CIVIL LAW REVIEW

2017-2018 Case Digests

The Faculty of the Civil Law Department

College of Law
Arellano University School of Law

Submitted by:

DOLLESIN, Jouvani I.
Sunday; 8:00AM to 12:00NN
Class No. 8
2015-0410

Submitted to:

Atty. Crisostomo A. Uribe

Civil Law Review II, Professor
 TITLE OF THE CASE Page

CIVIL LAW I

PERSONS AND FAMILY RELATIONS

Property Regime
1. Spouses Julieta B. Carlos And Fernando P. Carlos, Petitioners Vs. Juan Cruz Tolentino, 1
Respondent; G.R. No. 234533; June 27, 2018; VELASCO, JR., J.: Third Division

Family Home
2. Felicitas L. Salazar, Petitioner Vs. Remedios Felias, On Her Own Behalf and 3
Representation of The Other Heirs Of Catalino Nivera, Respondents; G.R. No. 213972;
February 5, 2018; REYES, JR., J.: Second Division

PROPERTY
Quieting of Title
3. Spouses Jaime And Catherine Basa, Spouses Juan And Erlinda Ogale Represented By 5
Winston Olagle, Spouses Rogelio And Lucena Lagasca Represented By Lucen Lagasca,
And Spouses Cresencio And Eleadora Apostol, Petitioners Vs. Angeline Loy Vda. De Senly
Loy, Heirs of Robert Carantes, The Register Of Deeds Of Baguio City And The City
Assessor’s Office Of Bagiou City, Respondents; G.R. No. 204131; June 4, 2018; Del
CASTILLO, J.: First Division

Co-Ownership
Rights of Each Co-Owner In A Co-Ownership
4. Forunato Anzures, Petitioner Vs. Spouses Erlinda Ventanilla And Arturo Ventanilla, 7
Respondents; G.R. No. 222297; July 9, 2018; GESMUNDO, J.: Third Division

Claim against Assurance Fund

5. Spouses Jose Manuel And Maria Esperanza Ridruejo Stilianopoulos, Petitioners Vs. The 9
Register Of Deeds For Legazpi City And The National Trasurer, Respondents; G.R. No.
224678; July 3, 2018; PERLAS BERNABE, J.: En Banc

SUCCESSION
Collation

6. Heirs Of Ernesto Morales Namely: Rosario M. Dangsalan, Evelyn M. Sangalan, Nenita M. 11

Sales, Ernesto Jose Morales, Jr., Raymond Morales And Melanie Morales, Petitioners
Vs. Astrid Morales Agustin Represented By Her Attorney-In-fact Edgardo Torres,
Respondent; G.R. No. 224849; June 6, 2018; REYES, JR., J.: Second Division

Extra-Judicial Settlement Of Estate – Declaration of Nullity

7. Amparo S. Cruz; Ernesto Halili; Alicia H. Florencio; Donald Halili; Editha H. Rivera; 13
Ernersto Halili, Jr.; And Julito Halili, Petitioners Vs. Angelito S. Cruz, Concepcion S. Cruz,
Serafin S. Cruz And Vicenta S. Cruz, Respondents; G.R. No. 211153; February 28, 2018;
DEL CASTILLO, J.: First Division

CIVIL LAW II

I. OBLIGATIONS
B. Sources of Civil Obligations
Quasi-delicts
8. St. Martin Polyclinic, Inc., Petitioner, Vs. Lwv Construction Corporation, Respondent; G.R. 15
No. 217426; December 4, 2017; PERLAS-BERNABE, J.: Second Division
E. Breach of Obligations
9. Jose Sanico And Vicente Castro, Petitioners, V. Werherlina P. Colipano, Respondent. 17
G.R. No. 209969; September 27, 2017; CAGUIOA, J.: Second Division
II. CONTRACTS
B. Fundamental Characteristics/Principle of Contracts
2. Obligatory Force of Contracts
10. Sps. Ellis R. Miles and Carolina Ronquillo-Miles, Petitioners, v. Bonnie Bautista Lao, 18
Respondent; GR. No. 209544, November 22, 2017; TIJAM, J.: First Division
3. Relativity of Contracts
11. Asian Terminals, Inc., Petitioner Vs. Padoson Stainless Steel Corporation, Respondents 20
G.R. No. 211876; June 25, 2018; TIJAM, J.: First Division

12. Rolando De Roca, Petitioners Vs. Eduardo C. Dabuyan, Jennifer A. Branzuela, Jennylyn 22

A. Ricarte And Herminigildo F. Sabante, Respondents; G.R. No. 215281; March 5, 2018;
DEL CASTILLO, J.: First Division

E. Essential Elements of Contracts

1. Consent of Contracting Parties
13. Rafael Almeda, Emerlina Almeda-Lirio, Alodia Almeda-Tan, Leticia Almeda-Magno, 24
Norma Almeda-Matias And Publio Tibi, Petitioners, V. Heirs Of Ponciano Almeda In
Substitution Of Original Defendant Ponciano Almeda, Intestate Estate Of Spouses Ponciano
And Eufemia Perez-Almeda And The Register Of Deeds Of Tagaytay City, Respondent.

Cesar Santos, Rosana Santos, Norman Santos And Ferdinand Santos, Unwilling

Plaintiffs/Petitioners; G.R. No. 194189; September 14, 2017; TIJAM, J.: First Division

G. Reformation of Contracts
14. Spouses Firmo S. Rosario And Agnes Annabelle Dean-Rosario, Petitioners Vs. Priscilla 26
P. Alvar, Respondent; G.R. No. 212731; September 26, 2017; DEL CASTILLO, J.: First
Division
I. Kinds of Contracts as to Validity
3. Void or Inexistent
15. Jose S. Ocampo, Petitioner Vs. Ricardo S. Ocampo, Sr., Respondent; G.R. No. 227894; 28
July 5, 2017; VELASCO, JR., J.: Third Division

16. Noemi S. Cruz And Heirs Of Hermenegildo T. Cruz, Represented By Noemi D. 30

Cruz, Petitioner Vs. City Of Makati, City Treasurer Of Makati, The Register Of Deeds Of
Makati, Laverne Realty And Development Corporation, Respondents; G.R. No. 210894;
September 12, 2018; DEL CASTILLO, J.: First Division

SPECIAL CONTRACTS
A. Sales
1. In General
Perfection of Contract of Sale
17. Heirs Of Gilberto Roldan, Namely: Adelina Roldan, Rolando Roldan, Gilberto Roldan, 32
Jr., Mario Roldan, Danny Roldan, Leonardo Roldan, Elsa Roldan, Erlinda Roldan-Caraos,
Thelma Roldan-Masinsin, Gilda Roldan-Dawal And Rhodora Roldan-Icamina, Petitioners, V.
Heirs Of Silvela Roldan, Namely: Antonio R. De Guzman, Augusto R. De Guzman, Alicia R.
Valdoria-Pineda, And Sally R. Valdoria, And Heirs Of Leopoldo Magtulis, Namely: Cynthia
Yorac-Magtulis, Lea Joyce Magtulis-Malaborbor, Dhancy Magtulis, Frances Diane Magtulis,
And Julierto Magtulis-Placer, Respondents. G.R. No. 202578; September 27, 2017;
SERENO, C.J.: First Division

18. Norma M. Diampoc, Petitioners Vs. Jessie Buenaventura And The Registry Of Deeds 33
For The City Of Taguig, Respondents; G.R. No. 200383; March 9, 2018; DEL CASTILLO, J.:
First Division

1. In General
Partially Executed Contract to Sell
19. Spouses Cipriano Pamplona And Bibiana Intac, Petitioners Vs. Spouses Lilia I. Cueto 35
And Vedasto Cueto, Respondents; G.R. No. 204735; February 19, 2018; BERSAMIN, J.:
Third Division

2. Elements
20. Maribelle Z. Neri, Petitioner Vs. Ryan Roy Yu, Respondent; G.R. No. 230831; 37
September 26, 2018; PERALTA, J.: Third Division

C. Lease
3. Rights and Obligations of Lessor/Lessee
21. Intramuros Administration, Petitioner Vs. Offshore Construction Development Company, 38
Respondent; G.R. No. 196795; March 7, 2018; LEONEN, J.: Third Division

SPECIAL CONTRACTS: ACCESSORY CONTRACTS

H. Mortgage
2. Essential Elements
22. Sofia Tabuada, Novee Yap, Ma. Loreta Nadal And Gladys Evidente, Petitioners Vs. 40
Eleanor Tabuada, Julieta Trabuco, Laureta Redondo And Sps. Bernan Certeza & Eleanor
D. Certeza, Respondents; G.R. No. 196510; September 12, 2018; BERSAMIN, J.: First
Division

3. Effect/Rights and Obligations

23. Makilito B. Mahinay, Petitioner Vs. Dura Tire & Rubber Industries, Inc., Respondent 42
G.R. No. 194152; June 5, 2017; LEONEN, J.: Second Division

4. Extinguishment/Foreclosures
24. Paradigm Development Corporation Of The Philippines, Petitioner Vs. Bank Of The 44
Philippine Islands, Respondent; G.R. No. 191174; June 7, 2017; REYES, Jr., J.: Second
Division

SPECIAL CONTRACTS: PREPARATORY CONTRACTS

(Business Associations and Relations)
I. Agency
2. Kinds, Creation & Existence
25. Dale Strickland, Petitioner Vs. Ernst & Young Llp, Punongbayan & Araullo, Respondent; 46
G.R. No. 193782; August 1, 2018; JARDELEZA, J.: First Division

3. Obligations of the Agent/Principal

26. Arturo C. Calubad, Petitioner Vs. Ricarcen Development Corporation, Respondent; G.R. 48
No. 202364; August 30, 2017; LEONEN, J.: Third Division

4. Modes of Extinguishment of Agency

27. Marcelino E. Lopez, Feliza Lopez, Zoilo Lopez, Leonardo Lopez And Sergio F. 50
Angeles, Petitioner Vs. The Hon. Court Of Appeals And Primex Corporation, Respondent;
G.R. No. 163959; August 1, 2018; BERSAMIN, J.: Third Division

IV. DAMAGES
A. In General
Persons Liable
28. John E.R. Reyes And Merwin Joseph Reyes, Petitioners, Vs. Orico Doctolero, Romeo A 52
Vila, Grandeur Security And Services Corporation, And Makati Cinema
Square, Respondents.; G.R. No. 185597; August 2, 2017; JARDELEZA, J.: Third Division
B. Kinds of Damages
1. Actual or Compensatory
29. Oriental Assurance Corporation, Petitioners, v. Manuel Ong and Asian Terminals, Inc., 54
Respondents; GR. No. 189524, October 11, 2017; LEONEN, J.: Third Division
2. Moral & 6. Exemplary
30. Alicia M.L. Coseteng And Diliman Preparatory School, Petitioner, Vs. Letecia 56
Perez, Respondent; G.R. No. 185938; September 6, 2017; REYES, Jr., J.: Second Division
 SPOUSES JULIETA B. CARLOS and FERNANDO P. CARLOS, Petitioners
vs.
JUAN CRUZ TOLENTINO, Respondent

G.R. No. 234533; June 27, 2018

Third Division
VELASCO, JR., J.:

TOPIC: Property Regime; Donation

NATURE OF THE ACTION: Complaint for Annulment of Title

FACTS:
The subject matter of the action is a parcel of land located in Quezon City and registered in the
name of respondent Juan Tolentino. Without Juan's knowledge and consent, Mercedes and Kristoff,
who were then residing in the subject property, allegedly forged a Deed of Donation thereby making it
appear that Juan and Mercedes donated the subject property to Kristoff. Thus, by virtue of the alleged
forged Deed of Donation, a new TCT was issued in the name of Kristoff.
Subsequently, Kristoff offered the sale of the property to Spouses Carlos. After a series of
negotiations, Kristoff and Julieta executed a Memorandum of Agreement stating that Kristoff is selling
the subject property to Julieta in the amount of Two Million Three Hundred Thousand Pesos
(P2,300,000.00). After Julieta made the full payment, on the same day a Deed of Absolute Sale was
executed between Kristoff and Julieta.
Upon learning of the foregoing events, Juan executed an Affidavit of Adverse Claim which was
annotated on the title. Juan also filed a criminal complaint for Falsification of Public Document before
the Office of the City Prosecutor of Quezon City against Kristoff.
Meanwhile, by virtue of the Deed of Absolute Sale, Register of Deeds issued a new transfer
certificate of title in favor of the spouses Carlos.
Which prompted Juan to file a complaint for annulment of title with damages against his wife
Mercedes Tolentino, his grandson Kristoff Tolentino, herein petitioner spouses Carlos and Register of
Deeds of Quezon City.
RTC, found that Juan’s signature was a forgery. Despite such finding, however, it dismissed
Juan's complaint. The R TC found that at the time Spouses Carlos fully paid the agreed price in the
MOA Kristoff was the registered owner of the subject property. Further, when the MOA and the Deed of
Absolute Sale dated June 30, 2011 were executed, nothing was annotated on the said title to indicate
the adverse claim of Juan or any other person. It was only on July 15, 2011 when Juan's adverse claim
was annotated on Kristoff's title.
On appeal before the Court of Appeals, the CA found that Spouses Carlos were negligent in not
taking the necessary steps to determine the status of the subject property prior to their purchase
thereof. Accordingly, the CA ruled that Juan has a better right over the subject property. Hence, this
petition.

ISSUE:
Whether or not the donation and subsequent sale of the subject property is valid?

RULING:
The Court partially granted the petition. The Court ruled that he donation and subsequent sale
of the subject property is declared NULL and VOID with respect to the undivided 1/2 portion owned by
Juan Cruz Tolentino, but VALID with respect to the other undivided 1/2 portion belonging to Mercedes
Tolentino. Accordingly, petitioners Spouses Carlos and respondent Juan Cruz Tolentino are hereby
declared as co-owners of the subject property.
Here, the Court noted that Juan and Mercedes appear to have been married before the
effectivity of the Family Code on August 3, 1988. There being no indication that they have adopted a
different property regime, the presumption is that their property relations is governed by the regime of
conjugal partnership of gains. Article 119 of the Civil Code thus provides:

Article 119. The future spouses may in the marriage settlements agree upon absolute
or relative community of property, or upon complete separation of property, or upon any
other regime. In the absence of marriage settlements, or when the same are void, the
system of relative community or conjugal partnership of gains as established in this
Code, shall govern the property relations between husband and wife.

Page 1 of 57
 Since the subject property was acquired on March 17, 196728 during the marriage of Juan and
Mercedes, it formed part of their conjugal partnership. It follows then that Juan and Mercedes are the
absolute owners of their undivided one-half interest, respectively, over the subject property.
Meanwhile, as in any other property relations between husband and wife, the conjugal
partnership is terminated upon the death of either of the spouses. In respondent Juan's Comment filed
before the Court, the Verification which he executed on February 9, 2018 states that he is already a
widower. Hence, the Court takes due notice of the fact of Mercedes' death which inevitably results in
the dissolution of the conjugal partnership.
In retrospect, as absolute owners of the subject property then covered by TCT No. RT-90746
(116229), Juan and Mercedes may validly exercise rights of ownership by executing deeds which
transfer title thereto such as, in this case, the Deed of Donation dated February 15, 2011 in favor of
their grandson, Kristoff.
With regard to Juan's consent to the afore-stated donation, the RTC, however, found that such
was lacking since his signature therein was forged. Notably, the CA did not overturn such finding, and
in fact, no longer touched upon the issue of forgery. On the other hand, it must be pointed out that the
signature of Mercedes in the Deed of Donation was never contested and is, therefore, deemed
admitted.
In the present case, while it has been settled that the congruence of the wills of the spouses is
essential for the valid disposition of conjugal property, it cannot be ignored that Mercedes' consent to
the disposition of her one-half interest in the subject property remained undisputed. It is apparent that
Mercedes, during her lifetime, relinquished all her rights thereon in favor of her grandson, Kristoff.
Furthermore, Mercedes' knowledge of and acquiescence to the subsequent sale of the subject
property to Spouses Carlos is evidenced by her signature appearing in the MOA dated April 12, 2011
and the Deed of Absolute Sale dated September 12, 2011. We are also mindful of the fact that
Spouses Carlos had already paid a valuable consideration in the amount of Two Million Three Hundred
Thousand Pesos (P2,300,000.00) for the subject property before Juan's adverse claim was annotated
on Kristoff s title. The said purchase and acquisition for valuable consideration deserves a certain
degree of legal protection.
Given the foregoing, the Court is disinclined to rule that the Deed of Donation is wholly void ab
initio and that the Spouses Carlos should be totally stripped of their right over the subject property. In
consonance with justice and equity, Court deem it proper to uphold the validity of the Deed of Donation
dated February 15, 2011 but only to the extent of Mercedes' one-half share in the subject property. And
rightly so, because why invalidate Mercedes' disposition of her one-half portion of the conjugal property
that will eventually be her share after the termination of the conjugal partnership? It will practically be
absurd, especially in the instant case, since the conjugal partnership had already been terminated upon
Mercedes' death.
Accordingly, the right of Kristoff, as donee, is limited only to the one-half undivided portion that
Mercedes owned. The Deed of Donation insofar as it covered the remaining one-half undivided portion
of the subject property is null and void, Juan not having consented to the donation of his undivided half.
Upon the foregoing perspective, Spouses Carlos' right, as vendees in the subsequent sale of the
subject property, is confined only to the one-half undivided portion thereof. The other undivided half still
belongs to Juan. As owners pro indiviso of a portion of the lot in question, either Spouses Carlos or
Juan may ask for the partition of the lot and their property rights shall be limited to the portion which
may be allotted to them in the division upon the termination of the co-ownership. This disposition is in
line with the well-established principle that the binding force of a contract must be recognized as far as
it is legally possible to do so—quando res non valet ut ago, valeat quantum valere potest.

Page 2 of 57
 FELICITAS L. SALAZAR, Petitioner
vs.
REMEDIOS FELIAS, on her own behalf and representation of the other HEIRS OF CATALINO
NIVERA, Respondents

G.R. No. 213972; February 5, 2018

Second Division
REYES, JR., J.:

TOPIC: Family Home

NATURE OF THE ACTION: Complaint for Recovery of Ownership, Possession and Damages

FACTS:
Private respondents Remedios Felias representing the Heirs of Nivera filed a Complaint for
Recovery of Ownership, Possession and Damages against the Spouses Romualdo Lastimosa and
Felisa Lastimosa. The subject matter of the case is a parcel of land located in Pangasinan.
Romualdo died, and a Motion for Substitution was filed by decedent’s wife and their children.
RTC rendered its decision declaring the Heirs of Nivera as the absolute owners of the parcels of
land in question, and thereby ordering the Heirs of Lastimosa to vacate the lands and to surrender
possession thereof.
The Heirs of Lastimosa did not file an appeal against the trial court’s ruling.
Meanwhile, petitioner Felicitas Salazar, daughter of Romualdo filed a Petition for Annulment of
Judgment with the Court of Appeals. Felicitas sought the nullification of the RTC decision. She claimed
that she was deprived of due process when she was not impleaded in the case for Recovery of
Ownership.
CA, dismissed the petition. The CA refused to give credence to the contention that the Heirs of
Nivera are at fault for failing to implead Felicitas as a party defendant in the action for recovery of
ownership. Rather, the failure to include Felicitas in the proceedings was due to the fault of the Heirs of
Lastimosa, who neglected to include her in their Motion to Substitute. The CA further ratiocinated that
since the RTC acquired jurisdiction over the person of the original defendants Romualdo and Felisa,
the outcome of the case is binding on all their heirs or any such persons claiming rights under them.
On appeal, the Supreme Court affirmed the CA decision in the petition for annulment of
judgment. The Court’s ruling became final.
Meanwhile, the Heirs of Lastimosa filed with the RTC an Urgent Motion to Order the Sheriff to
Desist from Making Demolition. The Motion to Desist was premised on the fact that the Sheriff cannot
execute the lower court's decision considering that Felicitas had an aliquot share over the property,
which had not yet been partitioned.
At about the same time, the Heirs of Nivera filed a Motion for Execution and Demolition. The
Motion for Execution was anchored on the fact that the Decision in the case for recovery of ownership,
possession and damages had long attained finality.
RTC issued an Order granting the Motion for Execution and Demolition and denying the Motion
to Desist.
Dissatisfied with the ruling, the Heirs of Lastimosa filed an appeal before the CA, questioning
the Writ of Execution and Demolition issued by the lower court. The CA dismissed the same. Hence,
this petition.

ISSUE:
Whether or not the execution cannot proceed as subject property is her family home and is
therefore exempt from execution?

RULING:
No. Indeed, the family home is a real right which is gratuitous, inalienable and free from
attachment, constituted over the dwelling place and the land on which it is situated. It confers upon a
particular family the right to enjoy such properties. It cannot be seized by creditors except in certain
special cases.
However, the claim that the property is exempt from execution for being the movant's family
home is not a magic wand that will freeze the court's hand and forestall the execution of a final and
executory ruling. It must be noted that it is not sufficient for the claimant to merely allege that such
property is a family home. Whether the claim is premised under the Old Civil Code or the Family Code,
the claim for exemption must be set up and proved.
Page 3 of 57
 In addition, residence in the family home must be actual. The law explicitly mandates that the
occupancy of the family home, either by the owner thereof, or by any of its beneficiaries must be actual.
This occupancy must be real, or actually existing, as opposed to something merely possible, or that
which is merely presumptive or constructive.
It bears emphasis that it is imperative that her claim must be backed with evidence showing that
the home was indeed (i) duly constituted as a family home, (ii) constituted jointly by the husband and
wife or by an unmarried head of a family, (iii) resided in by the family (or any of the family home's
beneficiaries), (iv) forms part of the properties of the absolute community or the conjugal partnership, or
of the exclusive properties of either spouse with the latter's consent, or property of the unmarried head
of the family, and (v) has an actual value of Php 300,000.00 in urban areas, and Php 200,000.00 in
rural areas.
A perusal of the petition, however, shows that aside from her bare allegation, Felicitas adduced
no proof to substantiate her claim that the property sought to be executed is indeed her family home.
Interestingly, Felicitas admitted in her Motion for Reconsideration dated December 23, 2013,
and her Petition for Annulment of Judgment dated June 22, 2006, that she is, and has always been a
resident of Mufioz, Nueva Ecija. Similarly, the address indicated in Felicitas' petition for review on
certiorari is Mufioz, Nueva Ecija.
Equally important, the Court takes judicial notice of the final ruling of the RTC Branch 55 in the
case for recovery of ownership, that the subject property has belonged to the Heirs of Nivera since the l
950s. This automatically negates Felicitas' claim that the property is her family home.
Undoubtedly, Felicitas' argument that the property subject of the writ of execution is a family
home, is an unsubstantiated allegation that cannot defeat the binding nature of a final and executory
judgment. Thus, the Writ of Execution and Demolition issued by the RTC Branch 55 must perforce be
given effect.
In fine, an effective and efficient administration of justice requires that once a judgment has
become final, the winning party should not be deprived of the fruits of the verdict. The case at bar
reveals the attempt of the losing party to thwart the execution of a final and executory judgment,
rendered by. the court thirteen (13) long years ago. The Court cannot sanction such vain and obstinate
attempts to forestall the execution of a final ruling. It is high time that the case be settled with finality
and the ruling of the RTC Branch 55 be given full force and effect.

Page 4 of 57
SPOUSES JAIME AND CATHERINE BASA, SPOUSES JUAN AND ERLINDA OGALE represented
by WINSTON OLAGLE, SPOUSES ROGELIO AND LUCENA LAGASCA represented by LUCEN
LAGASCA, and SPOUSES CRESENCIO AND ELEADORA APOSTOL, Petitioners
vs.
ANGELINE LOY VDA. DE SENLY LOY, HEIRS OF ROBERT CARANTES, THE REGISTER OF
DEEDS OF BAGUIO CITY and THE CITY ASSESSOR’S OFFICE OF BAGIOU CITY, Respondents

G.R. No. 204131; June 4, 2018

First Division
DEL CASTILLO, J.:

TOPIC: Quieting of Title; Legal Title; Equitable Title

NATURE OF THE ACTION: Petition for Quieting of Title with Prayer of Injunctive Relief and Damages

FACTS:
The case involves around a 496 square meter residential lot in Baguio City in the name of the
late Busa Carantes, who is the predecessor-in-interest of Manuel Carantes and herein respondent
Robert Carantes.
The subject property was mortgaged to respondent Angeline Joy and her husband. Thereafter,
they foreclosed on the mortgage, and at the auction sale, they emerged the highest bidder. after
consolidating ownership over the subject prope1ty Branch of the Baguio RTC issued in their favor a writ
of possession.
Herein petitioners filed before Branch 7 of the Baguio RTC a petition for quieting of title with
prayer for injunctive relief and damages against respondents. They essentially claimed that in 1992 and
1993, portions of the subject property-totaling 351 square meters - have already been sold to them by
respondent Robert Carantes, by virtue of deeds of sale executed in their favor, respectively; that they
took possession of the po1tions sold to them; and that the titles issued in favor of Angeline Loy created
a cloud upon their title and are prejudicial to their claim of ownership. They thus prayed that the
documents, instruments, and proceedings relative to the sale of the subject property to respondent
Angeline Loy be cancelled and annulled, and that they be awarded damages and declared owners of
the respective po1tions sold to them.
In her Answer Angeline Loy alleged that she was entitled to the subject property as a result of
the foreclosure and consequent award to her as the highest bidder during the foreclosure sale; that the
subject prope1ty was later divided by judicial partition, and new ce1tificates of title were issued in the
name of Manuel and Robe1t Carantes, which titles were later cancelled and new titles were issued in
her name as co-owner of the subject prope1ty together with Manuel Carantes; that she had no
knowledge of the supposed sales to petitioners by Robe1t Carantes as these transactions were not
annotated on the title of Busa Carantes; and that the sales to the petitioners were either unnotarized or
unconsummated for failure to pay the price in full. In his answer, Robert Carantes alleged that the sales
to petitioners did not materialize; that petitioners failed to fully pay the purchase price; that his
transactions with Angeline Loy and her husband were null and void; and that he was the real owner of
the subject property in issue.
RTC rendered its decision dismissing the complaint. On appeal before the Court of Appeals the
CA affirmed the decision of the RTC. Hence, this petition.

ISSUE:
Whether or not they petitioners have proved, by preponderant evidence, their case of quieting of
title.

RULING:
No. The Court ruled that in order that an action for quieting of title may prosper, it is essential
that the plaintiff must have legal or equitable title to, or interest in, the property which is the subject-
matter of the action. Legal title denotes registered ownership, while equitable title means beneficial
ownership. In the absence of such legal or equitable title, or interest, there is no cloud to be prevented
or removed. An action for quieting of title is essentially a common law remedy grounded on equity. The
competent court is tasked to determine the respective tights of the complainant and other claimants, not
only to place things in their proper place, to make the one who has no rights to said immovable respect
and not disturb the other, but also for the benefit of both, so that he who has the right would see every
cloud of doubt over the property dissipated, and he could afterwards without fear introduce the
improvements he may desire, to use, and even to abuse the property as he deems best. But for an
Page 5 of 57
action to quiet title to prosper, two indispensable requisites must concur, namely: (1) the plaintiff or
complainant has a legal or an equitable title to or interest in the real property subject of the action; and
(2) the deed, claim, encumbrance, or proceeding clain1ed to be casting cloud on his title must be
shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.
Petitioners' case for quieting of title was dismissed by the trial court for the reason that they
failed to present the originals of the purported deeds of sale executed by respondent Robert Carantes
in their favor. In other words, short of saying that petitioners failed to prove the first element in a suit for
quieting of title the existence of a legal or equitable title - the trial court simply held that they failed to
discharge the burden of proof required in such case. Petitioners then attempted to obtain a reversal by
attaching the supposed originals of the deeds of sale to their motion for reconsideration, but the trial
court did not reconsider as they failed to show that the reason for their failure to present the original
copies of the deeds fell within the exceptions under the best evidence rule, or Section 3, Rule 130 of
the Rules of Court.
The trial court cannot be faulted for ruling the way it did. By petitioners' failure to present the
original copies of the purpo1ted deeds of sale in their favor, the case for quieting of title did not have a
leg to stand on. Petitioners were unable to show their claimed right or title to the disputed property,
which is an essential element in a suit for quieting of title. Their belated presentation of the supposed
originals of the deeds of sale by attaching the same to their motion for reconsideration does not
deserve consideration as well; the documents hardly qualify as evidence.
Moreover, the unnotarized "Deed of Absolute Sale of a Portion of a Registered Parcel of a
Residential Land" between respondent Robert Carantes and petitioner-spouses Jaime and Catherine
Basa cannot stand without the corroboration or affirmation ofRobe1t Carantes. On its own, the
unnotarized deed is self-serving. Since Robert Carantes's affidavit - Exhibit "E" - was rendered
inadmissible by his failure to appear and testify thereon, then the supposed unnotarized deed of sale
executed by him in favor of the Basa spouses cannot sufficiently be proved.
Even if petitioners are in possession of the disputed property, this does not necessarily prove
their supposed title. It may be that their possession of the disputed property is by lease or any other
agreement or arrangement with the owner - or simply by mere tolerance. Without adequately proving
their title or tight to the disputed portions of the property, their case for quieting of title simply cannot
prosper.

Page 6 of 57
 FORUNATO ANZURES, Petitioner
vs.
SPOUSES ERLINDA VENTANILLA and ARTURO VENTANILLA, Respondents

G.R. No. 222297; July 9, 2018

Third Division
GESMUNDO, J.:

TOPIC: Rights of each co-owner in a co-ownership; Partition

NATURE OF THE ACTION: Complaint for Unlawful Detainer

FACTS:
Respondents filed a Complaint for Unlawful detainer before MTC against petitioner Fortunato
Anzures. They alleged that they were the owners of a residential house located in Bulacan and that the
said house had been declared for taxation purposes in their names. That the house stands in a289
square meters parcel of land in the names of petitioner and his wife Carolina Anzures. That by virtue of
a Deed of Donation petitioner and his wife donated the 144 square meters portion of the land in favor of
respondents and that respondent Erlinda Ventanilla "indicated to partition the said property," but the
house situated on said property constitutes a stumbling block on the partition of the said property; that
being the owners of the property, respondents merely tolerated the occupation of the property by
petitioner and demanded he vacate the house to give way to the subdivision and partition of the
property but to no avail.
In his Answer petitioner sought for the dismissal of the complaint for lack of cause of action. He
averred that he and his late spouse Carolina were the owners of the residential house and that he was
also the registered owner of the 289 square meters parcel of land. As such he is the rightful owner of
the residential house as shown by the tax receipts confirming the religious payments he made.
Petitioner also denied the genuineness and authenticity of the deed of donation because at that time,
Carolina was mentally and physically incompetent to execute the same. He contended that he had no
knowledge of the deed and he never affixed his signature thereon.
MTC ruled in favor of the respondents and granted their complaint for unlawful detainer.
Unconvinced, petitioner appealed to the RTC. The RTC affirmed in toto the judgment of the MTC. It
held that respondents have a better right over the subject property than petitioner. The RTC also
affirmed that respondents merely tolerated the possession of petitioner.
Aggrieved, petitioner sought relief before the CA. CA denied the petition. Hence, this petition.

ISSUE:
Whether or not respondents have a cause of action to eject petitioner from the subject property?

RULING:
No. The court ruled that petitioner’s wife Carolina and Erlinda as siblings are co-owners of the
house subject in litigation. From the documentary records, the property covered by OCT No.
2011000008 is co-owned by Carolina and Erlinda. Being co-owners of the property, they are also the
co-owners of the improvement thereon, including the subject house. This is clear from the Deed of
Absolute Sale of Unregistered Land dated August 2, 2000, executed in favor of Erlinda and Carolina,
whereby the three heirs of Vicenta Galvez, namely, Filomena Rodriguez Rivera, Enriqueta Rodriguez
and Rosalina Rodriguez sold, transferred and conveyed, absolutely and unconditionally, the subject
"parcel of land, with improvements" to the "two," "their heirs or assigns, free from all liens and
encumbrances."
Respondents cannot rely on the Extrajudicial Settlement of Estate with Waiver of Rights dated
October 11, 2011, whereby Filomena and Rosalina waived their rights over the house in favor of
Erlinda. The reason is as clear as daylight. On said date, Filomena and Rosalina no longer had the
right to convey the house as they were no longer the owners thereof. As evidenced by the August 2,
2000 deed of sale of unregistered land, they already sold the property together with the improvements
to the two sisters, Carolina and Erlinda. In fact, the title has been placed in Carolina's name, pursuant
Page 7 of 57
to their agreement, "Pagkakaloob ng Bahagi ng Lupa na may Kasunduan. " No one can give what one
does not have (Nemo dat quad non habet).
Being a co-owner of the property as heir of Carolina, petitioner cannot be ejected from the
subject property. In a co-ownership, the undivided thing or right belong to different persons, with each
of them holding the property pro indiviso and exercising his rights over the whole property. Each co-
owner may use and enjoy the property with no other limitation than that he shall not injure the interests
of his co-owners. The underlying rationale is that until a division is actually made, the respective share
of each cannot be determined, and every co-owner exercises, together with his co-participants, joint
ownership of the pro indiviso property, in addition to his use and enjoyment of it.
Ultimately, respondents do not have a cause of action to eject petitioner based on tolerance
because the latter is also entitled to possess and enjoy the subject property. Corollarily, neither of the
parties can assert exclusive ownership and possession of the same prior to any partition. If at all, the
action for unlawful detainer only resulted in the recognition of co-ownership between the parties over
the residential house.
The Court notes that respondents have recognized the co-ownership insofar as the parcel of
land is concerned when they alleged47 in their complaint for unlawful detainer their intention to partition
the same. They assert, however, exclusive ownership over the residential house standing thereon by
virtue of the deed of donation and extra judicial settlement of estate. The documentary evidence,
however, shows that the parties are also co-owners of the residential house.
The parties, being co-owners of both the land and the building, the remedy of the respondents is
to file an action for partition. Article 494 of the New Civil Code reads:
No co-owner shall be obliged to remain in the co-ownership. Each co-owner may
demand at any time the partition of the thing owned in common, insofar as his share is
concerned.

Page 8 of 57
 SPOUSES JOSE MANUEL and MARIA ESPERANZA RIDRUEJO STILIANOPOULOS, Petitioners
vs.
THE REGISTER OF DEEDS FOR LEGAZPI CITY and THE NATIONAL TRASURER, Respondents

G.R. No. 224678; July 3, 2018

En Banc
PERLAS BERNABE, J.:

TOPIC: Claim against Assurance Fund; Implied Trust; Purchaser in good faith
NATURE OF THE ACTION: Complaint for Declaration of Nullity of Transfer Certificate of Title and
Recovery of Possession

FACTS:
A Complaint for Declaration of Nullity of TCT No. 42486, Annulment of TCT No. 52392 and TCT
No. 59654, and Recovery of Possession of Lot No. 1320 with Damages was filed by petitioners against
respondents.
Petitioners alleged that they own a 6,425-square meter property known as Lot No. 1320, as
evidenced by TCT No. 134507 in the name of Jose Manuel, who is a resident of Spain and without any
administrator of said property in the Philippines. On October 9, 1995, Anduiza caused the cancellation
of TCT No. 13450 and issuance of TCT No. 424869 in his name. Thereafter, Anduiza mortgaged Lot
No. 1320 to Rowena. As a result of Anduiza's default, Rowena foreclosed the mortgage, and
consequently, caused the cancellation of TCT No. 42486 and issuance of TCT No. 52392 in her name
on July 19, 2001. On April 15, 2008, Rowena then sold Lot No. 1320 to the Co Group, resulting in the
cancellation of TCT No. 52392 and issuance of TCT No. 5965414 in the latter's name.
According to petitioners, their discovery of the aforesaid transactions only on January 28, 2008
prompted them to file a complaint for recovery of title on May 2, 2008. But such complaint was
dismissed for petitioners’ failure to allege the assessed value of Lot 1320. Thus, they filed this subject
complaint.
In their defense, Sps. Amurao and the Co Group both maintained that they purchased Lot No.
1320 in good faith and for value, and that petitioners' cause of action has already prescribed,
considering that they only had ten (10) years from the issuance of TCT No. 42486 in the name of
Anduiza on October 9, 1995 within which to file a complaint for recovery of possession.
RTC, dismissed the case against Spouses Amurao and the Co Group as they were shown to be
purchasers in good faith and for value. RTC also found Anduiza guilty of fraud in causing the
cancellation of petitioners' TCT over Lot No. 1320, and thus, ordered him to pay petitioners the amount
of Php782,500.00 representing the market value of Lot No. 1320, as well as Pl0,000.00 as exemplary
damages. It also held the National Treasurer, as custodian of the Assurance Fund, subsidiarily liable to
Anduiza's monetary liability should the latter be unable to fully pay the same.
Prefatorily, the RTC characterized the subject complaint filed on March 18, 2009 as one for
reconveyance based on an implied trust, which is subject to extinctive prescription of ten (10) years
ordinarily counted from the time of the repudiation of the trust, i.e., when Anduiza registered TCT No.
42486 in his name on October 9, 1995.
Aggrieved, petitioner moved for reconsideration. While RD-Legazpi City and National Treasurer
moved for a partial reconsideration. But both motions were denied by the court. As such, only the
appeal of the RD-Legazpi and the National Treasurer questioning the subsidiary liability of the
Assurance Fund was elevated to the CA.
On appeal, the CA reversed and set aside the RTC's ruling insofar as the National Treasurer's
subsidiary liability was concerned. It held that petitioners only had six (6) years from the time Anduiza
caused the cancellation of TCT No. 13450 on October 9, 1995, or until October 9, 2001, within which to
claim compensation from the Assurance Fund. Since petitioners only filed their claim on March 18,
2009, their claim against the Assurance Fund is already barred by prescription. Hence, this petition.

ISSUE:
Whether or not the CA correctly held that petitioners' claim against the Assurance Fund has
already been barred by prescription?
Page 9 of 57
RULING:
No. The Court reinstated the decision of the RTC.
The Assurance Fund is a long-standing feature of our property registration system which is
intended “to relieve innocent persons from the harshness of the doctrine that a certificate is conclusive
evidence of an indefeasible title to land”. Originally, claims against the Assurance Fund were governed
by Section 10154 of Act No. 496, otherwise known as the "Land Registration Act." The language of this
provision was substantially carried over to our present "Property Registration Decree”.
In Register of Deeds of Negros Occidental v. Anglo, Sr., the Court held that "based solely on
Section 95 of Presidential Decree No. 1529, the following conditions must be met: First, the individual
must sustain loss or damage, or the individual is deprived of land or any estate or interest. Second, the
individual must not be negligent. Third, the loss, damage, or deprivation is the consequence of either
(a) fraudulent registration under the Torrens system after the land's original registration, or (b) any
error, omission, mistake, or misdescription in any certificate of title or in any entry or memorandum in
the registration book. And fourth, the individual must be barred or otherwise precluded under the
provision of any law from bringing an action for the recovery of such land or the estate or interest
therein.”
Anent the first ground (i.e., item a of the third condition above), it should be clarified that loss,
damage, or deprivation of land or any estate or interest therein through fraudulent registration alone is
not a valid ground to recover damages against the Assurance Fund. Section 101 of PD 1529 explicitly
provides that "the Assurance Fund shall not be liable for any loss, damage or deprivation caused or
occasioned by a breach of trust, whether express, implied or constructive or by any mistake in the
resurvey or subdivision of registered land resulting in the expansion of area in the certificate of title." It
is hornbook doctrine that “when a party uses fraud or concealment to obtain a certificate of title of
property, a constructive trust is created in favor of the defrauded party."
Article 1456. If Property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.
However, as stated in Section 101 of PD 1529, the inability to recover from the defrauding party
does not make the Assurance Fund liable therefor.
Instead, the loss, damage or deprivation becomes compensable under the Assurance Fund
when the property has been further registered in the name of an innocent purchaser for value. This is
because in this instance, the loss, damage or deprivation are not actually caused by any breach of trust
but rather, by the operation of the Torrens system of registration which renders indefeasible the title of
the innocent purchaser for value. To note, it has been held that a mortgagee in good faith (such as
Rowena) stands as an innocent mortgagee for value with the rights of an innocent purchaser for value.
In sum, the Court herein holds that an action against the Assurance Fund on the ground of
"fraudulent registration under the Torrens system after the land's original registration" may be brought
only after the claimant's property is registered in the name of an innocent purchaser for value. This is
because it is only after the registration of the innocent purchaser for value's title (and not the usurper's
title which constitutes a breach of trust) can it be said that the claimant effectively "sustains loss or
damage, or is deprived of land or any estate or interest therein in consequence of the bringing of the
land under the operation of the Torrens system." The registration of the innocent purchaser for value's
title is therefore a condition sine qua non in order to properly claim against the Assurance Fund.
Here, the Court ruled that prescription, for purposes of determining the right to bring an action
against the Assurance Fund, should be reckoned from the moment the innocent purchaser for value
registers his or her title and upon actual knowledge thereof of the original title holder/claimant. As
above-discussed, the registration of the innocent purchaser for value's title is a prerequisite for a claim
against the Assurance Fund on the ground of fraud to proceed, while actual knowledge of the
registration is tantamount to the discovery of the fraud.
The constructive notice rule holds no application insofar as reckoning the prescriptive period for
Assurance Fund cases. Instead, the six (6)-year prescriptive period under Section 102 of PD 1529
should be counted from January 28, 2008, or the date when petitioners discovered the anomalous
transactions over their property, which included the registration of Rowena's title over the same. Thus,
when they filed their complaint on March 18, 2009, petitioners' claim against the Assurance Fund has
not yet prescribed.

Page 10 of 57
 HEIRS OF ERNESTO MORALES namely: ROSARIO M. DANGSALAN, EVELYN M. SANGALAN,
NENITA M. SALES, ERNESTO JOSE MORALES, JR., RAYMOND MORALES and MELANIE
MORALES, Petitioners
vs.
ASTRID MORALES AGUSTIN represented by her Attorney-in0fact EDGARDO TORRES,
Respondent

G.R. No. 224849; June 6, 2018

Second Division
REYES, JR., J.:

TOPIC: Partition of Inheritance; Collation

NATURE OF THE ACTION: Complaint for Partition

FACTS:
Respondent Astrid Morales Agustin, is a grandchild of Jayme Morales, who was the registered
owner of a parcel of land located in Laoag City. The respondent initiated the instant complaint, originally
together with Lydia Morales another grandchild of Jayme for the partition of Jayme’s property. They
alleged that they, together with the petitioners and their other cousins, were co-owners of the subject
property by virtue of their successional rights as heirs of Jayme.
Jayme and his wife both died intestate, were their four (4) children: Vicente Morales, Simeon
Morales, Jose Morales and Martina Morales- Enriquez. Vicente Morales was survived by his children:
(a) herein deceased defendant Ernesto Morales (substituted by his heirs who are now petitioners
herein); (b) Abraham Morales (also deceased); (c) former plaintiff and, eventually, defendant Lydia
Morales (now also deceased); and (d) original defendant Angelita Ragasa.
In response to the respondent's complaint, the heirs of Jose Morales filed an answer, interposed
no objection to the partition, "provided that their present positions on the subject property are
respected.”
On the other hand, Ernesto Morales, as one of the heirs of Vicente Morales, filed an Answer
with Motion to Dismiss. He alleged that herein respondent has no cause of action against the
petitioners because: (1) the proper remedy should not be a complaint for partition but an action for the
settlement of the intestate estate of Jayme and his wife; and (2) herein respondent has no more right of
participation over the subject property because the same has long been conveyed to Ernesto Morales
by the respondent's parents, Simeon and Leonila Morales.
The R TC ruled that: (1) the estate of a deceased who died intestate may be partitioned without
need of any settlement or administration proceeding.
Aggrieved, the petitioners elevated the case to the CA, which thereafter dismissed the appeal
and affirmed the RTC Decision. The CA opined that the settlement of the entire estate of the late
spouses Jayme and Telesfora is "of no moment in the instant case of partition" because the respondent
was "asserting her right as a co-owner of the subject property by virtue of her successional right from
her deceased father Simeon Morales, who was once a co-owner of the said property, and not from
Jayme and Telesfora Morales." Hence, this petition. The petitioners argue that an administration
proceeding for the settlement of the estate of the deceased is a condition that has to be met before any
partition of the estate and any distribution thereof to the heirs could be effected.

ISSUE:
Whether or not the partition of the subject property is proper despite the absence of the
settlement of the estate of the deceased registered owner?

RULING:
No. While the Court does not agree with this assertion by the petitioners, the Court,
nonetheless, agrees that the trial court should have collated Jayme's other properties, if any, prior to
the promulgation of any judgment of partition in accordance with the laws on Succession.

Page 11 of 57
 Generally, an action for partition may be seen to simultaneously present two issues: first, there
is the issue of whether the plaintiff is indeed a co-owner of the property sought to be partitioned; and
second, assuming that the plaintiff successfully hurdles the first issue, there is the secondary issue of
how the property is to be divided between the plaintiff and defendants, i.e., what portion should go to
which co-owner.
The Court must emphasize, however, that this definition does not take into account the
difference between (1) an action of partition based on the successional rights of the heirs of a
decedent, and (2) an ordinary action of partition among co-owners. While oftentimes interchanged with
one another, and although in many ways similar, these two partitions draw legal basis from two different
sets of legal provisions in the Civil Code of the Philippines (Civil Code).
To begin with, the laws governing the partition of inheritance draws basis from Article 777 of the
Civil Code, which states that the rights to the succession are transmitted from the moment of the death
of the decedent. As such, from that moment, the heirs, legatees, and devisees' successional rights are
vested, and they are considered to own in common the inheritance left by the decedent.
Under the law, partition of the inheritance may only be effected by (1) the heirs themselves
extrajudicially, (2) by the court in an ordinary action for partition, or in the course of administration
proceedings, (3) by the testator himself, and (4) by the third person designated by the testator.
Particularly, according to Article 1078 of the Civil Code, where there are two or more heirs, the
whole estate of the decedent is owned in common by such heirs, subject to the payment of debts of the
deceased. Partition, the Civil Code adds, is the separation, division and assignment of a thing held in
common among those to whom it may belong. Thus, every act which is intended to put an end to
indivision among co-heirs and legatees or devisees is deemed to be a partition, although it should
purport to be a sale, an exchange, a compromise, or any other transaction.
In addition, and on account of this partition, Article 1061 of the Civil Code requires the parties to
collate the properties of the decedent which they may have received by way of gratuitous title prior to
the former' s death, to wit:

Article 1061. Every compulsory heir, who succeeds with other compulsory heirs,
must bring into the mass of the estate any property or right which he may have received
from the decedent, during the lifetime of the latter, by way of donation, or any other
gratuitous title, in order that it may be computed in the determination of the legitime of
each heir, and in the account of the partition.

In the case at hand, the parties are the heirs of the late Jayme Morales. The land being sought
to be divided was a property duly registered under Jayme's name. Necessarily, therefore, the partition
invoked by the respondents is the partition of the estate of the deceased Jayme. As such, when the
petitioners alleged in their answer that there is yet another property that needs to be partitioned among
the parties, they were actually invoking the Civil Code provisions, not on Co-ownership, but on
Succession, which necessarily includes Article 1061 of the Civil Code-the provision on collation. It is
therefore proper for the trial court to have delved into this issue presented by the petitioner instead of
disregarding the same and limiting itself only to that singular property submitted by the respondent for
partition. Nonetheless, lest it be misunderstood, the law does not prohibit partial partition. In fact, the
Court, in administration proceedings, have allowed partition for special instances. But the Court should
caution that this power should be exercised sparingly. This is because a partial partition and distribution
of the estate does not put to rest the question of the division of the entire estate.
In this case, the Court is of the opinion that there is no cogent reason to render the partition of
one of Jayme's properties and totally ignore the others, if any. Absent any circumstance that would
warrant the partial partition and distribution of Jayme's estate, the prudent remedy is to settle the
entirety of the estate in the partition proceedings in the court a quo. Besides, as stated by the Court in
Gulang, it is quite unnecessary to require the plaintiff to file another action, separate and independent
from that of partition originally instituted. This would entail wastage of additional time and resources,
which could already be avoided through consolidated proceedings in the court a quo.
In sum, the factual milieu of this case presents questions of facts which are crucial in the
complete resolution of the controversy. The Court finds sufficiency in the trial court's decision with
regard to the summons directed against the warring heirs-as submitted by the respondent, but also
finds error in the trial court's refusal to delve into the genuine issue concerning the partition of the

Page 12 of 57
subject property-as submitted by the petitioners. In the end, only a full-blown trial on the merits of each
of the parties' claims-and not a mere summary judgment-could write finis on this family drama.
The case is ordered remanded to the RTC for further proceedings.

AMPARO S. CRUZ; ERNESTO HALILI; ALICIA H. FLORENCIO; DONALD HALILI; EDITHA H.

RIVERA; ERNERSTO HALILI, JR.; and JULITO HALILI, Petitioners
vs.
ANGELITO S. CRUZ, CONCEPCION S. CRUZ, SERAFIN S. CRUZ and VICENTA S. CRUZ,
Respondents

G.R. No. 211153; February 28, 2018

First Division
DEL CASTILLO, J.:

TOPIC: Extra-Judicial Settlement of Estate

NATURE OF THE ACTION: Complaint to Annul the Deed of Extra-Judicial Settlement of Estate

FACTS:
Respondents filed a complaint to annul the deed of extra-judicial settlement of estate. They
alleged that they—together with their siblings’ petitioners Amparo and Antonia Cruz inherited a 940
square meter parcel of land from their late parents. The parties executed a deed of extrajudicial
settlement of estate covering the subject property on the agreement that each heir was to receive an
equal portion. When the said property was being subdivided the respondents discovered that Antonia
was allocated two lots as against 1 each for the respondents. The same contravened with the
agreement among the heirs that they would receive equal shares. They further alleged that Amparo
and Antonia were able to perpetrate the fraud by inducing Concepcion --who was illiterate -to sign the
deed of extrajudicial settlement of estate, which was written in the English language, without previously
reading and explaining the contents thereof to the latter. Antonia passed away, but left as her heirs
herein petitioners Ernesto Halili, Alicia H. Florencio, Donald Halili, Editha H. Rivera, Ernesto Halili, Jr.
and Julito Halili, who are in possession of the two lots allocated to Antonia.
In their Answer, petitioners prayed for the dismissal of the case claiming that the deed of
extrajudicia1 settlement of estate had been voluntarily and freely executed by the parties, free from
vitiated consent; that respondents' cause of action has prescribed; that the complaint failed to state a
cause of action; and that no earnest efforts toward compromise have been made.
RTC rendered its decision dismissing the complaint. Moreover, fraud, as basis of the Complaint,
is not delineated therein with particularity. Under Sec. 5 Rule 8, fraud must be alleged specifically, not
generally. Nonetheless, apart from such allegations, no clear and convincing evidence was presented
by plaintiffs. The RTC ruled that just like any other contracts, parties in an extra-judicial settlement are
given wide latitude to stipulate terms and conditions they feel fair and convenient beneficial to one and
prejudicial to the other. By tradition and good customs, equality is relaxed if only to buy peace, or out of
compassion or courtesy. So long as not contrary to strict provisions of the law, the supremacy of
contracts shall be respected. Being consensual, extra-judicial settlement is deemed perfected once
mutual consent is manifested. Notarization being a mere formality, whatever its infirmity cannot
invalidate a contract but at most, merely ensue to administrative sanction on the part of their notary.
Even so, unless a strong clear and convincing evidence is shown, a document, one appeared
notarized, becomes a public document. As between a public document and mere allegations of
plaintiffs, the former prevails.
On appeal the Court of Appeals completely reversed and set aside the RTC's judgment and the
parties' deed of extrajudicial settlement. There was no valid consent. That in the testimony of
Concepcion she clearly denied any knowledge of the import and implication of the subject document
she signed, the subject extra-judicial settlement. She asserted that she does not understand English,
the language in which the terms of the subject document she signed was written. Hence, this instant
petition.

ISSUE:
Whether the CA erred in ruling in favor of Conception and setting aside the deed of extrajudicial
settlement?
Page 13 of 57
RULING:
No. The Court ruled that the CA was correct in ruling in favor of Concepcion and setting aside
the subject deed of extrajudicial settlement, it erred in appreciating and ruling that the case involved
fraud -thus applying the four-year prescriptive period -when it should have simply held that the action
for the declaration of nullity of the defective deed of extrajudicial settlement does not prescribe, under
the circumstances, given that the same was a total nullity. Clearly, the issue of literacy is relevant to the
extent that Concepcion was effectively deprived of her true inheritance, and not so much that she was
defrauded.
Under the law, "the children of the deceased shall always inherit from him in their own right,
dividing the inheritance in equal shares." In this case, two of Concepcion's co-heirs renounced their
shares in the subject property; their shares therefore accrued to the remaining co-heirs, in equal shares
as well.
The effect of excluding the heirs in the settlement of estate was elucidated in Segura v. Segura,
thus:
It is clear that Section 1 of Rule 74 does not apply to the partition in question
which was null and void as far as the plaintiffs were concerned. The rule covers only
valid partitions. The partition in the present case was invalid because it excluded six of
the nine heirs who were entitled to equal shares in the partitioned property. Under the
rule 'no extrajudicial settlement shall be binding upon any person who has not
participated therein or had no notice thereof.' As the partition was a total nullity and did
not affect the excluded heirs, it was not correct for the trial court to hold that their right to
challenge the partition had prescribed after two years from its execution ...

However, while the settlement of the estate is null and void, the subsequent sale
of the subject properties made by Enrique and his children, Napoleon, Alicia and
Visrninda, in favor of the respondent is valid but only with respect to their proportionate
shares therein. It cannot be denied that these heirs have acquired their respective
shares in the properties of Anunciacion from the moment of her death and that, as
owners thereof, they can very well sell their undivided share in the estate.

On the issue of prescription, the Court agrees with petitioners that the present
action has not prescribed in so far as it seeks to annul the extrajudicial settlement of the
estate. Contrary to the ruling of the CA the prescriptive period of 2 years provided in
Section 1 Rule 74 of the Rules of Court reckoned from the execution of the extrajudicial
settlement finds no application to petitioners Eutropia, Victoria and Douglas, who were
deprived of their lawful participation in the subject estate. Besides an 'action or defense
for the declaration of the inexistence of a contract does not prescribe' in accordance with
Article 1410 of the Civil Code.

Page 14 of 57
 ST. MARTIN POLYCLINIC, INC., Petitioner,
vs.
LWV CONSTRUCTION CORPORATION, Respondent.

G.R. No. 217426; December 4, 2017

Second Division
PERLAS-BERNABE, J.:

TOPIC: Quasi-Delict
NATURE OF THE ACTION: Complaint for Sum of Money and Damages

FACTS:
Respondent is engaged in the business of recruiting Filipino workers for deployment to Saudi
Arabia and petitioner is an accredited member of the Gulf Cooperative Council Approved Medical
Centers Association (GAMCA) authorized to conduct medical examinations of prospective applicants
for overseas employment.

Jonathan V. Raguindin an applicant was referred by respondent to petitioner for a pre-

deployment medical examination, in accordance with the instructions from GAMCA. Petitioner cleared
Raguindin after the examinations and found him “fit for employment”. Based on the same, the
respondent deployed Raguindin to Saudi Arabia. Unfortunately, Raguindin underwent another medical
examination with the General Care Dispensary of Saudi Arabia (General Care Dispensary), he
purportedly tested positive for HCV or the hepatitis C virus leading to Raguindin’s repatriation to the
Philippines.

Claiming that petitioner was reckless in issuing its Medical Report, respondent filed a Complaint
for sum of money and damages against petitioner before MeTC.

In its Answer with compulsory counterclaim, petitioner denied liability and claimed that: first,
respondent was not a proper party in interest for lack of privity of contract between them; second, the
MeTC had no jurisdiction over the case as it involves the interpretation and implementation of a
contract of employment; third, the action is premature as Raguindin has yet to undergo a post-
employment medical examination following his repatriation; and fourth, the complaint failed to state a
cause of action as the Medical Report issued by petitioner had already expired on April 11, 2008, or
three (3) months after its issuance on January 11, 2008.

MeTC ruled in favor of respondent. Aggrieved, petitioner filed appealed to the RTC. The RTC
dismissed the appeal and affirmed the decision of the MeTC. Petitioner’s motion for reconsideration
was likewise denied. Dissatisfied, petitioner elevated the case to the CA. The CA affirmed the decision
of the RTC. Hence, this petition.

ISSUE:
Whether or not petitioner was negligent in issuing the Medical Report declaring “fit for
employment” and hence should be held liable for damages?

RULING:
No. The Court ruled that an action for damages due to negligence of another may be instituted
on the basis of Article 2176 of the Civil Code, which defines a quasi-delict:

Article 2176. Whoever 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 called a quasi-delict and is governed by
the provisions of this Chapter.

Page 15 of 57
 The elements of a quasi-delict are: (1) an act or omission; (2) the presence of fault
or negligence in the performance or non-performance of the act; (3) injury; (4) a causal
connection between the negligent act and the injury; and (5) no pre-existing contractual
relation.
As a general rule, any act or omission coming under the purview of Article 2176 gives rise to a
cause of action under quasi-delict. This, in turn, gives the basis for a claim of damages. Notably, quasi-
delict is one among several sources of obligation. Article 1157 of the Civil Code states:
Article 1157. Obligations arise from:
1. Law
2. Contracts
3. Quasi-Contracts
4. Acts or omissions punished by law; and
5. Quasi-delicts.
However, as explained by Associate Justice Marvic M.V.F. Leonen (Justice Leonen) in his
opinion in Alano v. Magud-Logmao, "Article 2176 is not an all-encompassing enumeration of all
actionable wrongs which can give rise to the liability for damages. Under the Civil Code, acts done in
violation of Articles 19, 20, and 21 will also give rise to damages."

Negligence is defined as the 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.

As early as the case of Picart v. Smith, the Court elucidated that "the test by which to determine
the existence of negligence in a particular case 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.” x x x

Under our Rules of Evidence, it is disputably presumed that a person takes ordinary care of his
concerns and that private transactions have been fair and regular. In effect, negligence cannot be
presumed, and thus, must be proven by him who alleges it.

The records of this case show that the pieces of evidence mainly relied upon by respondent to
establish petitioner's negligence are: (a) the Certification dated April 28, 2008; and (b) the HCV
Confirmatory Test Report. However, these issuances only indicate the results of the General Care
Dispensary and Ministry of Health's own medical examination of Raguindin finding him to be positive for
HCV. Notably, the examination conducted by the General Care Dispensary, which was later affirmed by
the Ministry of Health, was conducted only on March 24, 2008, or at least two (2) months after
petitioner issued its Medical Report on January 11, 2008. Hence, even assuming that Raguindin's
diagnosis for HCV was correct, the fact that he later tested positive for the same does not convincingly
prove that he was already under the same medical state at the time petitioner issued the Medical
Report on January 11, 2008. In this regard, it was therefore incumbent upon respondent to show that
there was already negligence at the time the Medical Report was issued, may it be through evidence
that show that standard medical procedures were not carefully observed or that there were already
palpable signs that exhibited Raguindin's unfitness for deployment at that time. This is hardly the case
when respondent only proffered evidence which demonstrate that months after petitioner's Medical
Report was issued, Raguindin, who had already been deployed to Saudi Arabia, tested positive for
HCV and as such, was no longer "fit for employment".

In fact, there is a reasonable possibility that Raguindin became exposed to the HCV only after
his medical examination with petitioner on January 11, 2008. Based on published reports from the
World Health Organization, HCV or the hepatitis C virus causes both acute and chronic infection. Acute
HCV infection is usually asymptomatic, and is only very rarely associated with life-threatening diseases.
The incubation period for HCV is two (2) weeks to six (6) months, and following initial infection,
approximately 80% of people do not exhibit any symptoms. Indisputably, Raguindin was not deployed
to Saudi Arabia immediately after petitioner's medical examination and hence, could have possibly
contracted the same only when he arrived thereat. In light of the foregoing, the CA therefore erred in
holding that "[h]ad petitioner more thoroughly and diligently examined Raguindin, it would likely have
discovered the existence of the HCV because it was contrary to human experience that a newly-
deployed overseas worker, such as Raguindin, would immediately have contracted the disease at the
beginning of his deployment"

While petitioner's Medical Report indicates an expiration of April 11, 2008, the Court finds it
fitting to clarify that the same could not be construed as a certified guarantee coming from petitioner
that Raguindin's medical status at the time the report was issued on January 11, 2008 (i.e., that he was
fit for employment) would remain the same up until that date (i.e., April 11, 2008). As earlier intimated,
Page 16 of 57
the intervening period could very well account for a number of variables that could have led to a change
in Raguindin's condition, such as his deployment to a different environment in Saudi Arabia. If at all, the
expiration date only means that the Medical Report is valid - and as such, could be submitted - as a
formal requirement for overseas employment up until April 11, 2008; it does not, by any means, create
legal basis to hold the issuer accountable for any intervening change of condition from the time of
issuance up until expiration. Truly, petitioner could not be reasonably expected to predict, much less
assure, that Raguindin's medical status of being fit for employment would remain unchanged. Thus, the
fact that the Medical Report's expiration date of April 11, 2008 was only seventeen (17) days away from
the issuance of the General Care Dispensary's April 28, 2008 Certification finding Raguindin positive for
HCV should not - as it does not - establish petitioner's negligence.

JOSE SANICO AND VICENTE CASTRO, Petitioners, 

v. 
WERHERLINA P. COLIPANO, Respondent.

G.R. No. 209969; September 27, 2017

Second Division
CAGUIOA, J.:

TOPIC: Breach of Obligations

NATURE OF THE ACTION: Complaint for Breach of Contract of Carriage and Damages

FACTS:
Respondent filed a complaint for breach of contract of carriage and damages against
petitioners. Respondent claimed that she and her daughter were paying passengers in the jeepney
operated by Sanico which was driven by Castro. Further, that she was made to sit on an empty beer
case at the edge of the entrance/exit of the jeepney with her child on her lap. And at an uphill the
jeepney slid backwards because it did not have the power to reach the top. Respondent’s left foot
slipped and got crushed between the step board and a coconut tree which the jeepney bumped,
causing the jeepney to stop its backward movement. Respondent’s leg was badly injured and was
eventually amputated. Respondent prayed for actual damages, loss of income, moral damages,
exemplary damages, and attorney’s fees.
Petitioners in their answer admitted that respondents’ leg was crushed and amputated but
claimed that it was due to her fault. That the conductor instructed everyone not to panic but respondent
tried to disembark. Also, that the petitioner Sanico paid for all the hospital and medical expenses and
that respondent freely and voluntarily executed an Affidavit of Desistance and Release of Claim.
RTC ruled that petitioners breached the contract of carriage between them and awarded
respondent with only actual damages and compensatory damages.
Only petitioners appealed to Court of Appeals, which affirmed with modification the RTC
decision. Without moving for the reconsideration petitioners filed this petition.

ISSUE:
Whether or not Sanico and Castro breached the contract of carriage with respondent as such is
liable for breach of obligation?

RULING:
Yes. But the Court ruled that it is only petitioner Sanico breached the contract of carriage. Here,
it is beyond dispute that Colipano was injured while she was a passenger in the jeepney owned and
operated by Sanico that was being driven by Castro. Both the CA and RTC erroneously found both
petitioners jointly and severally liable because only Sanico was the party to the contract of carriage with
Colipano. Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico
is direct as the contract is between him and Colipano. Castro being merely the driver of Sanico’s
jeepney, cannot be made liable as he is not a party to the contract of carriage.
Specific to a contract of carriage, the Civil Code requires common carriers to observe
extraordinary diligence in safely transporting their passengers. Article 1733 of the Civil Code states:

ART. 1733. 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 and
for the safety of the passengers transported by them, according to all the circumstances
of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in
Articles 1734, 1735 and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the
safety of the passengers is further set forth in Articles 1755 and 1756.

Page 17 of 57
 This extraordinary diligence, following the Article 1755 of the Civil Code means that common
carriers have the obligation to carry passengers as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances.
The evidence indubitably established Sanico's negligence when Castro made Colipano sit on an
empty beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on her lap,
which put her and her child in greater peril than the other passengers.
The only defenses available to common carriers are (1) proof that they observed extraordinary
diligence as prescribed in Article 1756, and (2) following Article 1174 of the Civil Code, proof that the
injury or death was brought about by an event which "could not be foreseen, or which, though foreseen,
were inevitable," or a fortuitous event.
The Court finds that neither of these defenses obtain. Thus, Sanico is liable for damages to
Colipano because of the injury that Colipano suffered as a passenger of Sanico’s jeepney.
SPOUSES ELLIS R. MILES and CAROLINA RONQUILLO-MILES, Petitioners 
vs.
BONNIE BAUTISTA LAO, Respondent
G.R. No. 209544; November 22, 2017
First Division
TIJAM, J.:

TOPIC: Obligatory Force of Contracts

NATURE OF THE ACTION: Cancellation of Mortgage

FACTS:

Sps. Miles claimed that they became the registered owner of a parcel of land located in Makati
City sometime on March 28, 1983. They alleged that before they left for the United States, they
entrusted the duplicate of the TCT of the subject property to their niece, defendant Rodora Jimenez so
that she may offer the same to interested buyers. They also claimed that no written SPA to sell was
given to Rodora. Here, they alleged that Rodora and Sps. Ocampo conspired and made it appear,
through falsified Deed of Donation, that petitioners were donating the subject property to Sps. Ocampo,
a new title was issued in the name of the latter.

Later on, petitioners claimed that through falsification, Sps. Ocampo caused the execution of a
falsified Real Estate Mortgage in favor of respondent Lao with the subject property was security in
exchange of a loan in the amount of 2,5000,000.00. Since the Sps. Ocampo failed to pay the same,
respondent foreclosed the mortgage. As such, petitioners prayed for the cancellation of the new title,
nullification of the Deed of Donation, the mortgage and the cancellation of the mortgage inscription on
the title of the property.

All defendants denied that there was collusion among them. Respondent Lao alleged that she
entered into a mortgage contract with Sps. Ocampo without knowledge that their title was defective.

RTC ruled in favor of petitioners. Only respondent Lao appealed to the Court of Appeals. The
CA, reversed the decision of the RTC and ruled that respondent is a mortgagee in good faith.
Petitioners filed a motion for reconsideration but was denied. Hence, this petition.

ISSUE:
Whether or not the respondent may be considered a mortgagee in good faith?

RULING:
Yes. The Court ruled that there is indeed 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 buyers or mortgagees dealing with property covered by
a Torrens Certificate of Title are not required to go beyond what appears on the face of the title.

Indeed, 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, the
mortgagee has no obligation to undertake further investigation. This doctrine presupposes, however,
that the mortgagor, who is not the rightful owner of the property, has already succeeded in obtaining
Torrens title over the property in his name and that, after obtaining the said title, he succeeds in
mortgaging the property to another who relies on what appears on the title.

Page 18 of 57
 The Court, in the case of Andres, et al. vs. Philippine National Bank, explained the dynamics of
the burden of discovery in said doctrine, to wit:

The doctrine protecting mortgagees and innocent purchasers in good faith emanates
from the social interest embedded in the legal concept granting indefeasibility of titles.
The burden of discovery of invalid transactions relating to the property covered by a title
appearing regular on its face is shifted from the third party relying on the title to the co-
owners or the predecessors of the title holder. Between the third party and the co-
owners, it will be the latter that will be more intimately knowledgeable about the status of
the property and its history. The costs of discovery of the basis of invalidity, thus, are
better borne by them because it would naturally be lower. A reverse presumption will only
increase costs for the economy, delay transactions, and, thus, achieve a less optimal
welfare level for the entire society.

In 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. In this case, the title
of the property under the name of spouses Ocampo was already registered as early as May 6, 1998,
while the real estate mortgage was executed December 16, 1998. Hence, it is clear that respondent
had every right to rely on the TCT presented to her insofar as the mortgagors' right of ownership over
the subject property is concerned.

Page 19 of 57
 ASIAN TERMINALS, INC., Petitioner
vs.
PADOSON STAINLESS STEEL CORPORATION, Respondents

G.R. No. 211876; June 25, 2018

First Division
TIJAM, J.:

TOPIC: Principle of Relativity of Contracts

NATURE OF THE ACTION: Complaint for Collection of Sum of Money

FACTS:
Respondent Padoson Stainless Steel (Padoson) hired petitioner ATI to provide arrastre,
wharfage and storage services. ATI rendered storage services in relation to a shipment, consisting of
nine stainless steel coils and 72 hot-rolled steel coils which were imported in favor of Padoson, as
consignee. The shipments were stored within ATI's premises until they were discharged.
Meanwhile, the shipments became the subject of a Hold-Order issued by the Bureau of
Customs (BOC) due to Padoson’s tax liability over its shipment.
For the storage services it rendered, ATI made several demands from Padoson for the payment
of arrastre, wharfage and storage services. The demands, however, went unheeded. Which prompted
ATI to file a Complaint for Sum of Money Damages with prayer for the issuance of writ of preliminary
attachment before the RTC. In its Answer, Padoson claimed among others, that: (1) during the time
when the shipments were in ATI's custody and possession, they suffered material and substantial
deterioration; (2) ATI failed to exercise the extraordinary diligence required of an arrastre operator and
thus it should be held responsible for the damages; (3) the Hold-Order issued by the BOC was merely a
leverage to claim Padoson's alleged unpaid duties; (4) relative to the Customs case pending Padoson
filed a Motion for Ocular Inspection 11 and in the course of the inspection, Sheriff Romeo V. Diaz
(Sheriff Diaz) discovered that the shipments were found in an open area and were in a deteriorating
state; ( 5) due to this, Padoson was compelled to file a Manifestation and Motion praying for the release
of the shipments, which was in tum, granted by the RTC.
ATI countered that it exercise due diligence in the storage of the shipments and that the same
were withdrawn from its custody in the same condition and quantity as when they were unloaded from
the vessel.
RTC rendered its decision dismissing ATI’s complaint. The RTC reasoned out that by virtue of
the Hold-Order over Padoson's shipments, the BOC has acquired constructive possession over the
same. Consequently, the BOC should be the one liable to ATI's money claims. The RTC, however,
pointed out that since ATI did not imp lead the BOC in its complaint, the BOC cannot be held to answer
for the payment of the storage fees.
On appeal the RTC affirmed the decision of the RTC. CA pronounced that the RTC was correct
in holding that no relief may be given to both ATI and Padoson since the BOC was not impleaded in
ATI's complaint. Hence, this petition.

ISSUE:
Whether or not it is the BOC who is liable to ATI for the payment of storage fees for the services
rendered by ATI and not Padoson?

RULING:
No. The Court ruled that the Padoson is liable to ATI and not the BOC.
First, granting, without admitting, that the BOC has constructive possession over Padoson's
shipment, this does not, in itself release Padoson from its obligation to pay the storage fees due to ATI.
Page 20 of 57
It has been established that Padoson engaged ATI to perform arrastre, wharfage and storage services
over its shipments until it was discharged from ATI's premises. Although Padoson's shipments were the
subject of BOC's Hold-Order the fact remains that it was Padoson, and not BOC, that entered into a
contract of service with A TI and consequently was the one who was benefited therefrom.
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. Indeed, "where there is no privity of contract, there is likewise no
obligation or liability to speak about.” Guided by this doctrine, Padoson, cannot shift the burden of
paying the storage fees to BOC since the latter has never been privy to the contract of service between
Padoson and ATI. To rule otherwise would create an absurd situation wherein a private party may free
itself from liability arising from a contract of service, by merely invoking that the BOC has constructive
possession over its shipment by the issuance of a Hold-Order.
Second, the BOC's Hold-Order is not in any way related to the contract of service between A TI
and Padoson. Rather, it is directed at Padoson's shipment by reason of Padoson's tax liability and
which triggered the filing of the Customs Case. The BOC's exclusive jurisdiction over the shipment is
solely for the purpose of enforcing customs laws against Padoson's tax delinquency. The BOC's
interest over the shipment was limited to discharging its duty to collect Padoson's tax liability.
Clearly, in order to evade its liability, Padoson merely turned the table against ATI by arguing in
the RTC that due to the dismal condition of the shipment, ATI should be held liable. But, as We have
explained earlier, Padoson did hot adduce sufficient evidence to prove that A TI was negligent in the
storage of the shipment so as to entitle Padoson to recover damages. To put it differently, Padoson's
obligation with ATI for the storage fees and its computation thereon has already been settled by the
RTC and was no longer raised as an issue by Padoson. Thus, Padoson cannot now renege on its
obligation by merely attributing negligence to ATI.

Page 21 of 57
 ROLANDO DE ROCA, Petitioners
vs.
EDUARDO C. DABUYAN, JENNIFER A. BRANZUELA, JENNYLYN A. RICARTE and
HERMINIGILDO F. SABANTE, Respondents

G.R. No. 215281; March 5, 2018

First Division
DEL CASTILLO, J.:

TOPIC: Relativity of Contracts

NATURE OF THE ACTION: Complaint for Illegal Dismissal

FACTS:
Private respondents filed a complaint for illegal dismissal against “RAF Mansion Hotel Old
Management and New Management and Victoriano Ewayan." Later they amended the complaint and
included petitioner Rolando De Roca as co-respondent. Summons was issued and personally served to
petitioner but the bailiff of the NLRC. Despite service of the same, petitioner did not attend the
subsequent hearings prompting the labor arbiter to direct private respondents to submit position paper.
Petitioner filed a motion to dismiss on the ground of lack of jurisdiction. He alleged that while he
was the owner of RAF Mansion Hotel building, the same was being leased by Victoriano Ewayan., the
owner of Oceanics Travel and Tour Agency. Petitioner claims that Ewayan was the employer of private
respondents, Consequently, he asserted that there was no employer-employee relationship between
him and private respondents and the labor arbiter had no jurisdiction.
Labor Arbiter rendered decision directing petitioner to pay back wages and other monetary
award to private respondents. Labor Arbiter also denied the motion to dismiss.
Petitioner filed a petition for annulment of judgment on the ground of lack of jurisdiction before
the NLRC. However, the petition was dismissed because it was also filed beyond the period allowed by
the 2011 NLRC Rules of Procedure.
On appeal before the Court of Appeals via petition for Certiorari. Where he argued, among
others, that he was never an employer of the respondents, as he was merely the owner of the premises
which were leased out to and occupied by respondents' true employer, Victoriano Ewayan (Ewayan),
who owned Oceanic Travel and Tours Agency which operated the RAF Mansion Hotel where
respondents were hired. CA dismissed the petition.

ISSUE:
Whether or not petitioner is the respondent’s employer?

RULING:
No. The Court ruled that all throughout the proceedings, petitioner has insisted that he was not
the employer of respondents; that he did not hire the respondents, nor pay their salaries, nor exercise
supervision or control over them, nor did he have the power to terminate their services. In support of his
claim, he attached copies of a lease agreement -a Contract of Lease of a Building-executed by him and
Oceanic Tours and Travel Agency (Oceanic) represented by Ewayan through his attorney-in-fact
Marilou Buenafe. The agreement would show that petitioner was the owner of a building called the RAF
Mansion Hotel and that Oceanic agreed to lease the entire premises of RAF Mansion Hotel, including
the elevator, water pump, air conditioning units, and existing furnishings and all items found in the hotel
and included in the inventory list attached to the lease agreement.

Page 22 of 57
 Thus, it would appear from the fact on record and the evidence that petitioner's building was an
existing hotel called the "'RAF Mansion Hotel", which Oceanic agreed to continue to operate under the
same name. There is no connection between petitioner and Oceanic other than through the lease
agreement executed by them; they are not partners in the operation of RAF Mansion Hotel. It just so
happens that Oceanic decided to continue operating the hotel using the original name -"RAF Mansion
Hotel".
The only claim respondents have in resorting to implead petitioner as a co-respondent in the
labor case is the fact that he is the owner of the entire building called "RAF Mansion Hotel" which
happens to be the very same name of the hotel which Ewayan and Oceanic continued to adopt, for
reasons not evident in the pleadings. It must be noted as well that when they originally filed the labor
case, respondents did not include petitioner as respondent therein. It was only later on that they moved
to amend their complaint, impleading petitioner and thus amending the title of the case.
As correctly observed by petitioner, such belated attempt to implead him in the labor case must
be seen as an afterthought. Moreover, the fact that respondents recognize petitioner as embodying the
"new management" of RAF Mansion Hotel betrays an admission on their part that he had no hand in
the "old management" of the hotel under Ewayan, during which they were hired and maintained as
hotel employees -meaning that petitioner was never considered as Ewayan's partner and co-employer;
respondents merely viewing petitioner as the subsequent manager taking over from Ewayan, which
bolsters petitioner’s allegation that Ewayan had absconded and left respondents without recourse other
than to implead him as the "new management" upon whom the obligation to settle the claims
abandoned by Ewayan now fell.
"Contracts take effect only between the parties, their assigns and heirs, except in case where
the lights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law." The contract of employment between respondents, on the one hand, and
Oceanic and Ewayan on the other, is effective only between them; it does not extend to petitioner, who
is not a party thereto. His only role is as lessor of the premises which Oceanic leased to operate as a
hotel; he cannot be deemed as respondent's employer -not even under the pretext that he took over as
the "new management" of the hotel operated by Oceanic. There simply is no truth to such claim.
Thus, to allow respondents to recover their monetary claims from petitioner would necessarily
result in their unjust enrichment.

There is unjust enrichment 'when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience.' The principle of unjust enrichment
requires two conditions: (1) that a person is benefited without a valid basis or
justification, and (2) that such benefit is derived at the expense of another.
The main objective of the principle against unjust enrichment is to prevent one
from enriching himself at the expense of another without just cause or consideration. x x
x

"In rendering justice, courts have always been, as they ought to be, conscientiously guided by
the norm that on the balance, technicalities take a backseat against substantive rights, and not the
other way around." In short, substantive law outweighs procedural technicalities as in this case.
Taking this to mind, the labor tribunals and the CA should have considered petitioner’s repeated
please to scrutinize the facts and the particular lease agreement executed by him and Oceanic, which
would naturally exculpate him from liability as this would prove absence of an employment relation
between him and respondents.

Page 23 of 57
 RAFAEL ALMEDA, EMERLINA ALMEDA-LIRIO, ALODIA ALMEDA-TAN, LETICIA ALMEDA-
MAGNO, NORMA ALMEDA-MATIAS AND PUBLIO TIBI, Petitioners, 
v.
 HEIRS OF PONCIANO ALMEDA IN SUBSTITUTION OF ORIGINAL DEFENDANT PONCIANO
ALMEDA, INTESTATE ESTATE OF SPOUSES PONCIANO AND EUFEMIA PEREZ-ALMEDA AND
THE REGISTER OF DEEDS OF TAGAYTAY CITY, Respondent.

CESAR SANTOS, ROSANA SANTOS, NORMAN SANTOS AND FERDINAND SANTOS, Unwilling

Plaintiffs/Petitioners.

G.R. No. 194189; September 14, 2017

First Division
TIJAM, J.:

TOPIC: Nullity of Contracts; Forgery; Undue Influence; Simulated Contracts

NATURE OF THE ACTION: Complaint for Nullity of Contract

FACTS:
Spouses Venancio and Leonila Almeda were the parents of the nine children namely: Ponciano,
Rafael, Emerlina, Alodia, Leticia, Norma, Benjamin, Severina and Rosalinda. Sometime on May 19,
1976 a Power of Attorney was executed by Venancio and Leonila who were then 80 and 81 years old
respectively, granting Ponciano, among other, the authority to sell the parcels of land recovered which
Leonila inherited from her parents.
The said 4 parcels of land were registered in the name of “Leonila Almeda married to Venancio
Almeda”. Venancio died at the age of 90 and Leonila died 8 years later at the aged of 97. Within a year
of Leonila’s death, Rafael, Emerlina, Alodia, Leticia and Norma filed a notice of adverse claim with the
Register of Deeds over the said properties.
A complaint for Nullity of Contracts, Partition of Properties and Reconveyance of Titles with
Damages was filed before the RTC by petitioners against Ponciano and several others including the
Register of Deeds. Petitioners alleged that the parties were the only heirs of the late spouse who died
without leaving any will and without any legal obligation. In support of their claim, the alleged that
Ponciano took advantage of his being the eldest child and his close relationship with their parents,
cause the simulation and forgery of the following documents:

(1) Deed of Absolute Sale dated June 9, 1976 over Lot 30 under OCT No. O-197 executed by
Ponciano as Venancio's and Leonila's attorney-in-fact, in favor of Julian Y. Pabiloña, et al., for the price
of P160,940.00; and

(2) Deed of Deed of Absolute Sale dated October 3, 1978, executed by Venancio and Leonila in
favor of Ponciano, over the remaining lots under OCT No. O-197 and Lot 9 under OCT No. O-443, and
over Lots 6, 4 and 9-A with a total area 71,520 sq m which then had no technical description, for the
total consideration of P704,243.77.

Petitioners contends that their parents did not sign the Deed of Absolute Sale in favor of
Ponciano and their signatures may have been forged. Also, that their parents did not received due
consideration for the transaction and if Ponciano succeeded in making them sign. Petitioners further
alleged that Ponciano withheld from them the existence of the 1978 Deed in his favor, and when they
learned of it and demanded partition, Ponciano merely promised to cause the same at a proper time.
Page 24 of 57
When petitioners could no longer wait, they filed their notice of adverse claim with the Register of
Deeds. Petitioners, thus, prayed that the 1978 Deed in favor of Ponciano be declared null and void.
In their Answer, Ponciano and his wife, Eufemia, denied that the 1978 Deed was simulated or
forged, asserting its genuineness and execution for valuable consideration from which some of the
petitioners, including Rafael, received substantial pecuniary benefits. Ponciano died on October 16,
1997 and was substituted by his wife and children.
RTC issued an Order dismissing the complaint. It held that the questioned documents, having
been notarized and executed in the presence of two instrumental witnesses, enjoy the presumption of
regularity and petitioners failed to overcome this presumption by clear and convincing evidence. It
stressed that petitioners failed to present any proof of simulation or forgery f the subject documents.
RTC likewise denied the motion for reconsideration of the petitioners.
On appeal before the Cam CA denied the appeal and affirmed the decision of the RTC. Motion
for reconsideration was likewise denied. Hence, this petition.

ISSUE:
Whether or not the contract of sale between Ponciano and his parents Venancio and Leonila may be
declared a nullity due to the alleged forgery of the signatures of the latter as sellers.

RULING:
NO. As a rule, forgery cannot be presumed. An allegation of forgery must be proved by clear,
positive and convincing evidence, and the burden of proof lies on the party alleging forgery. Since
petitioners are assailing the genuineness of the 1978 Deed, they evidently have the burden of making
out a clear-cut case that the questioned document is bogus.
The Complaint, at the outset, did not allege in definite terms that Venancio and Leonila's
signatures on the 1978 Deed were forged. To establish forgery, the extent, kind and significance of the
variation in the standard and disputed signatures must be demonstrated; it must be proved that the
variation is due to the operation of a different personality and not merely an expected and inevitable
variation found in the genuine writing of the same writer; and it should be shown that the resemblance
is a result of a more or less skillful imitation and not merely a habitual and characteristic resemblance
which naturally appears in a genuine writing.
Petitioners assert that the 1976 Power of Attorney executed in favor of Ponciano, which bore
the true and genuine signatures of Venancio and Leonila, could have been used as basis for
comparison with the questioned signatures to determine their authenticity. Comparing these two sets of
signatures, the Court finds prominent similarities as to indicate the habitual and characteristic writing of
Venancio and Leonila. Leonila's signature on the 1978 Deed, in particular, appears almost the same as
her signature on the 1976 Power of Attorney. Venancio's signature on the 1978 Deed was not as
smooth as his signature on the 1976 Power of Attorney, but the similarities in the angles and slants
cannot be ignored.
To support their claim of forgery, petitioners described the questioned signatures as "wiri-wiri,"
or containing "wild strokes." The Court, however, does not find such wild strokes in the questioned
signatures. Leonila's was nearly as smooth as her signature on the 1976 Power of Attorney. Venancio's
signature gives the impression that it had been affixed by a less than steady but determined hand, and
though not as fluid as his previous signature, reveals the characteristic imprint of his handwriting.
Indeed, the resemblance in the questioned and standard signatures are more prominent or pronounced
than the apparent variance which could be attributed to the signatories' old age.
In fine, the apparent dissimilarities in the signatures are overshadowed by the striking
similarities and, therefore, fail to overcome the presumption of validity in favor of a notarized document.
While maintaining that the 1978 Deed was a forgery, petitioners also insist that the deed was
simulated. The incompatibility of these two contentions does not help petitioners' case. Forgery
suggests that no consent was given to the transaction, while simulation indicates a mutual agreement
albeit to deceive third persons.
Simulation has been defined as the declaration of a fictitious will, made deliberately by mutual
agreement of the parties, in order to produce the appearances of a juridical act which does not exist or
is different from that which was really executed, for the purpose of deceiving third persons. Accordingly,
simulation exists when: (a) there is an outward declaration of will different from the will of the parties;
(b) the false appearance was intended by mutual agreement of the parties; and (c) their purpose is to
deceive third persons. None of the foregoing requisites have been shown to exist in this case.
In claiming that the 1978 Deed was simulated, petitioners assert that there was no consideration
and the vouchers supposedly showing Ponciano's payment of P704,243.77 should not be considered
as evidence since private respondents failed to offer them, having been deemed to have waived their
presentation of evidence. Petitioners likewise argue that the price, in said amount, was unconscionable.
But the Court rule that petitioners failed to substantiate their claim considering they have not shown any
evidence.
Page 25 of 57
 Undue influence was not proved also. “There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice."
Other than petitioners' general allegation that Ponciano unduly took advantage of his being the eldest
child and his close relationship with their parents, no other circumstance or evidence has been
presented to show how Ponciano exerted his undue influence or how Venancio and Leonila were
thereby deprived of the freedom to exercise sufficient judgment in selling the subject properties to
Ponciano. "Undue influence that vitiated a party's consent must be established by full, clear and
convincing evidence, otherwise, the latter's presumed consent to the contract prevails."
A contract or conduct apparently honest and lawful must be treated as such until it is shown to
be otherwise by either positive or circumstantial evidence. A duly executed contract enjoys the
presumption of validity, and the party assailing its regularity has the burden to prove its simulation.
Indeed, it is settled that notarized documents carry the presumption of due execution, lending truth to
the statements therein contained and to the authenticity of the signatures thereto affixed. Petitioners
have failed to adduce the requisite clear and convincing evidence to overturn this presumption.
SPOUSES FIRMO S. ROSARIO AND AGNES ANNABELLE DEAN-ROSARIO, Petitioners 
vs.
PRISCILLA P. ALVAR, Respondent

G.R. No. 212731; September 26, 2017

First Division
DEL CASTILLO, J.:

TOPIC: Reformation of Contracts

NATURE OF THE ACTION: Complaint for Declaration of Nullity of Contract

FACTS:
On separate dates in 1989, petitioner Agnes borrowed from respondent Pricilla a total amount of
Php 600,000.00 secured by a real estate mortgages over two parcels of land which is the residence of
petitioner spouses and a five-door rental apartment. In the year 1990, the mortgages were discharged.
And on the year 1992, Agnes executed two Deed of Absolute Sale over the 2 lots in favor of Pricilla’s
daughter Evangeline for the amount of Php 900,000.00 each. Evangeline later sold the lots to Pricilla
also for the same price.

Pricilla sent a demand letter to petitioner spouses asking them to vacate. This prompted
petitioner spouses to file before RTC a complaint for Declaration of Nullity of Contract of Sale and
Mortgage, Cancellation of Transfer of Certificates of Title and Issuance of new TCT with Damages
against Pricilla. They alleged that respondent deceived Agnes into signing the Deeds of Absolute Sale
in favor of Evangeline, as Agnes merely intended to renew the mortgages over the two lots.

Pricilla, filed with RTC a complaint for Recovery of Possession claiming that she is the absolute
owner and that Agnes sold the same because she was in dire need of money. The cases were
consolidated and RTC rendered its decision granting Pricilla’s complaint while denying the petitioners
complaint.

On appeal. The CA reversed the decision of the RTC and ruled that although the transfer from
Agnes to Pricilla were identified as absolute sales, the contracts are deed equitable mortgages
pursuant to Article 1602 of the Civil Code. Since the parties did not file a motion for reconsideration or
appeal, the CA decision became final and executory.

Pricilla sent a letter to the spouses demanding the payment of her outstanding obligation
amounting to Php 1.8 million. Due to failure of the latter to heed the demand, Pricilla filed a complaint
for Judicial Foreclosure of Real Estate Mortgage. Petitioners moved for the dismissal but the RTC
denied the same.

Petitioner filed a Petition for Certiorari before the CA. CA denied the same for lack of merit. The
Supreme Court issued a Resolution denying the petition. Meanwhile Pricilla filed a Motion to Declare
the Defendants in Default for the failure of petitioners to file an answer within the reglementary period,
which RTC granted. Aggrieved, petitioner spouses appealed to CA. CA affirmed the ruling of RTC.
Hence this petition. Petitioners insist that before the subject lots can be judicially foreclosed, a
reformation of the fake and simulated Deeds of Absolute Sale must first be done to enable them to
present documentary and parol evidence.

Page 26 of 57
ISSUE:
Whether or not a reformation of the contract of sale between Agnes and Evangeline is required
before the lots subject thereof may be foreclosed.

RULING:
NO. Reformation of an instrument is a remedy in equity where a written instrument already
executed is allowed by law to be reformed or construed to express or conform to the real intention of
the parties. The rationale of the doctrine is that it would be unjust and inequitable to allow the
enforcement of a written instrument that does not express or reflect the real intention of the parties. In
the November 15, 2006 Decision, the CA denied petitioner spouses' Complaint for declaration of nullity
of contract of sale on the ground that what was required was the reformation of the instruments,
pursuant to Article 1365 of the Civil Code. In ruling that the Deeds of Absolute Sale were actually
mortgages, the CA, in effect, had reformed the instruments based on the true intention of the parties.
Thus, the filing of a separate complaint for reformation of instrument is no longer necessary because it
would only be redundant and a waste of time. Besides, in the November 15, 2006 Decision, the CA
already declared that absent any proof that petitioner spouses Rosario had fully paid their obligation,
respondent may seek the foreclosure of the subject lots.
In view of the foregoing, we find no error on the part of the CA in ruling that a separate action for
reformation of instrument is no longer necessary as the declaration in the November 15, 2006 Decision
that the parties' intention was to execute an equitable mortgage is sufficient reformation of such
instrument.

Page 27 of 57
 JOSE S. OCAMPO, Petitioner 
vs.
RICARDO S. OCAMPO, SR., Respondent

G.R. No. 227894; July 5, 2017

Third Division
VELASCO, JR., J.:

TOPIC: Void Contract, Implied Trust

NATURE OF THE ACTION: Complaint for Partition and Annulment of Transfer of Certificate of Title

FACTS:
Jose S. Ocampo and respondent Ricardo Ocampo are full-blooded brothers being sons of the
late Basilio Ocampo and Juliana Sunglao. A complaint was filed by respondent against petitioner for
partition and annulment of transfer of certificate of title. In the complaint respondent alleged that he and
petitioner are co-owners of the subject property, which was conjugal property left by their parents.
Respondent claimed that petitioner and his wife conspired in falsifying his signature on a
notarized Extra-Judicial Settlement with Waiver (ESW) and effecting the transfer of the property in the
name of petitioner. Based on the finding by the NBI that respondents’ signature was forged, an
information was filed against petitioner. Respondent requested of the property, but petitioner refused to
do so and secretly mortgaged the property.
Petitioner and his wife moved for the dismissal of the complaint, but it was denied by the trial
court. Thereafter, they filed their answer with Motion for Preliminary Hearing on the Affirmative Defense
of prescription. Based on their Answer, petitioner and his wife claimed that their parents executed a
Deed of Donation Propter Nuptias of the Subject Property in their favor as they were getting married,
with a promise on their part to demolish the old house and replace it with a new two-storey house,
which they did. To build the new house, they obtained a ₱l0,000.00 loan from the Development Bank of
the Philippines (DBP), with petitioner and his parents as borrowers. Petitioner was able to pay the DBP
loan through a loan secured from the Social Security System (SSS) with the consent of his father. He
claimed that on September 30, 1970, their father executed the ESW and secured respondent's
signature. By virtue of the ESW, petitioner was able to have TCT No. 36869 cancelled and have TCT
No. 102822 issued in favor of himself and his wife. Finally, petitioner argued that TCT No. 102822
became indefeasible one year after its issuance on November 24, 1971, and that the action to annul
TCT No. 102822 had prescribed since it was filed only on 21 years and 7 months from the issuance of
the title. He further claimed that the action to annul the ESW is a collateral attack on the title, and the
rule on non-prescription against a co-owner does not apply since he and his wife had become exclusive
owners of the Subject Property.
RTC dismissed the complaint on the ground of prescription. Motion for Reconsideration was
filed but was denied. On appeal to CA, declared RTC’s order null and void. Petitioner filed a motion for
extension of time to file a petition for review on certiorari before Supreme Court but was denied.
Respondent filed a Motion for writ of execution before RTC but was denied on the ground that
there is nothing to execute since the setting aside of the RTC calls for the case to be tried on the
merits. RTC, ruled in favor of respondent. Petitioner’s motion for reconsideration was denied. On
appeal, the CA affirmed the RTC. In dismissing the petition, the CA found that respondent was able to
prove that his signature on the ESW is not genuine, based on his and his wife’s testimony, as well as
the NBI report. Hence, this petition.

ISSUE:
Whether or not CA erred in sustaining that the EWS is a void and inexistent contract?

Page 28 of 57
RULING:
No. The Court affirmed the decision of the Court of Appeals. It is well settled that questions of
fact are not reviewable in petitions for review on certiorari under Rule 45 of the Rules of Court. Only
questions of law distinctly set forth shall be raised in a petition and resolved. Moreover, the factual
findings of the lower courts, if supported by substantial evidence, are accorded great respect and even
finality by the courts. Except for a few recognized exceptions, this Court will not disturb the factual
findings of the trial court. This Court sees no reason to overturn the factual findings of the trial court, as
affirmed by the CA, as the records show that preponderant evidence established the falsity of the ESW
and the fraudulent registration of the subject property in petitioner's name.
Given the falsity of the ESW, it becomes apparent that petitioner obtained the registration
through fraud. This wrongful registration gives occasion to the creation of an implied or constructive
trust under Article 1456 of the New Civil Code. An action for reconveyance based on an implied trust
generally prescribes in ten years. However, if the plaintiff remains in possession of the property, the
prescriptive period to recover title of possession does not run against him. In such case, his action is
deemed in the nature of a quieting of title, an action that is imprescriptible.
In the case before us, the certificate of title over the subject property was issued on November
24, 1970. Yet, the complaint for partition and annulment of the title was only filed on July 1, 1992, more
than twenty (20) years since the assailed title was issued. Respondent's complaint before the RTC
would have been barred by prescription. However, based on respondent's submission before the trial
court, both petitioner and respondent were residing at the subject property at the time the complaint
was filed. This was unqualifiedly admitted by petitioner in his Amended Answer and no denial was
interposed therefrom. Petitioner's failure to refute respondent's possession of the subject property may
be deemed as a judicial admission. Considering that respondent was in actual possession of the
disputed land at the time of the filing of the complaint, the present case may be treated as an action for
quieting of title. Quieting of title is a common law remedy for the removal of any cloud, doubt, or
uncertainty affecting title to real property.
Since it was already established that respondent's signature on the ESW, which was the basis
of petitioner's title over the property, was forged, then it is only necessary for the cloud on respondent's
title to be removed. Thus, the trial court's order to cancel TCT No. 102822 and uphold the parties' co-
ownership was proper.

Page 29 of 57
 NOEMI S. CRUZ and HEIRS OF HERMENEGILDO T. CRUZ, represented by NOEMI D.
CRUZ, Petitioner
vs.
CITY OF MAKATI, CITY TREASURER OF MAKATI, THE REGISTER OF DEEDS OF MAKATI,
LAVERNE REALTY AND DEVELOPMENT CORPORATION, Respondents

G.R. No. 210894; September 12, 2018

First Division
DEL CASTILLO, J.:

TOPIC: Action to declare the inexistence of a void or inexistent contract is imprescriptible

NATURE OF THE ACTION: Complaint for Annulment of Auction Sale

FACTS:
Petitioner Noemi Cruz and her husband Hermenegildo Cruz were registered owners of a
condominium unit in Cityland Condominium 10, Tower II, Makati City which was levied upon by the
respondent City of Makati for non-payment of real property taxes thereon after their designated
employee-representative failed to remit the entrusted tax payments amounting to Php 201, 231.17 to
the city and appeared to have absconded with the money instead. The subject property was auctioned
off and soled to respondent Laverne Realty and Development Corporation (Laverne) as the highest
bidder for Php 370,000.00.
Petitioners failed to redeem the subject property, prompting Laverne to file in 2009 before RTC
of Makati a petition to surrender the owner’s duplicate copy of the title to the subject property.
Previously, in 2007, petitioners filed before the Makati RTC a complaint for annulment of the
Laverne sale with the prayer of injunctive relief and damages. Petitioners alleged that the levy and sale
by the respondent City to Laverne were null and void because the notice of billing statements for real
property were mistakenly sent to Unit 1407 instead of Unit 407 as such, no warrant of levy was ever
received by them.
RTC granted petitioners application for injunctive relief. RTC issued another Order dismissing
the civil case for petitioners’ failure to comply with its Orders for them to inform it of the developments in
their motion for consolidation which directed the petitioners to apprise the court of the development in
the Land Registration Case.
Meanwhile, on the Land Registration Case or Laverne’s petition to surrender the owner’s copy
of title, petitioners filed a demurrer of evidence which was granted by the RTC. Laverne moved to
reconsider, but the same was denied. On appeal before the CA, the appellate court dismissed the
same for non-filing of the required brief. Laverne filed a motion for reconsideration but the CA denied
the same.
On the Civil case petitioners filed a petition for certiorari before the Court of Appeals. But the CA
affirmed the RTC’s decision. The trial court acted in the exercise of its sound judicial discretion in
denying the motion of the petitioners for the consolidation of LRC No. M-5237 with Civil Case No. 07-
1155. The proceedings in LRC No. M-5237 is not, strictly speaking, a judicial process and is a non-
litigious proceeding; it is summary in nature. In contrast, the action in Civil Case No. 07-1155 is an
ordinary civil action and adversarial in character. The rights of the respondent Laverne in LRC Case
No. M-5237 would be prejudiced if the said case were to be consolidated with Civil Case No. 071155,
especially since it had already adduced its evidence.
Hence, this instant petition.

ISSUE:
Whether or not the levy by the City of Makati and subsequent auction sale should be annulled?

Page 30 of 57
RULING:
Yes. The Court noted that in the Land Registration Case, the development was that it was
dismissed by the trail court for lack of compliance with the Local Government Code relative to the
sending, publication, and posting of the notice of tax delinquency, the service of the warrant of levy, and
the sending of billing statements, and the corresponding dismissal of respondent’s appeal before the
Court of Appeals, it has become obvious that there is nothing to consolidate with the civil case.
Petitioners are in danger of losing their property without benefit of due process of law owing to
the apparently irregular conduct by the City of Makati proceedings relative to the levy and sale of their
property. This Court held that a buyer of real property, herein respondent Laverne, at a real property tax
delinquency sale conducted by the City of Caloocan did not acquire any valid right to petition the trial
court for the cancellation of the owner's title and take possession of the latter's property, on the ground,
among others, that the notice and warrant of levy were sent by the city to the wrong address and the
owner was thus never made aware of the levy and delinquency sale of its property by the city.
The Court must protect private property owners from undue application of the law authorizing
the levy and sale of their properties for non-payment of the real property tax. This power of local
government units is prone to great abuse, in that owners of valuable real property are liable to lose
them on account of irregularities committed by these local government units or officials, done
intentionally with the collusion of third parties and with the deliberate unscrupulous intent to appropriate
these valuable properties for themselves and profit therefrom.
The Court constantly warns of the possible abuse of this taxing power. The premise is that no
presumption of regularity exists in any administrative action which results in depriving a taxpayer of his
property; due process of law must be followed in tax proceedings, because a sale of land for tax
delinquency is in derogation of private property and the registered owner's constitutional rights.
The procedural faults committed by petitioners no longer deserve consideration. Their choice of
remedy is irrelevant given the spectre of patent illegality that surrounds the levy and sale of petitioners'
property by the City of Makati to Laverne. A fundamental characteristic of void or inexistent contracts is
that the action for the declaration of their inexistence does not prescribe; nor may the right to set up the
defense of their inexistence or absolute nullity be waived or renounced. Void contracts are equivalent to
nothing and are absolutely wanting in civil effects; they cannot be validated either by ratification or
prescription.
On the other hand, the court trying Civil Case No. 07-1155 is admonished to tread carefully and
choose its actions with deliberate thought and consideration in light of the above disquisition. It would
not have arrived at the conclusion it did if it placed petitioners' substantive rights ahead of the
convenience of procedural rules. It is not beholden to the City of Makati, where its court sits; justice and
truth are its only masters.

Page 31 of 57
HEIRS OF GILBERTO ROLDAN, NAMELY: ADELINA ROLDAN, ROLANDO ROLDAN, GILBERTO
ROLDAN, JR., MARIO ROLDAN, DANNY ROLDAN, LEONARDO ROLDAN, ELSA ROLDAN,
ERLINDA ROLDAN-CARAOS, THELMA ROLDAN-MASINSIN, GILDA ROLDAN-DAWAL AND
RHODORA ROLDAN-ICAMINA, Petitioners,

v.

HEIRS OF SILVELA ROLDAN, NAMELY: ANTONIO R. DE GUZMAN, AUGUSTO R. DE GUZMAN,

ALICIA R. VALDORIA-PINEDA, AND SALLY R. VALDORIA, AND HEIRS OF LEOPOLDO
MAGTULIS, NAMELY: CYNTHIA YORAC-MAGTULIS, LEA JOYCE MAGTULIS-MALABORBOR,
DHANCY MAGTULIS, FRANCES DIANE MAGTULIS, AND JULIERTO MAGTULIS-
PLACER, Respondents.

G.R. No. 202578; September 27, 2017

First Division
SERENO, C.J.:

TOPIC: Perfection of Contract of Sale; Prescription on Co-ownership

NATURE OF THE ACTION: Complaint for Partition and Damages

FACTS:
Natalia Magtulis owned an agricultural land in Aklan. Her heirs which are Gilberto and Silvela,
her two children in her first marriage and Leopolda an alleged child from another man. After her death
Natalia left the lot to her children. However, Gilberta and his heirs took possession of the property to the
exclusion of respondents.
Respondents filed before RTC a Complaint for Partition and Damages against petitioners. The
latter refused to yield the property on these grounds: (1) respondent heirs of Silvela had already sold
her share to Gilberto; and (2) respondent heirs of Leopolda had no cause of action, given that he was
not a child of Natalia. During trial, petitioners failed to show any document evidencing the sale of
Silvela's share to Gilberto. 
RTC ruled that the heirs of Silvela remained co-owners of the property. As regards Leopoldo
Magtulis, the RTC concluded that he was a son of Natalia based on his Certificate of Baptism and
Marriage Contract. Considering that they were all descendants of Natalia, the RTC declared each set of
their respective heirs entitled to one-third share of the property. Consequently, it ordered petitioners to
account and deliver to respondents their equal share to the produce of the land.
Petitioners appealed to the CA, reiterated that Silvela had sold her share of the property to her
brother Gilberta. They asserted that the RTC could not have considered Leopolda the son of Natalia on
the mere basis of his Certificate of Baptism. Emphasizing that filiation required a high standard of proof,
petitioners argued that the baptismal certificate of Leopoldo served only as evidence of the
administration of the sacrament. CA, affirmed the ruling of the RTC. Petitioners filed motion for
reconsideration but was denied. Hence, this petition.

ISSUE:
Whether or not a perfected contract of sale between Silvela and Gilberto may be established
absent any proof presented during trial.

RULING:
NO. Here, petitioners argue that before us that Silvela had a perfected contract of sale with
Gilberto over her shares of Lot No. 4696. That argument is obviously a question of fact, as it delves into
the truth of whether she conveyed her rights in favor of her brother.
Page 32 of 57
 The assessment of the existence of the sale requires the calibration of the evidence on record
and the probative weight thereof. The RTC, as affirmed by the CA, already performed its function and
found that the heirs of Gilberto had not presented any document or witness to prove the fact of sale.
The factual determination of courts, when adopted and confirmed by the CA, is final and
conclusive on this Court except if unsupported by the evidence on record. In this case, the exception
does not apply, as petitioners merely alleged that Silvela "sold, transferred and conveyed her share in
the land in question to Gilberto Roldan for a valuable consideration" without particularizing the details or
referring to any proof of the transaction. Therefore, we sustain the conclusion that she remains co--
owner of Lot No. 4696.
As to the alleged prescription, prescription cannot be appreciated against the co-owners of a
property absent any conclusive act of repudiation made clearly known to the other co-owners. Here,
petitioners merely allege that the purported co-ownership “was already repudiated by one of the
parties” without supporting evidence. Aside from the mere passage of time, there was failure on the
part of the petitioners to substantiate their allegations of laches by proving that respondents slept on
their rights.
NORMA M. DIAMPOC, Petitioners
vs.
JESSIE BUENAVENTURA and THE REGISTRY OF DEEDS FOR THE CITY OF TAGUIG,
Respondents

G.R. No. 200383; March 9, 2018

First Division
DEL CASTILLO, J.:

TOPIC: Sale of an Immovable Property

NATURE OF THE ACTION: Complaint for Annulment of Deed of Sale and Recovery of Duplicate
Original Copy of Title with Damages

FACTS:
Petitioner Norma Diampoc and her husband Wilbur Diampoc (spouses Diampoc) filed a
Complaint for annulment of deed of sale and recovery of duplicate original copy of title, with damages
against respondent Jessie Buenaventura and the Registry of Deeds for the Province of Rizal.
The spouses Diampoc alleged that they owned a parcel of land locate in Taguig City and that
Buenaventura which became their friend asked to borrow the owner's copy of TCT 25044 to be used as
security for a Php 1 million loan she wished to secure, to which they acceded. However, subject to the
condition that Buenaventura should not sell the subject property. Also, that Buenaventura promised to
give them Php 300,000.00 out of the Php 1 million loan proceeds. Buenaventura caused them to sign a
folded document without giving them the opportunity to read its contents and she failed to give them a
copy of the document which they signed. They discovered later on that Buenaventura became the
owner of a one-half portion of the subject property by virtue of a supposed deed of sale for Php
200,000.00 in her favor.
In her Answer, Buenaventura claimed that the spouses Diampoc have no cause of action and
that the case is a rehash of an estafa case they previously filed against her but which was dismissed.
RTC, dismissed the complaint for insufficiency of evidence. On appeal before the Court of
Appeals, the CA denied the same. Hence, this petition. Petitioner claims that the deed was not signed
by the parties before the notary public; that it was notarized in her and her husband's absence; that
there was only one Community Tax Certificate used for both petitioner and her husband; and that
Buenaventura failed to present the notary public as her witness.

ISSUE:
Whether or not the CA erred in applying the prima facie presumption of regularity of notarized
documents and upholding the validity of the notarized deed of sale notwithstanding that undisputed fact
that there were irregularities in the execution and notarization of the deed of sale?

RULING:
No. The Court denies the petition. The Court ruled that it must be remembered, however, that
"the absence of notarization of the deed of sale would not invalidate the transaction evidenced therein";
it merely "reduces the evidentiary value of a document to that of a private document, which requires
proof of its due execution and authenticity to be admissible as evidence." "A defective notarization will
strip the document of its public character and reduce it to a private instrument. Consequently, when
there is a defect in the notarization of a document, the clear and convincing evidentiary standard

Page 33 of 57
normally attached to a duly-notarized document is dispensed with, and the measure to test the validity
of such document is preponderance of evidence."
In the case of Chong v. Court of Appeals, the Court held that:

x x x Article 1358 of the Civil Code requires that the form of a contract that transmits or
extinguishes real rights over immovable property should be in a public document, yet the
failure to observe the proper form does not render the transaction invalid. The necessity
of a public document for said contracts is only for convenience; it is not essential for
validity or enforceability. Even a sale of real property, though not contained in a public
instrument or formal writing, is nevertheless valid and binding, for even a verbal contract
of sale or real estate; produces legal effects between the parties. Consequently, when
there is a defect in the notarization of a document, the clear and convincing evidentiary
standard originally attached to a duly-notarized document is dispensed with, and the
measure to test the validity of such document is preponderance of evidence.

x x x Nevertheless, the defective notarization of the deed does not affect the validity of
the sale of the house. Although Article 1358 of the Civil Code states that the sale of real
property must appear in a public instrument, the formalities required by this article is not
essential for the validity of the contract but is simply for its greater efficacy or
convenience, or to bind third persons, and is merely a coercive means granted to the
contracting parties to enable them to reciprocally compel the observance of the
prescribed form. Consequently, the private conveyance of the house is valid between
the parties.

Thus, following the above pronouncements, the remaining judicial task, therefore, is to
determine if the deed of sale executed by and between the parties should be upheld. The RTC and the
CA are unanimous in declaring that the deed should be sustained on account of petitioner's failure to
discredit it with her evidence. The CA further found that petitioner and her husband received in full the
consideration of P200,000.00 for the sale. As far as the lower courts are concerned, the three
requirements of cause, object, and consideration concurred. This Court is left with no option but to
respect the lower courts' findings, for its jurisdiction in a petition for review on certiorari is limited to
reviewing only errors of law since it is not a trier of facts. This is especially so in view of the identical
conclusions arrived at by them.
Indeed, petitioner and her husband conceded that there was such a deed of sale, but only that
they were induced to sign it without being given the opportunity to read its contents -believing that the
document they were s1gnmg was a mere authorization to obtain a bank loan. According to petitioner,
the document was "folded" when she affixed her signature thereon; on the other hand, her husband
added that at the time he signed the same, it was "dark". These circumstances, however, did not
prevent them from discovering the true nature of the document; being high school graduates and thus
literate, they were not completely precluded from reading the contents thereof, as they should have
done if they were prudent enough, Petitioner's excuses are therefore flimsy and specious.
Petitioner and her husband's admission that they failed to exercise prudence can only be fatal to
their cause. They are not unlettered people possessed with a modicum of intelligence; they are
educated property owners capable of securing themselves and their property from unwarranted
intrusion when required. They knew the wherewithal of property ownership. Their failure to thus
observe the care and circumspect expected of them precludes the courts from lending a helping hand,
and so they must bear the consequences flowing from their own negligence.

The rule that one who signs a contract is presumed to know its contents has been
applied even to contracts of illiterate persons on the ground that if such persons are
unable to read, they are negligent if they fail to have the contract read to them. If a
person cannot read the instrument, it is as much his duty to procure some reliable
persons to read and explain it to him, before he signs it, as it would be to read it before
he signed it if he were able to do so and his failure to obtain a regarding and explanation
of it is such gross negligence as will stop him from avoiding it on the ground that he was
ignorant of its contents.

It is also a well-settled principle that "the law will not relieve parties from the effects of an
unwise, foolish or disastrous agreement they entered into with all the required formalities and with full
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awareness of what they were doing. Courts have no power to relieve them from obligations they
voluntarily assumed simply because their contracts tum out to be disastrous deals or unwise
investments. Neither the law nor the courts will extricate them from an unwise or undesirable contract
which they entered into with all the required formalities and with full knowledge of its consequences.

SPOUSES CIPRIANO PAMPLONA and BIBIANA INTAC, Petitioners

vs.
SPOUSES LILIA I. CUETO and VEDASTO CUETO, Respondents

G.R. No. 204735; February 19, 2018

Third Division
BERSAMIN, J.:

TOPIC: Partially Executed Contract to Sell

NATURE OF THE ACTION: Complaint for Specific Performance, Conveyance, Consignation and
Damages

FACTS:
Plaintiff spouses Cueto filed a Complaint for Specific Performance, conveyance, consignation
and damages against defendants’ spouses Intac.
Plaintiff alleged that the defendants are the registered owners of a lot located in Batangas City.
That Lilia and spouses Intac mutually agreed that the former would buy and the latter would sell on
installment the subject immovable property including the house standing thereon for the total sum of
US$25,000.00 payable on a monthly installment of US$300.00. The said agreement was verbal
considering that Lilia and defendants are sisters and brother-in-law. That defendants voluntarily
transferred the peaceful possession of the subject property to Lilia and from the date of the agreement,
the latter had remitted to the former her monthly instalments through registered mail. Lilia allowed her
son Rolando Cueto to reside at the subject property as Lilia had to leave for abroad due to her
employment in Italy. However, the defendants filed before the MTC a case for unlawful detainer against
plaintiff’s son in which his son was finally evicted. When Lilia learned about the eviction she returned
home and executed an Affidavit of Adverse Claim. Through her lawyer, a written tender of payment of
US$11,000.00 was sent to defendants by registered mail. As a consequence of the latter's
unreasonable refusal to recognize plaintiffs' just and valid demand, they were constrained to consign
the US$11,000.00 or its equivalent in Philippine currency, as final payment to defendants; after
plaintiff's compliance with her contractual obligation, she demanded from defendants to immediately
execute the necessary deed of conveyance and delivery of the owner's copy.
In its Answer defendants alleged that there exists no agreement duly signed by defendants, as
in truth and in fact they never sold the said property to the plaintiffs; Article 1405 of the New Civil Code
mandates that irrespective of who the parties are to agreement, if it involves more than Php500.00, it
should be reduced into writing.
The RTC dismissed the complaint for failure of the respondents to prove the existence of the
partially executed contract to sell involving the property; that neither documentary nor object evidence
confirmed the supposed partially executed contract to sell; and that the respondents accordingly failed
to support their cause of action by preponderance of evidence.
On appeal before the Court of Appeals, the CA reversed the RTC, and declared that the
respondents presented sufficient evidence to establish that petitioner Bibiana and her sister,
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respondent Lilia, had entered into an oral contract to sell; that their oral contract, being partially
executed by virtue of Lilia's partial payments to Bibiana, removed the contract from the application of
the Statute of Frauds; that the transfer of the property in favor of Redima, represented by the
petitioners' counsel, Atty. Dimayacyac, by virtue of the deed of transfer of rights, was null and void for
being violative of Article 1491 of the Civil Code. Hence, this petition.

ISSUE:
Whether or not the existence of the partially executed contract to sell between the parties was
sufficiently established?

RULING:
Yes. The Court concur with the CA's holding that the respondents adduced enough evidence to
establish the existence of the partially executed contract to sell between Lilia and Bibiana.
It is uncontested that Lilia sent money to Bibiana. The latter did not deny her receipt of the
money. Moreover, the records showed that the parties further agreed for Vedasto and Roilan to occupy
the property during the period when Lilia was remitting money to Bibiana; and that Lilia immediately
took steps to protect her interests in the property once the petitioners started to deny the existence of
the oral contract to sell by annotating her adverse claim on the petitioners' title and instituting this action
against the latter.
The petitioners have contended that the sums of money received from Lilia were payments of
the latter's obligations incurred in the past; that the admission by Roilan and his wife that the petitioners
owned the property negated the absence of the contract to sell; and that the admission by Vedasto that
the petitioners owned the property was an admission against interest that likewise belied the contract to
sell between Lilia and Bibiana. But the Court ruled that the contentions of the petitioners are factually
and legally unwarranted.
To start with, it was incumbent upon Bibiana to prove her allegation in the answer that the
money sent to her by Lilia was in payment of past debts. This conforms to the principle that each party
must prove her affirmative allegations. Yet, the petitioners presented nothing to establish the allegation.
They ought to be reminded that allegations could not substitute for evidence. Without proof of the
allegation, therefore, the inference to be properly drawn from Bibiana's receipt of the sums of money
was that the sums of money were for the purchase of the property, as claimed by the respondents.
Secondly, the admissions by Roilan and Vedasto of the petitioners' ownership of the property
could not be appreciated in favor of the petitioners. That Bibiana and Lilia had entered into a contract to
sell instead of a contract of sale must be well-noted. The distinctions between these kinds of contracts
are settled. In Serrano v. Caguiat, the Court has explained:

A contract to sell is akin to a conditional sale where the efficacy or obligatory

force of the vendor's obligation to transfer title is subordinated to the happening of a
future and uncertain event, so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never existed. The suspensive
condition is commonly full payment of the purchase price.
The differences between a contract to sell and a contract of sale are well-settled
in jurisprudence. As early as 1951, in Sing Yee v. Santos, we held that:
x x x [a] distinction must be made between a contract of sale in which title
passes to the buyer upon delivery of the thing sold and a contract to sell x x x
where by agreement the ownership is reserved in the seller and is not to pass
until the full payment, of the purchase price is made. In the first case, non-
payment of the price is a negative resolutory condition; in the second case, full
payment is a positive suspensive condition. Being contraries, their effect in law
cannot be identical. In the first case, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of sale is itself resolved
and set aside. In the second case, however, the title remains in the vendor if the
vendee does not comply with the condition precedent of making payment at the
time specified in the contract. In other words, in a contract to sell, ownership is
retained by the seller and is not to pass to the buyer until full payment of the
price. x x x x

Page 36 of 57
 The distinctions delineate why the admissions by Roilan and Vedasto were consistent
with the existence of the oral contract to sell between Lilia and Bibiana. Under the oral contract
to sell, the ownership had yet to pass to Lilia, and Bibiana retained ownership pending the full
payment of the purchase price agreed upon.

MARIBELLE Z. DALE, Petitioner 
vs.
RYAN ROY YU, Respondent

G.R. No. 230831; September 26, 2018

Third Division
PERALTA, J.:

TOPIC: Sales - Elements

NATURE OF THE ACTION: Complaint for Sum of Money

FACTS:
Respondent Yu filed a complaint before RTC for Sum of Money and Damages against Brigette
“Gigi” Insoy and petitioner. Respondent alleged that he and his friends William Matalam and Steven
Lao went on a leisure trip in Cebu City. Matalam planned to check out a Toyota Prado sports utility
vehicle that he intended to but from petitioner. In Cebu, petitioner introduced respondent’s group to
Insoy, petitioner’s supposed business partner in Cebu. Respondents’ group was shown different
models of MORALE
Petitioner joined respondent’s group for lunch, during which, she convinced respondent and Lao
to consider buying Toyota vehicles from her, saying that they can get a big discount if they buy from her
as a group.
Respondent test-drove a Toyota Grandia which petitioner which petitioner claimed that she can
sell to him at a discounted price of Php 1.2 million under bulk purchase as Lao and Matalam already
committed to purchase their respective Toyota vehicles from her. Yu’s group were convinced by
petitioners’ representations. Respondent allege that he transferred the amount of Php 1.2 million to
petitioner. Petitioner issued a receipt and assured respondent that the vehicle will be delivered after a
week. However, a week after, petitioner told respondent that the delivery of his vehicle will be delayed
without giving any reason. After several extensions and despite demands no vehicle was delivered.
Which prompted respondent to file the complaint.
Petitioner denied that she was Insoy’s business partner or agent. She claimed to have learned
that Insoy was selling Toyota vehicles at a lesser price through her friend. The main argument of Neri is
that she merely "placed an order online” in behalf of Insoy” and that there is no circumstance, either by
declaration or by supporting evidence that she obligated herself to respondent to transfer ownership of
and deliver the subject vehicle.
RTC ruled in favor of respondent holding Neri and Insoy jointly and severally liable. On appeal
the CA partially granted the appeal deleting the awarded damages. Hence, this petition.

ISSUE:
Whether or not Court of Appeal erred in ruling that Neri is a seller and not a mere agent of
Insoy.

RULING:

Page 37 of 57
 No. CA did not err in ruling that petitioner is engaged in the business of selling cars. It is clear
from petitioners’ testimony during the cross examination that Yu’s group, of whom only Lao is known to
Neri, directly went to her and transacted directly with her for the purchase of their respective Toyota
Vehicles and she was the one who ordered these vehicles from them online. Add this to the undisputed
fact that Neri received their payments in her bank account and issued an acknowledgment receipt
without qualification that such acknowledgment of payment was only for Insoy. The conclusion
becomes inescapable that Neri transacted as a seller, not as a mere conduit or middleman or agent.
The main argument of Neri is that she merely “placed an order online”. True, Neri cannot be
held liable under the transaction if she merely placed an order online. However, it would be an entirely
different story it the act of placing an order online is coupled with her efforts in convincing Yu to buy a
Toyota Grandia on several occasions.
Further, it is apparent that the participation of Neri here cannot be discounted as merely
accommodating Yu because in the first place Yu had no intention to buy the subjects vehicle when he
visited Cebu. It was through sales talk of Neri plus the discount that she gave Yu and his group that Yu
was enticed to purchase the subject vehicle. Moreover, the mere act of Neri in “ordering the vehicles
online” cannot overshadow her other acts negotiating, arranging and facilitating the purchase of the
subject vehicles.

INTRAMUROS ADMINISTRATION, Petitioner
vs.
OFFSHORE CONSTRUCTION DEVELOPMENT COMPANY, Respondent

G.R. No. 196795; March 7, 2018

Third Division
LEONEN, J.:

TOPIC: Contract of Lease – Rights and Obligations of Lessor/Lessee

NATURE OF THE ACTION: Complaint for Ejectment

FACTS:
Intramuros leased certain real properties of the national government, which it administered to
Offshore Construction. Three (3) properties were subjects of Contract of Lease for five years, from
September 1, 1998 to August 31, 2003. All their lease contracts also made reference to an August 20,
1998 memorandum of stipulations, which included a provision for lease renewals every five (5) years
upon the parties' mutual agreement.
Offshore Construction occupied and introduced improvements in the leased premises. However,
Intramuros and the Department of Tourism halted the projects due to Offshore Construction's non-
conformity with Presidential Decree No. 1616, which required 16th to 19th centuries' Philippine-Spanish
architecture in the area. 8 Consequently, Offshore Construction filed a complaint with prayer for
preliminary injunction and temporary restraining order against Intramuros and the Department of
Tourism. But eventually, the parties executed a Compromise Agreement. In the Compromise
Agreement, the parties affirmed the validity of the two (2) lease contracts but terminated the one over
Revellin de Recoletos.13 The Compromise Agreement retained the five (5)-year period of the existing
lease contracts and stated the areas that may be occupied by Offshore Construction.
During the lease period, Offshore Construction failed to pay its utility bills and rental fees,
despite several demand letters. Intramuros tolerated the continuing occupation, hoping that Offshore
Construction would pay its arrears. To settle its arrears, Offshore Construction proposed to pay the
Department of Tourism's monthly operational expenses for lights and sound equipment, electricity, and
performers at the Baluarte Plano Luneta de Sta. Isabel. Intramuros and the Department of Tourism
accepted the offer, and the parties executed a Memorandum of Agreement.
However, Offshore Construction continued to fail to pay its arrears, which amounted to
P13,448,867.45 as of December 31, 2009. On March 26, 2010, Offshore Construction received
Intramuros' latest demand letter. Intramuros filed a Complaint for Ejectment.
Offshore filed a motion to dismiss on the grounds of violation of the rule on non-forum shopping,
lack of jurisdiction over the case, and litis pendentia. It argued that the Metropolitan Trial Court did not

Page 38 of 57
acquire jurisdiction over the case since the relationship between the parties was not one of lessor-
lessee but governed by a concession agreement.
MTC ruled in favor of Offshore. It held that it had no jurisdiction over the complaint. While there
were lease contracts between the parties, the existence of the other contracts between them made
Intramuros and Offshore Construction's relationship as one of concession. Under this concession
agreement, Offshore Construction undertook to develop several areas of the Intramuros District, for
which it incurred expenses. The trial court found that the issues could not be mere possession and
rentals only. On appeal the RTC affirmed the decision of the MTC in toto. Hence, this petition.

ISSUE:
Whether or not Intramuros Administration is entitled to possess the leased premises and to
collect unpaid rentals?

RULING:
Yes. It is undisputed that respondent's occupation and use of the properties was by virtue of
Contracts of Lease all dated August 20, 1998.The Contracts of Lease were modified through
Addendums to the Contracts likewise dated August 20, 1998.
Then, to amicably settle Civil Case No. 98-91587 the parties and the Department of Tourism
entered into a Compromise Agreement. In the Compromise Agreement, the parties affirmed the validity
of the lease contracts, but agreed to transfer the areas to be occupied and used by respondent in
Baluarte de San Andres and Baluarte de San Francisco de Dilao due to improvements that it had
introduced to the leased premises. The lease over Revellin de Recoletos was terminated. It appears
that under this Compromise Agreement, the original five (5)-year period of the Contracts of Lease were
retained, such that the leases would expire on August 31, 2003, and renewable for another five (5)
years upon the parties' mutual agreement.
Thereafter, the Contracts of Lease expired. Respondent does not concede this, but there is no
proof that there has been any contract mutually agreed upon by the parties for any extensions of the
leases. Respondent can only argue that petitioner's continuing tolerance of respondent's possession
and acceptance of respondent's rental payments impliedly renewed the Contracts of Lease. But
petitioner's tolerance of respondent's occupation and use of the leased premises after the end of the
lease contracts does not give the latter a permanent and indefeasible right of possession in its favor.
When a demand to vacate has been made, as what petitioner had done, respondent's possession
became illegal and it should have left the leased premises.
The existence of an alleged concession agreement between petitioner and respondent is
unsupported by the evidence on record.
Respondent claims that the parties' agreement was for it to operate the leased premises to
recover its investments and to make profits. However, a review of the Contracts of Lease show that
they are lease contracts, as defined in Article 1643 of the Civil Code:

Article 1643. In the lease of things, one of the parties binds himself to give to another
the enjoyment or use of a thing for a price certain, and for a period which may be
definite or indefinite. However, no lease for more than ninety-nine years shall be valid.

The restrictions and limitations on respondent's use of the leased premises are consistent with
petitioner's right as lessor to stipulate the use of the properties being leased. Neither the Contracts of
Lease nor their respective Addendums to the Contract contain any stipulation that respondent may
occupy and use the leased premises until it recovers the expenses it incurred for improvements it
introduced there. Instead, the lease period was fixed at five (5) years, renewable for another five (5)
years upon mutual agreement.
The subsequent contracts, namely, the Compromise Agreement and the Memorandum of
Agreement, also do not point to any creation of a "concession" in favor of respondent. The Compromise
Agreement affirms the validity of the lease contracts, while the Memorandum of Agreement was for the
payment of respondent's arrears until July 2004.
However, this Court cannot award unpaid rentals to petitioner pursuant to the ejectment
proceeding, since the issue of rentals in Civil Case No. 08-119138 is currently pending with Branch 37,

Page 39 of 57
Regional Trial Court, Manila, by virtue of petitioner's counterclaim. As the parties dispute the amounts
to be offset under the Memorandum of Agreement and respondent's actual back and current rentals
due, the resolution of that case is better left to the Regional Trial Court for trial on the merits.

SOFIA TABUADA, NOVEE YAP, MA. LORETA NADAL and GLADYS EVIDENTE, Petitioners
vs.
ELEANOR TABUADA, JULIETA TRABUCO, LAURETA REDONDO and SPS. BERNAN CERTEZA
& ELEANOR D. CERTEZA, Respondents

G.R. No. 196510; September 12, 2018

First Division
BERSAMIN, J.:

TOPIC: Real Estate Mortgage – Essential Elements; Extinguisment

NATURE OF THE ACTION: Action to Declare the Nullity of a Mortgage and Damages

FACTS:
Petitioners commenced a civil case against respondents to declare the nullity of a mortgage and
damages.
For failure of the respondents to file their answers within the reglementary period, the petitioners
filed a Motion to Declare the Defendants in Default and for Judgment Based on Complaint. However,
spouses Certeza wrote the presiding judge to manifest that they had been informed by their secretary
who had attended in their behalf the February 3, 2005 hearing of the application for the TRO that there
was an on-going negotiation for settlement between the petitioners and respondents Eleanor Tabuada,
Trabuco and Redondo; and that in view of the pendency of the Motion to Declare Defendants in Default
and for Judgment Based on Complaint, the Spouses Certeza were thereby merely expressing the
intention to file their answer. Also, Eleanor Tabuada, Trabuco and Redondo submitted their Motion to
Admit Answer, which was opposed by petitioners.
The RTC denied the Motion to Admit Answer, and declared all the respondents in default.
At the ex parte hearing the petitioners presented Sofia Tabuada who testified that her late husband was
Simeon Tabuada, the son of Loreta Tabuada and the brother-in-law of defendant Eleanor Tabuada;
that her co-plaintiffs were her daughters; that defendant Julieta Trabuco was the daughter of Eleanor
Tabuada while Laureta Redondo was the latter's neighbor. That Loreta Tabuada had died on April 16,
1990 while her husband had died on July 18, 1997. That she received the notice sent by the Spouses
Certeza regarding their land, known as Lot 4272-B-2, that her husband had inherited from his mother,
Loreta Tabuada, and where they were residing, informing them that the land had been mortgaged to
them (Spouses Certeza). That she was puzzled to see the signature purportedly of Loreta Tabuada on
top of the name Loreta Tabuada printed on the Mortgage of Real Rights dated July 1, 1994 and the
Promissory Note dated July 4, 1994 despite Loreta Tabuada having died on April 16, 1990.
RTC ruled in favor of petitioners. The RTC declared the Mortgage of Real Rights dated July 1,
1994 null and void for not complying with the essential requisites of a real estate mortgage. It opined
that based on the complaint and the testimony of Sofia Tabuada "Eleanor Tabuada, who was not the
absolute owner of Lot No. 4272-B-2, and without having the legal authority to mortgage said property

Page 40 of 57
had misrepresented herself as the deceased Loreta Tabuada and mortgaged the property without the
knowledge of herein plaintiffs, and benefited from said mortgage to the detriment of the rights and
interests of plaintiffs." It ruled that moral damages were proper under Article 309, of the Civil Code
based on the showing of disrespect to the dead.
On appeal, the CA reversed and set aside the decision of the RTC. Hence this, petition.

ISSUE:
Whether or not the Real Estate Mortgage was null and void?

RULING:
Yes. The Court ruled that under Article 2085 of the Civil Code, a mortgage, to be valid, must
have the following requisites, namely: (a) that it be constituted to secure the fulfillment of a principal
obligation; (b) that the mortgagor be the absolute owner of the thing mortgaged; and ( c) that the person
constituting the mortgage has free disposal of the property, and in the absence of the right of free
disposal, that the person be legally authorized for the purpose.
It is uncontested that the late Loreta Tabuada had died in 1990, or four years before the
mortgage was constituted; and that Eleanor Tabuada and Trabuco admitted to petitioner Sofia Tabuada
that they had mortgaged the property to the Spouses Certezas. Accordingly, the RTC was fully justified
in declaring the nullity of the mortgage based on its finding that Eleanor Tabuada had fraudulently
represented herself to the Spouses Certeza as the late Loreta Tabuada, the titleholder. That the
titleholder had been dead when the mortgage was constituted on the property by Eleanor Tabuada was
not even contested by Eleanor Tabuada and Tabuco. In any event, Eleanor Tabuada had not been
legally authorized to mortgage the lot to the Spouses Certeza.
The Spouses Certeza contend that they were mortgagees in good faith considering that they
had no notice prior to the filing of Civil Case No. 0528420 that the real owner of the property had died
several years before the execution of the mortgage; and that they had believed in good faith in the
representations made by Eleanor Tabuada that she had been Loreta Tabuada, the titleholder. The
Court ruled that the contentions of the Spouses Certeza lack persuasion.
The Spouses Certeza admitted that the petitioners were the relatives by blood or affinity of their
co-defendants Eleanor Tabuada, et al.; and that Sofia Tabuada, et al. and the petitioners had been
living in their respective residences built on the property subject of the mortgage. Such admissions
belied the Spouses Certeza's contention of being mortgagees in good faith. At the very least, they
should have been prudent and cautious enough as to have inquired about Eleanor Tabuada's assertion
of her capacity and authority to mortgage in view of the actual presence of other persons like the
petitioners herein on the property. Such prudence and caution were demanded of persons like them
who are about to deal with realty; they should not close their eyes to facts that should put a reasonable
man on his guard and still claim he acted in good faith. Indeed, the status of a mortgagee in good faith
does not apply where the title is still in the name of the rightful owner and the mortgagor is a different
person pretending to be the owner. In such a case, the mortgagee is not an innocent mortgagee for
value and the registered owner will generally not lose his title.

Page 41 of 57
 MAKILITO B. MAHINAY, Petitioner 
vs.
DURA TIRE & RUBBER INDUSTRIES, INC., Respondent
G.R. No. 194152; June 5, 2017
Second Division
LEONEN, J.:

TOPIC: Contract of Mortgage; Rights of Mortgagor; Redemption Period

NATURE OF THE ACTION: Complaint for Specific Performance and Annulment of Auction Sale

FACTS:
A parcel of land in Cebu City was covered by a Transfer Certificate of Title under the name of
A&A Swiss International Commercial, Inc. (A&A Swiss). The said property was mortgaged to Dura Tire
and Rubber Industries, Inc. (Dura Tire), as a security for credit purchases to be made by Move
Overland Venture and Exploring, Inc. (Move Overland). Under the mortgage agreement, Dura Tire was
given the express authority to extrajudicially foreclose the property should Move Overland fail to pay its
credit purchases.
A&A Swiss sold the property to Mahinay for the sum of Php 540,000.00. in the Deed of Absolute
Sale, Mahinay acknowledged that the property had been previously mortgaged by A&A Swiss to Dura
Tire, holding himself liable for any claims that Dura Tire may have against Move Overland.
Mahinay wrote Dura Tire, requesting a statement of account of Move Overland’s credit
purchases. Mahinay sought to pay Move Overland’s obligation to release to property from the
mortgage. Dura Tire, however, ignored Mahinay’s request. For Move Overland’s failure to pay its credit
purchases, Dura Tire applied for extrajudicial foreclosure of the property. Mahinay protested the
impending sale and filed a third-party claim before the Office of the Provincial Sheriff of Cebu.
Despite protest, Sheriff Laurel proceeded with the sale and issued a Certificate of Sale in favor
of Dura Tire, the highest bidder at the sale. The property was purchased at Php 950,000.00 and the
Certificate of Sale was registered.
Mahinay filed a complaint for specific performance and annulment of auction sale before the
RTC. According to Mahinay, there was no proof that Dura Tire supplied raw materials to Move
Overland after the property was mortgaged. Mahinay added that Dura Tire allegedly deprived him of
the opportunity to release the property from the mortgage by failing to furnish him with Move Overland’s
statement of account. In its Answer, Dura Tire mainly argued that Mahinay had no cause of action to
file the complaint to annul the foreclosure sale since he was not privy to the mortgage agreement. RTC
initially dismissed the complaint. However, on mandamus and certiorari the Court of Appeals set aside
the order of the trial court and remanded the case for further proceedings.
After due proceedings, the trial court ultimately dismissed the complaint. The trial court held that
Dura Tire was entitled to foreclose the property because of Move Overland’s unpaid credit purchases.
Mahinay’s appeal was dismissed by the Court of Appeals that Mahinay had no right to question the
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foreclosure of the property. Mahinay, as “substitute mortgagor”, was fully aware that the property he
purchased from A&A Swiss was previously mortgaged to Dura Tire to answer for Move Overland’s
obligation. Considering that Move Overland failed to pay for its credit purchases, Dura Tire had every
right to foreclose the property. Mahinay’s motion for reconsideration was also denied.
Relying on the Court of Appeals finding that he was a “substitute mortgagor” Mahinay filed a
complaint for judicial declaration of right to redeem on August 24, 2007. As the admitted owner of the
property at the time of the foreclosure, Mahinay argued that he “must have possessed and still
continues to possess the absolute right to redeem the property. Dura Tire answered the Complaint,
raising the affirmative defense of res judicata. Dura Tire argued that the Complaint for judicial
declaration of right to redeem had identical parties, subject matter, and causes of action with that of the
Complaint for annulment of foreclosure sale. Furthermore, the period of Mahinay' s right of redemption
had already lapsed. Therefore, Mahinay could not be allowed to belatedly redeem the property.
During the hearing on October 27, 2008, Mahinay and Dura Tire jointly moved for a judgment on
the pleadings. The trial court granted the motion and deemed the case submitted for decision after the
filing of memoranda. Mahinay having acquired the property from A&A Swiss before Dura Tire
foreclosed the property, the trial court ruled that Mahinay became a "successor-in-interest" to the
property even before the foreclosure sale. Therefore, by operation of law, Mahinay was legally entitled
to redeem the property. However, considering that one (1) year period of redemption had already
lapsed, Mahinay could no longer exercise his right of redemption. Despite Dura Tire's refusal to accept
his offer to pay Move Overland' s unpaid credit purchases, the trial court said that "there was nothing to
stop [Mahinay] from redeeming the property as soon as he became aware of the foreclosure sale.
Mahinay could have ... filed an action to compel Dura Tire to accept payment by way of redemption." 
In the Judgment on the Pleadings the RTC dismissed Mahinay’s complaint for judicial
declaration of right to redeem. Mahinay filed a motion for reconsideration which was likewise denied.
Hence, this petition.

ISSUE:
Whether or not the one-year period of redemption was tolled when Mahinay filed his complaint
for annulment of foreclosure sale.
RULING:
No. A pending action to annul the foreclosure sale does not toll the running of the one-year
period of redemption under Act No. 3135. Contrary to Mahinay's claim, his right to redeem the
mortgaged property did not arise from the Court of Appeals' "judicial declaration" that he was a
"substitute mortgagor" of A&A Swiss. By force of law, specifically Section 6 of Act No. 3135, Mahinay's
right to redeem arose when the mortgaged property was extrajudicially foreclosed and sold at public
auction. Consequently, he had the right to buy it back from the purchaser at the sale, Dura Tire in this
case, from and at any time within the term of one year from and after the date of the sale. Section 6 of
Act No. 3135 provides:
Section 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property subsequent
to the mortgage or deed of trust under which the property is sold, may redeem the same
at any time within the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundred and sixty-four to
four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these
are not inconsistent with the provisions of this Act.
The "date of the sale" referred to in Section 6 is the date the certificate of sale is
registered with the Register of Deeds. This is because the sale of registered land does not '"take
effect as a conveyance, or bind the land' until it is registered." The right of redemption being
statutory, the mortgagor may compel the purchaser to sell back the property within the one-year
period under Act No. 3135. If the purchaser refuses to sell back the property, the mortgagor may
tender payment to the Sheriff who conducted the foreclosure sale. Here, Mahinay should have
tendered payment to Sheriff Laurel instead of insisting on directly paying Move Overland's
unpaid credit purchases to Dura Tire.
As early as 1956, this Court held in Mateo v. Court of Appeals that "the right of
redemption must be exercised iri the mode prescribed by the statute." The one (1)-year period of
redemption is fixed, hence, non-extendible, to "avoid prolonged economic uncertainty over the
ownership of the thing sold."
Since the period of redemption is fixed, it cannot be tolled or interrupted by the filing of
cases to annul the foreclosure sale or to enforce the right of redemption. "To rule otherwise ...
would constitute a dangerous precedent. A likely offshoot of such a ruling is the institution of
frivolous suits for annulment of mortgage intended merely to give the mortgagor more time to
redeem the mortgaged property." 

Page 43 of 57
 Here, the Certificate of Sale in favor of Dura Tire was registered on February 20, 1995.
Mahinay, as the successor-in-interest of previous owner A&A Swiss, had one (1) year from
February 20, 1995, or on February 20, 1996, to exercise his right of redemption and buy back
the property from Dura Tire at the bid price of ₱950,000.00. With Mahinay failing to redeem the
property within the one (1)-year period of redemption, his right to redeem had already lapsed. As
discussed, the pendency of an action to annul the foreclosure sale or to enforce the right to
redeem does not toll the running of the period of redemption.

PARADIGM DEVELOPMENT CORPORATION OF THE PHILIPPINES, Petitioner 

vs.
BANK OF THE PHILIPPINE ISLANDS, Respondent

G.R. No. 191174; June 7, 2017

Second Division
REYES, JR., J.:

TOPIC: Real Estate Mortgage

NATURE OF THE ACTION: Complaint for Annulment of Mortgage, Foreclosure and Certificate of Sale
and Damages

FACTS:
Sengkon Trading (Sengkon), a sole proprietorship owned by Anita Go, obtained a loan from Far
East Bank and Trust Company (FEBTC) under a credit denominated as Omnibus Line in the amount of
Php 100 million on several sub-facilities with their particular sub-limits denominated as follows: (i)
Discounting Line for P20 Million; (ii) Letter of Credit/Trust Receipt (LC-TR) Line for P60 Million; and (iii)
Bills Purchased Line for PS Million. This was embodied in the document denominated as "Agreement
for Renewal of Omnibus Line."
FEBT again granted another credit facility denominated as Credit Line, in the amount of Php 60
million as contained in the “Agreement for Credit Line”. Two real estate mortgage (REM) contracts were
executed by PDCP President Anthony Go (Go) to partially secure Sengkon’s obligation under this
Credit Line. One REM secured the amount of Php 8 million and another REM secured the amount of
Php 42, 400,000.00.
In a letter FEBTC informed Sengkon regarding the renewal, increase and conversion of its Php
100 million Omnibus Line to Php 150 million LC-TR Line and Php 20 million Discounting Line, the
renewal of the Php 60 million Bills Purchased Line. In the same letter FEBTC also approved the
request of Sengkon to change the account name from SENGKON TRADING to SENGKON TRADING,
INC. (STI).
Eventually Sengkon defaulted in the payment of its loan obligations. Thus, FEBTC demanded
the payment from PDCP in a letter of alleged Credit Line and Trust Receipt availments with the
principal balance of Php 244, 277, 199.68 which Sengkon failed to pay. PDCP responded by requesting
for segregation of Sengkon’s obligations under the Credit Line and for the pertinent statement of
account and supporting documents.
Negotiations were then held and PDCP proposed to pay approximately Php 50 million, allegedly
corresponding to the obligations secured by its property, for the release of its properties from FEBTC
pressed for a comprehensive repayment scheme for the entirety of Sengkon’s obligations. Meanwhile,
the negotiations were put on hold because BPI acquired FEB TC and assumed the rights and
obligations of the latter. When negotiations for the payment of Sengkon's outstanding obligations,
however, fell, FEBTC, on April 5, 2000, initiated foreclosure proceedings against the mortgaged
properties of PDCP before the RTC. FEBTC’s bid is Php 76, 500,000.00 and noted that the Bid is only
in PARTIAL SETTLEMENT of the obligation of PDCP.
PDCP verified with the Register of Deeds and discovered that FEBTC extra-judicially foreclosed
the properties without notice to it as mortgagor and sold the same to FEBTC as the lone bidder. The
corresponding Certificate of Sale was registered on August 8, 2000.

Page 44 of 57
 PDCP filed a Complaint for Annulment of Mortgage, Foreclosure and Certificate of Sale and
Damages with the RTC against BPI, successor-in-interest of FEBTC alleging that the REM’s and their
foreclosure were null and void. That the mortgaged properties will only secure the Credit Line sub-
facility of the Omnibus Line. With this understanding, PDCP President Go allegedly agreed to sign on
two separate dates a pro-forma and blank REM, securing the amount of ₱42.4 Million and P8 Million,
respectively. PDCP, however, claimed that it had no intent to be bound under the second REM, which
was not intended to be a separate contract, but only a means to reduce registration expenses.
Here, PDCP contended that when FEBTC registered both REM’s, even if the intent was only to
register one, the validity of both REM’s was vitiated by lack of consent. PDCP claims that the said intent
is supported by the fact that the REM’s were constituted merely as “partial security” for Sengkon’s
obligations and therefore there was really no intent to be bound under both- but only in one- REM.

ISSUE:
Whether or not the registration of the REM’s, even it contrary to the supposed intent of the
parties, did not affect the validity of the mortgage contracts?

RULING:
Yes. The court see its way clear through PDCP’s argument. To begin with, the registration of
the REM contract is not essential to its validity. Article 2085 of the Civil Code provides:
Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal
of their property, and in the absence thereof, that they be legally authorized for
the purpose.
Third persons who are not parties to the principal obligation may secure the latter
by pledging or mortgaging their own property. In relation thereto, Article 2125 of the Civil
Code reads:

Article 2125. In addition to the requisites stated in Article 2085, it is indispensable, in

order that a mortgage may be validly constituted, that the document in which it appears
be recorded in the Registry of Property. If the instrument is not recorded, the mortgage
is nevertheless binding between the parties.

Hence, even assuming that the parties indeed agreed to register only one of the two REM’s, the
subsequent registration of both did not affect an already validly executed REM if there was no other
basis for the declaration nullity. That the REM’s were intended merely as “partial security” does not
make PDCP’s argument more plausible because as aptly observed by the CA, the PDCP’s act of
surrendering all the tittles to the properties to FEBTC clearly established PDCP’s intent to mortgage all
of the four properties in favor of FEBTC to secure Sengkon’s obligation under the Credit Line. The
Court notes that the principal debtor, Sengkon, has several obligations under its Omnibus Line
corresponding to the several credit sub-facilities made available to it by FEBTC. As found by the trial
court, PDCP intended to be bound only for Sengkon’s availments under the Credit Line sub-facility and
not for just any of Sengkon's availments. Hence, it is in this sense that the phrase "partial security"
should be logically understood.
In this regard, PDCP argued that what its President signed is a pro-forma REM whose important details
were still left in blank at the time of its execution. But notably, nowhere in PDCP's Amended Complaint
did it anchor its cause of action for the nullity of the REMs on this ground. While it indeed alleged this
circumstance, PDCP's Amended Complaint is essentially premised on the supposed fraud employed
on it by FEBTC consisting of the latter's assurances that the REMs it already signed would not be
registered. In Solidbank Corporation v. Mindanao Ferroalloy Corporation, the Court discussed the
nature of fraud that would annul or avoid a contract, thus:

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
Page 45 of 57
 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.

Under Article 1344 of the Civil Code, the fraud must be serious to annul or avoid a contract and
render it voidable. This fraud or deception must be so material that had it not been present, the
defrauded party would not have entered into the contract.
In the present case, even if FEBTC represented that it will not register one of the REMs, PDCP
cannot disown the REMs it executed after FEBTC reneged on its alleged promise. As earlier stated,
with or without the registration of the REMs, as between the parties thereto, the same is valid and
PDCP is already bound thereby. The signature of PDCP's President coupled with its act of surrendering
the titles to the four properties to FEBTC is proof that no fraud existed in the execution of the contract.
Arguably at most, FEBTC's act of registering the mortgage only amounted to dolo incidente which is
not the kind of fraud that avoids a contract.

DALE STRICKLAND, Petitioner 
vs.
ERNST & YOUNG LLP, PUNONGBAYAN & ARAULLO, Respondent

G.R. No. 193782; August 1, 2018

First Division
JARDELEZA, J.:

TOPIC: Contract of Agency – Kinds, Creation & Existence

NATURE OF THE ACTION: Complaint for Collection of Sum of Money

FACTS:
A complaint was filed by Strickland against respondents PA and EYLLP for collection of sum of
money.
National Home Mortgage Finance Corporation (NHMFC) and PA entered into a Financial
Advisory Services Agreement (FASA) for the liquidation of the NHMFC's Unified Home Lending
Program (UHLP). At the time of the engagement, PA was the Philippine member of respondent global
company, EYLLP. In the March 26, 2002 letter of PA to NHMFC confirming their engagement as
exclusive Financial Advisor for the UHLP Project, PA is designated as P&A/Ernst & Young.
During this period, Strickland was a partner of EYLLP who was listed in the F ASA as member
of the Engagement Team.
Significantly, Strickland played a role in negotiating the FASA between PA and NHMFC. By
June 6, 2002, EYLLP wrote PA of the termination of its membership in EYLLP. Despite the termination,
the working relationship among the parties continued. In an assignment letter EYLLP confirmed
Strickland's assignment to Manila as a partner and summarized the working arrangement, specifying
the following provisions: (1) assignment and the terms; (2) compensation and benefits; (3) tax; ( 4)
change of circumstances; ( 5) repatriation; and ( 6) acceptance.
The transactional relationship between the parties went awry. In an exchange of letters, notice
was given to NHMFC of PA's intention to remove Strickland from the NHMFC Engagement Team as a
result of Strickland's resignation from EYLLP and/or EYAPFS.
Since NHMFC was intent on retaining Strickland's services despite his separation from EYLLP
and/or EY APFS, the parties entered into negotiations to define Strickland's possible continued
participation in the UHLP Project. PA, NHMFC, and Strickland exchanged letters containing proposed
amendments to cover the new engagement and Strickland's participation within the UHLP Project. No
actual written and final agreement among the parties.
On August 20, 2004, PA wrote a letter, signed by its President/Chairman & CEO, Benjamin R.
Punongbayan, to NHMFC to initiate discussions on a "mutual voluntary termination of the NHMFC
Agreement. " Consequently, PA and NHMFC executed an addendum to the original engagement letter
covering additional terms of the financial advisory services.
Subsequently, conflict on Strickland's actual participation and concurrent designation on the
project arose among PA, NHMFC, and Strickland as reflected in the proposed revisions to the "Draft
Financial Advisory Services" initially prepared by PA.
Page 46 of 57
 PA objected to Strickland's proposed amendments, specifically on the terms of compensation,
which now contemplated PA's engagement of Strickland as subcontractor for the closing of the UHLP
Project.
By May 23, 2005, counsel for Strickland filed a complaint against PA asking for "equitable
compensation for professional services" rendered to NHMFC on the UHLP Project from the time of his
separation from EYLLP and/or EY APFS in July 2004 "up and through the recent Signing and Closing
Ceremony held on 22 April 2004 and his continued provision of services as the final closing
approaches. RTC granted the complaint.
Counsel for PA responded, categorically denying any contractual relationship with Strickland
and his assertion that he effectively substituted EYLLP and/or EY APFS for the portion of the work he
carried out in the UHLP Project.
A motion to refer to Arbitration was filed which was denied by the RTC.
EYLLP and/or EYAPFS sought reconsideration, which was also denied. Prompting it to file a
Petitioner for Certiorari before the Supreme Court. The EC granted the petition. Pursuant to this ruling,
PA filed a Motion to Suspend with Motion to Reset Pre-Trial Conference on the ground that any
settlement during the arbitration between EYLLP and Strickland may cause prejudice to PA if the trial
court proceedings are continued as Strickland’s cause of action against PA was merely incidental to
that against EYLLP. But the said motion was denied. PA filed a motion for reconsideration before the
CA, of which CA granted the same and directed the RTC to suspend its proceedings pending
arbitration.
Hence, these consolidated petitions file by Strickland. Strickland maintains, however, that the
CA's suspension of the proceedings in Civil Case No. 05-692 is grave error because the CA should
have ordered the RTC to conduct an evidentiary hearing on the factual assertions that PA is an agent
of EYLLP/EYAPFS and that the causes of action of Strickland against EYLLP are intricately intertwined
with those against PA and the other defendants.

ISSUE:
Whether or not PA is an agent of EYLLP?

RULING:
Yes. The Court ruled that PA was unequivocally an agent of EYLLP at the time it executed, as
Philippine Member of the EYLLP global company, the FASA with NHMFC for the UHLP Project. The
records bear out in at least two documents that PA represented EYLLP/EY APFS in the F ASA with
NHMFC for the UHLP Project.
This fact of agency relationship between PA and EYLLP cannot be denied and avoided by
Strickland, given Articles 1868 and 1873 of the Civil Code which provides, thus:

Art. 1868. By the contract of agency, a person binds himself to render some service or
to do something in representation or on behalf of another, with the consent or authority
of the latter.
Art. 1873. If a person specially informs another or states by public advertisement that he
has given a power of attorney to a third person, the latter thereby becomes a duly
authorized agent, in the former case with respect to the person who received the special
information, and in the latter case with regard to any person.

Moreover, that PA is not a signatory to the Partnership Agreement containing the arbitration
clause is of no moment. The arbitration clause is applicable to PA and effectively stays the proceedings
against it.
Clearly, with the foregoing documents, PA is considered an agent of EYLLP. We quote with
favor the analysis of the CA in CA-G.R. SP No. 120897:

x x x Strickland admitted the following: (1) that he is an employee of Ernst & Young Asia,
assigned to different projects in Korea, Japan, Thailand, China and the Philippines; and
(2) that xx x P&A is an agent of Ernst & Young Asia. Such agency is also reflected in the
letter addressed to Strickland, dated April 15, 2002, stating that P&A was representing
Ernst & Young Asia, being its member firm located in the Philippines. P&A, as agent of
Ernst & Young Asia, was authorized to act in behalf of the latter with regard to the
liquidation of the UHLP as financial advisor for NHMFC.

Having established the fact of agency, there is no question that P&A derives its
authority for the UHLP liquidation from Ernst & Young Asia. As such agent, P &A cannot
Page 47 of 57
 sue and be sued on the contract of employment between Strickland and Ernst & Young
Asia. As explained by a recognized authority in civil law:
"(a) Normally, the agent has neither rights nor liabilities as against the third party. He
cannot sue or be sued on the contract. Since the contract may be violated only by
the parties thereto against each other, the real party-in-interest, either as plaintiff
or defendant in an action upon that contract must, generally be a party to said
contract."

In this case, the conflict arose from the terms of Strickland's employment
contract with Ernst & Young Asia and P&A's involvement in the same was a mere
consequence that the termination occurred while the UHLP was ongoing. The fact of
agency in itself and the aforequoted discussion of its effects shows that PA's liability is
anchored on that of Ernst & Young Asia, giving rise to a reason why the trial court's
proceedings must be suspended in the light of the pending arbitration proceedings
between PA’s principal, EYLLP, and xx x Strickland.

ARTURO C. CALUBAD, Petitioner 
vs.
RICARCEN DEVELOPMENT CORPORATION, Respondent

G.R. No. 202364; August 30, 2017

Third Division
LEONEN, J.:

TOPIC: Agency; Apparent Authority

NATURE OF THE ACTION: Annulment of Real Estate and Extrajudicial Foreclosure of Mortgage and
Sale with Damages

FACTS:
Respondent Ricarcen Development Corporation (Ricarcen) was the registered owner of a
parcel of land located in Quezon City. The said land was subdivided into two (2) lots. Ricarcen was a
family corporation. Marilyn Soliman, the president, acting on Ricarcen’s behalf took out a Php
4,000,000.00 loan from Calubad. This loan was secured by a real estate mortgage over Ricarcen’s said
property. Ricarcen and Calubad amended the loan to Php 5,000,000.00 with the same property used
as security.
Ricarcen, again acting through Marilyn took out an additional loan of Php 2,000,000.00. To
prove her authority to execute the 3 mortgage contracts in Ricarcen’s behalf, Marilyn presented
Calubad with a Board Resolution which empowered her to borrow money and use the Quezon City
property as collateral for the loans. She also presented 2 Secretary’s Certificate.
However, sometime in 2003 Ricarcen failed to pay its loan, Calubad initiated an extrajudicial
foreclosure proceeding on the real estate mortgages and was the highest bidder. The certificate of sale
was annotated on the TCT of the said property.
Ricarcen claimed that it only learned of Marilyn’s transactions with Calubad sometime of July
2003. On September 2003, Ricarcen filed its Complaint for Annulment of Real Estate Mortgage and
Extrajudicial Foreclosure of Mortgage and Sale with Damages against Marilyn, Calubad and Register of
Deeds before the RTC of Quezon City. In its complaint Ricarcen claimed that it never authorized its
former president Marilyn to obtain loans from Calubad and use the Quezon City Property as collateral
for the loans.
Calubad argued that even if Ricarcen did not authorize Marilyn, it was already estopped from
denying her authority since the loan proceeds had been released and Ricarcen had benefited from
them.
RTC granted the complaint and annulled the mortgage contracts, extrajudicial foreclosure and
sale. It held that Marilyn failed to present a special power of attorney as evidence of her authority from
Ricarcen. Also ruled that the Board Resolution and Secretary’s Certificates had been unmasked to
merely fabricated.
Only Calubad appealed the RTC decision to the Court of Appeals. The CA dismissed the appeal
and affirmed the RTC decision. It emphasized that the rule on the presumption of validity of a notarized

Page 48 of 57
board resolution and of secretary’s certificate is not absolute and may be validly overcome by contrary
evidence. Hence, this petition.

ISSUE:
Whether or not Marilyn was authorized by the Ricarcen corporation to enter into a contract of
loan?

RULING:
Yes. The Court ruled that the general principles of agency govern the relationship between a
corporation and its representatives. Article 1317 of the Civil Code similarly provides that the principal
must delegate the necessary authority before anyone can act on his or her behalf.
Nonetheless, law and jurisprudence recognize actual authority and apparent authority as the
two (2) types of authorities conferred upon a corporate officer or agent in dealing with third persons.
Actual authority can either be express or implied. Express actual authority refers to the power
delegated to the agent by the corporation, while an agent's implied authority can be measured by his or
her prior acts which have been ratified by the corporation or whose benefits have been accepted by the
corporation.
On the other hand, apparent authority is based on the principle of estoppel. The Civil Code
provides:
Article 14 31. Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon.

Article 1869. Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority. Agency may be oral, unless the law
requires a specific form.

In the case of Yao Ka Sin Trading v. Court of Appeals instructed that an agent's apparent
authority from the principal may also be ascertained through:
(1) the general manner by which the corporation holds out an officer or agent as having power
to act or, in other words, the apparent' authority with which it clothes him to act in general, or
(2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge
thereof, whether within or without the scope of his ordinary powers.

The doctrine of apparent authority provides that even if no actual authority has been conferred
on an agent, his or her acts, as long as they are within his or her apparent scope of authority, bind the
principal. However, the principal's liability is limited to third persons who are reasonably led to believe
that the agent was authorized to act for the principal due to the principal 's conduct.
Apparent authority is determined by the acts of the principal and not by the acts of the agent.
Thus, it is incumbent upon Calubad to prove how Ricarcen 's acts led him to believe that Marilyn was
duly authorized to represent it.
Here, as the former president of Ricarcen, it was within Marilyn's scope of authority to act for
and enter into contracts in Ricarcen's behalf. Her broad authority from Ricarcen can be seen with how
the corporate secretary entrusted her with blank yet signed sheets of paper to be used at her discretion.
She also had possession of the owner's duplicate copy of the land title covering the property mortgaged
to Calubad, further proving her authority from Ricarcen.
The records show that on October 15, 2001, Calubad drew and issued two (2) checks payable
to Ricarcen representing the loan proceeds for the first mortgage. Both checks were deposited in
Ricarcen 's bank account with Banco de Oro, Banawe Branch, and were honored by the drawee bank.
On December 6, 2001, Marilyn negotiated for an additional Php 1,000,000.00 loan with Calubad, under
the same terms and conditions. From December 15, 2001 to April 15, 2002, Ricarcen paid and issued
several checks payable to Calubad, which he claimed were the monthly interest payments of the
mortgage loans.
Calubad could not be faulted for continuing to transact with Marilyn, even agreeing to give out
additional loans, because Ricarcen clearly clothed her with apparent authority. Likewise, it reasonably
appeared that Ricarcen's officers knew of the mortgage contracts entered into by Marilyn in Ricarcen's
behalf as proven by the issued Banco De Oro checks as payments for the monthly interest and the
principal loan. Ricarcen claimed that it never granted Marilyn authority to transact with Calubad or use
the Quezon City property as collateral for the loans, but its actuations say otherwise. It appears as if
Ricarcen and its officers gravely erred in putting too much trust in Marilyn. However, Calubad, as an
Page 49 of 57
innocent third party dealing in good faith with Marilyn, should not be made to suffer because of
Ricarcen's negligence in conducting its own business affairs.

MARCELINO E. LOPEZ, FELIZA LOPEZ, ZOILO LOPEZ, LEONARDO LOPEZ and SERGIO F.
ANGELES, Petitioner 
vs.
THE HON. COURT OF APPEALS and PRIMEX CORPORATION, Respondent

G.R. No. 163959; August 1, 2018

Third Division
BERSAMIN, J.:

TOPIC: Extinguishment of Contract of Agency

NATURE OF THE ACTION: Complaint for Injunction, Specific Performance and Damages

FACTS:
Involved in this case is the sale of the 14-hectare property situated in Antipolo City between the
petitioners and respondent Primex Corporation (Primex).
Primex filed a complaint for injunction, specific performance and damages against petitioners
before the RTC of Pasig. In its complaint the Primex alleged that it entered into a Deed of Conditional
Sale (DCS) relative to a portion of land designated as Lot 15 of subdivision plan located in Antipolo,
Rizal with the herein plaintiffs as vendors. The agreed purchase price is Php 39, 208, 120.00. It
claimed that from the execution of the deed the company had dutifully complied with all its monetary
obligations and was again ready to pay another Php 2,000,000.00 upon presentation by the petitioners
of a valid certificate of title in the name of one or all of the vendors. However, the petitioners delivered
only a Transfer Certificate of Title and that the problem with the same according to Primex while it was
registered under the name of one of the vendors—Marcelino Lopez, the title was nonetheless derived
from Original Certificate of Title (OCT No. 537) which had been declared by the Supreme in Court as
null and void together with all the other TCT’s emanating from the said OCT. Consequently, Primex
refused the accept the TCT as a valid and sufficient compliance with the terms of the DCS which would
warrant the release of another Php 2 Million pesos. Despite failure to delivers a valid title the Primes
alleged that petitioners threatened to sell or mortgage the subject property to other parties on account
of Primex’s ostensible refusal to pay part of the purchase price as scheduled. Hence, Primex filed the
complaint.
Petitioners filed a motion to dismiss on the ground of improper venue and litis pendencia. As it
turned out that petitioners earlier filed for Rescission of Conditional Sale and damages against Primex.
But the said motion to dismiss was denied by the RTC.
On its Answer petitioners countered that they have fully complied with the provision of the DCS.
That it was Primex who violated the terms of the DCS by obstinately refusing to pay the amount of Php
1 Million despite fulfillment of the petitioner conditions.

Page 50 of 57
 Meanwhile, during the pendency of the case, petitioners delivered to Primex TCT No. 208538
which contained the exact portion and area subject property sold to Primex, and had already been
allegedly acceptable to the latter, so much so that the parties finally executed a Deed of Absolute Sale
over the piece of property. The Primex already released several payments amounting to Php 24 Million,
excluding a separate 4, 150, 000.00 loan covered by a real estate mortgage it extended to the
petitioners for the purpose of funding additional expenses incurred in relation to the fulfillment of the
petitioner’s obligation under the DCS. In light of the developments, petitioners again asked the court for
the dismissal of the case. But Primex filed an opposition and claimed that the TCT No. 208358 was
insufficient to comply with their obligations considering that there were still pending claims against the
petitioners and the subject property. Also, that despite the issuance of the TCT No. 216875 in the name
of Primex, still the petitioners failed to comply with their obligation to deliver the title to the property free
from any lien and encumbrances.
RTC rendered its decision in favor of petitioners and ordered Primex to pay the balance of the
purchase price. Aggrieved, Primex filed an appeal before the Court of Appeals. The CA set aside the
decision of the RTC and remanded the case for trial de novo. After trial the trial court rendered anew
decision declaring the Deed of Conditional Sale rescinded, and ordered mutual restitution between the
parties.
Petitioners’ filed a Motion for execution of judgment pending appeal. The RTC granted the same
through a special order. Aggrieved, Primex filed a Petitioner for certiorari, prohibition and mandamus
with prayer of issuance of TRO and writ of preliminary injunction. CA granted the petition and annulled
the special order.
Petitioners then brought their own petitioner for certiorari before the Supreme Court to annul the
resolution of the CA.
Meanwhile, on the appeal before the CA, it promulgated the assailed decision of the RTC by
reversing and setting aside the judgment and ordering the Primex to pay the petitioners the full balance
of the purchase price plus legal interests.
It is noted that because the petitioners had engaged services of two lawyers Atty. Angeles and
Atty. Pantaleon, another issue concerning the timeliness of the Motion for reconsideration by the
petitioners arose. Both lawyers received the copy of the CA decision as different date. The CA denied
the motion for reconsideration for having filed out of time and declared its decision final and executory.
However, the parties submitted the Compromise Agreement with the Joint Motion to Dismiss
and Withdrawal of Petition. The Court issued a resolution being challenged by the heirs of Marcelino
Lopez: (1) noting the Compromise Agreement; (2) granting the Joint Motion to Dismiss and Withdrawal
of Petition; and (3) Denying the petitions for review on certiorari on the ground of mootness.
Thereafter, the heirs of Marcelino Lopez filed their oppositions arguing that Atty. Angeles no
longer had the authority to enter into and submit the Compromise Agreement because the special
power of attorney in his favor had ceased to have force and effect upon the death of Marcelino Lopez.

ISSUE:
Whether or not the authority of Atty. Angeles was terminated upon the death of Marcelino
Lopez?

RULING:
Yes. The Court ruled that by the contract of agency, a person binds himself to render some
service or to do something in representation or on behalf of another with the consent or authority of the
latter. For a contract of agency to exist, therefor, the following requisites must concur, namely,: (1) there
must be consent coming from the persons or entities having the juridical capacity and capacity to act to
enter into such contract; (2) there must exist an object in the form of services to be undertaken by the
agent in favor of the principal; and (3) there must be a cause of consideration for the agency.
One of the modes of extinguishing a contract of agency is by the death of either the principal or
the agent. It would follow that a fortiori that any act of the agent after death of his principal should be
held void ab initio unless the act fell under the exceptions established under Article 1930 and 1931 of
the Civil Code, in which case, notwithstanding of death of either principal or agent, the contract of
agency continues to exist. The exceptions should be strictly construed.
Here, Atty. Angeles asserted that he had been authorized by the Lopezes to enter into a
Compromise Agreement; and that his authority had formed part of the original pre-trial records of the
RTC.
Marcelino Lopez died on December 3, 2009, as borne out of the Certificate of Death submitted
by the heirs. As such, the Compromise Agreement, which was filed on February 2, 2012, was entered
into more that two (2) years after the death of Marcelino Lopez. Considering that Atty. Angeles had
ceased to be the agent upon death of Marcelino Lopez, Atty. Angeles’ execution and submission of the
Compromise Agreement were void ab initio and of no effect.

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 The want of authority in favor of Atty. Angeles was aggravated by the fact that he did not
disclose the death of the late Marcelino Lopez to the Court. His omission reflected the height of
unprofessionalism on his part, for it engendered the suspicion that he thereby tried to pass off the
Compromise Agreement as genuine and valid despite his authority under the special power of attorney
having terminated for all legal purposes. Accordingly, the resolution granting the Joint Motion to
Dismiss and Withdrawal of Petition is set aside, and, consequently, the appeal of the petitioners is
reinstated.

JOHN E.R. REYES and MERWIN JOSEPH REYES, Petitioners, 

vs.
ORICO DOCTOLERO, ROMEO A VILA, GRANDEUR SECURITY AND SERVICES CORPORATION,
and MAKATI CINEMA SQUARE, Respondents.

G.R. No. 185597; August 2, 2017

Third Division
JARDELEZA, J.:

TOPIC: Persons Liable for Damages

NATURE OF THE ACTION: Complaint for Damages

FACTS:
An altercation arose between Orico Doctolero (Doctolero), a security guard of respondent
Grandeur Security and Services Corporation (Grandeur) and petitioners John E.R. Reyes (John) and
Mervin Joseph Reyes (Mervin) in the parking are of respondent Makati Cinema Square (MCS).
Grandeur advances a different version, one based on the Initial Report conducted by
Investigator Cosme Giron that while Doctolero was on duty at the ramp of the exit driveway of MCS’s
basement parking, John took over the left lane and insisted entry through the basement parking’s exit
driveway. Knowing that this is against the traffic rules, Doctolero stopped John, prompting the latter to
alight from his vehicle and confront Doctolero. With his wife unable to pacify him, John punched and
kicked Doctolero, hitting the latter on his left face and stomach. Doctolero tried to step back to avoid his
aggressor but John persisted, causing Doctolero to draw his service firearm and fire a warning shot.
John ignored this and continued his attack. He caught up with Doctolero and wrestled with him to get
the firearm. This caused the gun to fire off and hit John's leg. Mervin then ran after Doctolero but was
shot on the stomach by security guard Avila.
Petitioners filed before the Regional Trial Court a complaint for damages against respondents
Doctolero and Avida and their employer Grandeur, charging the latter with negligence in the selection
and supervision of its employees. They likewise impleaded MCS on the ground that it was negligent in
getting Grandeur's services. In their complaint, petitioners prayed that respondents be ordered, jointly
and severally, to pay them actual, moral, and exemplary damages, attorney's fees and litigation costs.
The RTC ruled against respondents Doctolero and Avila finding them responsible for the injuries
sustained by petitioners. The RTC ordered them to jointly and severally pay petitioners. The trial
thereafter continued with respect to Grandeur and MCS. The RTC dismissed the complaint against
MCS but RTC however, held Grandeur solidarily liable with respondents Doctolero and Avila. According
to the RTC, Grandeur was unable to prove that it exercised the diligence of a good father of a family in
the supervision of its employees because it failed to prove strict implementation of its rules, regulations,
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guidelines, issuances and instructions, and to monitor consistent compliance by respondents. Grandeur
filed a motion for reconsideration, the RTC issued an Order modifying its decision, it dismissed the
complaint filed against defendants Grandeur and MCS.
On appeal before CA, the CA dismissed the appeal and affirmed the Order’s of the RTC. It
agreed Hence, this petition.

ISSUE:
Whether Grandeur and MCS may be held vicariously liable for the damages caused by respondents
Doctolero and Avila to petitioners John and Mervin?

RULING:
No. The Court denied the petition. It ruled that as a general rule, one is only responsible for his
own act or omission. This general rule is laid down in Article 2176 of the Civil Code.
The law however provides for exceptions when it makes certain persons liable for the act or
omission of another. One exception is an employer who is made vicariously liable for the tort committed
by his employee under paragraph 5 of Article 2180. It must be stressed, however, that the above rule is
applicable only if there is an employer-employee relationship. We find no employer-employee
relationship between MCS and respondent guards. The guards were merely assigned by Grandeur to
secure MCS' premises pursuant to their Contract of Guard Services. Thus, MCS cannot be held
vicariously liable for damages caused by these guards' acts or omissions.
To rebut the presumption of negligence, Grandeur must prove two things: first, that it had
exercised due diligence in the selection of respondents Doctolero and Avila, and second, that after
hiring Doctolero and Avila, Grandeur had exercised due diligence in supervising them.
Here, both the RTC and the CA found that Grandeur was able to sufficiently prove, through
testimonial and documentary evidence, that it had exercised the diligence of a good father of a family in
the selection and hiring of its security guards.
Once evidence is introduced showing that the employer exercised the required amount of care
in selecting its employees, half of the employer's burden is overcome.
The question of diligent supervision, however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised diligent supervision of its employee
during the performance of the latter's assigned tasks would be enough to relieve him of the liability
imposed by Article 2180 in relation to Article 2176 of the Civil Code.
We agree with the CA that these may be considered, as they are related to the documents and
testimonies adduced during trial to show Grandeur's diligence in the supervision of the actual work
performance of its employees. Considering all the evidence borne by the records, we find that
Grandeur has sufficiently exercised the diligence of a good father of a family in the selection and
supervision of its employees. Hence, having successfully overcome the legal presumption of
negligence, it is relieved of liability from the negligent acts of its employees, respondents Doctolero and
Avila.

Page 53 of 57
 ORIENTAL ASSURANCE CORPORATION, Petitioner 
vs.
MANUEL ONG, doing business under the business name of WESTERN PACIFIC TRANSPORT
SERVICES AND/OR ASIAN TERMINALS, INC., Respondents

G.R. No. 189524; October 11, 2017

Third Division
LEONEN, J.:

TOPIC: Subrogation
NATURE OF THE ACTION: Complaint for Sum of Money

FACTS:
This is a petition for review on certiorari of the Resolution of the Court of Appeals (CA) which
affirmed the Regional Trial Court’s (RTC) dismissal of the complaint on the ground that the claim of
petitioner had already prescribed.

JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-zinc-alloy-
coated steel sheets in coils. Upon arrival of the vessel at the Manila South Harbor, the 72 coils were
discharged and stored in Pier 9 under the custody of the arrastre contractor, Asian Terminals Inc. The
coils were loaded on the trucks of Manuel Ong and delivered to JES Steel’s plant in Cavite. However,
11 of these coils were found to be in damaged condition, dented or their normal round shape deformed.

JEA Steel filed a claim with Oriental for the value of the 11 damaged coils pursuant to Marine
Insurance Policy. Oriental paid JEA Steel the sum of Php 521, 530.16 and subsequently demanded
indemnity from Ong and Asian Terminals (respondents) but they refused to pay.

Oriental filed a Complaint before Regional Trial Court of Manila for sum of money against the
respondents. Mr. Ong countered that the 11 coils were already damaged when they were loaded on his
trucks and transported to consignee. On the other hand, Asian Terminals claimed that it exercised due
diligence in handling the cargo, that the cargo was released to consignee’s representative in the same
condition as when received from the vessel. And further argued that the Oriental’s claim was barred for
the latter’s failure to file a notice of claim with the 15-day period provided in the Gate Pass and in Art.
VII, Section 7.01 of the Contract for Cargo Handling Services between the Philippines Ports Authority
and Asian Terminals and that its liability, if any, should not exceed 5,000.00 pursuant to said Section
7.01.

Page 54 of 57
 RTC, ruled dismissing the complaint. It found no preponderance of evidence to establish that
respondents were the one responsible for the damage of the coils. A motion for reconsideration was
filed by petitioner but the same was denied.

On appeal before the CA, the CA dismissed the appeal on the ground that its claim had already
prescribed. The CA found that the 11 coils were already damaged before they were loaded in Ong’s
trucks. Hence, the legal presumption of negligence applies against Asian Terminals unless it is able to
prove that it exercised extraordinary diligence in the handling of the cargo. The CA held that as an
arrastre operator Asian Terminals is bound to observe the same degree of care required to common
carriers. Hence, this petition.

ISSUE:
Whether or not Oriental who was not a party to the Gate Pass or Management Contract is
bound by the 15-day prescriptive period fixed in them to file a claim against the arrastre operator?

RULING:
Yes. It is the contention of the Oriental that it was not aware of the provisions of the Gate Pass
or the Management Contract, neither of which it was a party to. Consequently, it cannot be bound by
the stipulation limiting the liability of Asian Terminals. Asian Terminals counters that "the provisions of
the Management Contract and the Gate Pass are binding on Oriental as insurer-subrogee and
successor-in-interest of the consignee."
The fact that Oriental is not a party to the Gate Pass and the Management Contract does not
mean that it cannot be bound by their provisions. Oriental is subrogated to the rights of the consignee
simply upon its payment of the insurance claim. This Court explained the principle of subrogation in
insurance contracts:
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the
insured property is destroyed or damaged through the fault or negligence of a party other
than the assured, then the insurer, upon payment to the assured, will be subrogated to
the rights of the assured to recover from the wrongdoer to the extent that the insurer has
been obligated to pay. Payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies which the latter 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 or upon written
assignment of claim. It accrues simply upon payment of the insurance claim by the
insurer.
As subrogee, petitioner merely stepped into the shoes of the consignee and may only exercise
those rights that the consignee may have against the wrongdoer who caused the damage. "It can
recover only the amount that is recoverable by the assured." And since the right of action of the
consignee is subject to a precedent condition stipulated in the Gate Pass, which includes by reference
the terms of the Management Contract, necessarily a suit by the insurer is subject to the same
precedent condition.
As stated earlier, the dorsal side of the Gate Pass signed by the consignee's representative
upon receipt of the cargo expressly refers to the Management Contract between the Philippine Ports
Authority and Asian Terminals. Hence, the consignee and its subrogee, petitioner insurance company,
are deemed to have notice of this Management Contract.
However, this case presents a new situation in that unlike the previous cases, the facts do not
show that a provisional claim or a request for bad order survey was made by the consignee. Instead,
what was only established is that the consignee's claim letter dated July 2, 2002 was received by
respondent on July 4, 2002, or 17 days from last delivery of the coils to the consignee.

Even so, this Court adopts a reasonable interpretation of the stipulations in the Management
Contract and hold that petitioner's complaint is not time-barred.

First, under the express terms of the Management Contract, the consignee had thirty (30) days
from receipt of the cargo to request for a certificate of loss from the arrastre operator. Upon receipt of
such request, the arrastre operator would have 15 days to issue a certificate of loss, either actually or
constructively. From the date of issuance of the certificate of loss or where no certificate was issued,
from the expiration of the 15-day period, the consignee has 15 days within which to file a formal claim
with the arrastre operator.

In other words, the consignee had 45 to 60 days from the date of last delivery of the goods
within which to submit a formal claim to the arrastre operator.

Page 55 of 57
 The consignee's claim letter was received by respondent on July 4, 2002, or 17 days from the
last delivery of the goods, still within the prescribed 30-day period to request a certificate of loss,
damage, or injury from the arrastre operator.

This Court finds that whether the consignee files a claim letter or requests for a certificate of
loss or bad order examination, the effect would be the same, in that either would afford the arrastre
contractor knowledge that the shipment has been damaged and an opportunity to examine the nature
and extent of the injury. Under the Management Contract, the 30-day period is considered reasonable
for the contractor to make an investigation of a claim.

Hence, the consignee's claim letter is regarded as substantial compliance with the condition
precedent set forth in the Management Contract to hold the arrastre operator liable.

ALICIA M.L. COSETENG AND DILIMAN PREPARATORY SCHOOL, Petitioner, 

vs.
LETECIA PEREZ, Respondent.

G.R. No. 185938; September 6, 2017

Second Division
REYES, JR., J.:

TOPIC: Damages
NATURE OF THE ACTION: Complaint for Payment of Separation Benefits

FACTS:
Respondent Perez was hired in 1972 by the School as a teacher for elementary students. For
several years she was a regular teacher handling Grade III level students. Sometime in 1994 several
students reported that Perez collected payment from them for subscription to Saranggola magazine, an
educational publication endorsed by the School. However, they did not receive their copies of the
magazine, while students from other sections had already received theirs.
Thereafter, the school created a committee to conduct an investigation. Perez admitted she
failed to remit subscription payment supposedly due to her busy schedule, but agreed to return the
payment of the students instead. Moths later, the school found out that only five of the 20 students were
able to receive a refund of their subscription payments. Based on the findings of the School's
investigating committee, a case for misappropriation amounting to estafa could allegedly be built
against Perez. However, in view of her extensive service to the school, as well as to give her the benefit
of the doubt, the investigating committee reduced its findings to negligence and recommended that
Perez be suspended without pay for ten working days. Accordingly, Perez was suspended from work.  
Without reporting back to work, Perez tendered her resignation to Conseteng. Upon her
resignation, Perez received all amounts due her under the Private Education Retirement Annuity, a
program wherein teachers and employers contribute to a fund for the availment of the teachers on their
retirement. Thereafter, nothing more was heard from Perez, until she filed a Complaint for payment of
separation benefits with the Labor Arbiter. She argued that she was constructively dismissed from
employment.
The LA decided in favor of Perez's claim for separation pay due to its conclusion that the
petitioners have, as a practice, given separation pay to its employees who resigned. However, the LA
decreed that Perez resigned voluntarily from work and was not constructively dismissed, hence, the
complaint for constructive dismissal, damages and respondent's counterclaims were dismissed for lack
of merit. On appeal with the National Labor Relations Commission (NLRC), it modified the LA ruling in
that it affirmed the grant of separation pay to Perez but deemed the latter as constructively dismissed
from employment because she was placed on floating status.
When this case reached the Court of Appeals (CA), it ruled that Perez was constructively
dismissed from employment, necessitating an award for separation pay. The CA considered Perez's
reassignment as a demotion amounting to additional penalty for her infractions. Further, the CA
reinstated the LA's award of attorney's fees to Perez.
Petitioners filed a petition for review on certiorari, including a claim for exemplary damages,
among other claims.

Page 56 of 57
ISSUE:
Whether or not petitioner is entitled to damages and attorney’s fees since Perez’s claim that she
was constructively dismissed for having been demoted or placed on floating status?

RULING:
No. The Court denied the petitioners' prayer for moral damages on account of the complaint
filed by Perez for the reason that moral damages are not automatically granted as "there must still be
proof of the existence of the factual basis of the damage and its causal relation to the defendants' acts.”
With respect to exemplary damages, Article 2229 of the Civil Code states that, "exemplary or
corrective damages are imposed, by way of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages." Since the Court has adjudged the petitioners
as not entitled to moral damages, their plea for award of exemplary damages cannot be granted
pursuant, to the aforestated provision.
On the subject of attorney's fees, the Court holds that while the petitioners were compelled to
engage the services of a counsel and incurred litigation expenses to defend their interests, it appears
that Perez was not impelled by malice and bad faith in filing her complaint. She truly, albeit erroneously,
believed that she can avail of separation benefits even if she resigned from her work. Article 2208 of
the Civil Code states that attorney's fees may be recovered "when the defendant's act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest."
However, in Delos Santos v. Papa, the Court decreed: Award of attorney’s fees is the exception
rather than the general rule, and counsel's fees are not to be awarded every time a party wins a suit.
The discretion of the court to award attorney's fees under Article 2208 of the Civil Code demands
factual, legal, and equitable justification, without which the award is a conclusion without a premise, its
basis being improperly left to speculation and conjecture.

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