2006 Civil Law Case Digests

PERSONS

PRESUMPTIVE DEATH

Republic of the Philippines VS. Bermudez – Lorino

G.R. No. 160258. January 19, 2005

Facts: Gloria Bermudez and Francisco Lorino were married in June 1987. The wife was unaware that her husband was a habitual drinker with

violent attitude and character and had the propensity to go out with his friends to the point of being unable to work. In 1991 she left him and

returned to her parents together with her three children. She went abroad to work for her support her children. From the time she left him, she had

no communication with him or his relatives.

In 2000, nine years after leaving her husband, Gloria filed a verified petition with the RTC under the rules on Summary Judicial Proceedings in the

Family Law. The lower court issued an order for the publication of the petition in a newspaper of general circulation.

In November 7, 2001, the RTC granted the summary petition. Although the judgment was final and executors under the provisions of Act. 247 of the

Family Code, the OSG for the Republic of the Philippines filed a notice of appeal.

Issue: Whether or not the factual and legal bases for a judicial declaration of presumptive death under Art 41 of the Family Code were duly

established.

Held: Art. 238 of the Family Code under Title XI Summary Judicial Proceeding in the Family Law, sets the tenor for cases scoured by these rules, to

wit:

Art238. Until modified by the Supreme Court, the procedural rules in this Title shall apply in all cases provided for in this Code requiring summary

court proceeding. Such cases shall be decided in an expedition’s manner with out regards technical rules.

The judge of the RTC fully complied with the above-cited provision by expeditiously rending judgment within ninety (90) days after the formal offer

of evidence by the petitioner.

CO- OWNERSHIP

Buenaventura VS. CA

G.R. Nos. 127358 and G.R. Nos. 127449

March 31, 2005

Facts: Noel Buenaventura filed a position for the declaration of nullity of marriage on the ground that both he and his wife were psychologically

incapacitated.

The RTC in its decision, declared the marriage entered into between petitioner and respondent null and violation ordered the liquidation of the

assets of the conjugal partnership property; ordered petitioner a regular support in favor of his son in the amount of 15,000 monthly, subject to
modification as the necessity arises, and awarded the care and custody of the minor to his mother.

Petitioner appealed before the CA. While the appeal was pending, the CA, upon respondent’s motion issued a resolution increasing the support

pendants like to P20, 000.

The CA dismissal petitioner appeal for lack of merit and affirmed in to the RTC decision. Petitioner motion for reconsideration was denied, hence

this petition.

Issue: Whether or not co-ownership is applicable to valid marriage.

Held: Since the present case does not involve the annulment of a bigamous marriage, the provisions of article 50 in relation to articles 41, 42 and 43

of the Family Code, providing for the dissolution of the absolute community or conjugal partnership of gains, as the case maybe, do not apply.

Rather the general rule applies, which is in case a marriage is declared void ab initio, the property regime applicable to be liquidated, partitioned

and distributed is that of equal co-ownership.

Since the properties ordered to be distributed by the court a quo were found, both by the RTC and the CA, to have been acquired during the union of

the parties, the same would be covered by the co-ownership. No fruits of a separate property of one of the parties appear to have been included or

involved in said distribution.

ADOPTION; ILLEGITIMATE CHILD

IN THE MATTER OF THE ADOPTION OF STEPHANIE NATHY ASTORGA GARCIA

G.R. No. 148311. March 31, 2005

Facts: Honorato B. Catindig filed a petition to adopt his minor illegitimate child Stephanie Astorga Garcia. He averred that Stephanie was born on

June 26, 1994; that Stephanie had been using her mother’s middle name and surname; and that he is now a widower and qualified to be her

adopting parent. He prayed that Stephanie’s middle name be changedto Garcia, her mother’s surname, and that her surname “Garcia” be changed

to “Catindig” his surname.

The RTC granted the petition for adoption, and ordered that pursuant to article 189 of the Family Code, the minor shall be known as Stephanie

Nathy Catindig.

Honorato filed a motion for classification and/or reconsideration praying that Stephanie be allowed to use the surname of her natural mother

(Garcia) as her middle name. The lower court denied petitioner’s motion for reconsideration holding that there is no law or jurisprudence allowing

an adopted child to use the surname of his biological mother as his middle name.

Issue: Whether or not an illegitimate child may use the surname of her mother as her middle name when she is subsequently adopted by her natural

father.

Held: One of the effects of adoption is that the adopted is deemed to be a legitimate child of the adapter for all intents and purposes pursuant to

Article 189 of the Family Code and Section 17 of Article V of RA 8557.

Being a legitimate by virtue of her adoption, it follows that Stephanie is entitled to all the rights provided by law to a legitimate child without

discrimination of any kind, including the right to bear the surname of her father and her mother. This is consistent with the intention of the

members of the Civil Code and Family Law Committees. In fact, it is a Filipino custom that the initial or surname of the mother should immediately

precede the surname of the father.

JUDICIAL DECLARATION OF NULLITY

Cojuangco vs Palma

A.C. No. 2474 June 30, 2005

Facts: On June 22, 1982, respondent Atty. Leo J. Palma, despite his subsisting marriage, wed Maria Luisa Cojuangco, the daughter of complainant

Eduardo M. Cojuangco, Jr. Thus, the latter filed on November 1982, a complaint disbarment against respondent. Palma moved to dismiss the

complaint.

On March 2, 1983, the court referred the case to OSG for investigation and recommendation. The Assistant Solicitor General heard the testimonies

of the complainant and his witness in the presence of respondent’s counsel.

On March 19, 1984 respondent filed with the OSG an urgent motion to suspend proceedings on the ground that the final actions of his civil case for

the declaration of nullity of marriage between him and his wife Lisa, poses a prejudicial question to the disbarment proceeding, but it was denied.

The OSG transferred the disbarment case to the IBP, the latter found respondent guilty of gross immoral conduct and violation of his oath as a

lawyer, hence, was suspended from the practice of law for a period of three years.

In his motion for reconsideration, respondent alleged that he acted under a “firm factual and legal conviction in declaring before the Hong Kong

Marriage Registry that he is a bachelor because his first marriage is void even if there is judicial declaration of nullity.

Issue: Whether or not a subsequent void marriage still needs a judicial declaration of nullity for the purpose of remarriage.

Held: Respondents arguments that he was of the “firm factual and legal conviction when he declared before the HIC authorities that he was a

bachelor since his first marriage is void and does not need judicial declaration of nullity” cannot exonerate him. In Terre vs Terre, the same defense

was raised by respondent lawyer whose disbarment was also sought. We held:

“xxx respondent Jordan Terre, being a lawyer, knew or should have known that such an argument ran counter to the prevailing case law of this

court which holds that purposes of determining whether a person is legally free to contract a second marriage, a judicial declaration that the first

marriage was null and void an initio is essential. Even if we were to assume, arguendo merely, that Jordan Terre held that mistaken belief in good

faith, the same result will follow. For if we are to hold Jordan Terre to his own argument, his frist marriage to complainant Dorothy Terre must be

deemed valid, with the result that his second marriage must be regarded as bigamous and criminal.

MARITAL CONSENT

Pelayo vs. Perez

G.R. No. 141323

Facts: David Pelayo through a Deed of Absolute Sale executed a deed of sale and transferred to Melki Perez two parcel of agricultural lands. Loreza

Pelayo and another one whose signature is eligible witnesses such execution of deed.

Loreza signed only on the third page in the space provided for witnesses, as such, Perez application was denied.

Perez asked Loreza to sign on the first and should pages of the deed of sale but she refused. He then filed a complaint for specific performance

against the Pelayo spouses.

The spouses moved to dismiss the complaint on the ground for lack of marital consent as provided by art166 of the Civil Code.

Issue: Whether or not the deed of sale was null and viol for lack of marital consent.

Held: Under Art 173, in relation to Art166, both of the NCC, W/C was still in effect on January 11, 1988 when the deed in question was executed, the

lack of marital consent to the disposition of conjugal property does not make the contract viol of initio but Merely violable. Said provisions of law

provide:

Art 166. Unless the wife has been declared a non compass mentis or a spedthriff, or is under civil interdiction or is confined in a lepresarium, the

husband connot alienate or encumber any real property not the Longugal property w/o the wife’s consent. It she refuses nreasonable to give her

consent, the court may compel her to grant the same.

Art 173. The wife may during the marriage and w/in 10 years the transaction questioned, ask the court for the annulment of any contract of the

husband w/c tends to defraud her or impair interest in the conjugal partnership property. Should the wife fail to exercise this right she her heir,

after the dissolution of the marriage may demand the value of property fraudulently alienated by the husband.

MARITAL CONSENT

BRAVO ET AL. VS. COURT OF APPEALS

Facts: Spouses Mauricio and Simons owned two parcel of land. It contain a large residential dwelling or smaller house and other improvements.

They had three children – Roland, Cesar and Lily, Cesar died. Lily married David and had a son, David Jr,, Senia, Benjamin and their half-sister,

Ofelia.

Simona executed a General Power of Attorney (GPA) on June 17, 1966, appointing her husband as her attorney-in-fact. He subsequently mortgaged

the land to the PNB and DBP.

On October 25, 1970, Mauricio executed a Deed of Sale with assumption of Real Estate Mortgage transferring the properties to Roland, Ofelia and

Elizabeth. It was conditioned on the payment of P1,000 and on the assumption of the vendees of the PNB and DBP mortgages over the properties.

The deed of sale was notarized but was not annotated on TCT, neither was it presented to DBP and PNB. The mortgage loans and receipts for loan

payment issued by the two banks continued to be in Mauricio’s name even after his death November 1973. Simona passed away in 1977.

Issue: Whether or not the deed of sale was void for lack of marital consent.

Held: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium,

the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. If she refuses unreasonably to
give her consent, the court may compel her to grant the same.

This article shall not apply to property acquired by the conjugal partnerships before the effective date of this Code.

Article 166 expressly applies only to properties acquired by the conjugal partnership after the effectivity of the Civil Code of the Philippines ("Civil

Code"). The Civil Code came into force on 30 August 1950.1161 Although there is no dispute that the Properties were conjugal properties of Mauricio

and Simona, the records do not show, and the parties did not stipulate, when the Properties were acquired.1171 Under Article 1413 of the old

Spanish Civil Code, the husband could alienate conjugal partnership property for valuable consideration without the wife's consent.1181

Even under the present Civil Code, however, the Deed of Sale is not void. It is well-settled that contracts alienating conjugal real property without

the wife's consent are merely voidable under the Civil Code - that is, binding on the parties unless annulled by a competent court - and not void ab

initial

Article 166 must be read in conjunction with Article 173 of the Civil Code ("Article 173"). The latter prescribes certain conditions before a sale of

conjugal property can be annulled for lack of the wife's consent, as follows:

Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of any contract

of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or

impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the

marriage, may demand the value of property fraudulently alienated by the husband. (Emphasis supplied)

Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real property without her consent. The wife must file the

action for annulment during the marriage and within ten years from the questioned transaction. Article 173 is explicit on the remedies available if

the wife fails to exercise this right within the specified period. In such case, the wife or her heir; can only demand the value of the property provided

they prove that the husband fraudulently alienated the property. Fraud is never presumed, but must be established by clear and convincing

evidence.

ILLEGITIMATE CHILD’S SURNAME

ALBA vs. COURT OF APPEALS

G.R. No. 164041, July 29, 2005

Facts: Private respondent Rosendo C. Herrera filed a petition for cancellation of the following entries in the birth certificate of Rosendo Alba

Herrera, Jr, “ to wit: (1) the surname “Herrera” as appended to the name of the said child; (2) the reference to private respondent as the father of

Rosendo Alba Herrera Jr.; and (3) the alleged marriage of private respondent to all child’s mother, Armi A. Alba He averred that such challenged

entries are false.

Private respondent contended that he married only once, as evidenced by certification from NSO and Civil Registrar of Mandaluyong.

The RTC, finding the petition to be sufficient in form and substance the hearing was set. On the scheduled hearing the counsel from the OSG

appeared but filed no opposition, Armi was not present.

The court a quo rendered a decision ordering the correction of the entries in the Certification of Live Birth of Rosendo Alba Herrera, Jr.

Armi filed a petition for the annulment of the judgment, contending that she came to know of the decision of the RTC where the school where her

son was enrolled, was furnished by private respondent with a copy of a court order directing the change of petitioner’s surname from Herrera to

Alba. Armi contended that she and private respondent cohabited and after their separation, he continued to give support to their son.
Private respondent denied paternity of petitioner minor and his purported cohabitation with Armi.

Issue: Whether or not an illegitimate child shall use the surname of their mother.

Held: Under Art. 176 of the Family Code as amended by RA No. 9255, w/c took effect on March 19, 2004, illegitimate children shall use the surname

of their mother , unless their father recognizes their filiation, in w/c case they may bear the father’s surname. In Wang vs. Cebu Civil Registrar it was

held that an illegitimate child whose filiations is not recognized by the father bears only a given name and his mother’s surname. The name of the

unrecognized illegitimate child identifies him as such. It is only when said child is recognized that he may use his father’s surname, reflecting his

status us an acknowledged illegitimate held.

CHILD CUSTODY

PABLO-GUALBERTO VS. COURT OF APPEALS

G.R. Nos. 154994 and 156254 June 28, 2005

Facts: Crisanto Rafaelito G. Gualberto V filed before the RTC a petition for declaration of nullity of his marriage to Joycelyn w/ an ancillary prayer

for custody pendente lite of their almost 4 year old son, Rafaello, whom her wife took away w/ her from their conjugal home and his school when

she left him.

The RTC granted the ancillary prayer for custody pendente lite, since the wife failed to appear despite notice. A house helper of the spouses testified

that the mother does not care for the child as she very often goes out of the house and even saw her slapping the child. Another witness testified that

after surveillance he found out that the wife is having lesbian relations.

The judge issued the assailed order reversing her previous order, and this time awarded the custody of the child to the mother. Finding that the

reason stated by Crisanto not to be a compelling reason as provided in Art 213 of the Family Code.

Issue: Whether or not the custody of the minor child should be awarded to the mother.

Held: Article 213 of the Family Code provided: “Art 213. In case of separation of parents parental authority shall be exercised by the parent des

granted by the court. The court shall take into account all relevant consideration, especially the choice of the child over seven years of age, unless the

parent chosen is unfit.”

No child under seven yrs of age shall be separated from the mother unless the court finds compelling reasons to order otherwise,”

This Court has held that when the parents separated, legally or otherwise, the foregoing provision governs the custody of their child. Article 213

takes its bearing from Article 363 of the Civil Code, w/c reads:

“Art 363. In all question on the care, custody, education and property pf children, the latter welfare shall be paramount. No mother shall be

separated from her child under seven years of age, unless the court finds compelling reason for such measure.”

ANNULMENT OF MARRIAGE; PSYCHOLOGICAL INCAPACITY

DEBEL VS. COURT OF APPEALS, ET AL.

G.R. No. 151867. January 29, 2004

Facts: David Debel met Sharon Corpuz while he was working in the advertising business of his father. The acquaintance led to courtship and

romantic relations, culminating into marriage before the City Court of Pasay on September 28, 1966. On May 20, 1967, the civil marriage was

ratified in a church wedding. The union produced four children. The petitioner avers that during the marriage Sharon turned out to be an

irresponsible and immature wife and mother. She had an illicit affair with several men and then later to a Jordanian national named Ibrahim.

Sharon was once confined for psychiatric treatment but she didn’t stop her illicit relationship with the Jordanian national whom she married and

whom she had two children. Ibrahim left Sharon so she returned back to the petitioner who had accepted her back. However on December 9, 1995,

Sharon abandoned the petitioner and joined Ibrahim in Jordan with their two children. After giving up all hope for reconciliation, petitioner filed on

April 1, 1997 a petition seeking the declaration of nullity of his marriage on the ground of psychological incapacity. The RTC granted the nullity of

the marriage. It was appealed in the CA which set aside the decision of RTC and ordered dismissal of the case. Hence, the instant petition was filed

to the Supreme Court.

Issue: Whether or not private respondent’s sexual infidelity or perversion and abandonment fall within the term of psychological incapacity.

Held: In this case private respondent’s sexual infidelity or perversion and abandonment can hardly qualify as mental or psychological illness to such

extent that she could not have known the obligation she was assuming. It appears that private respondent’s promiscuity did not exist prior to or at

the inception of the marriage; in fact, the record disclosed that there was a blissful marital union. It must be shown that the acts are a manifestation

of a disordered personality which makes respondent completely unable to discharge the essential obligations of marital state, not merely due to her

youth, immaturity or sexual promiscuity.

ACTION FOR RECOGNITION OF ILLEGITIMATE CHILDREN WHO ARE MINORS AT THE TIME OF THE EFFECTIVITY OF THE FAMILY

CODE MAY BE BROUGHT FOR A PERIOD OF 4 YEARS FROM ATTAINING MAJORITY AGE; SPURIOUS CHILDREN

BERNABE VS. ALEJO

G.R. No. 140500. January 21, 2002

Facts: The late Fiscal Ernesto Bernabe allegedly fathered a son with his secretary Carolina Alejo and was named Adrian Bernabe who was born on

September 18, 1981. After Ernesto Bernabe and Rosalina, his legal wife died, the only heir left is Erestina. Carolina, in behalf of Adrian, filed a

complaint praying that Adrian be declared an acknowledged illegitimate son of Fiscal Bernabe and be given a share of his father’s estate.

Issue: Whether or not Adrian Bernabe may be declared an acknowledged illegitimate son.

Held: Under the new law, an action for the recognition of an illegitimate child must be brought within the lifetime of the alleged parent. The Family

Code makes no distinction on whether the former was still a minor when the latter died. Thus, the putative parent is given by the new code a chance
to dispute the claim, considering that “illegitimate children” are usually begotten and raised in secrecy and without the legitimate family being

aware of their existence.

OBLIGATIONS AND CONTRACTS

SAN MIGUEL CORPORATION vs. TROY FRANCIS L. MONASTERIO

G.R. No. 151037. June 23, 2005

Facts: SMC entered into an Exclusive Warehouse Agreement with SMB Warehousing Services, represented by its manager, Troy Francis L.

Monasterio. SMB undertook to provide land, physical structures, equipment and personnel for storage, warehousing and related services such as,

but not limited to, segregation of empty bottles, stock handling, and receiving SMC products for its route operations. From September 1993 to

September 1997 and May 1995 to November 1997, aside from rendering service as warehouseman, Monasterio was given the additional task of

cashiering in SMC’s Sorsogon and Camarines Norte sales offices for which he was promised a separate fee. But it was only on December 1, 1997, that

petitioner SMC started paying respondent P11,400 per month for his cashiering services. Monasterio demanded P82,959.32 for warehousing fees,

P11,400 for cashiering fees for the month of September, 1998, as well as exemplary damages, and attorney’s fees in the amount of P500,000 and

P300,000, respectively. SMC filed a Motion to Dismiss on the ground of improper venue The RTC denied the motion.

Issue: Did the RTC of Naga City err in denying the motion to dismiss filed by SMC alleging improper venue?

Held: Exclusive venue stipulation embodied in a contract restricts or confines parties thereto when the suit relates to breach of the said contract.

But where the exclusivity clause does not make it necessarily all encompassing, such that even those not related to the enforcement of the contract

should be subject to the exclusive venue, the stipulation designating exclusive venues should be strictly confined to the specific undertaking or

agreement. Otherwise, the basic principles of freedom to contract might work to the great disadvantage of a weak party-suitor who ought to be

allowed free access to courts of justice.

GF EQUITY, INC. vs. ARTURO VALENZONA

G.R. No. 156841. June 30, 2005

Facts: GF Equity hired Valenzona as Head Coach of the Alaska basketball team in the Philippine Basketball Association under a Contract of

Employment where GF Equity would pay Valenzona the sum of P35,000.00 monthly. While the employment period agreed upon was for two years

commencing, the last sentence of paragraph 3 of the contract carried the following condition: 3. x x x If at any time during the contract, the COACH,

in the sole opinion of the CORPORATION, fails to exhibit sufficient skill or competitive ability to coach the team, the CORPORATION may

terminate this contract. The caveat notwithstanding, Valenzona still acceded to the terms of the contract. Thereafter, Valenzona was terminated as

coach of the Alaska team. Valenzona demanded from GF Equity payment of compensation arising from the arbitrary and unilateral termination of

his employment. GF Equity, however, refused the claim. Valenzona thus filed before the RTC Manila a complaint against GF Equity for breach of

contract with damages. The trial court, upholding the validity of the assailed provision of the contract, dismissed the complaint.

Issue: Whether the questioned last sentence of paragraph 3 is violative of the principle of mutuality of contracts.
Held: Mutuality is one of the characteristics of a contract, its validity or performance or compliance of which cannot be left to the will of only one of

the parties. The ultimate purpose of the mutuality principle is thus to nullify a contract containing a condition which makes its fulfillment or pre-

termination dependent exclusively upon the uncontrolled will of one of the contracting parties. In the case at bar, the contract incorporates in

paragraph 3 the right of GF Equity to pre-terminate the contract. The assailed condition clearly transgresses the principle of mutuality of contracts.

GF Equity was given an unbridled prerogative to pre-terminate the contract irrespective of the soundness, fairness or reasonableness, or even lack

of basis of its opinion. The assailed stipulation being violative of the mutuality principle underlying Article 1308 of the Civil Code, it is null and void.

NORKIS FREE & INDEPENDENT WORKERS UNION vs. NORKIS TRADING COMPANY, INC.

G.R. No. 157098 June 30, 2005

Facts: On January 27, 1998, a Memorandum of Agreement was forged between the parties wherein petitioner shall grant a salary increase to all

regular and permanent employees Ten pesos per day increase effective August 1, 1997; Ten pesos per day increase effective August 1, 1998. On

March 10, 1998, the RTWPB of Region VII issued Wage Order ROVII-06 which established the minimum wage of P165.00, by mandating a wage

increase of five (P5.00) pesos per day beginning April 1, 1998, thereby raising the daily minimum wage to P160.00 and another increase of five

(P5.00) pesos per day beginning October 1, 1998, thereby raising the daily minimum wage to P165.00 per day. In accordance with the Wage Order

and Section 2, Article XII of the CBA, petitioner demanded an across-the-board increase. Respondent, however, refused to implement the Wage

Order, insisting that since it has been paying its workers the new minimum wage of P165.00 even before the issuance of the Wage Order, it cannot

be made to comply with said Wage Order.

Issue: Whether respondent violated the CBA in its refusal to grant its employees an across-the-board increase as a result of the passage of Wage

Order No. ROVII-06.

Held: The employees are not entitled to the claimed salary increase, simply because they are not within the coverage of the Wage Order, as they

were already receiving salaries greater than the minimum wage fixed by the Order. Concededly, there is an increase necessarily resulting from

raising the minimum wage level, but not across-the-board. Indeed, a “double burden” cannot be imposed upon an employer except by clear

provision of law. It would be unjust, therefore, to interpret Wage Order No. ROVII-06 to mean that respondent should grant an across-the-board

increase. Such interpretation of the Order is not sustained by its text.

CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO, CORAZON A. JALECO and LILIA A. OLAYON vs. SPOUSES

ANTONIO PADUA and EUGENIA PADUA

G.R. No. 165420. June 30, 2005

Facts: Spouses Eugenia and Antonio Padua owned a 216.40 sq. m. lot with an unfinished residential house Thereafter, Concepcion Ainza bought

one-half of an undivided portion of the property from her daughter, Eugenia and the latter’s husband, Antonio, for P100,000.00. No Deed of

Absolute Sale was executed to evidence the transaction, but cash payment was received by the respondents, and ownership was transferred to

Concepcion through physical delivery to Natividad Tuliao. However, respondents caused the subdivision of the property into three portions and

registered it in their names in violation of the restrictions annotated at the back of the title. Antonio claimed that his wife, Eugenia, admitted that

Concepcion offered to buy 1/3 of the property who gave her small amounts over several years which totaled P100,000.00 by 1987 and for which she

signed a receipt.
Issue: Whether there was a valid contract of sale between Eugenia and Concepcion.

Held: There was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a portion of the

property to Concepcion, who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both

parties fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia the price of

P100,000.00, as evidenced by the receipt. The verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the Statute

of Frauds. When a verbal contract has been completed, executed or partially consummated, as in this case, its enforceability will not be barred by

the Statute of Frauds, which applies only to an executory agreement. However, the sale of the conjugal property by Eugenia without the consent of

her husband is voidable. It is undisputed that the subject property was conjugal and sold by Eugenia in April 1987 or prior to the effectivity of the

Family Code on August 3, 1988. Thus, the contract of sale between Eugenia and Concepcion being an oral contract, the action to annul the same

must be commenced within six years from the time the right of action accrued. It is binding unless annulled. Antonio failed to exercise his right to

ask for the annulment within the prescribed period, hence, he is now barred from questioning the validity of the sale between his wife and

Concepcion.

OLIVERIO LAPERAL& FILIPINAS GOLF & COUNTRY CLUB INC. vs. SOLID HOMES, INC.

G.R. No. 130913. June 21, 2005

Facts: Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas Golf and Country Club, Inc., represented by its then

President, Oliverio Laperal, entered into a Development and Management Agreement with respondent Solid Homes, Inc., a registered subdivision

developer, involving several parcels of land owned by Laperal and FGSDC. Under the terms and conditions of the aforementioned Agreement and

the Supplement, respondent undertook to convert at its own expense the land subject of the agreement into a first-class residential subdivision, in

consideration of which respondent will get 45% of the lot titles of the saleable area in the entire project. The aforementioned Agreement was

cancelled by the parties, and, in lieu thereof, two contracts identically denominated Revised Development and Management Agreement were

entered into by respondent with the two successors-in-interest of FGSDC. Unlike the original agreement, both Revised Agreements omitted the

obligation of petitioners Laperal and FGCCI to make available to respondent Solid Homes, Inc. the owner’s duplicate copies of the titles covering the

subject parcels of land. It appears, however, that even as the Revised Agreements already provided for the non-surrender of the owner’s duplicate

copies of the titles, respondent persisted in its request for the delivery thereof .Then, petitioners served on respondent notices of rescission of the

Revised Agreements with a demand to vacate the subject properties and yield possession thereof to them.

Issue: Whether the termination of the Revised Agreement and Addendum, because of the contractual breach committed by respondent solid homes,

carried with it the effect provided under Article 1385 of the New Civil Code.

Held: Mutual restitution is required in cases involving rescission under Article 1191. Since Article 1385 of the Civil Code expressly and clearly states

that “rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its

interest,” the Court finds no justification to sustain petitioners’ position that said Article 1385 does not apply to rescission under Article 1191.As a

consequence of the resolution by petitioners, rights to the lot should be restored to private respondent or the same should be replaced by another

acceptable lot. Applying the clear language of the law and the consistent jurisprudence on the matter, therefore, the Court rules that rescission

under Article 1191 in the present case, carries with it the corresponding obligation of restitution.
MONDRAGON LEISURE AND RESORTS CORPORATION vs. COURT OF APPEALS, ASIAN BANK CORPORATION, FAR EAST BANK AND

TRUST COMPANY, and UNITED COCONUT PLANTERS BANK

G.R. No. 154188 June 15, 2005

Facts: Mondragon International Philippines, Inc., Mondragon Securities Corporation and herein petitioner entered into a lease agreement with the

Clark Development Corporation for the development of what is now known as the Mimosa Leisure Estate.To help finance the project, petitioner,

entered into an Omnibus Loan and Security Agreement with respondent banks for a syndicated term loan in the aggregate principal amount of

US$20M. Under the agreement, the proceeds of the loan were to be released through advances evidenced by promissory notes to be executed by

petitioner in favor of each lender-bank, and to be paid within a six-year period from the date of initial advance inclusive of a one year and two

quarters grace period. Petitioner, which had regularly paid the monthly interests due on the promissory notes until October 1998, thereafter failed

to make payments. Consequently, written notices of default, acceleration of payment and demand letters were sent by the lenders to the petitioner.

Then, respondents filed a complaint for the foreclosure of leasehold rights against petitioner. Petitioner moved for the dismissal of the complaint

but was denied.

Issue: Whether or not respondents have a cause of action against the petitioner?

Held: Under the foregoing provisions of the Agreement, petitioner may be validly declared in default for failure to pay the interest. As a consequence

of default, the unpaid amount shall earn default interest, and the respondent-banks have four alternative remedies without prejudice to the

application of the provisions on collaterals and any other steps or action which may be adopted by the majority lender. The four remedies are

alternative, with the right of choice given to the lenders, in this case the respondents. Under Article 1201 of the Civil Code, the choice shall produce

no effect except from the time it has been communicated. In the present case, we find that written notices were sent to the petitioner by the

respondents. The notices clearly indicate respondents’ choice of remedy: to accelerate all payments payable under the loan agreement It should be

noted that the agreement also provides that the choice of remedy is without prejudice to the action on the collaterals. Thus, respondents could

properly file an action for foreclosure of the leasehold rights to obtain payment for the amount demanded.

SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE

CORPORATION,

G.R. No. 139523. May 26, 2005

Facts: Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173, 800.00 to purchase a house and lot located at

Pulang Lupa, Las Piñas, To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan

Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173,

800.00. Petitioner Leticia Cannu agreed to buy the property for P120, 000.00 and to assume the balance of the mortgage obligations with the

NHMFC and with CERF Realty. Of the P120, 000. 00, several payments were made leaving a balance of P45, 000.00. A Deed of Sale with

Assumption of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang and spouses Leticia and Felipe

Cannu over the house and lot. Petitioners immediately took possession and occupied the house and lot. Despite requests from Adelina R. Timbang

and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so.

Issues: 1) Whether or not the breach of the obligation is substantial.

2) Whether or not there was substantial compliance with the obligation to pay the monthly amortization with NHMFC.

3) Whether or not respondents-spouses Galang demanded from petitioners a strict and/or faithful compliance of the Deed of Sale with Assumption

of Mortgage. 4. Whether or not the action for rescission is subsidiary.

Held: 1) Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the

agreement. The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage

of the amount not paid. In the case at bar, we find petitioners’ failure to pay the remaining balance of P45,000.00 to be substantial. Taken together

with the fact that the last payment made was on 28 November 1991, eighteen months before the respondent Fernandina Galang paid the

outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear.

2) The petitioners were not religious in paying the amortization with the NHMFC. As admitted by them, in the span of three years from 1990 to

1993, their payments covered only thirty months. This, indeed, constitutes another breach or violation of the Deed of Sale with Assumption of

Mortgage. On top of this, there was no formal assumption of the mortgage obligation with NHMFC because of the lack of approval by the NHMFC

on account of petitioners’ non-submission of requirements in order to be considered as assignees/successors-in-interest over the property covered

by the mortgage obligation.

3) There is sufficient evidence showing that demands were made from petitioners to comply with their obligation. Adelina R. Timbang, attorney-in-

fact of respondents-spouses, per instruction of respondent Fernandina Galang, made constant follow-ups after the last payment made on 28

November 1991, but petitioners did not pay. Sometime in March 1993, due to the fact that full payment has not been paid and that the monthly

amortizations with the NHMFC have not been fully updated, she made her intentions clear with petitioner Leticia Cannu that she will rescind or

annul the Deed of Sale with Assumption of Mortgage. 4. The subsidiary character of the action for rescission applies to contracts enumerated in

Articles 1381 of the Civil Code. The contract involved in the case before us is not one of those mentioned therein. The provision that applies in the

case at bar is Article 1191.As a consequence of the rescission or, more accurately, resolution of the Deed of Sale with Assumption of Mortgage, it is

the duty of the court to require the parties to surrender whatever they may have received from the other. The parties should be restored to their

original situation.