuant to Section 6 of Presidential Decree No. 1594, which provides that “[T]he
contractor shall not assign, transfer, pledge, subcontract or make any other
disposition of the contract or any part or interest therein except with the approval of
the Minister of Public Works, Transportation and Communications, the Minister of
Public Highways, or the Minister of Energy, as the case may be. Approval of the
subcontract shall not relieve the main contractor from any liability or obligation
under his contract with the Government nor shall it create any contractual relation
between the subcontractor and the Government.” Domingo Gonzalo v. John
Tarnate, Jr., G.R. No. 160600, January 15, 2014.

Family law; conjugal property; all property of the marriage is presumed to be

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

pg. 82
Family law; exclusive property of spouse; when the property is registered in the
name of a spouse only and there is no showing as to when the property was
acquired by said spouse, this is an indication that the property belongs exclusively
to said spouse. Article 160 of the Civil Code provides as follows: All property of the
marriage is presumed to belong to the conjugal partnership, unless it be proved that
it pertains exclusively to the husband or to the wife.”

The presumption applies to property acquired during the lifetime of the husband
and wife. In this case, it appears on the face of the title that the properties were
acquired by Donata Montemayor when she was already a widow. When the property
is registered in the name of a spouse only and there is no showing as to when the
property was acquired by said spouse, this is an indication that the property belongs
exclusively to said spouse. And this presumption under Article 160 of the Civil Code
cannot prevail when the title is in the name of only one spouse and the rights of
innocent third parties are involved. Francisco Lim v. Equitable PCI Bank, now known
as Banco De Oro Unibank, Inc., G.R. No. 183918. January 15, 2014.

Torrens system; certificate of title; a certificate of title serves as evidence of an

indefeasible and incontrovertible title to the property in favor of the person whose
name appears therein. “[A] certificate of title serves as evidence of an indefeasible
and incontrovertible title to the property in favor of the person whose name appears
therein.” Having no certificate of title issued in their names, spouses Vilbar have no
indefeasible and incontrovertible title over Lot 20 to support their claim. Further, it
is an established rule that “registration is the operative act which gives validity to
the transfer or creates a lien upon the land.” “Any buyer or mortgagee of realty
covered by a Torrens certificate of title x x x is charged with notice only of such
burdens and claims as are annotated on the title.” Failing to annotate the deed for
the eventual transfer of title over Lot 20 in their names, the spouses Vilbar cannot
claim a greater right over Opinion, who acquired the property with clean title in
good faith and registered the same in his name by going through the legally
required procedure. Sps. Bernadette and Rodulfo Vilbar v. Angelito L. Opinion, G.R.
No. 176043. January 15, 2014.

Torrens system; Torrens title; a person dealing with a registered land has a right to
rely upon the face of the Torrens certificate of title; exceptions. The well-known rule
in this jurisdiction is that a person dealing with a registered land has a right to rely
upon the face of the torrens certificate of title and to dispense with the need of
inquiring further, except when the party concerned has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such
inquiry.

A torrens title concludes all controversy over ownership of the land covered by a
final decree of registration. Once the title is registered the owner may rest assured
without the necessity of stepping into the portals of the court or sitting in the
mirador de su casa to avoid the possibility of losing his land. Francisco Lim v.
Equitable PCI Bank, now known as Banco De Oro Unibank, Inc., G.R. No. 183918.
January 15, 2014.

pg. 83
Torrens title; a person dealing with a registered land has a right to rely upon the
face of the Torrens certificate of title; exception in the case of a person who buys
from a person who is not the registered owner.The general rule is that every person
dealing with registered land may safely rely on the correctness of the certificate of
title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property. Where there is nothing in the
certificate of title to indicate any cloud or vice in the ownership of the property, or
any encumbrance thereon, the purchaser is not required to explore further than
what the Torrens Title upon its face indicates in quest for any hidden defects or
inchoate right that may subsequently defeat his right thereto.

However, a higher degree of prudence is required from one who buys from a person
who is not the registered owner, although the land object of the transaction is
registered. In such a case, the buyer is expected to examine not only the certificate
of title but all factual circumstances necessary for him to determine if there are any
flaws in the title of the transferor. The buyer also has the duty to ascertain the
identity of the person with whom he is dealing with and the latter’s legal authority
to convey the property. The Heirs of Victorino Sarili, namely, Isabel A. Sarili, et al. v.
Pedro F. Lagrosa, represented in this act by his Attorney-in-Fact, Lourdes Labios
Mojica, G.R. No. 193517, January 15, 2014.

Torrens system;even if the procurement of a certificate of title was tainted with

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

Torrens system; levy on attachment, duly registered, takes preference over a prior
unregistered sale.”[T]he settled rule that levy on attachment, duly registered, takes
preference over a prior unregistered sale. This result is a necessary consequence of
the fact that the [properties] involved [were] duly covered by the Torrens system
which works under the fundamental principle that registration is the operative act
which gives validity to the transfer or creates a lien upon the land.” Sps. Bernadette
and Rodulfo Vilbar v. Angelito L. Opinion, G.R. No. 176043. January 15, 2014.

Contract law; principle of relativity. The basic principle of relativity of contracts is

that contracts can only bind the parties who entered into it, and cannot favor or
prejudice a third person, even if he is aware of such contract and has acted with
knowledge thereof “Where there is no privity of contract, there is likewise no

pg. 84
obligation or liability to speak about.” Philippine National Bank v. Teresita Tan Dee,
et al., G.R. No. 182128, February 19, 2014.

Contract of sale; obligations of the parties; there is nothing in the decision of the
HLURB, as affirmed by the OP and the CA, which shows that the petitioner is being
ordered to assume the obligation of any of the respondents.In a contract of sale, the
parties’ obligations are plain and simple. The law obliges the vendor to transfer the
ownership of and to deliver the thing that is the object of sale. On the other hand,
the principal obligation of a vendee is to pay the full purchase price at the agreed
time. Philippine National Bank v. Teresita Tan Dee, et al., G.R. No. 182128, February
19, 2014.

Contract to sell; ownership; right to mortgage the property by the owner. Note that
at the time PEPI mortgaged the property to the petitioner, the prevailing contract
between respondents PEPI and Dee was still the Contract to Sell, as Dee was yet to
fully pay the purchase price of the property. On this point, PEPI was acting fully well
within its right when it mortgaged the property to the petitioner, for in a contract to
sell, ownership is retained by the seller and is not to pass until full payment of the
purchase price. In other words, at the time of the mortgage, PEPI was still the owner
of the property. Thus, in China Banking Corporation v. Spouses Lozada the Court
affirmed the right of the owner/developer to mortgage the property subject of
development, to wit: “[P.D.] No. 957 cannot totally prevent the owner or developer
from mortgaging the subdivision lot or condominium unit when the title thereto still
resides in the owner or developer awaiting the full payment of the purchase price by
the installment buyer.” Philippine National Bank v. Teresita Tan Dee, et al., G.R. No.
182128, February 19, 2014.

Dacion en pago; concept of.Dacion en pago or dation in payment is the delivery and
transmission of ownership of a thing by the debtor to the creditor as an accepted
equivalent of the performance of the obligation. It is a mode of extinguishing an
existing obligation and partakes the nature of sale as the creditor is really buying
the thing or property of the debtor, the payment for which is to be charged against
the debtor’s debt. Dation in payment extinguishes the obligation to the extent of
the value of the thing delivered, either as agreed upon by the parties or as may be
proved, unless the parties by agreement – express or implied, or by their silence –
consider the thing as equivalent to the obligation, in which case the obligation is
totally extinguished.Philippine National Bank v. Teresita Tan Dee, et al., G.R. No.
182128, February 19, 2014.

Co-ownership; when present.Art. 484. There is co-ownership whenever the

ownership of an undivided thing or right belongs to different persons. Art. 1078.
When there are two or more heirs, the whole estate of the decedent is, before its
partition, owned in common by such heirs, subject to the payment of debts of the
deceased. Teodoro S. Teodoro, et al. v. Danilo Espino, et al., G.R. No. 189248,
February 5, 2014.

Co-ownership; right of possession.Certainly, and as found by the trial courts, the

whole of Lot No. 2476 including the portion now litigated is, owing to the fact that it
has remained registered in the name of Genaro who is the common ancestor of both

pg. 85
parties herein, co-owned property. All, or both Teodoro Teodoro and respondents are
entitled to exercise the right of possession as co-owners. Neither party can exclude
the other from possession. Although the property remains unpartitioned, the
respondents in fact possess specific areas. Teodoro Teodoro can likewise point to a
specific area, which is that which was possessed by Petra. Teodoro Teodoro cannot
be dispossessed of such area, not only by virtue of Petra’s bequeathal in his favor
but also because of his own right of possession that comes from his co-ownership of
the property. Teodoro S. Teodoro, et al. v. Danilo Espino, et al., G.R. No. 189248,
February 5, 2014.

Alienable and disposable land; to prove that the land subject of an application for
registration is alienable, an applicant must establish the existence of a positive act
of the government; annotation in the survey plan is not sufficient. However, Cortez’
reliance on the foregoing annotation in the survey plan is amiss; it does not
constitute incontrovertible evidence to overcome the presumption that the subject
property remains part of the inalienable public domain. In Republic of the Philippines
v. Tri-Plus Corporation, the Court clarified that, the applicant must at the very least
submit a certification from the proper government agency stating that the parcel of
land subject of the application for registration is indeed alienable and disposable,
viz: It must be stressed that incontrovertible evidence must be presented to
establish that the land subject of the application is alienable or disposable. In the
present case, the only evidence to prove the character of the subject lands as
required by law is the notation appearing in the Advance Plan stating in effect that
the said properties are alienable and disposable. However, this is hardly the kind of
proof required by law. To prove that the land subject of an application for
registration is alienable, anapplicant must establish the existence of a positive act
of the government such as a presidential proclamation or an executive order, an
administrative action, investigation reports of Bureau of Lands investigators, and a
legislative act or statute. The applicant may also secure a certification from the
Government that the lands applied for are alienable and disposable. Republic of the
Philippines v. Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.

Patrimonial property; susceptible to acquisitive prescription; start of the running of

the prescriptive period.The Civil Code makes it clear that patrimonial property of the
State may be acquired by private persons through prescription. This is brought
about by Article 1113, which states that “[a]ll things which are within the commerce
of man are susceptible to prescription,” and that [p]roperty of the State or any of its
subdivisions not patrimonial in character shall not be the object of
prescription.”Nonetheless, Article 422 of the Civil Code states that “[p]roperty of
public dominion, when no longer intended for public use or for public service, shall
form part of the patrimonial property of the State.” It is this provision that controls
how public dominion property may be converted into patrimonial property
susceptible to acquisition by prescription. After all, Article 420(2) makes clear that
those property “which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth” are
public dominion property. For as long as the property belongs to the State, although
already classified as alienable or disposable, it remains property of the public
dominion if when it is “intended for some public service or for the development of
the national wealth.” Accordingly, there must be an express declaration by the State
that the public dominion property is no longer intended for public service or the
pg. 86
development of the national wealth or that the property has been converted into
patrimonial. Without such express declaration, the property, even if classified as
alienable or disposable, remains property of the public dominion, pursuant to Article
420(2), and thus incapable of acquisition by prescription. It is only when such
alienable and disposable lands are expressly declared by the State to be no longer
intended for public service or for the development of the national wealth that the
period of acquisitive prescription can begin to run. Such declaration shall be in the
form of a law duly enacted by Congress or a Presidential Proclamation in cases
where the President is duly authorized by law. Republic of the Philippines v.
Emmanuel C. Cortez,G.R. No. 186639. February 5, 2014.

Sale; warranties of sellers.Indeed, this Court is convinced – from an examination of

the evidence and by the concurring opinions of the courts below – that Bignay
purchased the property without knowledge of the pending Civil Case No. Q-52702.
Union Bank is therefore answerable for its express undertaking under the December
20, 1989 deed of sale to “defend its title to the Parcel/s of Land with improvement
thereon against the claims of any person whatsoever.” By this warranty, Union
Bank represented to Bignay that it had title to the property, and by assuming the
obligation to defend such title, it promised to do so at least in good faith and with
sufficient prudence, if not to the best of its abilities. Bignay EX-IM Philippines, Inc. v.
Union Bank of the Philippines / Union Bank of the Philippines v. Bignay EX-IM
Philippines, Inc., G.R. No. 171590 & G.R. No. 171598, February 12, 2014.

Breach of contract; gross negligence.The record reveals, however, that Union Bank
was grossly negligent in the handling and prosecution of Civil Case No. Q-52702. Its
appeal of the December 12, 1991 Decision in said case was dismissed by the CA for
failure to file the required appellant’s brief. Next, the ensuing Petition for Review on
Certiorari filed with this Court was likewise denied due to late filing and payment of
legal fees. Finally, the bank sought the annulment of the December 12, 1991
judgment, yet again, the CA dismissed the petition for its failure to comply with
Supreme Court Circular No. 28-91. As a result, the December 12, 1991 Decision
became final and executory, and Bignay was evicted from the property. Such
negligence in the handling of the case is far from coincidental; it is decidedly
glaring, and amounts to bad faith. “[N]egligence may be occasionally so gross as to
amount tomalice [or bad faith].” Indeed, in culpa contractual or breach of contract,
gross negligence of a party amounting to bad faith is a ground for the recovery of
Damages by the injured party.Bignay EX-IM Philippines, Inc. v. Union Bank of the
Philippines / Union Bank of the Philippines v. Bignay EX-IM Philippines, Inc., G.R. No.
171590 & G.R. No. 171598, February 12, 2014.

Unenforceable contract; entering into a contract without or beyond authority; sale

of property despite objection of laymen’s committee.The Court finds it erroneous for
the CA to ignore the fact that the laymen’s committee objected to the sale of the lot
in question. The Canons require that ALL the church entities listed in Article IV (a)
thereof should give its approval to the transaction. Thus, when the Supreme Bishop
executed the contract of sale of petitioner’s lot despite the opposition made by the
laymen’s committee, he acted beyond his powers. This case clearly falls under the
category of unenforceable contracts mentioned in Article 1403, paragraph (1) of the
Civil Code, which provides, thus: Art. 1403. The following contracts are

pg. 87
unenforceable, unless they are ratified: (1) Those entered into in the name of
another person by one who has been given no authority or legal representation, or
who has acted beyond his powers; In Mercado v. Allied Banking Corporation, the
Court explained that: x x x Unenforceable contracts are those which cannot be
enforced by a proper action in court, unless they are ratified, because either they
are entered into without or in excess of authority or they do not comply with the
statute of frauds or both of the contracting parties do not possess the required legal
capacity. x x x. Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No.
179597, February 3, 2014.

Unenforceable contract; analogous cases. Closely analogous cases of unenforceable

contracts are those where a person signs a deed of extrajudicial partition in behalf
of co-heirs without the latter’s authority; where a mother as judicial guardian of her
minor children, executes a deed of extrajudicial partition wherein she favors one
child by giving him more than his share of the estate to the prejudice of her other
children; and where a person, holding a special power of attorney, sells a property
of his principal that is not included in said special power of attorney. Iglesia Felipina
Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597, February 3, 2014.

Article 1456, Civil Code; implied trust; acquiring property through mistake. In the
present case, however, respondents’ predecessor-in-interest, Bernardino Taeza, had
already obtained a transfer certificate of title in his name over the property in
question. Since the person supposedly transferring ownership was not authorized
to do so, the property had evidently been acquired by mistake. In Vda. de Esconde
v. Court ofAppeals, the Court affirmed the trial court’s ruling that the applicable
provision of law in such cases is Article 1456 of the Civil Code which states that “[i]f
property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.” Iglesia Felipina Independiente v. Heirs of Bernardino
Taeza,G.R. No. 179597, February 3, 2014.

Constructive trust; concept of. A deeper analysis of Article 1456 reveals that it is not
a trust in the technical sense for in a typical trust, confidence is reposed in one
person who is named a trustee for the benefit of another who is called the cestui
que trust, respecting property which is held by the trustee for the benefit of the
cestui que trust. A constructive trust, unlike an express trust, does not emanate
from, or generate a fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a constructive trust, there
is neither a promise nor any fiduciary relation to speak of and the so-called trustee
neither accepts any trust nor intends holding the property for the beneficiary.
Iglesia Felipina Independiente v. Heirs of Bernardino Taeza,G.R. No. 179597,
February 3, 2014.

Constructive trust; prescriptive period.A constructive trust having been constituted

by law between respondents as trustees and petitioner as beneficiary of the subject
property, may respondents acquire ownership over the said property? The Court
held in the same case of Aznar, that unlike in express trusts and resulting implied
trusts where a trustee cannot acquire by prescription any property entrusted to him
unless he repudiates the trust, in constructive implied trusts, the trustee may

pg. 88
acquire the property through prescription even if he does not repudiate the
relationship. It is then incumbent upon the beneficiary to bring an action for
reconveyance before prescription bars the same.An action for reconveyance based
on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an action for
reconveyance based on an implied or constructive trust prescribes in ten years from
the issuance of the Torrens title over the property. It has also been ruled that the
ten-year prescriptive period begins to run from the date of registration of the deed
or the date of the issuance of the certificate of title over the property, Iglesia
Felipina Independiente v. Heirs of Bernardino Taeza, G.R. No. 179597, February 3,
2014.

Surety; concept of. A surety is considered in law as being the same party as the
debtor in relation to whatever is adjudged touching the obligation of the latter, and
their liabilities are interwoven as to be inseparable. Although the contract of a
surety is in essence secondary only to a valid principal obligation, his liability to the
creditor is direct, primary and absolute; he becomes liable for the debt and duty of
another although he possesses no direct or personal interest over the obligations
nor does he receive any benefit therefrom. Trade and Investment Development
Corporation of the Philippines (Formerly Philippine Export and Foreign Loan
Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403. February
12, 2014.

Surety; solidary debtor. The fundamental reason therefor is that a contract of

suretyship effectively binds the surety as a solidary debtor. This is provided under
Article 2047 of the Civil Code which states: By guaranty a person, called the
guarantor, binds himself to the creditor to fulfill the obligation of the principal
debtor in case the latter should fail to do so. If a person binds himself solidarily with
the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall
be observed. In such case the contract is called a suretyship. Thus, since 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. Trade and Investment
Development Corporation of the Philippines (Formerly Philippine Export and Foreign
Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No. 187403.
February 12, 2014.

Surety; distinguished from guarantor. Comparing a surety’s obligations with that of

a guarantor, the Court, in the case of Palmares v. CA, illumined that a surety is
responsible for the debt’s payment at once if the principal debtor makes default,
whereas a guarantor pays only if the principal debtor is unable to pay, viz. : 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

pg. 89
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. Trade and
Investment Development Corporation of the Philippines (Formerly Philippine Export
and Foreign Loan Guarantee Corporation) v. Asia Paces Corporation, et al., G.R. No.
187403. February 12, 2014.

Surety; extension given to debtor without consent of guarantor; effect of. Despite
these distinctions, the Court in Cochingyan, Jr. v. R&B Surety & Insurance Co., Inc.,
and later in the case of Security Bank, held that Article 2079 of the Civil Code, which
pertinently provides that “[a]n extension granted to the debtor by the creditor
without the consent of the guarantor extinguishes the guaranty,” equally applies to
bothcontracts of guaranty and suretyship. The rationale therefor was explained by
the Court as follows: The theory behind Article 2079 is that an extension of time
given to the principal debtor by the creditor without the surety’s consent would
deprive the surety of his right to pay the creditor and to be immediately subrogated
to the creditor’s remedies against the principal debtor upon the maturity date. The
surety is said to be entitled to protect himself against the contingency of the
principal debtor or the indemnitors becoming insolvent during the extended period.
Trade and Investment Development Corporation of the Philippines (Formerly
Philippine Export and Foreign Loan Guarantee Corporation) v. Asia Paces
Corporation, et al., G.R. No. 187403. February 12, 2014.

Surety; extension given to debtor without consent of guarantor; the payment

extensions granted by Banque Indosuez and PCI Capital to TIDCORP under the
Restructuring Agreement did not have the effect of extinguishing the bonding
companies’ obligations to TIDCORP under the Surety Bonds, notwithstanding the
fact that said extensions were made without their consent. This is because Article
2079 of the Civil Code refers to a payment extension granted by the creditor to the
principal debtor without the consent of the guarantor or surety. In this case, the
Surety Bonds are suretyship contracts which secure the debt of ASPAC, the principal
debtor, under the Deeds of Undertaking to pay TIDCORP, the creditor, the damages
and liabilities it may incur under the Letters of Guarantee, within the bounds of the
bonds’ respective coverage periods and amounts. No payment extension was,
however, granted by TIDCORP in favor of ASPAC in this regard; hence, Article 2079
of the Civil Code should not be applied with respect to the bonding companies’
liabilities to TIDCORP under the Surety Bonds.

The payment extensions granted by Banque Indosuez and PCI Capital pertain to
TIDCORP’s own debt under the Letters of Guarantee wherein it (TIDCORP)
irrevocably and unconditionally guaranteed full payment of ASPAC’s loan obligations
to the banks in the event of its (ASPAC) default. In other words, the Letters of
Guarantee secured ASPAC’s loan agreements to the banks. Under this arrangement,
TIDCORP therefore acted as a guarantor, with ASPAC as the principal debtor, and
the banks as creditors. Trade and Investment Development Corporation of the
Philippines (Formerly Philippine Export and Foreign Loan Guarantee Corporation) v.
Asia Paces Corporation, et al., G.R. No. 187403. February 12, 2014.

pg. 90
Deed of mortgage; effect when the authorized agent failed to indicate in the
mortgage that she was acting for and on behalf of her principal. Similarly, in this
case, the authorized agent failed to indicate in the mortgage that she was acting for
and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its
face, that it was signed by Concepcion in her own name and in her own personal
capacity. In fact, there is nothing in the document to show that she was acting or
signing as an agent of petitioner. Thus, consistent with the law on agency and
established jurisprudence, petitioner cannot be bound by the acts of Concepcion.
Nicanora G. v. Rural Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24,
2014.

Bank; negligence of. At this point, we find it significant to mention that respondent
bank has no one to blame but itself. Not only did it act with undue haste when it
granted and released the loan in less than three days, it also acted negligently in
preparing the Real Estate Mortgage as it failed to indicate that Concepcion was
signing it for and on behalf of petitioner. We need not belabor that the words “as
attorney-in-fact of,” “as agent of,” or “for and on behalf of,” are vital in order for the
principal to be bound by the acts of his agent. Without these words, any mortgage,
although signed by the agent, cannot bind the principal as it is considered to have
been signed by the agent in his personal capacity. Nicanora G. v. Rural Bank of El
Salvador, Inc. et al., G.R. No. 179625. February 24, 2014.

Agent; liability when deed of mortgage is signed in personal capacity. Concepcion,

on the other hand, is liable to pay respondent bank her unpaid obligation under the
Promissory Note dated June 11, 1982, with interest. As we have said, Concepcion
signed the Promissory Note in her own personal capacity; thus, she cannot escape
liability. She is also liable to reimburse respondent bank for all damages, attorneys’
fees, and costs the latter is adjudged to pay petitioner in this case. Nicanora G. v.
Rural Bank of El Salvador, Inc. et al., G.R. No. 179625. February 24, 2014.

Article 1308 of the Civil Code; principle of mutuality of contracts. The credit
agreement executed succinctly stipulated that the loan would be subjected to
interest at a rate “determined by the Bank to be its prime rate plus applicable
spread, prevailing at the current month.” This stipulation was carried over to or
adopted by the subsequent renewals of the credit agreement. PNB thereby
arrogated unto itself the sole prerogative to determine and increase the interest
rates imposed on the Spouses Manalo. Such a unilateral determination of the
interest rates contravened the principle of mutuality of contracts embodied in
Article 1308 of the Civil Code.Philippine National Bank v. Sps. Enrique Manalo &
Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.

Contracts; a contract where there is no mutuality between the parties partakes of

the nature of a contract of adhesion. The Court has declared that a contract where
there is no mutuality between the parties partakes of the nature of a contract of
adhesion, and any obscurity will be construed against the party who prepared the
contract, the latter being presumed the stronger party to the agreement, and who
caused the obscurity. PNB should then suffer the consequences of its failure to
specifically indicate the rates of interest in the credit agreement. We spoke clearly
on this in Philippine Savings Bank v. Castillo, to wit: The unilateral determination

pg. 91
and imposition of the increased rates is violative of the principle of mutuality of
contracts under Article 1308 of the Civil Code, which provides that ‘[t]he contract
must bind both contracting parties; its validity or compliance cannot be left to the
will of one of them.’ A perusal of the Promissory Note will readily show that the
increase or decrease of interest rates hinges solely on the discretion of petitioner. It
does not require the conformity of the maker before a new interest rate could be
enforced. Any contract which appears to be heavily weighed in favor of one of the
parties so as to lead to an unconscionable result, thus partaking of the nature of a
contract of adhesion, is void. Any stipulation regarding the validity or compliance of
the contract left solely to the will of one of the parties is likewise invalid. Philippine
National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No. 174433,
February 24, 2014.

Interest; interest should be computed from the time of the judicial or extrajudicial
demand; rule when there is no demand. Indeed, the Court said in Eastern Shipping
Lines, Inc. v. Court of Appeals that interest should be computed from the time of the
judicial or extrajudicial demand. However, this case presents a peculiar situation,
the peculiarity being that the Spouses Manalo did not demand interest either
judicially or extrajudicially. In the RTC, they specifically sought as the main reliefs
the nullification of the foreclosure proceedings brought by PNB, accounting of the
payments they had made to PNB, and the conversion of their loan into a long term
one. In its judgment, the RTC even upheld the validity of the interest rates imposed
by PNB. In their appellant’s brief, the Spouses Manalo again sought the nullification
of the foreclosure proceedings as the main relief. It is evident, therefore, that the
Spouses Manalo made no judicial or extrajudicial demand from which to reckon the
interest on any amount to be refunded to them. Such demand could only be
reckoned from the promulgation of the CA’s decision because it was there that the
right to the refund was first judicially recognized. Nevertheless, pursuant to Eastern
Shipping Lines, Inc. v. Court of Appeals, the amount to be refunded and the interest
thereon should earn interest to be computed from the finality of the judgment until
the full refund has been made.Philippine National Bank v. Sps. Enrique Manalo &
Rosalinda Jacinto, et al., G.R. No. 174433, February 24, 2014.

Interest; Monetary Board Circular No. 799 reduced the interest rates from 12% per
annum to 6% per annum. Anent the correct rates of interest to be applied on the
amount to be refunded by PNB, the Court, in Nacar v. Gallery Frames and S.C.
Megaworld Construction v. Parada, already applied Monetary Board Circular No. 799
by reducing the interest rates allowed in judgments from 12% per annum to 6% per
annum. Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al.,
G.R. No. 174433, February 24, 2014.

Interest; prospective application of Monetary Board Circular No. 799. According to

Nacar v. Gallery Frames, MB Circular No. 799 is applied prospectively, and
judgments that became final and executory prior to its effectivity on July 1, 2013 are
not to be disturbed but continue to be implemented applying the old legal rate of
12% per annum. Hence, the old legal rate of 12% per annum applied to judgments
becoming final and executory prior to July 1, 2013, but the new rate of 6% per
annum applies to judgments becoming final and executory after said date.

pg. 92
Philippine National Bank v. Sps. Enrique Manalo & Rosalinda Jacinto, et al., G.R. No.
174433, February 24, 2014.

Mortgagee in good faith; doctrine of. In Bank of Commerce v. San Pablo, Jr., the
doctrine of mortgagee in good faith was explained:There is, however, a situation
where, despite the fact that the mortgagor is not the owner of the mortgaged
property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising there from are given effect by reason of public policy. This is the doctrine of
“the mortgagee in good faith” based on the rule that all persons dealing with
property covered by the Torrens Certificates of Title, as buyers or mortgagees, are
not required to go beyond what appears on the face of the title. The public interest
in upholding indefeasibility of a certificate of title, as evidence of lawful ownership
of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in
good faith, relied upon what appears on the face of the certificate of title.
Homeowners Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De
Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26, 2014.

Mortgagee in good faith; HSLB, as a mortgagee, had a right to rely in good faith on
Delgado’s title, and in the absence of any sign that might arouse suspicion, HSLB
had no obligation to undertake further investigation.When the property was
mortgaged to HSLB, the registered owner of the subject property was Delgado who
had in her name TCT No. 44848. Thus, HSLB cannot be faulted in relying on the face
of Delgado’s title. The records indicate that Delgado was at the time of the
mortgage in possession of the subject property and Delgado’s title did not contain
any annotation that would arouse HSLB’s suspicion. HSLB, as a mortgagee, had a
right to rely in good faith on Delgado’s title, and in the absence of any sign that
might arouse suspicion, HSLB had no obligation to undertake further investigation.
As held by this Court in Cebu International Finance Corp. v. CA: The prevailing
jurisprudence is that a mortgagee has a right to rely in good faith on the certificate
of title of the mortgagor of the property given as security and in the absence of any
sign that might arouse suspicion, has no obligation to undertake further
investigation. Hence, even if the mortgagor is not the rightful owner of, or does not
have a valid title to, the mortgaged property, the mortgagee or transferee in good
faith is nonetheless entitled to protection. Homeowners Savings and Loan Bank v.
Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No.
189477. February 26, 2014.

Purchaser in good faith; doctrine of; duty of a prospective buyer. purchaser in good
faith is defined as one who buys a property without notice that some other person
has a right to, or interest in, the property and pays full and fair price at the time of
purchase or before he has notice of the claim or interest of other persons in the
property.When a prospective buyer is faced with facts and circumstances as to
arouse his suspicion, he must take precautionary steps to qualify as a purchaser in
good faith. In Spouses Mathay v. CA, we determined the duty of a prospective
buyer: 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 of course, expected from the purchaser of a valued

pg. 93
piece of land to inquire first into the status or nature of possession of the occupants,
i.e., whether or not the occupants possess the land en concepto de dueño, in the
concept of the owner. As is the common practice in the real estate industry, an
ocular inspection of the premises involved is a safeguard a cautious a nd 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 thereby preclude
him from claiming or invoking the rights of a purchaser in good faith. Homeowners
Savings and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by
Maribel Frias, et al., G.R. No. 189477. February 26, 2014.

Notice of lis pendens; definition of; purpose of. Lis pendens is a Latin term which
literally means, “a pending suit or a pending litigation” while a notice of lis pendens
is an announcement to the whole world that a real property is in litigation, serving
as a warning that anyone who acquires an interest over the property does so at
his/her own risk, or that he/she gambles on the result of the litigation over the
property. It is a warning to prospective buyers to take precautions and investigate
the pending litigation.

The purpose of a notice of lis pendens is to protect the rights of the registrant while
the case is pending resolution or decision. With the notice of lis pendens duly
recorded and remaining uncancelled, the registrant could rest secure that he/she
will not lose the property or any part thereof during litigation. Homeowners Savings
and Loan Bank v. Asuncion P. Felonia and Lydia C. De Guzman, rep. by Maribel Frias,
et al., G.R. No. 189477. February 26, 2014.

Notice of lis pendens; effect of actual knowledge of the annotated Notice of Lis
Pendens. Indeed, at the time HSLB bought the subject property, HSLB had actual
knowledge of the annotated Notice of Lis Pendens. Instead of heeding the same,
HSLB continued with the purchase knowing the legal repercussions a notice of lis
pendens entails. HSLB took upon itself the risk that the Notice of Lis Pendens leads
to. As correctly found by the CA, “the notice of lis pendens was annotated on 14
September 1995, whereas the foreclosure sale, where the appellant was declared as
the highest bidder, took place sometime in 1997. There is no doubt that at the time
appellant purchased the subject property, it was aware of the pending litigation
concerning the same property and thus, the title issued in its favor was subject to
the outcome of said litigation.” Homeowners Savings and Loan Bank v. Asuncion P.
Felonia and Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477.
February 26, 2014.

Mortgage; mortgagor must be absolute owner of the thing mortgaged. That the
mortgagor be the absolute owner of the thing mortgaged is an essential requisite of
a contract of mortgage. Article 2085 (2) of the Civil Code specifically says so: Art.
2085. The following requisites are essential to the contracts of pledge and
mortgage: x x x x (2) That the pledgor or mortagagor be the absolute owner of the
thing pledged or mortgaged. Succinctly, for a valid mortgage to exist, ownership of
the property is an essential requisite. Reyes v. De Leon cited the case of Philippine

pg. 94
National Bank v. Rocha where it was pronounced that “a mortgage of real property
executed by one who is not an owner thereof at the time of the execution of the
mortgage is without legal existence.” Such that, according to DBP v. Prudential
Bank, there being no valid mortgage, there could also be no valid foreclosure or
valid auction sale. Homeowners Savings and Loan Bank v. Asuncion P. Felonia and
Lydia C. De Guzman, rep. by Maribel Frias, et al., G.R. No. 189477. February 26,
2014.

SPECIAL LAWS

P.D. No. 957; subdivision lots; a bank dealing with a property that is already subject
of a contract to sell and is protected by the provisions of P.D. No. 957, is bound by
the contract to sell.Thus, in Luzon Development Bank v. Enriquez, the Court
reiterated the rule that a bank dealing with a property that is already subject of a
contract to sell and is protected by the provisions of P.D. No. 957, is bound by the
contract to sell. However, the transferee BANK is bound by the Contract to Sell and
has to respect Enriquez’s rights thereunder. This is because the Contract to Sell,
involving a subdivision lot, is covered and protected by PD 957. x x x. x x x x x x x
Under these circumstances, the BANK knew or should have known of the possibility
and risk that the assigned properties were already covered by existing contracts to
sell in favor of subdivision lot buyers. As observed by the Court in another case
involving a bank regarding a subdivision lot that was already subject of a contract to
sell with a third party:“[The Bank] should have considered that it was dealing with a
property subject of a real estate development project. A reasonable person,
particularly a financial institution x x x, should have been aware that, to finance the
project, funds other than those obtained from the loan could have been used to
serve the purpose, albeit partially. Hence, there was a need to verify whether any
part of the property was already intended to be the subject of any other contract
involving buyers or potential buyers. In granting the loan, [the Bank] should not
have been content merely with a clean title, considering the presence of
circumstances indicating the need for a thorough investigation of the existence of
buyers x x x. Wanting in care and prudence, the [Bank] cannot be deemed to be an
innocent mortgagee. x x x” Philippine National Bank v. Teresita Tan Dee, et al., G.R.
No. 182128, February 19, 2014.

Section 14 of P.D. No. 1529; original registration of title to land; who may apply.
Applicants for original registration of title to land must establish compliance with the
provisions of Section 14 of P.D. No. 1529, which pertinently provides that: Sec.14.
Who may apply. The following persons may file in the proper Court of First Instance
an application for registration of title to land, whether personally or through their
duly authorized representatives:(1) Those who by themselves or through their
predecessors-in interest have been in open, continuous, exclusive and notorious
possession and occupation of alienable and disposable lands of the public domain
under a bona fide claim of ownership since June 12, 1945, or earlier. (2) Those who
have acquired ownership of private lands by prescription under the provision of
existing laws.Republic of the Philippines v. Emmanuel C. Cortez, G.R. No. 186639.
February 5, 2014.

pg. 95
Section 14 of P.D. No. 1529; original registration of title to land; requisites.Section
14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or incomplete
titles to public land acquired under Section 48(b)of C.A. No.141, as amended by P.D.
No. 1073. “Under Section 14(1) [of P.D. No. 1529], applicants for registration of title
must sufficiently establish first, that the subject land forms part of the disposable
and alienable lands of the public domain; second, that the applicant and his
predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and third, that it is under a bona fide claim
of ownership since June 12, 1945, or earlier.” Republic of the Philippines v.
Emmanuel C. Cortez, G.R. No. 186639. February 5, 2014.

Psychological incapacity; concept of; characterizations. “Psychological incapacity,”

as a ground to nullify a marriage under Article 36 of the Family Code, should refer to
no less than a mental – not merely physical – incapacity that causes a party to be
truly incognitive of the basic marital covenants that concomitantly must be
assumed and discharged by the parties to the marriage which, as so expressed in
Article 68 of the Family Code, among others, include their mutual obligations to live
together, observe love, respect and fidelity and render help and support.There is
hardly any doubt that the intendment of the law has been to confine the meaning of
“psychological incapacity” to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance
to the marriage. Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No.
171557. February 12, 2014.

Psychological incapacity; emotional immaturity, irresponsibility, or even sexual

promiscuity, cannot be equated with psychological incapacity.Keeping with these
principles, the Court, in Dedel v. CA, held that therein respondent’s emotional
immaturity and irresponsibility could not be equated with psychological incapacity
as it was not shown that these acts are manifestations of a disordered personality
which make her completely unable to discharge the essential marital obligations of
the marital state, not merely due to her youth, immaturity or sexual promiscuity.
Republic of the Philippines v. Rodolfo O. De Gracia, G.R. No. 171557. February 12,
2014.

Psychological incapacity; although expert opinions furnished by psychologists

regarding the psychological temperament of parties are usually given considerable
weight by the courts, the existence of psychological incapacity must still be proven
by independent evidence. Verily, although expert opinions furnished by
psychologists regarding the psychological temperament of parties are usually given
considerable weight by the courts, the existence of psychological incapacity must
still be proven by independent evidence. Republic of the Philippines v. Rodolfo O. De
Gracia, G.R. No. 171557. February 12, 2014.

Psychological incapacity; refusal to live with Rodolfo and to assume her duties as
wife and mother as well as her emotional immaturity, irresponsibility and infidelity
do not rise to the level of psychological incapacity that would justify the nullification
of the parties’ marriage. To the Court’s mind, Natividad’s refusal to live with Rodolfo
and to assume her duties as wife and mother as well as her emotional immaturity,
irresponsibility and infidelity do not rise to the level of psychological incapacity that

pg. 96
would justify the nullification of the parties’ marriage. Indeed, to be declared
clinically or medically incurable is one thing; to refuse or be reluctant to perform
one’s duties is another. To hark back to what has been earlier discussed,
psychological incapacity refers only to the most serious cases of personality
disorders clearly demonstrative of an utter insensitivity or inability to give meaning
and significance to the marriage. Republic of the Philippines v. Rodolfo O. De Gracia,
G.R. No. 171557. February 12, 2014.

Section 14 (1), Presidential Decree No. 1529; judicial confirmation of imperfect or

incomplete titles to public land; requisites. Section 14(1) of P.D. No. 1529 refers to
the judicial confirmation of imperfect or incomplete titles to public land acquired
under Section 48(b) of Commonwealth Act (C.A.) No. 141, or the Public Land Act, as
amended by P.D. No. 1073. Under Section 14(1) of P.D. No. 1529, applicants for
registration of title must sufficiently establish: first, that the subject land forms part
of the disposable and alienable lands of the public domain; second, that the
applicant and his predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupation of the same; and third, that it is under a
bona fide claim of ownership since June 12, 1945, or earlier. Republic of the
Philippines v. Remman Enterprises, Inc. represented by Ronnie P. Inocencio, G.R. No.
199310. February 19, 2014.

Proof that land is alienable and disposable; certifications insufficient. However, the
said certifications presented by the respondent are insufficient to prove that the
subject properties are alienable and disposable. In Republic of the Philippines v.
T.A.N. Properties, Inc., the Court clarified that, in addition to the certification issued
by the proper government agency that a parcel of land is alienable and disposable,
applicants for land registration must prove that the DENR Secretary had approved
the land classification and released the land of public domain as alienable and
disposable. They must present a copy of the original classification approved by the
DENR Secretary and certified as true copy by the legal custodian of the records.
Republic of the Philippines v. Remman Enterprises, Inc. represented by Ronnie P.
Inocencio, G.R. No. 199310. February 19, 2014.

Possession and occupation; proof of specific acts of ownership must be presented to

substantiate the claim of open, continuous, exclusive, and notorious possession and
occupation of the land subject of the application. For purposes of land registration
under Section 14(1) of P.D. No. 1529, proof of specific acts of ownership must be
presented to substantiate the claim of open, continuous, exclusive, and notorious
possession and occupation of the land subject of the application. Applicants for land
registration cannot just offer general statements which are mere conclusions of law
rather than factual evidence of possession. Actual possession consists in the
manifestation of acts of dominion over it of such a nature as a party would actually
exercise over his own property. Republic of the Philippines v. Remman Enterprises,
Inc. represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014.

Possession and occupation; mere casual cultivation of portions of the land by the
claimant does not constitute possession under claim of ownership. Although
Cerquena testified that the respondent and its predecessors-in-interest cultivated
the subject properties, by planting different crops thereon, his testimony is bereft of

pg. 97
any specificity as to the nature of such cultivation as to warrant the conclusion that
they have been indeed in possession and occupation of the subject properties in the
manner required by law. There was no showing as to the number of crops that are
planted in the subject properties or to the volume of the produce harvested from
the crops supposedly planted thereon. Further, assuming ex gratia argumenti that
the respondent and its predecessors-in-interest have indeed planted crops on the
subject properties, it does not necessarily follow that the subject properties have
been possessed and occupied by them in the manner contemplated by law. The
supposed planting of crops in the subject properties may only have amounted to
mere casual cultivation, which is not the possession and occupation required by law.
“A mere casual cultivation of portions of the land by the claimant does not
constitute possession under claim of ownership. For him, possession is not exclusive
and notorious so as to give rise to a presumptive grant from the state. The
possession of public land, however long the period thereof may have extended,
never confers title thereto upon the possessor because the statute of limitations
with regard to public land does not operate against the state, unless the occupant
can prove possession and occupation of the same under claim of ownership for the
required number of years.” Republic of the Philippines v. Remman Enterprises, Inc.
represented by Ronnie P. Inocencio, G.R. No. 199310. February 19, 2014.

Action for quieting of title; trial court had no jurisdiction to determine who among
the parties have better right over the disputed property which is admittedly still part
of the public domain. Having established that the disputed property is public land,
the trial court was therefore correct in dismissing the complaint to quiet title for lack
of jurisdiction. The trial court had no jurisdiction to determine who among the
parties have better right over the disputed property which is admittedly still part of
the public domain. As held in Dajunos v. Tandayag (G.R. Nos. L-32651-52, 31 August
1971, 40 SCRA 449):

x x x The Tarucs’ action was for “quieting of title” and necessitated determination of
the respective rights of the litigants, both claimants to a free patent title, over a
piece of property, admittedly public land. The law, administration, disposition and
alienation of public lands with the Director of Lands subject, of course, to the control
of the Secretary of Agriculture and Natural Resources.

In sum, the decision rendered in Civil Case No. 1218 on October 28, 1968 is a patent
nullity. The lower court did not have power to determine who (the Firmalos or the
Tarucs) were entitled to an award of free patent title over that piece of property that
yet belonged to the public domain. Neither did it have power to adjudge the Tarucs
as entitled to the “true equitable ownership” thereof, the latter’s effect being the
same: the exclusion of the Firmalos in favor of the Tarucs. Heirs of Pacifico Pocido,
et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146, March 19, 2014.

Action for quieting of title. In an action for quieting of title, the complainant is
seeking for “an adjudication that a claim of title or interest in property adverse to
the claimant is invalid, to free him from the danger of hostile claim, and to remove a
cloud upon or quiet title to land where stale or unenforceable claims or demands
exist.” Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No.
199146, March 19, 2014.

pg. 98
Action for quieting of title; two indispensable requisites. Under Articles 476 and 477
of the Civil Code, the two indispensable requisites in an action to quiet title are: (1)
that the plaintiff has a legal or equitable title to or interest in the real property
subject of the action; and (2) that there is a cloud on his title by reason of any
instrument, record, deed, claim, encumbrance or proceeding, which must be shown
to be in fact invalid or inoperative despite its prima facie appearance of validity.
Heirs of Pacifico Pocido, et al. v. Arsenia Avila and Emelinda Chua, G.R. No. 199146,
March 19, 2014.

Co-ownership; Article 493 of the Civil Code; rights of a co-owner of a certain

property; each one of the co-owners with full ownership of their parts can sell their
fully owned part. Article 493 of the Code defines the ownership of the co-owner,
clearly establishing that each co-owner shall have full ownership of his part and of
its fruits and benefits. Pertinent to this case, Article 493 dictates that each one of
the parties herein as co-owners with full ownership of their parts can sell their fully
owned part. The sale by the petitioners of their parts shall not affect the full
ownership by the respondents of the part that belongs to them. Their part which
petitioners will sell shall be that which may be apportioned to them in the division
upon the termination of the co-ownership. With the full ownership of the
respondents remaining unaffected by petitioners’ sale of their parts, the nature of
the property, as co-owned, likewise stays. In lieu of the petitioners, their vendees
shall be co-owners with the respondents. The text of Article 493 says so. Raul V.
Arambulo and Teresita Dela Cruz v. Genaro Nolasco and Jeremy Spencer Nolasco,
G.R. No. 189420, March 26, 2014.

Co-ownership; Article 494 of the Civil Code; partition. Article 494 of the Civil Code
provides that no co-owner shall be obliged to remain in the co-ownership, and that
each co-owner may demand at any time partition of the thing owned in common
insofar as his share is concerned. Raul V. Arambulo and Teresita Dela Cruz v. Genaro
Nolasco and Jeremy Spencer Nolasco, G.R. No. 189420, March 26, 2014.

Co-ownership; Article 498 of the Civil Code; when this may be resorted to. Article
498 of the Civil Code states that whenever the thing is essentially indivisible and
the co-owners cannot agree that it be allotted to one of them who shall indemnify
the others, it shall be sold and its proceeds accordingly distributed. This is resorted
to (a) when the right to partition the property is invoked by any of the co-owners
but because of the nature of the property, it cannot be subdivided or its
subdivision would prejudice the interests of the co-owners, and (b) the co-owners
are not in agreement as to who among them shall be allotted or assigned the entire
property upon proper reimbursement of the co-owners. Raul V. Arambulo and
Teresita Dela Cruz v. Genaro Nolasco and Jeremy Spencer Nolasco, G.R. No. 189420,
March 26, 2014.

Damages; actual or compensatory damages. Article 2199 of the Civil Code states
that “[e]xcept as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him a he has duly proved.
Such compensation is referred to as actual or compensatory damages.” “Actual
damages are compensation for an injury that will put the injured party in the
position where it was before the injury. They pertain to such injuries or losses that

pg. 99
are actually sustained and susceptible of measurement. Except as provided by law
or by stipulation, a party is entitled to adequate compensation only for such
pecuniary loss as is duly proven. Basic is the rule that to recover actual damages,
not only must the amount of loss be capable of proof; it must also be actually
proven with a reasonable degree of certainty, premised upon competent proof or
the best evidence obtainable.” International Container Terminal Services, Inc. v.
Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Damages; Attorney’s fees; when allowed. Article 2208 of the Civil Code does not
prohibit recovery of attorney’s fees if there is a stipulation in the contract for
payment of the same. Thus, in Asian Construction and Development Corporation v.
Cathay Pacific SteelCorporation (CAPASCO), the Court, citing Titan
ConstructionCorporation v. Uni-Field Enterprises, Inc., noted that the law allows a
party to recover attorney’s fees under a written agreement. In Barons Marketing
Corporation v. Court of Appeals, the Court ruled that attorney’s fees are in the
nature of liquidated damages and the stipulation therefor is aptly called a penal
clause. It has been said that so long as such stipulation does not contravene law,
morals, or public order, it is strictly binding upon defendant. The attorney’s fees so
provided areawarded in favor of the litigant, not his counsel.On the other hand, the
law also allows parties to a contract tostipulate on liquidated damages to be paid in
case of breach. A stipulationon liquidated damages is a penalty clause where the
obligor assumes agreater liability in case of breach of an obligation. The obligor is
bound topay the stipulated amount without need for proof on the existence and
onthe measure of damages caused by the breach. However, even if such attorney’s
fees are allowed by law, the courts still have the power to reduce the same if it is
unreasonable. Mariano Lim v. Security Bank Corporation,G.R. No. 188539, March 12,
2014.

Damages; Attorney’s fees; when proper. An award of attorney’s fees has always
been the exception rather than the rule and there must be some compelling legal
reason to bring the case within the exception and justify the award. In this case,
none of the exceptions applies. “Attorney’s fees are not awarded every time a party
prevails in a suit. The policy of the Court is that no premium should be placed on the
right to litigate.” “Even when a claimant is compelled to litigate with third persons
or to incur expenses to protect his rights, still, attorney’s fees may not be awarded
where no sufficient showing of bad faith could be reflected in a party’s persistence
in a case other than an erroneous conviction of the righteousness of his cause.”
International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031,
March 26, 2014.

Damages; moral damages. Certainly, an award of moral damages must be anchored

on a clear showing that the party claiming the same actually experienced
mental anguish, besmirched reputation, sleepless nights, wounded feelings, or
similar injury. In the case herein under consideration, the records are bereft of any
proof that respondent in fact suffered moral damages as contemplated in the afore-
quoted provision of the Civil Code. The ruling of the trial court provides simply that:
“[Petitioner’s] outright denial and unjust refusal to heed [respondent’s] claim for
payment of the value of her lost/damaged shipment caus[ed] the latter to suffer
serious anxiety, mental anguish and wounded feelings warranting the award of

pg. 100
moral damages x x x.” The testimony of respondent, on the other hand, merely
states that when she failed to recover damages from petitioner, she “was saddened,
had sleepless nights and anxiety” without providing specific details of the suffering
she allegedly went through. “Since an award of moral damages is predicated on a
categorical showing by the claimant that she actually experienced emotional and
mental sufferings, it must be disallowed absent any evidence thereon.”
International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031,
March 26, 2014.

Damages; Nominal damages; when awarded; Network Bank did not violate any of
Baric’s rights.Nominal damages are recoverable where a legal right is technically
violated and must be vindicated against an invasion that has produced no actual
present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown.

Under Article 2221 of the Civil Code, nominal damages may be awarded to a
plaintiff whose right has been violated or invaded by the defendant, for the purpose
of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss
suffered. Nominal damages are not for indemnification of loss suffered but for the
vindication or recognition of a right violated or invaded.

Network Bank did not violate any of Baric’s rights; it was merely a purchaser or
transferee of the property. Surely, it is not prohibited from acquiring the property
even while the forcible entry case was pending, because as the registered owner of
the subject property, Palado may transfer his title at any time and the lease merely
follows the property as a lien or encumbrance. Any invasion or violation of Baric’s
rights as lessee was committed solely by Palado, and Network Bank may not be
implicated or found guilty unless it actually took part in the commission of illegal
acts, which does not appear to be so from the evidence on record. On the contrary,
it appears that Barie was ousted through Palado’s acts even before Network Bank
acquired the subject property or came into the picture. Thus, it was error to hold the
bank liable for nominal damages. One Network Rural Bank, Inc. v. Danilo G.
Baric,G.R. No. 193684, March 5, 2014.

Damages; Temperate damages. In the absence of competent proof on the amount

of actual damages suffered, a party is entitled to receive temperate damages.
Article 2224 of the New Civil Code provides that: “Temperate or moderate damages,
which are more than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be proved with certainty.” The amount
thereof is usually left to the sound discretion of the courts but the same should be
reasonable, bearing in mind that temperate damages should be “more than nominal
but less than compensatory.” International Container Terminal Services, Inc. v.
Celeste M. Chua, G.R. No. 195031, March 26, 2014.

Fraud; concept of; Article 1338 of the Civil Code. According to Article 1338 of the
Civil Code, there is fraud when one of the contracting parties, through insidious
words or machinations, induces the other to enter into the contract that, without the
inducement, he would not have agreed to. Yet, fraud, to vitiate consent, must be the

pg. 101
causal (dolo causante), not merely the incidental (dolo incidente), inducement to
the making of the contract. In Samson v. Court of Appeals (G.R. No. 108245,
November 25, 1994, 238 SCRA 397), causal fraud is defined as “a deception
employed by one party prior to or simultaneous to the contract in order to secure
the consent of the other.”

Fraud cannot be presumed but must be proved by clear and convincing evidence.
Whoever alleges fraud affecting a transaction must substantiate his allegation,
because a person is always presumed to take ordinary care of his concerns, and
private transactions are similarly presumed to have been fair and regular. To be
remembered is that mere allegation is definitely not evidence; hence, it must be
proved by sufficient evidence. Metropolitan Fabrics, Inc., et al. v. Prosperity Credit
Resources, Inc. et al., G.R. No. 154390, March 17, 2014.

Fraud; Article 1390, in relation to Article 1391 of the Civil Code; consent obtained
through fraud; action for annulment; prescriptive period. Article 1390, in relation to
Article 1391 of the Civil Code, provides that if the consent of the contracting parties
was obtained through fraud, the contract is considered voidable and may be
annulled within four years from the time of the discovery of the fraud. Metropolitan
Fabrics, Inc., et al. v. Prosperity Credit Resources, Inc. et al., G.R. No. 154390, March
17, 2014.

Mortgage; a higher degree of prudence must be exercised by the mortgagee in

cases where he does not directly deal with the registered owner of real property. In
Bank of Commerce v. Spouses San Pablo, Jr. (550 Phil. 805, 821 (2007)), the court
declared that a mortgagee has a right to rely in good faith on the certificate of title
of the mortgagor of the property offered as security, and in the absence of any sign
that might arouse suspicion, the mortgagee has no obligation to undertake further
investigation.

However, in Bank of Commerce v. Spouses San Pablo, Jr. (550 Phil. 805, 821
(2007)), the court also ruled that “[i]n cases where the mortgagee does not directly
deal with the registered owner of real property, the law requires that a higher
degree of prudence be exercised by the mortgagee.” Specifically, the court cited
Abad v. Sps. Guimba (503 Phil. 321, 331-332 (2005)), where it held,

“x x x While one who buys from the registered owner does not need to look behind
the certificate of title, one who buys from one who is not the registered owner is
expected to examine not only the certificate of title but all factual circumstances
necessary for [one] to determine if there are any flaws in the title of the transferor,
or in [the] capacity to transfer the land.”

Although the instant case does not involve a sale but only a mortgage, the same
rule applies inasmuch as the law itself includes a mortgagee in the term
“purchaser.”

Thus, where the mortgagor is not the registered owner of the property but is merely
an attorney-in-fact of the same, it is incumbent upon the mortgagee to exercise
greater care and a higher degree of prudence in dealing with such mortgagor.

pg. 102
Macaria Arguelles and the Heirs of the Deceased Petronio Arguelles v. Malarayat
Rural Bank, Inc., G.R. No. 200468, March 19, 2014.

Mortgage; banks are enjoined to exert a higher degree of diligence, care, and
prudence than individuals in handling real estate transactions; it cannot rely merely
on the certificate of title. In Ursal v. Court of Appeals (509 Phil. 628, 642 (2005)), the
court held that where the mortgagee is a bank, it cannot rely merely on the
certificate of title offered by the mortgagor in ascertaining the status of mortgaged
properties. Since its business is impressed with public interest, the mortgagee-bank
is duty-bound to be more cautious even in dealing with registered lands. Indeed, the
rule that person dealing with registered lands can rely solely on the certificate of
title does not apply to banks. Thus, before approving a loan application, it is a
standard operating practice for these institutions to conduct an ocular inspection of
the property offered for mortgage and to verify the genuineness of the title to
determine the real owners thereof. The apparent purpose of an ocular inspection is
to protect the “true owner” of the property as well as innocent third parties with a
right, interest or claim thereon from a usurper who may have acquired a fraudulent
certificate of title thereto. Macaria Arguelles and the Heirs of the Deceased Petronio
Arguelles v. Malarayat Rural Bank, Inc., G.R. No. 200468, March 19, 2014.

1. Negligence, the Court said in Layugan v. Intermediate Appellate Court (G.R.

No. L-73998, November 14, 1988), is “the omission to do something which a
reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do, or as Judge Cooley defines it,
‘(t)he failure to observe for the protection of the interests of another person,
that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’” In order that a party
may be held liable for damages for any injury brought about by the
negligence of another, the claimant must prove that the negligence was the
immediate and proximate cause of the injury. BJDC Construction,
represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E. Lanuzo, et
al., G.R. No. 161151, March 24, 2014.

Negligence; Medical negligence; four elements the plaintiff must prove by

competent evidence. An action upon medical negligence – whether criminal, civil or
administrative – calls for the plaintiff to prove by competent evidence each of the
following four elements, namely: (a) the duty owed by the physician to the patient,
as created by the physician-patient relationship, to act in accordance with the
specific norms or standards established by his profession; (b) the breach of the duty
by the physician’s failing to act in accordance with the applicable standard of care;
(3) the causation, i.e., there must be a reasonably close and causal connection
between the negligent act or omission and the resulting injury; and (4) the damages
suffered by thepatient. Dr. Fernando P. Solidum v. People of the Philippines,G.R. No.
192123, March 10, 2014.

Negligence; Medical Negligence; standard of care of the medical profession;

standard of care observed by other members of the profession in good standing
under similar circumstances. Negligence is defined as the failure to observe for the

pg. 103
protection of the interests of another person that degree of care, precaution, and
vigilance that the circumstances justly demand, whereby such other person suffers
injury. Reckless imprudence, on the other hand, consists of voluntarily doing or
failing to do, without malice, an act from which material damage results by reason
of an inexcusable lack of precaution on the part of the person performing or failing
to perform such act.

The Court aptly explained in Cruz v. Court of Appeals that: Whether or not a
physician has committed an “inexcusable lack of precaution” in the treatment of his
patient is to be determined according to the standard of care observed by other
members of the profession in good standing under similar circumstances bearing in
mind the advanced state of the profession at the time of treatment or the present
state of medical science. In the recent case of Leonila Garcia-Rueda v. Wilfred L.
Pacasio,et. al., this Court stated that in accepting a case, a doctor in effect
represents that, having the needed training and skill possessed by physicians and
surgeons practicing in the same field, he will employ such training, care and skill in
the treatment of his patients. He therefore has a duty to use at least the same level
of care that any other reasonably competent doctor would use to treat a condition
under the same circumstances. It is in this aspect of medical malpractice that
expert testimony is essential to establish not only the standard of care of the
profession but also that the physician’s conduct in the treatment and care falls
below such standard. Further, inasmuch as the causes of the injuries involved in
malpractice actions are determinable only in the light of scientific knowledge, it has
been recognized that expert testimony is usually necessary to support the
conclusion as to causation. Dr. Fernando P. Solidum v. People of the Philippines,G.R.
No. 192123, March 10, 2014.

Negligence; Medical negligence; standard of care; an objective standard by which

the conduct of a physician sued for negligence or malpractice may be measured.In
the medical profession, specific norms or standards to protect the patient against
unreasonable risk, commonly referred to as standards of care, set the duty of the
physician to act in respect of the patient. Unfortunately, no clear definition of the
duty of a particular physician in a particular case exists. Because most medical
malpractice cases are highly technical, witnesses with special medical qualifications
must provide guidance by giving the knowledge necessary to render a fair and just
verdict. As a result, the standard of medical care of a prudent physician must be
determined from expert testimony in most cases; and in the case of a specialist (like
an anesthesiologist), the standard of care by which the specialist is judged is the
care and skill commonly possessed and exercised by similar specialists under
similar circumstances. The specialty standard ofcare may be higher than that
required of the general practitioner. Dr. Fernando P. Solidum v. People of the
Philippines,G.R. No. 192123, March 10, 2014.

Negligence, test to determine its existence. The test by which the existence of
negligence in a particular case is determined is aptly stated in the leading case of
Picart v. Smith (G.R. No. 12219, March 15, 1918).

According to this case, the test by which to determine the existence of negligence in
a particular case may be stated as follows:

pg. 104
“Did the defendant in doing the alleged negligent act use that reasonable care
and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet
paterfamilias of the Roman law. The existence of negligence in a given case is not
determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in
the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and
in view of the facts involved in the particular case. Abstract speculation cannot here
be of much value but this much can be profitably said: Reasonable men govern
their conduct by the circumstances which are before them or known to them.
They are not, and are not supposed to be, omniscient of the future. Hence they can
be expected to take care only when there is something before them to suggest or
warn of danger. Could a prudent man, in the case under consideration, foresee harm
as a result of the course actually pursued? If so, it was the duty of the actor to
take precautions to guard against that harm. Reasonable foresight of harm,
followed by the ignoring of the suggestion born of this prevision, is always
necessary before negligence can be held to exist. Stated in these terms, the proper
criterion for determining the existence of negligence in a given case is this: Conduct
is said to be negligent when a prudent man in the position of the tortfeasor would
have foreseen that an effect harmful to another was sufficiently probable to warrant
his foregoing the conduct or guarding against its consequences.” BJDC
Construction, represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E.
Lanuzo, et al.,G.R. No. 161151, March 24, 2014.

Property; Recovery of possession of real property; three kinds of actions available.

In Sps. Bonifacio R. Valdez, Jr. et al. vs. Hon. Court of Appeals, et al. (523 Phil. 39
(2006)), the Court is instructive anent the three kinds of actions available to recover
possession of real property, viz: (a) accion interdictal; (b) accion publiciana; and (c)
accion reivindicatoria.

Accion interdictal comprises two distinct causes of action, namely, forcible entry
(detentacion) and unlawful detainer (desahuico) [sic]. In forcible entry, one is
deprived of physical possession of real property by means of force, intimidation,
strategy, threats, or stealth whereas in unlawful detainer, one illegally withholds
possession 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 party has prior de facto possession while in unlawful
detainer, possession of the defendant is originally legal but became illegal due to
the expiration or termination of the right to possess.

The jurisdiction of these two actions, which are summary in nature, lies in the
proper municipal trial court or metropolitan trial court. Both actions must be brought
within one year from the date of actual entry on the land, in case of forcible entry,

pg. 105
and from the date of last demand, in case of unlawful detainer. The issue in said
cases is the right to physical possession.

Accion publiciana is the plenary action to recover the right of possession which
should be brought in the proper regional trial court when dispossession has lasted
for more than one year. It is an ordinary civil proceeding to determine the better
right of possession of realty independently of title. In other words, if at the time of
the filing of the complaint more than one year had elapsed since defendant had
turned plaintiff out of possession or defendant’s possession had become illegal, the
action will be, not one of the forcible entry or illegal detainer, but an accion
publiciana. On the other hand, accion reivindicatoria is an action to recover
ownership also brought in the proper regional trial court in an ordinary civil
proceeding. Carmencita Suarez v. Mr. and Mrs. Felix E. Emboy, Jr. and Marilou P.
Emboy-Delantar, G.R. No. 187944, March 12, 2014.

Res ipsa loquitor; a mode of proof or a mere procedural convenience.In Jarcia, Jr. v.
People, the court has underscored that the doctrine is not a rule of substantive law,
but merely a mode of proof or a mere procedural convenience. The doctrine, when
applicable to the facts and circumstances of a given case, is not meant to and does
not dispense with the requirement of proof of culpable negligence against the party
charged. It merely determines and regulates what shall be prima facie evidence
thereof, and helps the plaintiff in proving a breach of the duty. The doctrine can be
invoked when and only when, under the circumstances involved, direct evidence is
absent and not readily available. Dr. Fernando P. Solidum v. People of the
Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitor; applicability in medical negligence cases. The applicability of the
doctrine of res ipsa loquitur in medical negligence cases was significantly and
exhaustively explained in Ramos v. Court of Appeals, where the Court said–Medical
malpractice cases do not escape the application of this doctrine. Thus, res ipsa
loquitur has been applied when the circumstances attendant upon the harm are
themselves of such a character as to justify an inference of negligence as the cause
of that harm. The application of resipsa loquitur in medical negligence cases
presents a question of law since it is a judicial function to determine whether a
certain set of circumstances does, as a matter of law, permit a given inference.
Although generally, expert medical testimony is relied upon in malpractice suits to
prove that a physician has done a negligent act or that he has deviated from the
standard medical procedure, when the doctrine of res ipsa loquitur is availed by the
plaintiff, the need for expert medical testimony is dispensed with because the injury
itself provides the proof of negligence. The reason is that the general rule on the
necessity of expert testimony applies only to such matters clearly within the domain
of medical science, and not to matters that are within the common knowledge of
mankind which may be testified to by anyone familiar with the facts. Ordinarily, only
physicians and surgeons of skill and experience are competent to testify as to
whether a patient has been treated or operated upon with a reasonable degree of
skill and care. However, testimony as to the statements and acts of physicians and
surgeons, external appearances, and manifest conditions which are observable by
any one may be given by non-expert witnesses. Hence, in cases where the res ipsa
loquitur is applicable, the court is permitted to find a physician negligent upon

pg. 106
proper proof of injury to the patient, without the aid of expert testimony, where the
court from its fund of common knowledge can determine the proper standard of
care. Where common knowledge and experience teach that a resulting injury would
not have occurred to the patient if due care had been exercised, an inference of
negligence may be drawn giving rise to an application of the doctrine of res ipsa
loquitur without medical evidence, which is ordinarily required to show not only
what occurred but how and why it occurred. When the doctrine is appropriate, all
that the patient must do is prove a nexus between the particular act or omission
complained of and the injury sustained while under the custody and management of
the defendant without need to produce expert medical testimony to establish the
standard of care. Resort to res ipsa loquitur is allowed because there is no other
way, under usual and ordinary conditions, by which the patient can obtain redress
for injury suffered by him. Dr. Fernando P. Solidum v. People of the Philippines,G.R.
No. 192123, March 10, 2014.

Res ipsa loquitur; applied in conjunction with the doctrine of common knowledge.It
is simply “a recognition of the postulate that, as a matter of common knowledge
and experience, the very nature of certain types of occurrences may justify an
inference of negligence on the part of the person who controls the instrumentality
causing the injury in the absence of some explanation by the defendant who is
charged with negligence. It is grounded in the superior logic of ordinary human
experience and on the basis of such experience or common knowledge, negligence
may be deduced from the mere occurrence of the accident itself. Hence, res ipsa
loquitur is applied in conjunction with the doctrine ofcommon knowledge.” Dr.
Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitor. Res ipsa loquitur is literally translated as “the thing or the
transaction speaks for itself.” The doctrine res ipsa loquitur means that “where the
thing which causes injury is shown to be under the management of the defendant,
and the accident is such as in the ordinary course of things does not happen if those
who have the management use proper care, it affords reasonable evidence, in the
absence of an explanation by the defendant, thatthe accident arose from want of
care.” Dr. Fernando P. Solidum v. People of the Philippines,G.R. No. 192123, March
10, 2014.

Res ipsa loquitur. The doctrine of res ipsa loquitur is “based on the theory that the
defendant either knows the cause of the accident or has the best opportunity of
ascertaining it and the plaintiff, having no knowledge thereof, is compelled to
allege negligence in general terms. In such instance, the plaintiff relies on proof
of the happening of the accident alone to establish negligence.” The principle,
furthermore, provides a means by which a plaintiff can hold liable a defendant who,
if innocent, should be able to prove that he exercised due care to prevent the
accident complained of from happening. It is, consequently, the defendant’s
responsibility to show that there was no negligence on his part. International
Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031, March 26,
2014.

Res ipsa loquitur; concept of; requirements for the doctrine to apply. In Tan v. JAM
Transit, Inc. (G.R. No. 183198, November 25, 2009), the Court noted that res ipsa

pg. 107
loquitur is a Latin phrase that literally means “the thing or the transaction speaks
for itself.” It is a maxim for the rule that the fact of the occurrence of an injury,
taken with the surrounding circumstances, may permit an inference or raise a
presumption of negligence, or make out a plaintiff’s prima facie case, and present a
question of fact for defendant to meet with an explanation. Where the thing that
caused the injury complained of is shown to be under the management of the
defendant or his servants; and the accident, in the ordinary course of things, would
not happen if those who had management or control used proper care, it
affords reasonable evidence—in the absence of a sufficient, reasonable and logical
explanation by defendant—that the accident arose from or was caused by the
defendant’s want of care. This rule is grounded on the superior logic of ordinary
human experience, and it is on the basis of such experience or common knowledge
that negligence may be deduced from the mere occurrence of the accident itself.
Hence, the rule is applied in conjunction with the doctrine of common knowledge.”

For the doctrine to apply, the following requirements must be shown to exist,
namely: (a) the accident is of a kind that ordinarily does not occur in the absence
of someone’s negligence; (b) it is caused by an instrumentality within the
exclusive control of the defendant or defendants; and (c) the possibility of
contributing conduct that would make the plaintiff responsible is eliminated. BJDC
Construction, represented by its Manager/Proprieto Janet S. Dela Cruz v. Nena E.
Lanuzo, et al., G.R. No. 161151, March 24, 2014.

Res ipsa loquitor; doctrine does not automatically apply to all cases of medical
negligence as to mechanically shift the burden of proof to the defendant.Despite the
fact that the scope of res ipsa loquitur has been measurably enlarged, it does not
automatically apply to all cases of medical negligence as to mechanically shift the
burden of proof to the defendant to show that he is not guilty of the ascribed
negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily
used but a rule to be cautiously applied, depending upon the circumstances of each
case. It is generally restricted to situations in malpractice cases where a layman is
able to say, as a matter of common knowledge and observation, that the
consequences of professional care were not as such as would ordinarily have
followed if due care had been exercised. A distinction must be made between the
failure to secure results, and the occurrence of something more unusual and not
ordinarily found if the service or treatment rendered followed the usual procedure of
those skilled in that particular practice. It must be conceded that the doctrine of res
ipsa loquitur can have no application in a suit against a physician or surgeon which
involves the merits of a diagnosis or of a scientific treatment. The physician or
surgeon is not required at his peril to explain why any particular diagnosis was not
correct, or why any particular scientific treatment did not produce the desired
result. Thus, res ipsa loquitur is not available in a malpractice suit if the only
showing is that the desired result of an operation or treatment was not
accomplished. The real question, therefore, is whether or not in the process of the
operation any extraordinary incident or unusual event outside of the routine
performance occurred which is beyond the regular scope of customary professional
activity in such operations, which, if unexplained would themselves reasonably
speak to the average man as the negligent cause or causes of the untoward
consequence. If there was such extraneous intervention, the doctrine of res ipsa
loquitur may be utilized and the defendant is calledupon to explain the matter, by
pg. 108
evidence of exculpation, if he could. Dr. Fernando P. Solidum v. People of the
Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitor; essential requisites.In order to allow resort to the doctrine,
therefore, the following essential requisites must first be satisfied, to wit: (1) the
accident was of a kind that does not ordinarily occur unless someone is negligent;
(2) the instrumentality or agency that caused the injury was under the exclusive
control of the person charged; and (3) the injury suffered must not have been due
to any voluntary action or contribution of the person injured. Dr. Fernando P.
Solidum v. People of the Philippines,G.R. No. 192123, March 10, 2014.

Res ipsa loquitur; when may be invoked. The doctrine “can be invoked when and
only when, under the circumstances involved, direct evidence is absent and not
readily available.” Here, there was no evidence as to how or why the fire in the
container yard of petitioner started; hence, it was up to petitioner to satisfactorily
prove that it exercised the diligence required to prevent the fire from happening.
International Container Terminal Services, Inc. v. Celeste M. Chua, G.R. No. 195031,
March 26, 2014.

Suretyship; Continuing suretyship; nature of; example of.A Continuing Suretyship,

which the Court described in Saludo, Jr. v. Security Bank Corporation as follows:

The essence of a continuing surety has been highlighted in the case of Totanes v.
China Banking Corporation in this wise: Comprehensive or continuing surety
agreements are, in fact, quite commonplace in present day financial and
commercial practice. A bank or financing companywhich anticipates entering into a
series of credit transactions with a particular company, normallyrequires the
projected principal debtor to execute acontinuing surety agreement along with its
sureties. Byexecuting such an agreement, the principal places itselfin a position to
enter into the projected series oftransactions with its creditor; with such
suretyshipagreement, there would be no need to execute a separatesurety contract
or bond for each financing or creditaccommodation extended to the principal
debtor.

The terms of the Continuing Suretyship executed by petitioner are very clear. It
states that petitioner, as surety, shall, without need for any notice, demand or any
other act or deed, immediately become liable and shall pay “all credit
accommodations extended by the Bank to the Debtor, including increases,
renewals, roll-overs, extensions, restructurings, amendments or novations thereof,
as well as (i) all obligations of theDebtor presently or hereafter owing to
the Bank, as appears in the accounts, books and records of the Bank,
whether direct or indirect, and (ii) any and all expenses which the Bank may
incur in enforcing any of its rights, powers and remedies under the Credit
Instruments as defined hereinbelow.” Mariano Lim v. Security Bank Corporation,G.R.
No. 188539, March 12, 2014.

Suretyship. A contract of suretyship is an agreement whereby a party, called the

surety, guarantees the performance by another party, called the principal or obligor,
of an obligation or undertaking in favor of another party, called the obligee.

pg. 109
Although the contract of a surety is secondary only to a valid principal obligation,
the surety becomes liable for the debt or duty of another although it possesses no
direct or personal interest over the obligations nor does it receive any benefit
therefrom. This was explained in the case of Stronghold Insurance Company, Inc. v.
Republic-Asahi Glass Corporation, where it was written: The surety’s obligation is
not an original and direct one for the performance of his own act, but merely
accessory or collateral to the obligation contracted by the principal. Nevertheless,
although the contract of a suretyis in essence secondary only to a valid
principalobligation, his liability to the creditor or promisee of theprincipal
is said to be direct, primary and absolute; inother words, he is directly and
equally bound with theprincipal.

Thus, suretyship arises upon the solidary binding of a person deemed the surety
with the principal debtor for the purpose of fulfilling an obligation. A surety is
considered in law as being the same party asthe debtor in relation to
whatever is adjudged touching the obligationof the latter, and their
liabilities are interwoven as to be inseparable. Mariano Lim v. Security Bank
Corporation,G.R. No. 188539, March 12, 2014.

SPECIAL LAWS

Comprehensive Agrarian Reform Law (CARL); Section 65 of R.A. 6657; DAR is

empowered to authorize, under certain conditions, the reclassification or
conversion of agricultural lands. Under Section 65 of R.A. No. 6657, the DAR is
empowered to authorize, under certain conditions, the reclassification or conversion
of agricultural lands. Pursuant to this authority and in the exercise of its rulemaking
power under Section 49 of R.A. No. 6657, the DAR issued Administrative Order No.
12, series of 1994 (DAR A.O. 12-94) (the then prevailing administrative order),
providing the rules and procedure governing agricultural land conversion. Item VII of
DAR A.O. 12-94 enumerates the documentary requirements for approval of an
application for land conversion.35 Notably, Item VI-E provides that no application for
conversion shall be given due course if: (1) the DAR has issued a Notice of
Acquisition under the compulsory acquisition process; (2) a Voluntary Offer to Sell
covering the subject property has been received by the DAR; or (3) there is already
a perfected agreement between the landowner and the beneficiaries under
Voluntary Land Transfer. Heirs of Teresita Montoya, et al. v. National Housing
Authority, et al., G.R. No. 181055, March 19, 2014.

Comprehensive Agrarian Reform Law (CARL); Section 6 of R.A. 6657; retention

limits. Section 6 of R.A. No. 6657 specifically governs retention limits. Under its last
paragraph, “any sale, disposition, lease, management, contract or transfer of
possession of private lands executed by the original landowner in violation of [R.A.
No. 6657]” is considered null and void. A plain reading of the last paragraph
appears to imply that the CARL absolutely prohibits sales or dispositions of private
agricultural lands. The interpretation or construction of this prohibitory clause,
however, should be made within the context of Section 6, following the basic rule in
statutory construction that every part of the statute be “interpreted with reference
to the context, i.e., that every part of the statute must be considered together with
the other parts, and kept subservient to the general intent of the whole enactment.”

pg. 110
Notably, nothing in this paragraph, when read with the entire section, discloses any
legislative intention to absolutely prohibit the sale or other transfer agreements of
private agricultural lands after the effectivity of the Act.

In other words, therefore, the sale, disposition, etc. of private lands that Section 6 of
R.A. No. 6657 contextually prohibits and considers as null and void are those which
the original owner executes in violation of this provision, i.e., sales or dispositions
executed with the intention of circumventing the retention limits set by R.A. No.
6657. Consistent with this interpretation, the proscription in Section 6 on sales or
dispositions of private agricultural lands does not apply to those that do not violate
or were not intended to circumvent the CARL’s retention limits. Heirs of Teresita
Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19,
2014.

Emancipation of Tenants; P.D. 27; CLT; legal effects of issuance; tenant-farmer does
not acquire full ownership of the covered landholding simply by the issuance of a
CLT. A CLT is a document that the government issues to a tenant-farmer of an
agricultural land primarily devoted to rice and corn production placed under the
coverage of the government’s OLT program pursuant to P.D. No. 27. It serves as the
tenant-farmer’s (grantee of the certificate) proof of inchoate right over the land
covered thereby.

A CLT does not automatically grant a tenant-farmer absolute ownership of the

covered landholding. Under PD No. 27, land transfer is effected in two stages: (1)
issuance of the CLT to the tenant-farmer in recognition that said person is a
“deemed owner”; and (2) issuance of an Emancipation Patent (EP) as proof of full
ownership upon the tenant-farmer’s full payment of the annual amortizations or
lease rentals.

As a preliminary step, therefore, the issuance of a CLT merely evinces that the
grantee thereof is qualified to avail of the statutory mechanism for the acquisition of
ownership of the land tilled by him, as provided under P.D. No. 27. The CLT is not a
muniment of title that vests in the tenant-farmer absolute ownership of his tillage. It
is only after compliance with the conditions which entitle the tenant-farmer to an EP
that the tenant-farmer acquires the vested right of absolute ownership in the
landholding. Stated otherwise, the tenant-farmer does not acquire full ownership of
the covered landholding simply by the issuance of a CLT. The tenant-farmer must
first comply with the prescribed conditions and procedures for acquiring full
ownership but until then, the title remains with the landowner. Heirs of Teresita
Montoya, et al. v. National Housing Authority, et al., G.R. No. 181055, March 19,
2014.

Land registration; Classification of land; evidence of a positive act from the

government reclassifying the lot as alienable and disposable agricultural land of the
public domain. Accordingly, jurisprudence has required that an applicant for
registration of title acquired through a public land grant must present
incontrovertible evidence that the land subject of the application is alienable or
disposable by establishing the existence of a positive act of the government, such
as a presidential proclamation or an executive order; an administrative action;

pg. 111
investigation reports of Bureau of Lands investigators; and a legislative act or a
statute. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R.
No. 173423, March 5, 2014.

Land registration; Classification of land; Executive prerogative.Under Section 6 of

the Public Land Act, the classification and the reclassification of public lands are the
prerogative of the Executive Department. The President, through a presidential
proclamation or executive order, can classify or reclassify a land to be included or
excluded from the public domain. The Department of Environment and Natural
Resources Secretary is likewise empowered by law to approve a land classification
and declare such land as alienable and disposable. Sps. Antonio Fortuna and Erlinda
Fortuna v. Republic of the Philippines,G.R. No. 173423, March 5, 2014.

Land registration; it is essential for any applicant for registration of title to land
derived through a public grant to establish foremost the alienable and disposable
nature of the land. The Constitution declares that all lands of the public domain are
owned by the State. Of the four classes of public land, i.e., agricultural lands, forest
or timber lands, mineral lands, and national parks, only agricultural lands may be
alienated. Public land that has not been classified as alienable agricultural land
remains part of the inalienable public domain. Thus, it is essential for any
applicant for registration of title toland derived through a public grant to
establish foremost the alienableand disposable nature of the land. The
Public Land Act provisions on the grant and disposition of alienable public lands,
specifically, Sections 11 and 48(b), will find application only from the time that a
public land has been classified as agricultural and declared as alienable and
disposable. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the
Philippines,G.R. No. 173423, March 5, 2014.

Land registration; Judicial confirmation of imperfect or incomplete title; cut-off date

for applications. As mentioned, the Public Land Act is the law that governs the grant
and disposition of alienable agricultural lands. Under Section 11 of the PLA,
alienable lands of the public domain may be disposed of, among others, by judicial
confirmation of imperfect or incomplete title. This mode of acquisition of title
is governed by Section 48(b) of the PLA, the original version of which states:

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

xxxx

(b) Those who by themselves or through their predecessors-in-interest have been in

open, continuous, exclusive, and notorious possession and occupation of
agricultural lands of the public domain, under a bona fide claim of acquisition or
ownership, except as against the Government, since July twenty-sixth, eighteen
hundred and ninety-four, except when prevented by war or force majeure. These

pg. 112
shall be conclusively presumed to have performed all the conditions essential to a
government grant and shall be entitled to a certificate of title under the provisions
of this chapter. [emphasis supplied]

On June 22, 1957, the cut-off date of July 26, 1894 was replaced by a 30-year period
of possession under RA No. 1942. Section 48(b) of the PLA, as amended by RA No.
1942, read:

(b) Those who by themselves or through their predecessors in interest have been in
open, continuous, exclusive and notorious possession and occupation of agricultural
lands of the public domain, under a bona fide claim of acquisition of ownership, for
at least thirty years immediately preceding the filing of the application for
confirmation of title, except when prevented by war or force majeure.

On January 25, 1977, PD No. 1073 replaced the 30-year period of possession by
requiring possession since June 12, 1945. Section 4 of PD No. 1073 reads:

SEC. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public
Land Act are hereby amended in the sense that these provisions shall apply only to
alienable and disposable lands of the public domain which have been in open,
continuous, exclusive and notorious possession and occupation by the applicant
himself or thru his predecessor-in-interest, under a bona fide claim of acquisition of
ownership, since June 12, 1945.

Under the P.D. No. 1073 amendment, possession of at least 32 years – from 1945
up to its enactment in 1977 – is required. This effectively impairs the vested rights
of applicants who had complied with the 30-year possession required under the RA
No. 1942 amendment, but whose possession commenced only after the cut-off date
of June 12, 1945 was established by the PD No. 1073 amendment. To remedy this,
the Court ruled in Abejaron v. Nabasa that “Filipino citizens who by themselves or
their predecessors-in-interest have been, prior to the effectivity of P.D. 1073on
January 25, 1977, in open, continuous, exclusive and notorious possession and
occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition of ownership, for at least 30 years, or atleast since January 24,
1947 may apply for judicial confirmation of their imperfect or incomplete title under
Sec. 48(b) of the [PLA].” January 24,1947 was considered as the cut off date
as this was exactly 30 yearscounted backward from January 25, 1977 – the
effectivity date of PDNo. 1073.

It appears, however, that January 25, 1977 was the date PD No. 1073 was
enacted; based on the certification from the National PrintingOffice, PD No. 1073
was published in Vol. 73, No. 19 of the Official Gazette, months later than its
enactment or on May 9, 1977. Thisuncontroverted fact materially affects the cut-
off date for applications forjudicial confirmation of incomplete title under Section
48(b) of the PLA.Although Section 6 of PD No. 1073 states that “[the] Decree
shalltake effect upon its promulgation,” the Court has declared in Tañada, et al.v.
Hon. Tuvera, etc., et al. that the publication of laws is an indispensablerequirement
for its effectivity. “[A]ll statutes, including those of localapplication and private laws,
shall be published as a condition for theireffectivity, which shall begin fifteen days

pg. 113
after publication unless a differenteffectivity date is fixed by the legislature.”
Accordingly, Section 6 of PDNo. 1073 should be understood to mean that the decree
took effect onlyupon its publication, or on May 9, 1977. This, therefore, moves the
cut-off date for applications for judicial confirmation of imperfect or
incomplete title under Section 48(b) of the PLA to May 8, 1947. In
otherwords, applicants must prove that they have been in open,
continuous,exclusive and notorious possession and occupation of
agricultural lands ofthe public domain, under a bona fide claim of
acquisition of ownership,for at least 30 years, or at least since May 8,
1947. Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R.
No. 173423, March 5, 2014.

Land registration; Possession; as a requirement for the application for registration of

title.Notably, Section 48(b) of the PLA speaks of possession and occupation. “Since
these words are separated by the conjunction and, the clear intention of the law is
not to make one synonymous with the other. Possession is broader than occupation
because it includes constructive possession. When, therefore, the law adds the word
occupation, it seeks to delimit the all-encompassing effect of constructive
possession. Taken together with the words open, continuous, exclusive and
notorious, the word occupation serves to highlight the fact that for an applicant to
qualify, his possession must not be a mere fiction.” Nothing in Tax Declaration No.
8366 shows that Pastora exercised acts of possession and occupation such as
cultivation of or fencing off the land. Indeed, the lot was described as “cogonal.”
Sps. Antonio Fortuna and Erlinda Fortuna v. Republic of the Philippines,G.R. No.
173423, March 5, 2014.

Public Land Act; Sec 48(b), as amended by P.D. 1073; requirements for judicial
confirmation of title. The requirements for judicial confirmation of imperfect title are
found in Section 48(b) of the Public Land Act, as amended by Presidential Decree
No. 1073, as follows:

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

xxxx

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

pg. 114
Republic of the Philippines represented by Aklan National Colleges of Fisheries
(ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of
Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin,
Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S.
Vita,G.R. No. 157485, March 26, 2014.

Regalian Doctrine; all lands of the public domain belong to the State and that lands
not appearing to be clearly within private ownership are presumed to belong to the
State. As this Court held in the fairly recent case of Valiao v. Republic (G.R. No.
170757, November 28, 2011,): “Under the Regalian doctrine, which is embodied in
our Constitution, all lands of the public domain belong to the State, which is the
source of any asserted right to any ownership of land. All lands not appearing to be
clearly within private ownership are presumed to belong to the State. Accordingly,
public lands not shown to have been reclassified or released as alienable
agricultural land or alienated to a private person by the State remain part of the
inalienable public domain. Unless public land is shown to have been reclassified as
alienable or disposable to a private person by the State, it remains part of the
inalienable public domain. Property of the public domain is beyond the commerce of
man and not susceptible of private appropriation and acquisitive prescription.
Occupation thereof in the concept of owner no matter how long cannot ripen into
ownership and be registered as a title. The burden of proof in overcoming the
presumption of State ownership of the lands of the public domain is on the person
applying for registration (or claiming ownership), who must prove that the land
subject of the application is alienable or disposable. To overcome this presumption,
incontrovertible evidence must be established that the land subject of the
application (or claim) is alienable or disposable.” Republic of the Philippines
represented by Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R.
Adrade, in her capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin,
namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat,
Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No.
157485, March 26, 2014.

Public Land Act; two requisites for judicial confirmation of title. The two requisites
for judicial confirmation of imperfect or incomplete title under CA No. 141, namely:
(1) open, continuous, exclusive, and notorious possession and occupation of the
subject land by himself or through his predecessors-in-interest under a bona fide
claim of ownership since time immemorial or from June 12, 1945; and (2) the
classification of the land as alienable and disposable land of the public domain.
Republic of the Philippines represented by Aklan National Colleges of Fisheries
(ANCF) and Dr. Elenita R. Adrade, in her capacity as ANCF Superintendent v. Heirs of
Maxima Lachica Sin, namely: Salvacion L. Sin, Rosario S. Enriquez, Francisco L. Sin,
Maria S. Yuchintat, Manuel L. Sin, Jaime Cardinal Sin, Ramon L. Sin, and Ceferina S.
Vita, G.R. No. 157485, March 26, 2014.

Regalian Doctrine; failure of Republic to show competent evidence that the subject
land was declared a timberland before its formal classification as such in 1960 does
not lead to the presumption that said land was alienable and disposable prior to
said date. Accordingly, in the case at bar, the failure of petitioner Republic to show
competent evidence that the subject land was declared a timberland before its

pg. 115
formal classification as such in 1960 does not lead to the presumption that
said land was alienable and disposable prior to said date. On the contrary, the
presumption is that unclassified lands are inalienable public lands. It is therefore
the respondents which have the burden to identify a positive act of the government,
such as an official proclamation, declassifying inalienable public land into disposable
land for agricultural or other purposes. Since respondents failed to do so, the
alleged possession by them and by their predecessors-in-interest is inconsequential
and could never ripen into ownership. Republic of the Philippines represented by
Aklan National Colleges of Fisheries (ANCF) and Dr. Elenita R. Adrade, in her
capacity as ANCF Superintendent v. Heirs of Maxima Lachica Sin, namely: Salvacion
L. Sin, Rosario S. Enriquez, Francisco L. Sin, Maria S. Yuchintat, Manuel L. Sin, Jaime
Cardinal Sin, Ramon L. Sin, and Ceferina S. Vita, G.R. No. 157485, March 26, 2014.

pg. 116