Civil Law Recentjuris Final

Recent Jurisprudence (April 2014 - March Law
2015)
PERSONS
CONFLICT OF LAWS
DAVID A. NOVERAS vs. LETICIA T. NOVERAS
G.R. No. 188289, August 20, 2014, J. Perez
David and Leticia are US citizens who own properties in the USA and in the
Philippines. Leticia obtained a decree of divorce from the Superior Court of
California in June 2005 wherein the court awarded all the properties in the USA to
Leticia. With respect to their properties in the Philippines, Leticia filed a petition for
judicial separation of conjugal properties. The Court ruled that even if the Court
applies the doctrine of processual presumption as the lower courts did with respect
to the property regime of the parties, the recognition of divorce is entirely a
different matter because, to begin with, divorce is not recognized between Filipino
citizens in the Philippines. Absent a valid recognition of the divorce decree, it
follows that the parties are still legally married in the Philippines. The trial court
thus erred in proceeding directly to liquidation.
Facts:
David A. Noveras (David) and Leticia T. Noveras (Leticia) were married on 3
December 1988 in Quezon City, Philippines. They resided in California, United States
of America (USA) where they eventually acquired American citizenship. They then
begot two children, namely: Jerome T. Noveras, who was born on 4 November 1990
and JenaT. Noveras, born on 2 May 1993. David was engaged in courier service
business while Leticia worked as a nurse in San Francisco, California.
Due to business reverses, David left the USA and returned to the Philippines
in 2001. Upon learning that David had an extra-marital affair, Leticia filed a petition
for divorce with the Superior Court of California, County of San Mateo, USA. The
California court granted the divorce on 24 June 2005 and judgment was duly
entered on 29 June 2005.6 The California court granted to Leticia the custody of her
two children, as well as all the couples properties in the USA.
On 8 August 2005, Leticia filed a petition for Judicial Separation of Conjugal
Property before the RTC of Baler, Aurora. She prayed for: 1) the power to administer
all conjugal properties in the Philippines; 2) David and his partner to cease and
desist from selling the subject conjugal properties; 3) the declaration that all
conjugal properties be forfeited in favor of her children; 4) David to remit half of the
purchase price as share of Leticia from the sale of the Sampaloc property; and 5)
the payment ofP50,000.00 and P100,000.00 litigation expenses
In his Answer, David stated that a judgment for the dissolution of their
marriage was entered on 29 June 2005 by the Superior Court of California, County of
San Mateo. He demanded that the conjugal partnership properties, which also
include the USA properties, be liquidated and that all expenses of liquidation,
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including attorneys fees of both parties be charged against the conjugal
partnership.
The RTC considered the petition filed by Leticia as one for liquidation of the
absolute community of property regime instead of an action for judicial separation
of conjugal property. As to the property relations, the trial court ruled that in
accordance with the doctrine of processual presumption, Philippine law should
apply. The absolute community properties cannot be forfeited in favor of Leticia and
her children.
On appeal, the Court of Appeals modified the trial courts Decision by
directing the equal division of the Philippine properties between the spouses.
Issues:
1. Whether or not the divorce decree should be judicially recognized
2. Whether or not the petition for judicial separation of property is proper
Ruling:
1. No, the divorce decree should not be judicially recognized for the requisites
were not complied with.
The requirements of presenting the foreign divorce decree and the national
law of the foreigner must comply with our Rules of Evidence. Specifically, for
Philippine courts to recognize a foreign judgment relating to the status of a
marriage, a copy of the foreign judgment may be admitted in evidence and proven
as a fact under Rule 132, Sections 24 and 25, in relation to Rule 39, Section 48(b) of
the Rules of Court.
Based on the records, only the divorce decree was presented in evidence.
The required certificates to prove its authenticity, as well as the pertinent California
law on divorce were not presented. Even if the Court applies the doctrine of
processual presumption as the lower courts did with respect to the property regime
of the parties, the recognition of divorce is entirely a different matter because, to
begin with, divorce is not recognized between Filipino citizens in the Philippines.
Absent a valid recognition of the divorce decree, it follows that the parties are still
legally married in the Philippines. The trial court thus erred in proceeding directly to
liquidation.
2. Having established that Leticia and David had actually separated for at
least one year, the petition for judicial separation of absolute community of property
should be granted.
Separation in fact for one year as a ground to grant a judicial separation of
property was not tackled in the trial courts decision because, the trial court
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erroneously treated the petition as liquidation of the absolute community of
properties.
The records of this case are replete with evidence that Leticia and David had
indeed separated for more than a year and that reconciliation is highly improbable.
First, while actual abandonment had not been proven, it is undisputed that the
spouses had been living separately since 2003 when David decided to go back to
the Philippines to set up his own business. Second, Leticia heard from her friends
that David has been cohabiting with Estrellita Martinez, who represented herself as
Estrellita Noveras. Editha Apolonio, who worked in the hospital where David was
once confined, testified that she saw the name of Estrellita listed as the wife of
David in the Consent for Operation form. Third and more significantly, they had filed
for divorce and it was granted by the California court in June 2005.
NORMA A. DEL SOCORRO for and in behalf of her Minor Child RODERIGO
NORJO VAN WILSEM vs. ERNST JOHAN BRINKMAN VAN WILSEM
G.R. No. 193707, December 10, 2014, J. Peralta
Under the doctrine of processual presumption, if the foreign law involved is
not properly pleaded and proved, our courts will presume that the foreign law is the
same as our local or domestic or internal law. Hence, pleading a foreign law without
proving the same will bar its application in the Philippines.
Facts:
Petitioner Norma A. Del Socorro and respondent Ernst Johan Brinkman Van
Wilsem contracted marriage in Holland on September 25, 1990. On January 19,
1994, they were blessed with a son named Roderigo Norjo Van Wilsem.
Unfortunately, their marriage bond ended on July 19, 1995 by virtue of a Divorce
Decree issued by the appropriate Court of Holland. At that time, their son was only
eighteen (18) months old. Thereafter, Norma and her son came home to the
Philippines. Since the arrival of Norma and her son in the Philippines, Ernst never
gave support to the son, Roderigo. Not long thereafter, Ernst came to the Philippines
and remarried in Pinamungahan, Cebu, and since then, have been residing thereat.
On August 28, 2009, Norma, through her counsel, sent a letter demanding for
support from Ernst. However, he refused to receive the letter. Because of the
foregoing circumstances, Norma filed a complaint-affidavit with the Provincial
Prosecutor of Cebu City against Ernst for violation of Section 5, paragraph E(2) of
R.A. No. 9262 for the latters unjust refusal to support his minor child with her. She
also filed a Motion/Application of Permanent Protection Order to which Ernst filed his
Opposition. On February 19, 2010, the RTC-Cebu dismissed the instant criminal case
against on the ground that the facts charged in the information do not constitute an
offense with respect to the Ernst who is an alien. Thereafter, Norma filed her Motion
for Reconsideration thereto reiterating Ernsts obligation to support their child under
Article 195 of the Family Code, thus, failure to do so makes him liable under R.A. No.
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9262 which equally applies to all persons in the Philippines who are obliged to
support their minor children regardless of the obligors nationality.
Issue:
Whether a foreign national could be held liable for acts and omissions
punishable under special criminal laws, specifically in relation to family rights and
duties.
Ruling:
Yes, he can.
Let it be noted that RTC-Cebu is correct in saying that Ernst is subject to the
laws of his country, not to Philippine law, as to whether he is obliged to give support
to his child, as well as the consequences of his failure to do so.
However, in international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the foreign law. In the
present case, Ernst hastily concludes that being a national of the Netherlands, he is
governed by such laws on the matter of provision of and capacity to support. While
Ernst pleaded the laws of the Netherlands in advancing his position that he is not
obliged to support his son, he never proved the same. In view of his failure to prove
the national law of the Netherlands in his favor, the doctrine of processual
presumption shall govern. Under this doctrine, if the foreign law involved is not
properly pleaded and proved, our courts will presume that the foreign law is the
same as our local or domestic or internal law. Notwithstanding that the national law
of respondent Ernst states that parents have no obligation to support their children
or that such obligation is not punishable by law, said law would still not find
applicability because when the foreign law, judgment or contract is contrary to a
sound and established public policy of the forum, the said foreign law, judgment or
order shall not be applied.
In addition, considering that Ernst is currently living in the Philippines, the
Court finds strength in Normas claim that the Territoriality Principle in criminal law,
in relation to Article 14 of the New Civil Code, applies to the instant case. On this
score, it is indisputable that the alleged continuing acts of Ernst in refusing to
support his child with Norma is committed here in the Philippines as all of the
parties herein are residents of the Province of Cebu City. As such, our courts have
territorial jurisdiction over the offense charged against Ernst.
HUMAN RELATIONS
CARLOS A. LORIA vs. LUDOLFO P. MUOZ
G.R. No. 187240, October 15, 2014, J. Leonen
The principle of unjust enrichment has two conditions. First, a person must
have been benefited without a real or valid basis or justification. Second, the
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benefit was derived at another persons expense or damage. In this case, Loria
received P2,000,000.00 from Muoz for a subcontract of a government project to
dredge the Masarawag and San Francisco Rivers in Guinobatan, Albay. However,
contrary to the parties agreement, Muoz was not subcontracted for the project.
Nevertheless, Loria retained the P2,000,000.00. Thus, Loria was unjustly enriched.
He retained Muozs money without valid basis or justification. Under Article 22 of
the Civil Code of the Philippines, Loria must return the P2,000,000.00 to Muoz.
Facts:
Ludolfo P. Muoz, Jr. (Muoz) filed a complaint for sum of money and damages
with an application for issuance of a writ of preliminary attachment against Carlos A.
Loria (Loria) with the Regional Trial Court of Legazpi City.
In his complaint, Muoz alleged that he has been engaged in construction
under the name, Ludolfo P. Muoz, Jr. Construction. In August 2000, Loria visited
Muoz in his office in Doa Maria Subdivision in Daraga, Albay. He invited Muoz to
advance P2,000,000.00 for a subcontract of a P50,000,000.00 river-dredging project
in Guinobatan.
Loria represented that he would make arrangements such that Elizaldy Co,
owner of Sunwest Construction and Development Corporation, would turn out to be
the lowest bidder for the project. Elizaldy Co would pay P8,000,000.00 to ensure the
projects award to Sunwest. After the award to Sunwest, Sunwest would subcontract
20% or P10,000,000.00 worth of the project to Muoz. Since Muoz had known
Loria for five years, Muoz accepted Lorias proposal.
On October 2, 2000, Muoz requested Allied Bank to release P3,000,000.00
from his joint account with his business partner, Christopher Co, to a certain Grace
delos Santos (delos Santos). Loria then obtained the money from delos Santos.
Four days later, P1,800,000.00 of the P3,000,000.00 was returned to Muoz.
On January 10, 2001, Loria collected Muozs P800,000.00 balance. After deducting
Lorias personal loans from Muoz, Muoz issued a check to Loria for P481,800.00.
Loria acknowledged receiving this amount from Muoz.
The project to dredge the Masarawag and San Francisco Rivers in Guinobatan
was subjected to public bidding. The project was awarded to the lowest bidder,
Sunwest Construction and Development Corporation. Sunwest allegedly finished
dredging the Masarawag and San Francisco Rivers without subcontracting Muoz.
With the project allegedly finished, Muoz demanded Loria to return his
P2,000,000.00. Loria, however, did not return the money.
Muoz then filed the complaint for sum of money.
During pre-trial, the parties agreed to litigate the sole issue of whether Loria
is liable to Muoz for P2,000,000.00.
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According to the trial court, Muoz established with preponderant evidence
that Loria received P2,000,000.00 from Muoz for a subcontract of the riverdredging project. Since no part of the project was subcontracted to Muoz, Loria
must return the P2,000,000.00 he received, or he would be unduly enriching
himself at the expense of Muoz.
The Court of Appeals sustained the trial courts factual findings.
Issue:
Whether Loria is liable for P2,000,000.00 to Muoz.
Ruling:
Yes. Loria is liable for P2,000,000.00 to Muoz.
Under Article 22 of the Civil Code of the Philippines, every person who
through an act of performance by another, or any other means, acquires or comes
into possession of something at the expense of the latter without just or legal
ground, shall return the same to him. 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 has two conditions. First, a person must
have been benefited without a real or valid basis or justification. Second, the
benefit was derived at another persons expense or damage.
In this case, Loria received P2,000,000.00 from Muoz for a subcontract of a
government project to dredge the Masarawag and San Francisco Rivers in
Guinobatan, Albay. However, contrary to the parties agreement, Muoz was not
subcontracted for the project. Nevertheless, Loria retained the P2,000,000.00.
Thus, Loria was unjustly enriched. He retained Muozs money without valid basis
or justification. Under Article 22 of the Civil Code of the Philippines, Loria must
return the P2,000,000.00 to Muoz.
Unjust enrichment exists, according to Hulst v. PR Builders, Inc., when a
person unjustly retains a benefit at the loss of another, or when a person retains
money or property of another against the fundamental principles of justice, equity
and good conscience. The prevention of unjust enrichment is a recognized public
policy of the State, for Article 22 of the Civil Code explicitly provides that every
person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without
just or legal ground, shall return the same to him. It is well to note that Article 22
is part of the chapter of the Civil Code on Human Relations, the provisions of which
were formulated as basic principles to be observed for the rightful relationship
between human beings and for the stability of the social order; designed to indicate
certain norms that spring from the fountain of good conscience; guides for human
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conduct that should run as golden threads through society to the end that law may
approach its supreme ideal which is the sway and dominance of justice.
WILLAWARE PRODUCTS CORPORATION vs. JESICHRIS MANUFACTURING
CORPORATION
G.R. No. 195549, September 3, 2014, J. Peralta
Article 28 of the Civil Code provides that unfair competition in agricultural,
commercial or industrial enterprises or in labor through the use of force,
intimidation, deceit, machination or any other unjust, oppressive or high-handed
method shall give rise to a right of action by the person who thereby suffers
damage. What is being sought to be prevented is not competition per se but the
use of unjust, oppressive or highhanded methods which may deprive others of a fair
chance to engage in business or to earn a living. Thus, when a manufacturer of
plastic kitchenware products employed the former employees of a neighboring
partnership engaged in the manufacture of plastic automotive parts; deliberately
copied the latters products and even went to the extent of selling these products to
the latters customers, there is unfair competition.
Facts:
Respondent Jesichris Manufacturing Company (Jesichris), a partnership
engaged in manufacturing and distributing plastic and metal products, including
plastic-made automotive parts, filed with the RTC a complaint for damages for
unfair competition with prayer for permanent injunction to enjoin petitioner
Willaware Products Corporation (Willaware), which is engaged in the manufacturing
and distributing plastic kitchenware products, from manufacturing and distributing
plastic-made automotive parts similar to those of Jesichris.
Jesichris alleged that it had originated the use of plastic in place of rubber in
the manufacture of automotive underchassis parts. Willawares manufacture of the
same automotive parts with plastic material was taken from Jesichris idea of using
plastic for automotive parts. Also, Willaware deliberately copied Jesichris products
all of which acts constitute unfair competition.
Willaware claims that there can be no unfair competition as the plastic-made
automotive parts are mere reproductions of original parts and their construction and
composition merely conforms to the specifications of the original parts of motor
vehicles they intend to replace. Thus, Jesichris cannot claim that it originated the
use of plastic for these automotive parts. In addition, Jesichris had no exclusive right
to use, manufacture and sell these as it has no patent over these products.
The RTC ruled in favor of Jesichris, holding that Willaware clearly invaded the
rights or interest of Jesichris by deliberately copying and performing acts amounting
to unfair competition. The CA agreed with the RTC and held that there was unfair
competition.
Issue:
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Did Willaware commit acts amounting to unfair competition under Article 28
of the New Civil Code?
Ruling:
Prefatorily, the Court would like to stress that the instant case falls under
Article 28 of the Civil Code on human relations, and not unfair competition under
Republic Act No. 8293, as the present suit is a damage suit and the products are not
covered by patent registration. A fortiori, the existence of patent registration is
immaterial in the present case.
The concept of unfair competition under Article 28 is very much broader
than that covered by intellectual property laws. Under the present article, which
follows the extended concept of unfair competition in American jurisdictions, the
term covers even cases of discovery of trade secrets of a competitor, bribery of his
employees, misrepresentation of all kinds, interference with the fulfillment of a
competitors contracts, or any malicious interference with the latters business.
Article 28 of the Civil Code provides that unfair competition in agricultural,
commercial or industrial enterprises or in labor through the use of force,
intimidation, deceit, machination or any other unjust, oppressive or high-handed
method shall give rise to a right of action by the person who thereby suffers
damage.
From the foregoing, it is clear that what is being sought to be prevented is not
competition per se but the use of unjust, oppressive or highhanded methods which
may deprive others of a fair chance to engage in business or to earn a living.
Plainly, what the law prohibits is unfair competition and not competition where the
means used are fair and legitimate.
In order to qualify the competition as unfair, it must have two
characteristics: (1) it must involve an injury to a competitor or trade rival, and (2) it
must involve acts which are characterized as contrary to good conscience, or
shocking to judicial sensibilities, or otherwise unlawful; in the language of our law,
these include force, intimidation, deceit, machination or any other unjust,
oppressive or high-handed method. The public injury or interest is a minor factor;
the essence of the matter appears to be a private wrong perpetrated by
unconscionable means.
Here, both characteristics are present.
First, both parties are competitors or trade rivals, both being engaged in the
manufacture of plastic-made automotive parts. Second, the acts of the Willaware
were clearly contrary to good conscience as Willaware admitted having employed
Jesichriss former employees, deliberately copied Jesichriss products and even went
to the extent of selling these products to Jesichriss customers.
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To bolster this point, the CA correctly pointed out that Willawares hiring of
the former employees of Jesichris and Willawares act of copying the subject plastic
parts of Jesichris were tantamount to unfair competition.
Thus, it is evident that Willaware is engaged in unfair competition as shown
by his act of suddenly shifting his business from manufacturing kitchenware to
plastic-made automotive parts; his luring the employees of the Jesichris to transfer
to his employ and trying to discover the trade secrets of the Jesichris.
Moreover, when a person starts an opposing place of business, not for the
sake of profit to himself, but regardless of loss and for the sole purpose of driving
his competitor out of business so that later on he can take advantage of the effects
of his malevolent purpose, he is guilty of wanton wrong. As aptly observed by the
court a quo, the testimony of Willawares witnesses indicate that it acted in bad
faith in competing with the business of Jesichris.
In sum, Willaware is guilty of unfair competition under Article 28 of the Civil
Code.
MARRIAGE
FOREIGN DIVORCE
SOLEDAD L. LAVADIA vs. HEIRS OF JUAN LUCES LUNA, represented by
GREGORIO Z. LUNA and
EUGENIA ZABALLERO-LUNA
G.R. No. 171914, July 23, 2014, J. Lucas P. Bersamin
Divorce between Filipinos is void and ineffectual under the nationality rule
adopted by Philippine law. Hence, any settlement of property between the parties of
the first marriage involving Filipinos submitted as an incident of a divorce obtained
in a foreign country lacks competent judicial approval, and cannot be enforceable
against the assets of the husband who contracts a subsequent marriage.
Atty. Lunas subsequent marriage to Soledad was void for being

bigamous, on the ground that the marriage between Atty. Luna and Eugenia had
not been dissolved by the Divorce Decree rendered by the CFI of Sto. Domingo in
the Dominican Republic but had subsisted until the death of Atty. Luna
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Given the subsistence of the first marriage between Atty. Luna and Eugenia,
the presumption that Atty. Luna acquired the properties out of his own personal
funds and effort remained. It should then be justly concluded that the properties in
litis legally pertained to their conjugal partnership of gains as of the time of his
death. Consequently, the sole ownership of the 25/100 pro indiviso share of Atty.
Luna in the condominium unit, and of the law books pertained to the respondents
as the lawful heirs of Atty. Luna
Facts:
Atty. Luna, a practicing lawyer, was at first a name partner in the prestigious
law firm Sycip, Salazar, Luna, Manalo, Hernandez & Feliciano Law Offices at that
time when he was living with his first wife, herein intervenor-appellant Eugenia
Zaballero-Luna (Eugenia). They begot seven (7) children.
After almost two (2) decades of marriage, Atty. Luna, obtained a divorce
decree of his marriage with Eugenia from the Civil and Commercial Chamber of the
First Circumscription of the Court of First Instance of Sto. Domingo, Dominican
Republic. Also in Sto.Domingo, Dominican Republic, on the same date, Atty. Luna,
contracted another marriage, this time with Soledad. Thereafter, Atty. Luna, and
Soledad returned to the Philippines and lived together as husband and wife.
Atty. Luna, organized a new law firm named: Luna, Puruganan, Sison and
Ongkiko (LUPSICON) where Atty. Luna, was the managing partner. LUPSICON through
Atty. Luna, purchased a Condominium Unit to be paid on installment basis for
36month. Said condominium unit was to be used as law office of LUPSICON.
After the death of Atty. Luna, his share in the condominium unit including the
lawbooks, office furniture and equipment found therein were taken over by Gregorio
Z. Luna, Atty. Lunas son of the first marriage. Gregorio Z. Luna then leased out the
25/100 portion of the condominium unit belonging to his father to Atty. Renato G. De
la Cruz.
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The 25/100 pro-indiviso share of Atty. Luna in the condominium unit as well
as the law books, office furniture and equipment became the subject of the
complaint filed by Soledad against the heirs of Atty. Luna with the RTC. The
complaint alleged that the subject properties were acquired during the existence of
the marriage between Atty. Luna and Soledad through their joint efforts that since
they had no children, she became co-owner of the said properties upon the death of
Atty. Luna.
RTC rendered that the Condominium unit was acquired by Atty. Juan Lucas
Luna through his sole industry; that Soledad has no right as owner or under any
other concept over the condominium unit; that Soledad declared to be the owner of
the books Corpus Juris, Fletcher on Corporation, American Jurisprudence and Federal
Supreme Court Reports found in the condominium unit.
CA modified the RTCs decision in holding and ruling that Eugenia, the first
wife, was the legitimate wife of Atty. Luna until the latters death. The absolute
divorce decree obtained by Atty. Luna in the Dominican Republic did not terminate
his prior marriage with Eugenia because foreign divorce between Filipino citizens is
not recognized in our jurisdiction. Hence, Defendants-appellants, the heirs of Juan
Luces Luna and Eugenia Zaballero-Luna(first marriage) are hereby declared to be
the owner of the books Corpus Juris, Fletcher on Corporation, American
Jurisprudence and Federal Supreme Court Reports found in the condominium unit.
Issues:
1. Whether or not the divorce between Atty. Luna and Eugenia Zaballero-Luna
(Eugenia) had validly dissolved the first marriage.
2. Whether the second marriage entered into by the late Atty. Luna and the
Soledad entitled the latter to any rights in property.
Ruling:
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1. Atty. Lunas first marriage with Eugenia subsisted up to the time of his
death
The first marriage between Atty. Luna and Eugenia, both Filipinos, was
solemnized in the Philippines. The law in force at the time of the solemnization was
the Spanish Civil Code, which adopted the nationality rule. The Civil Code continued
to follow the nationality rule, to the effect that Philippine laws relating to family
rights and duties, or to the status, condition and legal capacity of persons were
binding upon citizens of the Philippines, although living abroad.
From the time of the celebration of the first marriage until the present,
absolute divorce between Filipino spouses has not been recognized in the
Philippines. The non-recognition of absolute divorce between Filipinos has remained
even under the Family Code, even if either or both of the spouses are residing
abroad. Indeed, the only two types of defective marital unions under our laws have
been the void and the voidable marriages. As such, the remedies against such
defective marriages have been limited to the declaration of nullity of the marriage
and the annulment of the marriage.
It is true that the Court of First Instance (CFI) of Sto. Domingo in the
Dominican Republic issued the Divorce Decree dissolving the first marriage of Atty.
Luna and Eugenia. Conformably with the nationality rule, however, the divorce,
even if voluntarily obtained abroad, did not dissolve the marriage between Atty.
Luna and Eugenia, which subsisted up to the time of his death.
2. Atty. Lunas marriage with Soledad, being bigamous, was void; properties
acquired during their marriage were governed by the rules on co-ownership
Atty. Lunas subsequent marriage to Soledad was void for being bigamous, on
the ground that the marriage between Atty. Luna and Eugenia had not been
dissolved by the Divorce Decree rendered by the CFI of Sto. Domingo in the
Dominican Republic but had subsisted until the death of Atty. Luna
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In the Philippines, marriages that are bigamous, polygamous, or incestuous

are void as provided by Article 71 of the OLD Civil Code. Due to the second
marriage between Atty. Luna and the Soledad being void ab initio by virtue of its
being bigamous, the properties acquired during the bigamous marriage were
governed by the rules on co-ownership, conformably with Article 144 of the OLD
Civil Code
In such a situation, whoever alleges co-ownership carried the burden of proof

to confirm such fact. To establish co-ownership, therefore, it became imperative for
Soledad to offer proof of her actual contributions in the acquisition of property. Her
mere allegation of co-ownership, without sufficient and competent evidence, would
warrant no relief in her favor. The plaintiff is not automatically entitled to the relief
prayed for. The law gives the defendant some measure of protection as the plaintiff
must still prove the allegations in the complaint.
Soledad was not able to prove by preponderance of evidence that her own
independent funds were used to buy the law office condominium and the law books
subject matter in contention in this case proof that was required for Article 144 of
the New Civil Code and Article 148 of the Family Code to apply as to cases where
properties were acquired by a man and a woman living together as husband and
wife but not married, or under a marriage which was void ab initio. Under Article
144 of the New Civil Code, the rules on co-ownership would govern.
In contrast, given the subsistence of the first marriage between Atty. Luna
and Eugenia, the presumption that Atty. Luna acquired the properties out of his own
personal funds and effort remained. It should then be justly concluded that the
properties in litis legally pertained to their conjugal partnership of gains as of the
time of his death. Consequently, the sole ownership of the 25/100 pro indiviso share
of Atty. Luna in the condominium unit, and of the law books pertained to the
respondents as the lawful heirs of Atty. Luna.
EDELINA T. ANDO vs. DEPARTMENT OF FOREIGN AFFAIRS

G.R. No. 195432, August 27, 2014, CJ. Sereno
Petitioner questions the decision of the RTC, dismissing her petition for
the recognition of her second marriage as valid, for failing to comply with the
requirements set forth in Art. 13 of the Family Code that is obtaining a judicial
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recognition of the foreign decree of absolute divorce in our country. The SC
however ruled that a divorce obtained abroad by an alien may be recognized in
our jurisdiction, provided the decree is valid according to the national law of the
foreigner. The presentation solely of the divorce decree is insufficient; both the
divorce decree and the governing personal law of the alien spouse who obtained
the divorce must be proven. Because our courts do not take judicial notice of
foreign laws and judgment, our law on evidence requires that both the divorce
decree and the national law of the alien must be alleged and proven and like
any other fact. Hence, instead of filing a petition for the recognition of her
second marriage as valid, petitioner should have filed a petition for the judicial
recognition of her foreign divorce from her first husband.
Facts:
On 16 September 2001, petitioner Edelina married Yuichiro Kobayashi, a
Japanese National, in a civil wedding solemnized at Candaba, Pampanga.
Thereafter, Yuichiro Kobayashi sought in Japan, and was validly granted under
Japanese laws, a divorce in respect of his marriage with Edelina. Believing in good
faith that said divorce capacitated her to remarry and that by such she reverted to
her single status; Edelina married Masatomi Y. Ando in a civil wedding celebrated in
Sta. Ana, Pampanga. However, when Edelina applied for the renewal of her
Philippine passport to indicate her surname with her husband Masatomi she was
told by the DFA that the same cannot be issued to her until she can prove by
competent court decision that her marriage with her said husband Masatomi is
valid.
Edelina then filed with the RTC a Petition for Declaratory Relief praying that
her marriage with Masatomi be declared as valid and to order the DFA to issue a
Philippine passport to Edelina nder the name of Edelina Ando y Tungol.
For failure to comply with the requirements set forth in Art. 13 of the Family
Code that is obtaining a judicial recognition of the foreign decree of absolute
divorce in our country the RTC dismissed the petition. The RTC further held that
since the divorce allegedly obtained by her first husband was never recognized in
the Philippines, Edelina is still considered as married to Kobayashi, her first
husband. Accordingly, the second marriage with Ando cannot be honored and
considered as valid at this time. Hence, this petition.
Edelina argues that assuming a court judgment recognizing a judicial decree
of divorce is required under Article 13 of the Family Code, noncompliance therewith
is a mere irregularity in the issuance of a marriage license. She contends that any
irregularity in the formal requisites of marriage, such as with respect to the
marriage license, shall not affect the legality of the marriage.
Issue:
Whether or not petitioners second marriage should be recognized.
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Ruling:
No, Edelinas second marriage should not be recognized.
With respect to her prayer for the recognition of her second marriage as
valid, Edelina should have filed, instead, a petition for the judicial recognition of her
foreign divorce from her first husband.
In Garcia v. Recio, the Court ruled that a divorce obtained abroad by an alien
may be recognized in our jurisdiction, provided the decree is valid according to the
national law of the foreigner. The presentation solely of the divorce decree is
insufficient; both the divorce decree and the governing personal law of the alien
spouse who obtained the divorce must be proven. Because our courts do not take
judicial notice of foreign laws and judgment, our law on evidence requires that both
the divorce decree and the national law of the alien must be alleged and proven and
like any other fact.
While it has been ruled that a petition for the authority to remarry filed before
a trial court actually constitutes a petition for declaratory relief, the Court is still
unable to grant the prayer of Edelina. As held by the RTC, there appears to be
insufficient proof or evidence presented on record of both the national law of her
first husband, Kobayashi, and of the validity of the divorce decree under that
national law. Hence, any declaration as to the validity of the divorce can only be
made upon her complete submission of evidence proving the divorce decree and
the national law of her alien spouse, in an action instituted in the proper forum.
PSYCHOLOGICAL INCAPACITY
VALERIO E. KALAW vs. MA. ELENA FERNANDEZ
G.R. No. 166357, January 14, 2015, J. Del Castillo
Psychological incapacity is the downright incapacity or inability to take
cognizance of and to assume the basic marital obligations. The burden of proving
psychological incapacity is on the plaintiff. The plaintiff must prove that the
incapacitated party, based on his or her actions or behavior, suffers a serious
psychological disorder that completely disables him or her from understanding and
discharging the essential obligations of the marital state. The psychological problem
must be grave, must have existed at the time of marriage, and must be incurable.
Facts:
Petitioner Valerio E. Kalaw (Tyrone) and respondent Ma. Elena Fernandez
(Malyn) met in 1973. They maintained a relationship and eventually married in Hong
Kong on November 4, 1976. They had four children, Rio, Maria Eva Ria, Miggy, and
Jay. Shortly after the birth of their youngest son, Tyrone had an extramarital affair
with Jocelyn Quejano, who gave birth to a son in March 1983. Meanwhile, Tyrone
started living with Jocelyn, who bore him three more children.
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On July 6, 1994, nine years since the de facto separation from his wife, Tyrone
filed a petition for declaration of nullity of marriage based on Article 36 of the Family
Code. He alleged that Malyn was psychologically incapacitated to perform and
comply with the essential marital obligations at the time of the celebration of their
marriage. He further claimed that her psychological incapacity was manifested by
her immaturity and irresponsibility towards Tyrone and their children during their cohabitation as shown by the following acts: she left the children without proper care
and attention as she played mahjong all day and all night; she left the house to
party with male friends and returned in the early hours of the following day; and she
committed adultery on June 9, 1985, which act Tyrone discovered in flagrante
delicto.
During trial, Tyrone presented a psychologist, Dr. Gates, and a Catholic canon
law expert, Fr. Healy to testify on Malyns psychological incapacity. Dr. Gates
explained on the stand that the factual allegations regarding Malyns behavior her
sexual infidelity, habitual mahjong playing, and her frequent nights-out with friends
may reflect a narcissistic personality disorder. Fr. Healy corroborated Dr. Gates
assessment. He explained that her psychological incapacity is rooted in her role as
the breadwinner of her family. This role allegedly inflated Malyns ego to the point
that her needs became priority, while her kids and husbands needs became
secondary.
Malyn denied being psychologically incapacitated. While she admitted playing
mahjong, she denied playing as frequently as Tyrone alleged. She maintained that
she did so only two to three times a week and always between 1 p.m. to 6 p.m. only.
She maintained that she did not neglect her duties as mother and wife. Malyn
denied the allegation of adultery.
The trial court ordered the court social worker, Jocelyn V. Arre (Arre), to
conduct a social case study on the parties as well as the minor children. While both
parents are financially stable and have positive relationships with their children, she
recommended that the custody of the minor children be awarded to Malyn. Based
on the interviews of family members themselves, Malyn was shown to be more
available to the children and to exercise better supervision and care.
The trial court concluded that both parties are psychologically incapacitated
to perform the essential marital obligations under the Family Code. The CA reversed
the trial courts ruling because it is not supported by the facts on record. Both
partys allegations and incriminations against each other do not support a finding of
psychological incapacity. The partys faults tend only to picture their immaturity and
irresponsibility in performing their marital and familial obligations. Hence this
petition for review.
Petitioner Tyrone argues that the CA erred in disregarding the factual findings
of the trial court, which is the court that is in the best position to appreciate the
evidence. He opines that he has presented preponderant evidence to prove that
Malyn is psychologically incapacitated to perform her essential marital obligations
Malyn maintains that Tyrone failed to discharge his burden of proving her alleged
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psychological incapacity. She argues that the testimonies of her children and the
findings of the court social worker to the effect that she was a good, loving, and
attentive mother are sufficient to rebut Tyrones allegation that she was negligent
and irresponsible.
Issue:
Whether petitioner Tyrone has sufficiently proved that Malyn suffers from
psychological incapacity
Ruling:
Tyrone failed to prove that Malyn suffers from psychological incapacity. He
presented the testimonies of two supposed expert witnesses who concluded that
Malyn is psychologically incapacitated, but the conclusions of these witnesses were
premised on the alleged acts or behavior of Malyn which had not been sufficiently
proven. Tyrones experts heavily relied on his allegations of Malyns constant
mahjong sessions, visits to the beauty parlor, going out with friends, adultery, and
neglect of their children.
For instance, Tyrone alleged that Malyn constantly played mahjong and
neglected their children as a result. Malyn admittedly played mahjong, but it was
not proven that she engaged in mahjong so frequently that she neglected her duties
as a mother and a wife. Malyn refuted Tyrones allegations that she played four to
five times a week. Tyrone did not present any proof, other than his own testimony,
that the mahjong sessions were so frequent that Malyn neglected her family. The
least that could have been done was to prove the frequency of Malyns mahjongplaying during the years when these two children were in second grade. This was
not done. Thus, while there is no dispute that Malyn played mahjong, its alleged
debilitating frequency and adverse effect on the children were not proven.
Also unproven was Tyrones claim about Malyns alleged constant visits to the
beauty parlor, going out with friends, and obsessive need for attention from other
men.No proof whatsoever was presented to prove her visits to beauty salons or her
frequent partying with friends.
Given the insufficiency of evidence that Malyn actually engaged in the
behaviors described as constitutive of NPD, there is no basis for concluding that she
was indeed psychologically incapacitated. Indeed, the totality of the evidence points
to the opposite conclusion. A fair assessment of the facts would show that Malyn
was not totally remiss and incapable of appreciating and performing her marital and
parental duties. Not once did the children state that they were neglected by their
mother. On the contrary, they narrated that she took care of them, was around
when they were sick, and cooked the food they like. It appears that Malyn made real
efforts to see and take care of her children despite her estrangement from their
father. There was no testimony whatsoever that shows abandonment and neglect of
familial duties. While Tyrone cites the fact that his two sons, Rio and Miggy, both
failed the second elementary level despite having tutors, there is nothing to link
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their academic shortcomings to Malyns actions. After poring over the records of the
case, the Court finds no factual basis for the conclusion of psychological incapacity.
What transpired between the parties is acrimony and, perhaps, infidelity, which may
have constrained them from dedicating the best of themselves to each other and to
their children. There may be grounds for legal separation, but certainly not
psychological incapacity that voids a marriage.
GLENN VIAS vs. MARY GRACE PAREL-VIAS
G.R. No. 208790, January 21, 2015, J. Reyes
The lack of personal examination or assessment by a psychologist or
psychiatrist is not necessarily fatal in a petition for the declaration of nullity of
marriage. If the totality of evidence presented is enough to sustain a finding of
psychological incapacity, then actual medical examination of the person concerned
need not be resorted to. In the case at bar, the assessment of the psychological
incapacity of the wife was based solely on the information provided by the husband
whose bias in favor of his cause cannot be doubted. While this circumstance alone
does not disqualify the psychologist for reasons of bias, her report, testimony and
conclusions deserve the application of a more rigid and stringent set of standards.
Hence, if the totality of the evidence presented provides inadequate basis to
warrant the conclusion that a psychological incapacity existed that prevented her
from complying with the essential obligations of marriage, the declaration of the
nullity of the marriage cannot be obtained. It has been settled that irreconcilable
differences, sexual infidelity or perversion, emotional immaturity and
irresponsibility, and the like, do not by themselves warrant a finding of
psychological incapacity under Article 36, as the same may only be due to a
persons refusal or unwillingness to assume the essential obligations of marriage
and not due to some psychological illness that is contemplated by said rule.
Facts:
On April 26, 1999, Glenn, a bartender, and Mary Grace, a production
engineer, got married in civil rites held in Lipa City, Batangas. At that time, Mary
Grace was already pregnant. The couple thereafter lived together under one roof.
The infant, however, died at birth due to weakness and malnourishment. Glenn
alleged that the infants death was caused by Mary Graces heavy drinking and
smoking during her pregnancy.
Sometime in March of 2006, Mary Grace left the home which she shared with
Glenn. The latter subsequently found out that she went to work in Dubai.
Eventually, Glenn filed a Petition for the declaration of nullity of his marriage with
Mary Grace. He alleged that Mary Grace was insecure, extremely jealous, outgoing
and prone to regularly resorting to any pretext to be able to leave the house. She
thoroughly enjoyed the night life, and drank and smoked heavily even when she
was pregnant. Further, Mary Grace refused to perform even the most essential
household chores of cleaning and cooking. According to Glenn, Mary Grace had not
exhibited the foregoing traits and behavior during their whirlwind courtship. He
likewise alleged that she was not remorseful about the death of the infant whom
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she delivered. She lived as if she were single and was unmindful of her husbands
needs. She was self-centered, selfish and immature. When Glenn confronted her
about her behavior, she showed indifference and eventually left their home without
informing him.
To ease their marital problems, Glenn sought professional guidance and
submitted himself to a psychological evaluation by Clinical Psychologist Nedy Tayag
(Dr. Tayag). Dr. Tayag found him as amply aware of his marital roles and capable
of maintaining a mature and healthy heterosexual relationship. On the other hand,
Dr. Tayag also assessed Mary Graces personality through the data she had
gathered from Glenn and his cousin, Rodelito Mayo (Rodelito), who knew Mary
Grace way back in college. Apparently, at the time of the said examination, Mary
Grace was employed in Dubai and romantically involved with another man.
Eventually, Dr. Tayag diagnosed Mary Grace to be suffering from a Narcissistic
Personality Disorder with anti-social traits. Dr. Tayag concluded that Mary Grace and
Glenns relationship is not founded on mutual love, trust, respect, commitment and
fidelity to each other. Considering the said disorder of Mary Grace to be severe,
serious, grave, permanent and chronic in proportion and is incurable by any form of
clinical intervention as it has already been deeply embedded within her system as it
was found to have started as early as her childhood years, Dr. Tayag recommended
the propriety of declaring the nullity of the couples marriage. Dr. Tayag found that
the psychological incapacity of Mary Grace is of a juridical antecedence as it was
already in her system even prior to the solemnization of her marriage with Glenn.
Subsequently, substituted service of summons was made upon Mary Grace
through her aunt, Susana Rosita. Mary Grace filed no answer and did not attend any
of the proceedings before the RTC. During the trial, the testimonies of Glenn, Dr.
Tayag and Rodelito were offered as evidence. Glenn and Rodelito described Mary
Grace as outgoing, carefree, and irresponsible. She is the exact opposite of Glenn,
who is conservative and preoccupied with his work. On her part, Dr. Tayag reiterated
her findings in the psychological report dated December 29, 2008.
The RTC eventually declared the marriage between Glenn and Mary Grace as
null and void on account of the latters psychological incapacity. The Office of the
Solicitor General (OSG) moved for reconsideration but it was denied by the RTC. On
appeal before the CA, the RTC ruling was reversed and the marriage between Glenn
and Mary Grace was declared as valid and subsisting.
Issue:
Whether or not the marriage of Glenn and Mary Grace merits a declaration of
nullity on account of psychological incapacity of the latter.
Ruling:
The lack of personal examination or assessment of Mary Grace by a
psychologist or psychiatrist is not necessarily fatal in a petition for the declaration of
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nullity of marriage. If the totality of evidence presented is enough to sustain a
finding of psychological incapacity, then actual medical examination of the person
concerned need not be resorted to.
In the instant petition, however, the cumulative testimonies of Glenn, Dr.
Tayag and Rodelito, and the documentary evidence offered do not sufficiently prove
the root cause, gravity and incurability of Mary Graces condition. The evidence
merely shows that Mary Grace is outgoing, strong-willed and not inclined to perform
household chores. Further, she is employed in Dubai and is romantically-involved
with another man. She has not been maintaining lines of communication with Glenn
at the time the latter filed the petition before the RTC. Glenn, on the other hand, is
conservative, family-oriented and is the exact opposite of Mary Grace. While Glenn
and Mary Grace possess incompatible personalities, the latters acts and traits do
not necessarily indicate psychological incapacity. It has been settled that
irreconcilable differences, sexual infidelity or perversion, emotional immaturity and
irresponsibility, and the like, do not by themselves warrant a finding of
psychological incapacity under Article 36, as the same may only be due to a
persons refusal or unwillingness to assume the essential obligations of marriage
and not due to some psychological illness that is contemplated by said rule.
It is worth noting that Glenn and Mary Grace lived with each other for more or
less seven years from 1999 to 2006. The foregoing established fact shows that
living together as spouses under one roof is not an impossibility. Mary Graces
departure from their home in 2006 indicates either a refusal or mere difficulty, but
not absolute inability to comply with her obligation to live with her husband.
Further, considering that Mary Grace was not personally examined by Dr.
Tayag, there arose a greater burden to present more convincing evidence to prove
the gravity, juridical antecedence and incurability of the formers condition. Glenn,
however, failed in this respect. Glenns testimony is wanting in material details.
Rodelito, on the other hand, is a blood relative of Glenn. Glenns statements are
hardly objective. Moreover, Glenn and Rodelito both referred to Mary Graces traits
and acts, which she exhibited during the marriage. Hence, there is nary a proof on
the antecedence of Mary Graces alleged incapacity. Glenn even testified that, six
months before they got married, they saw each other almost everyday and he saw
a loving, caring and well-educated person in Mary Grace.
Anent Dr. Tayags assessment of Mary Graces condition, the Court finds the
same as unfounded. First, Dr. Tayags conclusions about the her psychological
incapacity were based on the information fed to her by only one side Glenn
whose bias in favor of his cause cannot be doubted. While this circumstance alone
does not disqualify the psychologist for reasons of bias, her report, testimony and
conclusions deserve the application of a more rigid and stringent set of standards.
For, effectively, Dr. Tayag only diagnosed her from the prism of a third party
account; she did not actually hear, see and evaluate Mary Grace and how she would
have reacted and responded to the doctors probes. This Court thus finds Dr. Tayags
observations and conclusions insufficiently in-depth and comprehensive to warrant
the conclusion that a psychological incapacity existed that prevented Mary Grace
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from complying with the essential obligations of marriage. It failed to identify the
root cause of her narcissistic personality disorder and to prove that it existed at the
inception of the marriage. Neither did it explain the incapacitating nature of the
alleged disorder, nor show that she was really incapable of fulfilling his duties due to
some incapacity of a psychological, not physical, nature. To make conclusions and
generalizations on Mary Graces psychological condition based on the information
fed by only one side is, to our mind, not different from admitting hearsay evidence
as proof of the truthfulness of the content of such evidence. Second, a careful
reading of Dr. Tayags testimony reveals that she failed to establish the fact that at
the time the parties were married, Mary Grace was already suffering from a
psychological defect that deprived him of the ability to assume the essential duties
and responsibilities of marriage. Neither did she adequately explain how she came
to the conclusion that Mary Graces condition was grave and incurable. Clearly, Dr.
Tayag made general references to Mary Graces status as the eldest among her
siblings, her fathers being an overseas contract worker and her very tolerant
mother, a housewife. These, however, are not sufficient to establish and explain the
supposed psychological incapacity of Mary Grace warranting the declaration of the
nullity of the couples marriage.
This Court understands the inherent difficulty attendant to obtaining the
statements of witnesses who can attest to the antecedence of a persons
psychological incapacity, but such difficulty does not exempt a petitioner from
complying with what the law requires. While the Court also commiserates with
Glenns marital woes, the totality of the evidence presented provides inadequate
basis for the Court to conclude that Mary Grace is indeed psychologically
incapacitated to comply with her obligations as Glenns spouse.
ROBERT F. MALLILIN vs. LUZ G. JAMESOLAMIN AND THE REPUBLIC OF THE
PHILIPPINES
G.R. No. 192718, February 18, 2015, J. Mendoza
The alleged failure of Luz to assume her duties as a wife and as a mother, as
well as her emotional immaturity, irresponsibility and infidelity, cannot rise to the
level of psychological incapacity that justifies the nullification of the parties'
marriage. Psychological incapacity as required by Article 36 must be characterized
by (a) gravity, (b) juridical antecedence and (c) incurability. The interpretations
given by the National Appellate Matrimonial Tribunal of the Catholic Church in the
Philippines, while not controlling or decisive, should be given great respect by our
courts. The decision of the NAMT was based on the second paragraph of Canon
1095 which refers to those who suffer from a grave lack of discretion of judgment
concerning essential matrimonial rights and obligations to be mutually given and
accepted, a cause not of psychological nature under Article 36 of the Family Code.
A cause of psychological nature similar to Article 36 is covered by the third
paragraph of Canon 1095 of the Code of Canon Law.
Facts:
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Robert and Luz were married on September 6, 1972. They begot three (3)
children. On March 16, 1994, Robert filed a complaint for declaration of nullity of
marriage before the RTC, Branch 23, Cagayan de Oro City, the RTC-Br. 23 denied the
petition. Robert appealed this judgment before the CA, the CA reversed the RTC-Br.
23 decision due to lack of participation of the State as required under Article 48 of
the Family Code. The case was remanded to the RTC for further proceedings and its
records were thereafter transferred from RTC-Br. 23 to RTC-Br. 37.
In the complaint, Robert alleged that at the time of the celebration of their
marriage, Luz was suffering from psychological and mental incapacity and
unpreparedness to enter into such marital life and to comply with its essential
obligations and responsibilities. Such incapacity became even more apparent during
their marriage when Luz exhibited clear manifestation of immaturity,
irresponsibility, deficiency of independent rational judgment, and inability to cope
with the heavy and oftentimes demanding obligation of a parent. Luz filed her
Answer with Counterclaim contesting the complaint. She averred that it was Robert
who manifested psychological incapacity in their marriage. Despite due notice,
however, she did not appear during the trial. Assistant City Prosecutor Isabelo
Sabanal appeared for the State.
When Robert testified, he disclosed that Luz was already living in California,
USA, and had married an American. He also revealed that when they were still
engaged, Luz continued seeing and dating another boyfriend, a certain Lt. Liwag. He
also claimed that from the outset, Luz had been remiss in her duties both as a wife
and as a mother. In addition, Robert presented the testimony of Myrna Delos Reyes
Villanueva, Guidance Psychologist II of Northern Mindanao Medical Center.On May 8,
2000, while the case was pending before the trial court, Robert filed a petition for
marriage annulment with the Metropolitan Tribunal of First Instance for the
Archdiocese of Manila. The Metropolitan Tribunal handed down a decision declaring
their marriage invalid ab initio on the ground of grave lack of due discretion on the
part of both parties as contemplated by the second paragraph of Canon 1095. This
decision was affirmed by the National Appellate Matrimonial Tribunal. Prior to that,
the RTC had rendered a decision declaring the marriage null and void on the ground
of psychological incapacity on the part of Luz as she failed to comply with the
essential marital obligations. The State, represented by the Office of the Solicitor
General (OSG), interposed an appeal with the CA. The OSG argued that Robert failed
to make a case for declaration of nullity of his marriage with Luz. The CA, in its
Decision, granted the petition and reversed the RTC decision. Robert filed a motion
for reconsideration, but it was denied by the CA. Hence, this petition.
Issue:
Whether or not the totality of the evidence adduced proves that Luz was
psychologically incapacitated to comply with the essential obligations of marriage
warranting the annulment of their marriage under Article 36 of the Family Code.
Ruling:
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A petition for declaration of nullity of marriage is anchored on Article 36 of
the Family Code. Psychological incapacity," as a ground to nullify a marriage under
Article 36of the Family Code, should refer to no less than a mental not merely
physical incapacity that causes a party to be truly incognitive of the basic marital
covenants that concomitantly must be assumed and discharged by the parties to
the marriage. Psychological incapacity as required by Article 36 must be
characterized by (a) gravity, (b) juridical antecedence and (c) incurability. The
incapacity must be grave or serious such that the party would be incapable of
carrying out the ordinary duties required in marriage. It must be rooted in the
history of the party antedating the marriage, although the overt manifestations may
only emerge after the marriage. It must be incurable or, even if it were otherwise,
the cure would be beyond the means of the party involved.
First, the testimony of Robert failed to overcome the burden of proof to show
the nullity of the marriage. Other than his self-serving testimony, no other evidence
was adduced to show the alleged incapacity of Luz. Second, the root cause of the
alleged psychological incapacity of Luz was not medically or clinically identified, and
sufficiently proven during the trial. The alleged failure of Luz to assume her duties
as a wife and as a mother, as well as her emotional immaturity, irresponsibility and
infidelity, cannot rise to the level of psychological incapacity that justifies the
nullification of the parties' marriage. The Court has repeatedly stressed that
psychological incapacity contemplates downright incapacity or inability to take
cognizance of and to assume the basic marital obligations, not merely the refusal,
neglect or difficulty, much less ill will, on the part of the errant spouse. Indeed, to be
declared clinically or medically incurable is one thing; to refuse or be reluctant to
perform one's duties is another. Psychological incapacity refers only to the most
serious cases of personality disorders clearly demonstrative of an utter insensitivity
or inability to give meaning and significance to the marriage. As correctly found by
the CA, sexual infidelity or perversion and abandonment do not, by themselves,
constitute grounds for declaring a marriage void based on psychological incapacity.
Third, the psychological report of Villanueva, Guidance Psychologist II of the
Northern Mindanao Medical Center, Cagayan de Oro City, was insufficient to prove
the psychological incapacity of Luz. There was nothing in the records that would
indicate that Luz had either been interviewed or was subjected to a psychological
examination. The finding as to her psychological incapacity was based entirely on
hearsay and the self-serving information provided by Robert.
Fourth, the decision of the Metropolitan Tribunal is insufficient to prove the
psychological incapacity of Luz. Interpretations given by the NAMT of the Catholic
Church in the Philippines, while not controlling or decisive, should be given great
respect by our courts, still it is subject to the law on evidence. In this regard, the
belated presentation of the decision of the NAMT cannot be given value since it was
not offered during the trial, and the Court has in no way of ascertaining the
evidence considered by the same tribunal. Granting that it was offered and
admitted, it must be pointed out that the basis of the declaration of nullity of
marriage by the NAMT was the second paragraph of Canon 1095 which refers to
those who suffer from grave lack of discretion of judgment concerning essential
Page 23 of 483

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matrimonial rights and obligations to be mutually given and accepted. Hence,
Roberts reliance on the NAMT decision is misplaced.
In fine, the Court holds that the CA decided correctly. Robert failed to adduce
sufficient and convincing evidence to prove the alleged psychological incapacity of
Luz. As asserted by the OSG, the allegations of Robert make a case for legal
separation.
SUBSEQUENT MARRIAGE
CELERINA J. SANTOS vs. RICARDO T. SANTOS
The proper remedy for a judicial declaration of presumptive death obtained
by extrinsic fraud is an action to annul the judgment. An affidavit of reappearance is
not the proper remedy when the person declared presumptively dead has never
been absent.
Facts:
On July 27, 2007, the Regional Trial Court of Tarlac City declared petitioner
Celerina J. Santos (Celerina) presumptively dead after her husband, respondent
Ricardo T. Santos (Ricardo), had filed a petition for declaration of absence or
presumptive death for the purpose of remarriage on June 15, 2007. Ricardo
remarried on September 17, 2008.
In his petition, Ricardo alleged therein that he and Celerina rented an
apartment somewhere in San Juan, Metro Manila; after they had gotten married on
June 18, 1980. After a year, they moved to Tarlac City and were engaged in the buy
and sell business. However, when the business did not prosper, Celerina convinced
him to allow her to work as a domestic helper in Hong Kong. He initially refused but
because of Celerina's insistence, he allowed her to work abroad. She allegedly
applied in an employment agency in Ermita, Manila, in February 1995 and then left
Tarlac two months after and was never heard from again. He further alleged that he
exerted efforts to locate Celerina by inquiring from her parents and other relatives
and friends, but no one gave him any information. Furthermore, claiming that it was
almost 12 years from the date of his Regional Trial Court petition since she left, he
believed that she had passed away.
On the other hand, Celerina claimed that she learned about Ricardo's petition
only sometime in October 2008 when she could no longer avail the remedies of new
trial, appeal, petition for relief, or other appropriate remedies. Thereafter, on
November 17, 2008, she filed a petition for annulment of judgment before the Court
of Appeals on the grounds of extrinsic fraud and lack of jurisdiction. She argued that
she was deprived her day in court when Ricardo, despite his knowledge of her true
residence, misrepresented to the court that she was a resident of Tarlac City when,
in fact, she never resided there. According to Celerina, her true residence was in
Neptune Extension, Congressional Avenue, Quezon City. This residence had been
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her and Ricardo's conjugal dwelling since 1989 until Ricardo left in May 2008. As a
result of Ricardo's misrepresentation, she was deprived of any notice of and
opportunity to oppose the petition declaring her presumptively dead. Moreover, she
claimed that she also never left and worked as a domestic helper abroad. Neither
did she go to an employment agency in February 1995. She also claimed that it was
not true that she had been absent for 12 years as Ricardo was aware that she never
left their conjugal dwelling in Quezon City. She insisted that it was he who left the
conjugal dwelling in May 2008 to cohabit with another woman. To support her
contention that Ricardo made false allegations in his petition, she referred to a joint
affidavit executed by their children.
Eventually, the Court of Appeals dismissed Celerina's petition for annulment
of judgment for being a wrong mode of remedy. It ruled that the proper remedy was
to file a sworn statement before the civil registry, declaring her reappearance in
accordance with Article 42 of the Family Code. She sought the reconsideration of
the said decision but the same was denied. Hence, this petition was filed.
Issue:
Whether or not the Court of Appeals erred in dismissing Celerina's petition for
annulment of judgment for being a wrong remedy for a fraudulently obtained
judgment declaring presumptive death.
Ruling:
Celerinas petition for annulment of judgment is the proper remedy.
Annulment of judgment is the remedy when the Regional Trial Court's
judgment, order, or resolution has become final, and the remedies of new trial,
appeal, petition for relief (or other appropriate remedies) are no longer available
through no fault of the petitioner.
The grounds for annulment of judgment are extrinsic fraud and lack of
jurisdiction. In the case at bar, Celerina made the following allegations: 1) that there
was fraud when Ricardo deliberately made false allegations in the court with respect
to her residence; 2) that Ricardo falsely claimed that she was absent for 12 years;
3) that there was also no publication of the notice of hearing of Ricardo's petition in
a newspaper of general circulation; and 4) that the court did not acquire jurisdiction
because the Office of the Solicitor General and the Provincial Prosecutor's Office
were not given copies of his petition. Hence, she theorized that she was deprived of
notice and opportunity to oppose Ricardo's petition. Clearly, these are allegations of
extrinsic fraud and lack of jurisdiction. Thus, Celerina alleged in her petition with the
Court of Appeals sufficient ground/s for annulment of judgment.
Also, Celerina filed her petition for annulment of judgment on November 17,
2008. This was less than two years from the July 27, 2007 decision declaring her
presumptively dead and about a month from her discovery of the decision in
October 2008. The petition was, therefore, filed within the four-year period allowed
Page 25 of 483

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by law in case of extrinsic fraud, and before the action is barred by laches, which is
the period allowed in case of lack of jurisdiction. There was also no other sufficient
remedy available to Celerina at the time of her discovery of the fraud perpetrated
on her.
The choice of remedy is important because remedies carry with them certain
admissions, presumptions, and conditions. It is also important for purposes of
determining the status of the second marriage and the liabilities of the spouse who,
in bad faith, claimed that the other spouse was absent.
The Family Code provides that it is the proof of absence of a spouse for four
consecutive years, coupled with a well-founded belief by the present spouse that
the absent spouse is already dead, that constitutes a justification for a second
marriage during the subsistence of another marriage. It also provides that the
second marriage is in danger of being terminated by the presumptively dead spouse
when he or she reappears. A close reading of the entire Article 42 reveals that the
termination of the subsequent marriage by reappearance is subject to several
conditions: (1) the non-existence of a judgment annulling the previous marriage or
declaring it void ab initio; (2) recording in the civil registry of the residence of the
parties to the subsequent marriage of the sworn statement of fact and
circumstances of reappearance; (3) due notice to the spouses of the subsequent
marriage of the fact of reappearance; and (4) the fact of reappearance must either
be undisputed or judicially determined. Hence, reappearance of the absent or
presumptively dead spouse will cause the termination of the subsequent marriage
only when all the conditions enumerated in the Family Code are present.
It has also been settled that mere reappearance will not terminate the
subsequent marriage even if the parties to the subsequent marriage were notified if
there was no step taken to terminate the subsequent marriage, either by filing an
affidavit of reappearance or by court action. Since the second marriage has been
contracted because of a presumption that the former spouse is dead, such
presumption continues in spite of the spouse's physical reappearance, and by
fiction of law, he or she must still be regarded as legally an absentee until the
subsequent marriage is terminated as provided by law.
A subsequent marriage contracted in bad faith, even if it was contracted after
a court declaration of presumptive death, lacks the requirement of a well-founded
belief that the spouse is already dead. As such, the first marriage will not be
considered as validly terminated. Therefore, the party who contracted the
subsequent marriage in bad faith is also not immune from an action to declare his
subsequent marriage void for being bigamous.
If, as Celerina contends, Ricardo was in bad faith when he filed his petition to
declare her presumptively dead and when he contracted the subsequent marriage,
such marriage would be considered void for being bigamous under Article 35(4) of
the Family Code. This is because the circumstances lack the element of "wellfounded belief under Article 41 of the Family Code, which is essential for the
exception to the rule against bigamous marriages to apply. Furthermore, she seeks
Page 26 of 483

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not merely the termination of the subsequent marriage but also the nullification of
its effects. This Court gives credence to her contention that reappearance is not a
sufficient remedy because it will only terminate the subsequent marriage but not
nullify the effects of the declaration of her presumptive death and the subsequent
marriage. Since an undisturbed subsequent marriage under Article 42 of the Family
Code is valid until terminated, the "children of such marriage shall be considered
legitimate, and the property relations of the spouses in such marriage will be the
same as in valid marriages." If it is terminated by mere reappearance, the children
of the subsequent marriage conceived before the termination shall still be
considered legitimate. Moreover, a judgment declaring presumptive death is a
defense against prosecution for bigamy.
While it is true that in most cases, an action to declare the nullity of the
subsequent marriage may nullify the effects of the subsequent marriage,
specifically, in relation to the status of children and the prospect of prosecuting a
Ricardo for bigamy, such recourse may be filed solely by the husband or wife. As
such, even if Celerina is a real party in interest who stands to be benefited or
injured by the outcome of an action to nullify the second marriage, this remedy is
not available to her. Therefore, for the purpose of not only terminating the
subsequent marriage but also of nullifying the effects of the declaration of
presumptive death and the subsequent marriage, mere filing of an affidavit of
reappearance would not suffice. Celerina's choice to file an action for annulment of
judgment will, therefore, lie.
PROPERTY RELATIONS OF THE SPOUSES
MARIETTA N. BARRIDO vs. LEONARDO V. NONATO

G.R. No. 176492, October 20, 2014, J. Peralta
After the marriage of petitioner and respondent has been declared void,
petitioner filed a complaint for the partition of the house and lot obtained by them
during their marriage. The SC ruled that what governs them is Art. 147 of the
Family Code. Under this article, property acquired by both spouses through their
work and industry shall be governed by the rules on equal co-ownership. Any
property acquired during the union is prima facie presumed to have been obtained
through their joint efforts. A party who did not participate in the acquisition of the
property shall be considered as having contributed to the same jointly if said party's
efforts consisted in the care and maintenance of the family household. Efforts in
the care and maintenance of the family and household are regarded as
contributions to the acquisition of common property by one who has no salary or
income or work or industry. In the case at bar since the former spouses both agreed
that they acquired the subject property during the subsistence of their marriage, it
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shall be presumed to have been obtained by their joint efforts, work or industry,
thus, the property is jointly owned by them in equal shares.
Facts:
In the course of the marriage of respondent Leonardo V. Nonato (Nonato) and
petitioner Marietta N. Barrido (Barrido), they were able to acquire a property
situated in Eroreco, Bacolod City, consisting of a house and lot, covered by Transfer
Certificate of Title (TCT). On March 15, 1996, their marriage was declared void on
the ground of psychological incapacity. Since there was no more reason to maintain
their co-ownership over the property, Nonato asked Barrido for partition, but the
latter refused. Thus, on January 29, 2003, Nonato filed a Complaint for partition
before the Municipal Trial Court in Cities (MTCC) of Bacolod City, Branch 3.
Barrido claimed, by way of affirmative defense, that the subject property had
already been sold to their children, Joseph Raymund and Joseph Leo. She likewise
moved for the dismissal of the complaint because the MTCC lacked jurisdiction, the
partition case being an action incapable of pecuniary estimation.
The Bacolod MTCC rendered a Decision dated September 17, 2003, applying
Article 129 of the Family Code. It ruled in favor of Barrido and adjudicated to her
the dwelling with whom the majority of the common children choose to remain.
Nonato appealed the MTCC Decision before the RTC. On July 21, 2004, the
Bacolod RTC reversed the ruling of the MTCC. It found that even though the MTCC
aptly applied Article 129 of the Family Code, it nevertheless made a reversible error
in adjudicating the subject property to Barrido.
Upon appeal, the CA affirmed the RTC Decision on November 16, 2006.
Issue:
Whether or not the subject property is still owned in common after the
marriage was declared void on the ground of psychological incapacity.
Ruling:
Yes. The property is still owned in common.
The records reveal that Nonato and Barridos marriage had been declared
void for psychological incapacity under Article 3610 of the Family Code. During their
marriage, however, the conjugal partnership regime governed their property
relations. Although Article 129 provides for the procedure in case of dissolution of
the conjugal partnership regime, Article 147 specifically covers the effects of void
marriages on the spouses property relations. Article 147 reads:
Art. 147. When a man and a woman who are capacitated to marry
each other, live exclusively with each other as husband and wife
Page 28 of 483

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without the benefit of marriage or under a void marriage, their wages
and salaries shall be owned by them in equal shares and the property
acquired by both of them through their work or industry shall be
governed by the rules on coownership.
In the absence of proof to the contrary, properties acquired while they
lived together shall be presumed to have been obtained by their joint
efforts, work or industry, and shall be owned by them in equal shares.
For purposes of this Article, a party who did not participate in the
acquisition by the other party of any property shall be deemed to have
contributed jointly in the acquisition thereof if the former's efforts
consisted in the care and maintenance of the family and of the
household.
Neither party can encumber or dispose by acts inter vivos of his or her
share in the property acquired during cohabitation and owned in
common, without the consent of the other, until after the termination
of their cohabitation.
When only one of the parties to a void marriage is in good faith, the
share of the party in bad faith in the co-ownership shall be forfeited in
favor of their common children. In case of default of or waiver by any
or all of the common children or their descendants, each vacant share
shall belong to the respective surviving descendants. In the absence of
descendants, such share shall belong to the innocent party. In all
cases, the forfeiture shall take place upon termination of the
cohabitation.
This particular kind of co-ownership applies when a man and a woman,
suffering no illegal impediment to marry each other, exclusively live together as
husband and wife under a void marriage or without the benefit of marriage.12 It is
clear, therefore, that for Article 147 to operate, the man and the woman: (1) must
be capacitated to marry each other; (2) live exclusively with each other as husband
and wife; and (3) their union is without the benefit of marriage or their marriage is
void. Here, all these elements are present. The term "capacitated" in the first
paragraph of the provision pertains to the legal capacity of a party to contract
marriage. Any impediment to marry has not been shown to have existed on the
part of either Nonato or Barrido. They lived exclusively with each other as husband
and wife. However, their marriage was found to be void under Article 36 of the
Family Code on the ground of psychological incapacity.
Under this property regime, property acquired by both spouses through their
work and industry shall be governed by the rules on equal coownership. Any
property acquired during the union is prima facie presumed to have been obtained
through their joint efforts. A party who did not participate in the acquisition of the
property shall be considered as having contributed to the same jointly if said party's
efforts consisted in the care and maintenance of the family household. Efforts in
the care and maintenance of the family and household are regarded as
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contributions to the acquisition of common property by one who has no salary or
income or work or industry.
Here, the former spouses both agree that they acquired the subject property
during the subsistence of their marriage. Thus, it shall be presumed to have been
obtained by their joint efforts, work or industry, and shall be jointly owned by them
in equal shares. Barrido, however, claims that the ownership over the property in
question is already vested on their children, by virtue of a Deed of Sale. But aside
from the title to the property still being registered in the names of the former
spouses, said document of safe does not bear a notarization of a notary public. It
must be noted that without the notarial seal, a document remains to be private and
cannot be converted into a public document, making it inadmissible in evidence
unless properly authenticated. Unfortunately, Barrido failed to prove its due
execution and authenticity. In fact, she merely annexed said Deed of Sale to her
position paper. Therefore, the subject property remains to be owned in common by
Nonato and Barrido, which should be divided in accordance with the rules on coownership.
PATERNITY AND FILIATION
PROOF OF FILIATION
RODOLFO S. AGUILAR vs. EDNA G. SIASAT

G.R. No. 200169, January 28, 2015, J. Mariano C. Del Castillo
The filiation of illegitimate children, like legitimate children, is established by

(1) the record of birth appearing in the civil register or a final judgment; or (2) an
admission of legitimate filiation in a public document or a private handwritten
instrument and signed by the parent concerned. In the absence thereof, filiation
shall be proved by (1) the open and continuous possession of the status of a
legitimate child; or (2) any other means allowed by the Rules of Court and special
laws. The due recognition of an illegitimate child in a record of birth, a will, a
statement before a court of record, or in any authentic writing is, in itself, a
consummated act of acknowledgment of the child, and no further court action is
required. In fact, any authentic writing is treated not just a ground for compulsory
recognition; it is in itself a voluntary recognition that does not require a separate
action for judicial approval.
It must be concluded that Rodolfo who was born during the marriage of
Alfredo Aguilar and Candelaria Siasat-Aguilar and before their respective deaths
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has sufficiently proved that he is the legitimate issue of the Aguilar spouses. He
correctly argues, Alfredo Aguilars SSS satisfies the requirement for proof of filiation
and relationship to the Aguilar spouses under Article 172 of the Family Code; by
itself, said document constitutes an admission of legitimate filiation in a public
document or a private handwritten instrument and signed by the parent
concerned.
Facts:
Spouses Alfredo Aguilar and Candelaria Siasat-Aguilar (the Aguilar spouses) died,
intestate and without debts. Included in their estate are two parcels of land (herein
subject properties).
Petitioner, Rodolfo S. Aguilar filed with the RTC of Bacolod City a civil case for
mandatory injunction with damages against respondent Edna G. Sias at alleging
that Rodolfo is the only son and sole surviving heir of the Aguilar spouses. Edna
claimed that Rodolfo is not the son and sole surviving heir of the Aguilar spouses,
but a mere stranger who was raised by the Aguilar spouses out of generosity and
kindness of heart; that he is not a natural or adopted child of the Aguilar spouses.
RTC issued its Decision rendering that Rodolfo is not deemed vested with
sufficient interest in this action to be considered qualified or entitled to the issuance
of the writ of mandatory injunction and Damages prayed for, this was affirmed by
CA.
Rodolfo argues in this petition that Alfredo Aguilars SSS satisfies the
requirement for proof of filiation and relationship to the Aguilar spouses under
Article 172 of the Family Code.
Issue:
Whether or not Rodolfo satisfies the requirement for proof of filiation and
relationship to the Aguilar spouses
Page 31 of 483

2015)
Ruling:
the
Yes, Rodolfo satisfies the requirement for proof of filiation and relationship to
Aguilar
spouses.
The filiation of illegitimate children, like legitimate children, is established by

(1) the record of birth appearing in the civil register or a final judgment; or (2) an
admission of legitimate filiation in a public document or a private handwritten
instrument and signed by the parent concerned. In the absence thereof, filiation
shall be proved by (1) the open and continuous possession of the status of a
legitimate child; or (2) any other means allowed by the Rules of Court and special
laws. The due recognition of an illegitimate child in a record of birth, a will, a
statement before a court of record, or in any authentic writing is, in itself, a
consummated act of acknowledgment of the child, and no further court action is
required.
In fact, any authentic writing is treated not just a ground for compulsory
recognition; it is in itself a voluntary recognition that does not require a separate
action for judicial approval. Where, instead, a claim for recognition is predicated on
other evidence merely tending to prove paternity, i.e., outside of a record of birth, a
will, a statement before a court of record or an authentic writing, judicial action
within the applicable statute of limitations is essential in order to establish the
childs acknowledgment.
There is perhaps no presumption of the law more firmly established and

founded on sounder morality and more convincing reason than the presumption
that children born in wedlock are legitimate. This presumption indeed becomes
conclusive in the absence of proof that there is physical impossibility of access
between the spouses during the first 120 days of the 300 days which immediately
precedes the birth of the child due to (a) the physical incapacity of the husband to
have sexual intercourse with his wife; (b) the fact that the husband and wife are
living separately in such a way that sexual intercourse is not possible; or (c) serious
illness of the husband, which absolutely prevents sexual intercourse.
Page 32 of 483

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Quite remarkably, upon the expiration of the periods set forth in Article 170,
and in proper cases Article 171, of the Family Code, the action to impugn the
legitimacy of a child would no longer be legally feasible and the status conferred by
the presumption becomes fixed and unassailable.
Thus, applying the foregoing pronouncement to the instant case, it must be

concluded that Rodolfo who was born during the marriage of Alfredo Aguilar and
Candelaria Siasat-Aguilar and before their respective deaths has sufficiently
proved that he is the legitimate issue of the Aguilar spouses. He correctly argues,
Alfredo Aguilars SSS satisfies the requirement for proof of filiation and relationship
to the Aguilar spouses under Article 172 of the Family Code; by itself, said document
constitutes an admission of legitimate filiation in a public document or a private
handwritten instrument and signed by the parent concerned.
Rodolfo has shown that he cannot produce his Certificate of Live Birth since
all the records covering the period 1945-1946 of the Local Civil Registry of Bacolod
City were destroyed, which necessitated the introduction of other documentary
evidence particularly Alfredo Aguilars SSS to prove filiation. It was erroneous for
the CA to treat said document as mere proof of open and continuous possession of
the status of a legitimate child under the second paragraph of Article 172 of the
Family Code; it is evidence of filiation under the first paragraph thereof, the same
being an express recognition in a public instrument.
In view of the pronouncements herein made, the Court sees it fit to adopt the
following rules respecting the requirement of affixing the signature of the
acknowledging parent in any private handwritten instrument wherein an admission
of filiation of a legitimate or illegitimate child is made:
1) Where the private handwritten instrument is the lone piece of evidence

submitted to prove filiation, there should be strict compliance with the requirement
that the same must be signed by the acknowledging parent; and
2) Where the private handwritten instrument is accompanied by other

relevant and competent evidence, it suffices that the claim of filiation therein be
shown to have been made and handwritten by the acknowledging parent as it is
merely
corroborative
of
such
other
evidence.
Page 33 of 483

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In all actions concerning children, whether undertaken by public or private
social welfare institutions, courts of law, administrative authorities or legislative
bodies, the best interests of the child shall be a primary consideration.
FUNERALS
FE FLORO VALINO vs. ROSARIO D. ADRIANO, FLORANTE D. ADRIANO,

RUBEN D. ADRIANO, MARIA TERESA ADRIANO ONGOCO, VICTORIA ADRIANO
BAYONA, and LEAH ANTONETTE D. ADRIANO
G.R. No. 182894, April 22, 2014, J. Mendoza
The petitioner alleges that being a common law spouse who took care of the
deceased, she has the right to make funeral arrangements for the deceased. The
Supreme Court ruled that the duty and the right to make funeral arrangements are
confined within the family of the deceased particularly the spouse of the deceased
to the exclusion of a common law spouse.
Facts:
Atty. Adriano Adriano is married to respondent Rosario Adriano. When their
marriage turned sour, they separated in fact. Twenty (20) years later, Atty. Adriano
courted his client petition Fe Floro Valino. Valino and Atty. Adriano decided to live
together as husband and wife. Despite this arrangement, Atty. Adriano continued to
provide financial support to Rosario and their children.
However, Atty. Adriano died of acute emphysema. Since no one in Atty.
Adrianos family was present during his death, petitioner Valino took it upon herself
to pay the necessary funeral expenses and buried Atty. Adriano at the mausoleum
of the family of Valino in Manila Memorial Park.
Because of this, respondent Rosario filed a petition before the Regional Trial
Court for indemnification for actual, moral, exemplary damages and attorneys fees.
She alleged that the burial at Manila Memorial Park is contrary to the wishes of Atty.
Adriano.
The RTC rendered a decision in favor of Valino. However, on appeal, the Court
of Appeals reversed the decision of RTC and ruled that under Article 305 of the New
Civil Code, Rosario being the legal wife of Atty. Adriano gave her not only the duty
but also the right to make arrangements for the funeral of her husband. Hence, the
current petition.
Issue:
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The lone legal issue in this petition is who between Rosario and Valino is
entitled to the remains of Atty. Adriano.
Ruling:
Article 305 of the Civil Code, in relation to what is now Article 1996 of the
Family Code, specifies the persons who have the right and duty to make funeral
arrangements for the deceased. Thus:
Art. 305. The duty and the right to make arrangements for the funeral of a
relative shall be in accordance with the order established for support, under Article
294. In case of descendants of the same degree, or of brothers and sisters, the
oldest shall be preferred. In case of ascendants, the paternal shall have a better
right.
Art. 199. Whenever two or more persons are obliged to give support, the
liability shall devolve upon the following persons in the order herein provided:
(1)
(2)
(3)
(4)
The
The
The
The
spouse;
descendants in the nearest degree;
ascendants in the nearest degree; and
brothers and sisters.
Further, Article 308 of the Civil Code provides:

Art. 308. No human remains shall be retained, interred, disposed of or
exhumed without the consent of the persons mentioned in Articles 294 and 305. In
this connection, Section 1103 of the Revised Administrative Code provides:
Section 1103. Persons charged with the duty of burial. The immediate duty
of burying the body of a deceased person, regardless of the ultimate liability for the
expense thereof, shall devolve upon the persons herein below specified:
(a) If the deceased was a married man or woman, the duty of the burial shall
devolve upon the surviving spouse if he or she possesses sufficient means to
pay the necessary expenses;
From the foregoing provisions it is clear that the duty and the right to make
funeral arrangements are confined within the family of the deceased particularly the
spouse of the deceased to the exclusion of a common law spouse. The term spouse
in the said provision is to be construed as the legal spouse. As applied to this case,
it is clear that the law gives the right and duty to make funeral arrangements to
Rosario, she being the surviving legal wife of Atty. Adriano. The fact that she was
living separately from her husband and was in the United States when he died has
no controlling significance. To say that Rosario had, in effect, waived or renounced,
expressly or impliedly, her right and duty to make arrangements for the funeral of
her deceased husband is baseless. The right and duty to make funeral
Page 35 of 483

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arrangements, like any other right, will not be considered as having been waived or
renounced, except upon clear and satisfactory proof of conduct indicative of a free
and voluntary intent to that end. While there was disaffection between Atty. Adriano
and Rosario and their children when he was still alive, the Court also recognizes that
human compassion, more often than not, opens the door to mercy and forgiveness
once a family member joins his Creator. Notably, it is an undisputed fact that the
respondents wasted no time in making frantic pleas to Valino for the delay of the
interment for a few days so they could attend the service and view the remains of
the deceased. As soon as they came to know about Atty. Adrianos death in the
morning of December 19, 1992 (December 20, 1992 in the Philippines), the
respondents immediately contacted Valino and the Arlington Memorial Chapel to
express their request, but to no avail.
Even assuming, ex gratia argumenti, that Atty. Adriano truly wished to be
buried in the Valino family plot at the Manila Memorial Park, the result remains the
same. Article 307 of the Civil Code provides:
Art. 307. The funeral shall be in accordance with the expressed wishes of the
deceased. In the absence of such expression, his religious beliefs or affiliation shall
determine the funeral rites. In case of doubt, the form of the funeral shall be
decided upon by the person obliged to make arrangements for the same, after
consulting the other members of the family.
From its terms, it is apparent that Article 307 simply seeks to prescribe the
"form of the funeral rites" that should govern in the burial of the deceased. As
thoroughly explained earlier, the right and duty to make funeral arrangements
reside in the persons specified in Article 305 in relation to Article 199 of the Family
Code. Even if Article 307 were to be interpreted to include the place of burial
among those on which the wishes of the deceased shall be followed, Dr. Arturo M.
Tolentino (Dr. Tolentino), an eminent authority on civil law, commented that it is
generally recognized that any inferences as to the wishes of the deceased should
be established by some form of testamentary disposition. As Article 307 itself
provides, the wishes of the deceased must be expressly provided. It cannot be
inferred lightly, such as from the circumstance that Atty. Adriano spent his last
remaining days with Valino. It bears stressing once more that other than Valinos
claim that Atty. Adriano wished to be buried at the Valino family plot, no other
evidence was presented to corroborate it.
PROPERTY
OWNERSHIP
OWNERSHIP IN GENERAL
DEPARTMENT OF EDUCATION, represented by its REGIONAL DIRECTOR
TERESITA DOMALANTA vs. MARIANO TULIAO
Page 36 of 483

2015)
G.R. No. 205664, June 9, 2014, J. Mendoza
In actions for recovery of possession, the plaintiff must show proof to support
his claim of his right to possession of the property. The defendant in turn must show
proof to controvert the plaintiffs claim; otherwise the court will rule for the plaintiff.
Thus, when a landowner filed an action for recovery of possession against a public
school which built a gymnasium on a parcel of land which the owner allowed the
school to use as an access road for the schoolchildren, and the plaintiff showed as
evidence tax declarations and a certificate of title over the property, the lone
testimonial evidence the DepEd presented is not sufficient to controvert the
landowners case. In addition, the landowners claim is not barred by laches when
the schools possession of the property is not adverse, and when the landowner
brought suit two years after he learned that the school is constructing a gymnasium
over the property.
Facts:
On October 8, 2002 respondent Mariano Tuliao filed an action for recovery of
possession and removal of structure with damages against petitioner DepEd with
the MTCC, alleging that a portion of a parcel of land registered in his name was
allowed by his predecessors-in-interest to be used by the Atulayan Elementary
School (AES) as an access road for the schoolchildren in going to and from the
school. In March 2000, upon discovering that a structure was being constructed on
the land, he demanded that the DepED cease and desist and vacate the property.
DepEd refused.
DepEd averred that Tuliaos claim had already been barred by prescription
and/or laches. Its occupation of the subject land was adverse, peaceful, continuous,
and in the concept of an owner for more than fifty (50) years.
MTCC rendered its decision, ruling that Tuliao was the registered owner of the
subject property and, thus, had a right of action against the holder and possessor of
the said property. Further, it found that respondents possession of the subject
property was merely tolerated by Tuliao. For said reason, his right to recover it was
never barred by laches.
The RTC dismissed DepEds appeal and affirmed the MTCC. Interestingly, the
RTC opined that the case was impressed with public interest and it was the
paramount interest of the pupils who would be prejudiced by the finality and
execution of the appealed decision, and strongly suggested that DepEd pay Tuliao
the just compensation of the land in question. The CA affirmed the RTC decision.
Issues:
1. Did the CA err in holding that Tuliao is entitled to possession of the
property?
2. Was Tuliaos claim barred by laches?
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Ruling:
The petition is denied.
1. No. Tuliao presented sufficient proof of ownership while DepEds evidence
were insufficient to refute Tuliaos claim.
Here, Tuliao, as the registered owner, filed a complaint for recovery of
possession and removal of structure. To support his claim, he presented not only tax
declarations and tax receipts, but also a certificate of title. The Court agrees with
the CA that the said pieces of evidence were sufficient to resolve the issue of who
had the better right of possession. That being the case, the burden was shifted to
the DepEd to prove otherwise. Unfortunately, the DepEd only presented testimonial
evidence and nothing more to prove its defense and refute Tuliaos claim. Its lone
witness was all that the DepEd had to prove its right of possession. As between a
certificate of title, which is an incontrovertible proof of ownership, accompanied with
a tax declaration and a tax receipt on one hand, and a testimony of a lone witness
who is a retired teacher on the other, the former prevails in establishing who has a
better right of possession over the property, following the rule that testimonial
evidence cannot prevail over documentary evidence.
2. No. DepEds possession was adverse only when it started to build the
gymnasium; and Tuliao filed the action two years later; thus he was not
sleeping on his rights.
As regards the DepEds defense of laches, it has no merit either. It avers that
its possession of the subject land was open, continuous, exclusive, adverse,
notorious and in the concept of an owner for at least thirty-two (32) years already at
the time Tuliao filed the complaint. It must be noted, however, that Tuliao's claim
that the DepEd's possession of a portion of his land to be used as a passageway for
the students was mere tolerance was not refuted. Thus, the same is deemed
admitted. This means that the DepEd's possession was not truly adverse.
The Court once ruled that mere material possession of the land was not adverse as
against the owner and was insufficient to vest title, unless such possession was
accompanied by the intent to possess as an owner. Accordingly, the DepEd's
possession can only be considered as adverse from the time the gymnasium was
being constructed in 1999 on the subject portion of Tuliao's property. In March 2000,
Tuliao discovered the construction and demanded that the DepEd cease and desist
from continuing the same. When DepEd refused, Tuliao filed a complaint for
recovery of possession of the subject lot in 2002. Thus, only two (2) years had
elapsed from the time the DepEd resisted Tuliaos claims. Clearly, he did not sleep
on his rights. There was no prolonged inaction that barred him from prosecuting his
claims.
HEIRS OF PACIANO YABAO, represented by REMEDIOS CHAN vs. PAZ
LENTEJAS VAN DER KOLK
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A tax declaration is not a proof of ownership; it is not a conclusive evidence
of ownership of real property. In the absence of actual, public, and adverse
possession, the declaration of the land for tax purposes does not prove ownership.
Facts:
It was claimed that the plaintiffs herein are the sole surviving heirs of the late
spouses Paciano Yabao and Mercedes Cano and that they are co-owners of the land
herein. That sometime in 1996, Kolk asserted claim of ownership and allowed a
person to possess the above-described property, notwithstanding vehement
opposition thereto by the Yabaos. Notwithstanding demands for Kolk to vacate the
premises usurped and occupied by her, she refused and still continued to refuse, to
leave the said premises. The Heirs of Yabao prayed that they be declared the coowners and possessors of a parcel of land designated as Lot 2473 located in Brgy.
Capoocan, Calbayog City and that possession thereof be restored to them.
On April 2, 2001, Van Der Kolk filed a Motion to Dismiss the complaint on the
ground of lack of cause of action on the part of the Yabaos.
Issue:
Whether the heirs of Paciano Yabao had proven their cause of action to
initiate the present proceedings.
Ruling:
No, they did not.
The MTCC erred when it granted the reliefs prayed by the Heirs of Yabao
because the same were not warranted by the allegations in the complaint. The
Court noted that the allegations pertinent to the their cause of action, particularly
on their claim of ownership and right to possession over Lot 2473, were not
supported by any document annexed to the complaint. Mere assertions, as what the
heirs of Yabao proffered, do not suffice.
Ownership by the heirs cannot be established by mere lip service and bare
allegations in the complaint. As in all matters, a party must establish his/her
averments in the complaint by sufficient evidence necessary to prove such claim. It
is significant that the basis of Yabaos claim of ownership was a mere tax
declaration that was supposedly in the name of their putative ancestor Paciano
Yabao. However, a tax declaration is not a proof of ownership; it is not a conclusive
evidence of ownership of real property. In the absence of actual, public, and adverse
possession, the declaration of the land for tax purposes does not prove ownership.
It can only be a strong indication of ownership if coupled with possession. In the
case at bench, it was the petitioner who was in possession of the property and not
the respondents. Consequently, the tax declaration, standing alone, is not an
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acceptable proof of ownership. Accordingly, the Yabaos entitlement to their claims
was not proven by preponderance of evidence.
MIDWAY MARITIME AND TECHNOLOGICAL FOUNDATION, represented by its
Chairman/President PhD in Education DR. SABINO M. MANGLICMOT vs.
MARISSA E. CASTRO, ET AL.
G.R. No. 189061, August 6, 2014, J. Reyes
The petitioner is a lessee of a parcel of land and disputes the title of the
owners of the building built on the land they are leasing. The Supreme Court ruled
that it is settled that "[o]nce a contact of lease is shown to exist between the
parties, the lessee cannot by any proof, however strong, overturn the conclusive
presumption that the lessor has a valid title to or a better right of possession to the
subject premises than the lessee." Section 2(b), Rule 131 of the Rules of Court
prohibits a tenant from denying the title of his landlord at the time of the
commencement of the relation of landlord and tenant between them.
Facts:
The petitioner MIDWAY MARITIME is a lessee of two parcels of land owned by
spouses Manglicmot. The lease contract was executed between the petitioner
company and the respondent. Inside the two parcels of land is a building which is
the subject of the dispute in the case at bar. The respondent Castro alleges that she
is the owner of the building within the parcels of land owned by the spouses. She
asserts that what the petitioner spouses only acquired in is the two parcels of land
and it does not include the residential building in it. On the other hand, the spouses
Manglicmot contend that they are the owners of the said residential building by
virtue of the title they acquired from their predecessor-in-interest which is Union
Bank which acquired the property from Bancom who, in turn, acquired the property
through a public auction.
The Regional Trial Court rendered a decision in favor of the respondents
declaring them to be the absolute owners of the residential building. On appeal, the
Court of Appeals affirmed the decision of the RTC. Hence, the current petition.
The petitioner MIDWAY MARITIME contests the award of rentals made by the
RTC, which was affirmed by the CA, contending that when Tomas bought the two
parcels of land from Union Bank in 1993, the sale included the improvements
thereon, one of which was the residential house in dispute. The petitioner also
argues that the lease between CCC and the respondents already expired at the time
of the sale and they are now the current lessees of the property, albeit the
residential house is still standing inside the school compound. The petitioner relies
on a decision rendered by the RTC of Cabanatuan City, Branch 26, in Civil Case No.
2939 (AF),which was an appeal from the trial courts dismissal of the complaint for
Ejectment with Damages filed by the respondents against the petitioner. In said
decision, the RTC stated that "in the advertised sale of the lots covered by TCT Nos.
T-45816 and [T-45817] of the land records of Cabanatuan City, all improvements
were included, hence, the instant case has no factual and legal basis."
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Issue:
Whether or not the spouses Manglicmot owns the residential building located
within the two parcels of land they own.
Ruling:
No. The Supreme Court affirmed the decision of the Court of Appeals and
dismissed the petition filed by the spouses.
Given the existence of the lease, the petitioners claim denying the
respondents ownership of the residential house must be rejected. According to the
petitioner, it is Adoracion who actually owns the residential building having bought
the same, together withthe two parcels of land, from her father Tomas, who, in turn,
bought it in an auction sale.
It is settled that "[o]nce a contact of lease is shown to exist between the
parties, the lessee cannot by any proof, however strong, overturn the conclusive
presumption that the lessor has a valid title to or a better right of possession to the
subject premises than the lessee." Section 2(b), Rule 131 of the Rules of Court
prohibits a tenant from denying the title of his landlord at the time of the
commencement of the relation of landlord and tenant between them. In Santos v.
National Statistics Office, the Court expounded on the rule on estoppel against a
tenant and further clarified that what a tenant is estopped from denying is the title
of his landlord at the time of the commencement of the landlord-tenant relation. If
the title asserted is one that is alleged to have been acquired subsequent to the
commencement of that relation, the presumption will not apply.
More importantly, the respondents ownership of the residential building is
already an established fact.
"Nemo dat quod non habet. One can sell only what one owns or is authorized
to sell, and the buyer can acquire no more right than what the seller can transfer
legally."18 It must be pointed out that what Tomas bought from Union Bank in the
auction sale were the two parcels of land originally owned and mortgaged by CCC to
Bancom, and which mortgage was later assigned by Bancom to Union Bank.
Contrary to the petitioners assertion, the property subject of the mortgage and
consequently the auction sale pertains only to these two parcels of land and did not
include the residential house. This was precisely the tenor of Castro, Jr. v. CA19
where the Court nullified the writ of possession issued by the trial court insofar as it
affected the residential house constructed by the respondents on the mortgaged
property as it was not owned by CCC, which was the mortgagor. The Court ruled:
[Article 2127 of the Civil Code] extends the effects of the real estate
mortgage to accessions and accessories found on the hypothecated property when
the secured obligation becomes due. The law is predicated on an assumption that
the ownership of such accessions and accessories also belongs to the mortgagor as
the owner of the principal. The provision has thus been seen by the Court, x xx, to
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mean that all improvements subsequently introduced or owned by the mortgagor
on the encumbered property are deemed to form part of the mortgage. That the
improvements are to be considered so incorporated only if so owned by the
mortgagor is a rule that can hardly be debated since a contract of security, whether
real or personal, needs as an indispensable element thereof the ownership by the
pledger or mortgagor of the property pledged or mortgaged. The rationale shouldbe
clear enough in the event of default on the secured obligation, the foreclosure
sale of the property would naturally be the next step that can expectedly follow. A
sale would result in the transmission of title to the buyer which is feasible only if the
seller can be in a position to convey ownership of the thing sold (Article 1458, Civil
Code). It is to say, in the instant case, that a foreclosure would be ineffective unless
the mortgagor has title to the property to be foreclosed. The rule is that "when a
decision becomes final and executory, it becomes valid and binding upon the
parties and their successors in interest." Such being the case, Castro, which already
determined with finality the respondents ownership of the residential house in
question, is applicable and binding in this case and the petitioner cannot be allowed
to challenge the same. Thus, as correctly ruled by the CA, "[t]o our mind, the
pronouncement resolving the said issue necessarily touches also the issue on the
ownership of the building. x xx The finding of the Court [in Castro], now being final
and executory, is no longer open for inquiry and therefore, has attained its
immutability
Also, Adoracions subsequent acquisition of the two parcels of land from her
father does not necessarily entail the acquisition of the residential building. "A
building by itself is a realor immovable property distinct from the land on which it is
constructed and therefore can be a separate subject of contracts." Whatever
Adoracion acquired from her father is still subject to the limitation pronounced by
the Court in Castro, and the sale between Adoracion and Tomas is confined only to
the two parcels of land and excluded the residential building owned by the
respondents. It is beyond question that Tomas, and subsequently, Adoracion, could
nothave acquired a right greater than what their predecessors-in-interest CCC and
later, Union Bank had.
ROLANDO S. ABADILLA, JR. vs. SPOUSES BONIFACIO P. OBRERO and
BERNABELA N. OBRERO
G.R. No. 199448, November 12, 2014, J. Reyes
The petitioner claims that they are the rightful owners of the disputed
property. Thus, an ejectment proceeding cannot be commenced against them. The
Supreme Court ruled that "ejectment proceedings are summary proceedings
intended to provide an expeditious means of protecting actual possession or right
to possession of property. Title is not involved. The sole issue to be resolved is who
is entitled to the physical or material possession of the premises or possession de
facto." "Issues as to the right of possession or ownership are not involved in the
action; evidence thereon is not admissible, except only for the purpose of
determining the issue of possession."
Facts:
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The respondents spouses Obrero filed a complaint for ejectment against the
petitioner Rolando Abadilla, Jr. The spouses allege that they are the owners of the
land which is in their possession and that Abadilla with the aid of armed men
caused the dispossession of the spouses Obrero from the disputed property. On the
other hand, Abadilla claims that they are the rightful owners of the property and
that the spouses Obrero has been trespassing their property for a number of years
now.
The MTC dismissed the complaint of the spouses. On appeal, the Regional
Trial Court reversed and set aside the decision of the MTC and ordered Abadilla to
return the possession of the said property to the spouses. The Court of Appeals
affirmed the decisions of the RTC. Hence, the current petition.
Issue:
Whether or not the complaint for ejectment filed by the spouses Obrero
should be dismissed.
Ruling:
No. The Supreme Court affirmed the decision of the Court of Appeals and
ruled that Abadilla illegally dispossessed the spouses Obrero of the possession of
the disputed property thereby the complaint for ejectment shall prosper.
"Ejectment proceedings are summary proceedings intended to provide an
expeditious means of protecting actual possession or right to possession of
property. Title is not involved. The sole issue to be resolved is who is entitled to the
physical or material possession of the premises or possession de facto." "Issues as
to the rightof possession or ownership are not involved in the action; evidence
thereon is not admissible, except only for the purpose of determining the issue of
possession."
Thus, where the parties to an ejectment case raise the issue of ownership,
the courts may pass upon that issue but only to determine who between the parties
has the better right to possess the property. As such, any adjudication of the
ownership issue isnot final and binding; it is only provisional, and not a bar to an
action between the same parties involving title to the property.
As borne by the records, the respondents have erected concrete and bamboo
structures (i.e., picnic shades, shower rooms, comfort rooms, lodging rooms,
cottages, apartelle) on the subject land, declared the same for taxation purposes
and paid the realty taxes thereon before the petitioner and his men entered the
same on September 22, 2007.
In contrast, the petitioners claim of possession was based on the
unsubstantiated and unreliable affidavits of his supposed caretakers that he had the
land fenced in 1996 and thereafter maintained those fences thru repairs. As
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correctly observed by the RTC and the CA, their affidavits failed to state whether the
fences they built and maintained pertained to the land subject of this controversy.
Neitherwere the supposed caretakers able to particularly identify the years when
the fences were purportedly repaired and when the respondents allegedly
trespassed on the land.
Indeed, the petitioner failed to show any competent and convincing evidence
of possession or act of dominion in contrast to the overwhelming proof of actual
possession and occupation proffered by the respondents. Consequently, it is
indubitable that the respondents, as registered owners, are entitled to and must be
restored to the physical possession forcibly wrested from them by the petitioner. It
remains undisputed that the petitioner and his men unlawfully entered the land,
enclosed it with barbed-wire fence, destroyed the improvements thereon and
excluded the respondents therefrom. These actions necessarily imply the use of
force31 which is remedied by the herein proceedings for ejectment.
SUBIC BAY LEGEND RESORTS AND CASINOS, INC vs. BERNARD C.
FERNANDEZ
G.R. No. 193426, September 29, 2014, J. Del Castillo
Though casino chips do not constitute legal tender, there is no law which
prohibits their use or trade outside of the casino which issues them. Since casino
chips are considered to have been exchanged with their corresponding
representative value it is with more reason that the Court should require SBL to
prove convincingly and persuasively that the chips it confiscated from Ludwin and
Deoven were indeed stolen from it. If SBL cannot prove its loss, then Article 559
cannot apply; the presumption that the chips were exchanged for value remains.
Facts:
Pietitioner Subic Bay Legend Resorts And Casinos, Inc., (SBL) a duly organized
and existing corporation operating under Philippine laws, operates the Legenda
Hotel and Casino located in the Subic Bay Freeport Zone in Zambales. On the other
hand, Respondent Bernard C. Fernandez (Bernard) is the plaintiff in Civil Case No.
237-0-97 prosecuted against SBL in Olongapo RTC.
At around eleven oclock in the evening of 6 June 1997, Bernard
Fernandezs brother Ludwin Fernandez visited the Legenda Hotel and Casino
Legenda had strategically installed several CCTV cameras as part of security
measures required by its business. The monitors revealed that Ludwin changed
$5,000.00 worth of chips into smaller denominations. Legenda admitted in its brief
that its surveillance staff paid close attention to Ludwin simply because it was
unusual for a Filipino to play using dollar-denominated chips. After Ludwin won
$200.00 in a game of baccarat, he redeemed the value of chips worth $7,200.00. An
operation was launched by Legenda to zero-in on Ludwin whose picture was
furnished its security section. Thus, unbeknownst to him, he was already closely
watched when he went with another brother, Deoven, to the casino. After playing
(and losing $100.00) only one round of baccarat, the siblings had their chips
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encashed at two separate windows. Cashiers froze the transaction. Shortly
thereafter, Legendas internal security officers accosted Ludwin and Deoven and
ordered them to return the cash and they complied without ado because they were
being pulled away. The two were eventually escorted to private rooms where they
were separately interrogated about the source of the chips they brought. The
ultimatum was simple: they confess that the chips were given by a certain
employee, Michael Cabrera, or they would not be released from questioning.
Finally, the brothers succumbed to Legendas instruction to execute a joint
statement implicating Cabrera as the illegal source of the chips. Due to hunger
pangs and fatigue, they did not disown the statement even when they subscribed
the same before the prosecutor in whose office they were later brought. About two
weeks later, Deoven executed a retraction in Baguio City where he took up his
engineering course.
On July 1, 1997, Bernard filed Civil Case No. 237-0-97 for recovery of sum of
money with damages against SBL, on the premise that on June 13, 1997, he went to
Legenda with his brothers Ludwin and Deoven; that he handed over Legenda casino
chips worth US$6,000.00, which belonged to him, to his brothers for the latter to
use at the casino; that SBL accosted his brothers and unduly and illegally
confiscated his casino chips equivalent to US$5,900.00. SBLs Answer essentially
alleged they voluntarily agreed to proceed to the Legenda security office upon
invitation, where Ludwin voluntarily informed security officers that it was a certain
Michael Cabrera (Cabrera) a Legenda table inspector at the time who gave him
the casino chips for encashment, taught him how to play baccarat and thereafter
encash the chips, and rewarded him with P1,000.00 for every $1,000.00 he
encashed; that they volunteered to testify against Cabrera; that Ludwin and Deoven
voluntarily executed a joint affidavit before the Olongapo City Prosecutors Office,
which they subsequently recanted.
The trial court rendered a judgment in favor of the Bernard. It ruled that SBL
failed to prove that the casino chips were stolen. On appeal, the CA affirmed the
decision of the trial court. Hence, this petition for review of certiorari. Bernard
argued that SBL failed to rebut the presumption that a person in possession of
personal property is the lawful owner of the same, pursuant to Article 559 of the
Civil Code
Issue:
Whether or not Ludwin and Deoven can be presumed to be the owners of the
chips.
Ruling:
The Petition is denied.
SBLs underlying theory is that the subject casino chips were in fact stolen by
its employee Cabrera, then handed over to Bernards brothers, Ludwin and Deoven,
for encashment at the casino; that Ludwin and Deoven played at the casino only for
show and to conceal their true intention, which is to encash the chips; that
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Bernards claim that he owned the chips, as they were given to him in payment of
services he rendered to a Chinese client, is false. The failure of SBL to file a criminal
case against the latter including Ludwin and Deoven for that matter up to this
point certainly does not help to convince the Court of its position, especially
considering that the supposed stolen chips represent a fairly large amount of
money. Indeed, for purposes of this proceeding, there appears to be no evidence on
record other than mere allegations and suppositions that Cabrera stole the
casino chips in question; such conclusion came unilaterally from SBL, and for it to
use the same as foundation to the claim that Ludwin, Deoven and Bernard are
dealing in stolen chips is clearly irregular and unfair. Thus, there should be no basis
to suppose that the casino chips found in Ludwins and Deovens possession were
stolen; SBL acted arbitrarily in confiscating the same without basis. Their Joint
Affidavit which was later recanted does not even bear such fact; it merely states
that the chips came from Cabrera. If it cannot be proved, in the first place, that
Cabrera stole these chips, then there is no more reason to suppose that Ludwin and
Deoven were dealing in or possessed stolen goods; unless the independent fact that
Cabrera stole the chips can be proved, it cannot be said that they must be
confiscated when found to be in Ludwins and Deovens possession.
prohibits their use or trade outside of the casino which issues them. In any case, it
is not unusual nor is it unlikely that Bernard could be paid by his Chinese client
at the formers car shop with the casino chips in question; said transaction, if not
common, is nonetheless not unlawful. Given this premise that casino chips are
considered to have been exchanged with their corresponding representative value
it is with more reason that the Court should require SBL to prove convincingly and
persuasively that the chips it confiscated from Ludwin and Deoven were indeed
stolen from it; if so, any Tom, Dick or Harry in possession of genuine casino chips is
presumed to have paid for their representative value in exchange therefor. If SBL
cannot prove its loss, then Article 559 cannot apply; the presumption that the chips
were exchanged for value remains.
Finally, the Court sustains the award of attorneys fees. SBLs act of arbitrarily
confiscating the casino chips and treating Ludwin and Deoven the way it did, and in
refusing to satisfy Bernards claim despite the fact that it had no basis to withhold
the chips, confirm its bad faith, and should entitle Bernard to an award.
ACCESSION
RIGHT OF ACCESSION WITH RESPECT TO IMMOVABLE PROPERTY
BANK OF THE PHILIPPINE ISLANDS vs. VICENTE VICTOR C. SANCHEZ ET AL.;
GENEROSO TULAGAN ET AL. vs. VICENTE VICTOR C. SANCHEZ ET AL.;
REYNALDO V. MANIWANG vs. VICENTE VICTOR C. SANCHEZ and FELISA
GARCIA YAP
G.R. No. 179518; G.R. No. 179835; G.R. No. 179954, November 19, 2014, J.
Velasco Jr.
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Article 453 of the Civil Code clearly reads that a landowner is considered in
bad faith if he does not oppose the unauthorized construction thereon despite
knowledge of the same. The fact that the Sanchezes did take action to oppose the
construction on their property by writing the HLURB and the City Building Official of
Quezon City. The Court agrees with both the RTC and the CA that Garcia and TSEI
are builders in bad faith. They knew for a fact that the property still belonged to the
Sanchezes and yet proceeded to build the townhouses not just without the
authority of the landowners, but also against their will.
Facts:
Vicente Victor C. Sanchez, Kenneth Nereo Sanchez and Imelda C. V da. De
Sanchez owned a parcel of land located at No. 10 Panay Avenue, Quezon City
consisting of 900 square meters. The property was registered under TCT 156254 of
the Registry of Deeds of Quezon City. On October 10, 1988, Jesus V. Garcia, doing
business under the name TransAmerican Sales and Exposition, Inc., wrote a letter to
Vicente offering to buy the Subject Property for One Million Eight Hundred Thousand
Pesos under subject terms and conditions. The offer was good for only seven (7)
days. The period elapsed with the parties failing to come to an agreement.
Sometime in the third week of October 1988, Felisa Yap, the widow of Kenneth
Nereo Sanchez, and Garcia had a meeting at the Quezon City Sports Club wherein
the parties agreed to the sale of the subject property. Pursuant to this agreement,
Yap turned over to Garcia the original owners copy of TCT 156254, the copy of the
filed Application for Restitution of Title to the property, and copies of all receipts for
the payment of real estate taxes on the property, while Garcia paid Yap 50,000 as
earnest money.
Afterwards, Yap required the occupants of the subject property to vacate the
same. Immediately after it was vacated, Garcia, without Yaps knowledge and
consent, took possession of the lot and installed his own caretaker thereon with
strict instructions not to allow anyone to enter the property. Yap later learned that
Garcia had also demolished the house on the property and advertised the
construction and sale of "Trans American Townhouse V" thereon. The foregoing
developments notwithstanding and despite numerous demands, Garcia failed to pay
the balance of the purchase price as agreed upon.
Yap was informed that the checks representing the purchase price of the
subject property were ready but that Vicente must pick up his checks personally.
However, out of the six (6) checks that were presented to them, four (4) of them
were post-dated, further delaying their overdue payment. In order to properly
document such check payments, the parties executed an Agreement dated
December 8, 1988, which relevantly provide: That the total consideration of sale of
the rights, interest, participation and title of the Yap and Vicente of the aforestated
parcel of land to Garcia shall be One Million Eight Hundred Fifty Thousand Pesos
(P1,850,000.00), Philippine Currency, payable in check.That the parties hereto
agree that once the aforestated checks are honored by the bank and encashed by
the payees thereof, the First and Second Parties shall execute an EXTRA-JUDICIAL
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SETTLEMENT OF ESTATE WITH SALE distributing and dividing among themselves.
Subsequently, the first four (4) checks were deposited with no issue. However, the
last two (2) checks, amounting to P400,000 each, were dishonored for the reason of
"DAIF" or drawn against insufficient funds.Thus, Yap wrote a letter to Garcia
informing him that the two (2) checks were dishonored and asking that the checks
be replaced within five (5) days from receipt of the letter. Such request was left
unheeded. Yap informed Garcia in a letter that she and Vicente were rescinding the
Agreement while demanding the return of the original owners copy of TCT 156254.
This prompted Garcia to offer two (2) managers checks in the aggregate amount
of P300,000 which Yap flatly refused, reiterating the rescission of their Agreement
and demanding for the return of all documents entrusted to Garcia through a
January 21, 1989 letter.
Garcias counsel, Atty. Francisco Beato, Jr, informed Yap that they had an
agreement that the P800,000 balance of the purchase price was due to be paid by
Garcia only upon Yap and Vicentes payment of the realty, inheritance and capital
gains taxes due on the transfer of the property. Thus, Garcia effectively refused to
return the documents and to vacate the subject property. Yap referred Beatos letter
to her own counsel, Atty. Julian S. Yap, who wrote back in a letter refuting the claim
of Garcia that the P800,000 was not yet due and reiterating their decision to rescind
the Agreement and demanding that Garcia vacate the property and return the
documents that were surrendered to him by Yap. On February 19, 1989, Yap and
Vicente discovered that Garcia posted an advertisement in the classified ads of the
Manila Bulletin offering to sell units at the Trans American Townhouse V situated at
the subject property. Thus, on February 27, 1989, Atty. Yap wrote the Housing and
Land Use Regulatory Board (HLURB) informing the latter of the existing public
advertisement of TSEI offering for sale townhouses illegally constructed on the
subject property and urging the HLURB to cancel any existing permit or license to
sell the said townhouse units or to deny any application therefor. On March 17,
1989, the HLURB issued a Cease and Desist Order (CDO) enjoining TSEI and Garcia
from further developing and selling the townhouses.
In a delayed response to the CDO, TSEI wrote a letter to the HLURB alleging
that only ground leveling works were being undertaken on the project. Yap and
Vicente also inquired from the City Building Official of Quezon City, in a letter the
office found that the construction on the subject property was indeed illegal and at
its 5% initial stage. Yap also wrote a letter to the Register of Deeds in Quezon City
informing it that TCT 156254 was no longer in their possession and requesting that
the office clear the matter with them first before acting on any transaction
pertaining to the subject property. Then, on August 21, 1989, Yap filed a formal
complaint with the Office of the City Building Official of Quezon City. However, both
Garcia and TSEI failed to attend the said hearing. Thereafter,Yap and Vicente, in his
own behalf and representing the heirs of Imelda C.Vda. De Sanchez, RTC in Quezon
City a Complaint for the rescission of contract, restitution and damages with prayer
for TRO/preliminary injunction against TSEI and Garcia.
Meanwhile, Garcia managed to cause the cancellation of TCT 156254 and its
replacement with TCT 383697 in the name of TSEI. TCT 383697, however, bore the
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date of issuance as June 9, 1988, way before the parties agreed on the sale
sometime in October 1988. Garcia apparently used TCT 383697 to entice several
buyers to buy the townhouse units being constructed by TSEI on the subject lot.
Claiming to have bought townhouse units sometime in early 1989, the following
intervened in the instant case: the spouses Jose and Visitacion Caminas, Reynaldo V.
Maniwang, Generoso C. Tulagan, Varied Traders Concept, Inc, and Arturo Marquez.
TSEI left the townhouse units unfinished, leaving these intervenors to finish their
townhouses by themselves. Notably, except for the Absolute Deeds of Sale
executed between TSEI and VTCI, all the other intervenors contracts conveying
townhouses in their favor identified their purchased lots as covered by TCT 156254.
Far East Bank and Trust Company entered into a Loan Agreement with TSEI
secured by a Real Estate Mortgage over TCT 156254.FEBTC later merged with the
Bank of the Philippine Islands with the latter as the surviving bank. Garcia
purportedly explained to FEBTC that the parties were still in the process of
transferring the title. Garcia submitted a copy of TCT 383697 in TSEIs name. Upon
default, FEBTC foreclosed the subject lot and had the Foreclosure Certificate of Sale
annotated on TCT 383697. The RTC rendered a Decision in favor of the Sanchezes.
The CA rendered, the assailed Decision affirming the RTC Decision with
modifications.
Issue:
Whether or not the parties all acted in bad faith.
Ruling:
No, The Sanchezes are not guilty of negligence and bad faith.
It must be stated that the CA already ruled that the issue of the Sanchezes
negligence was never raised at the pre-trial. As such, it can no longer be raised on
appeal. Nevertheless, even if such issue were to be passed upon, the Sanchezes
cannot be considered negligent, much less in bad faith.
It must be noted that defendant Garcia committed himself that, upon full payment
of the purchase price, he would personally undertake the preparation and execution
of the Extrajudicial Settlement with Sale as well as the reconstitution of the original
copy of TCT No. 156254 on file with the Register of Deeds of Quezon City. Thus, it
was inevitably for Felisa Yap to surrender to Garcia the owners duplicate copy of the
aforesaid title as well as the other documents pertinent for such documentation and
reconstitution. To Our mind, this does not constitute negligence on the part of the
Sanchezes as the surrender was purely to comply with and in pursuance to their
earlier agreement with the defendants.
As regards the alleged relinquishment of possession of the subject property,
this Court also do not find any negligence on the part of the Sanchezes. The records
would disclose that the Sanchezes did not voluntarily surrender possession thereof
to defendants. On the contrary, it was Garcia who took possession of the subject
property, without Sanchezes knowledge, posted his own caretaker therein with strict
Page 49 of 483

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instructions not to allow anyone to enter the same. The latter also caused the
demolition of the old house standing thereon and advertised the same for sale by
placing a large billboard in front of the subject property. In fact, had it not been for
persistent efforts of plaintiffs-appellants/appellees, the Agreement which eventually
protected the latters rights over the subject property, could not have been
executed.
Article 453 of the Civil Code is relevant. The second paragraph of the
provision clearly reads that a landowner is considered in bad faith if he does not
oppose the unauthorized construction thereon despite knowledge of the same. The
fact of the matter is that the Sanchezes did take action to oppose the construction
on their property by writing the HLURB and the City Building Official of Quezon City.
The Court agrees with both the RTC and the CA that Garcia and/or TSEI are builders
in bad faith. They knew for a fact that the property still belonged to the Sanchezes
and yet proceeded to build the townhouses not just without the authority of the
landowners, but also against their will. The factual milieu of the case reveals that
intervenors are buyers in bad faith. They admitted that they executed either
contracts of sale or contracts to sell indicating that the lot is covered by TCT No.
156254 registered under the name of the respondent Sanchezes. And the
intervenors know, based on the contract of sale or contract to sell, that the property
is registered under TCT No. 156254 in the name of the Sanchezes.
VTCI has not shown that it verified with the RD if the alleged TCT 383697 of
TSEI is valid and genuine. And the CDO and the warnings to the public and
prospective buyers published VTCI should have been aware of the irregularities in
the proposed sale of townhouses by Garcia and TSEI. Even as the intervenors have
been found to be in bad faith, BPI, the successor of FEBTC, cannot be considered a
mortgagee in good faith, considering the glaring anomalies in the loan transaction
between TSEI and FEBTC. The general rule that a mortgagee need not look beyond
the title does not apply to banks and other financial institutions as greater care and
due diligence are required of them, and FEBTC should have exercised the
appropriate due diligence review and made the requisite inquiries about the subject
property which was offered to secure the loan applied for by Garcia/TSEI under a
real estate mortgage. FEBTC was negligent and cannot be considered as a
mortgagee in good faith.
QUIETING OF TITLE TO, OR INTEREST IN AND REMOVAL OF
INTEREST OR CLOUD OVER TITLE TO OR INTEREST IN REAL PROPERTY
QUIETING OF TITLE
VILMA QUINTOS, represented by her Attorney-in-Fact FIDEL I. QUINTOS,
JR.; FLORENCIA I. DANCEL, represented by her Attorney-in-Fact FLOVY I.
DANCEL; and CATALINO L. IBARRA, vs. PELAGIA I. NICOLAS, NOLI L.
IBARRA, SANTIAGO L. IBARRA, PEDRO L. IBARRA, DAVID L. IBARRA,
GILBERTO L. IBARRA, HEIRS OF AUGUSTO L. IBARRA, namely CONCHITA R.,
IBARRA, APOLONIO IBARRA, and NARCISO IBARRA, and the spouses RECTO
CANDELARIO and ROSEMARIE CANDELARIO
Page 50 of 483

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G.R. No. 210252, June 16, 2014, J. Velasco, Jr.
For an action to quiet title to prosper, two indispensable requisites must
concur, namely: (1) the plaintiff or complainant has a legal or equitable title to or
interest in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on the title must be shown
to be in fact invalid or inoperative despite its prima facie appearance of validity or
efficacy. The first requisite was not complied with. Petitioners alleged open,
continuous, exclusive, and uninterrupted possession of the subject property is
belied by the fact that respondents, in 2005, entered into a Contract of Lease with
the Avico Lending Investor Co. over the subject lot without any objection from the
petitioners. Petitioners inability to offer evidence tending to prove that Bienvenido
and Escolastica Ibarra transferred the ownership over the property in favor of
petitioners is likewise fatal to the latters claim.
Facts:
Petitioners and respondents are siblings. Their parents, Bienvenido and
Escolastica Ibarra, were the owners of the subject property. By 1999, both
Bienvenido and Escolastica had already passed away, leaving to their 10 children
ownership over the subject property. Subsequently, sometime in 2002, respondents
brought an action for partition against petitioners. It was dismissed for the failure of
the parties to attend the scheduled hearings. It was not appealed and thus became
final.
Thereafter, respondents instead resorted to executing a Deed of Adjudication
to transfer the property in favor of the 10 siblings. TCT No. 318717 was then
canceled and TCT No. 390484 was issued in its place by the Registry of Deeds of
Tarlac in the names of the 10 heirs of the Ibarra spouses.
Respondents sold their 7/10 undivided share over the property in favor of
their co-respondents, the spouses Recto and Rosemarie Candelario. A Deed of
Absolute Sale was executed in favor of the spouses and an Agreement of
Subdivision was purportedly executed by them and petitioners. TCT No. 434304 was
issued in the name of the Candelarios, covering the 7/10 portion.
Petitioners filed a complaint for Quieting of Title and Damages against
respondents wherein they alleged that upon distribution of their parents properties,
they received the subject property and the house constructed thereon as their
share. They averred that they have been in adverse, open, continuous, and
uninterrupted possession of the property for over four decades and are, thus,
entitled to equitable title thereto. They also denied any participation in the
execution of the Deed of Adjudication and the Agreement of Subdivision.
During pre-trial, the respondents admitted having filed an action for partition,
and that petitioners did not participate in the Deed of Adjudication that served as
the basis for the issuance of TCT No. 390484, and that the Agreement of Subdivision
Page 51 of 483

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that led to the issuance of TCT No. 434304 in favor of spouses Candelario was
falsified.
The trial court, however, dismissed the petition. The court did not find merit
in the allegations that the petitioners have acquired title over the property through
acquisitive prescription and noted that there was no document evidencing that their
parents bequeathed to them the subject property.
On appeal, the petitioners added that the partition should no longer be
allowed since it is already barred by res judicata, respondents having already filed a
case for partition that was dismissed with finality. The appellate court affirmed the
trial courts ruling. As to the partition, CA ruled that it shall be in accordance to the
subdivision plan as prepared.
Issue:
1. Whether or not the petitioners were able to prove ownership over the
property
2. Whether or not the respondents counterclaim for partition is already barred
by res judicata
3. Whether or not the CA was correct in approving the subdivision agreement as
basis for the partition of the property
Ruling:
1. No, the petitioners were not able to prove their ownership.
concur, namely: (1) the plaintiff or complainant has a legal or equitable title to or
interest in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on the title must be shown
to be in fact invalid or inoperative despite its prima facie appearance of validity or
efficacy.
The first requisite was not complied with. The Court stressed that this issue is
substantially a factual issue that improper to delve into in a petition for review on
certiorari under Rule 45.
Petitioners alleged open, continuous, exclusive, and uninterrupted
possession of the subject property is belied by the fact that respondents, in 2005,
entered into a Contract of Lease with the Avico Lending Investor Co. over the
subject lot without any objection from the petitioners. Petitioners inability to offer
evidence tending to prove that Bienvenido and Escolastica Ibarra transferred the
ownership over the property in favor of petitioners is likewise fatal to the latters
claim. On the contrary, Escolastica Ibarra executed a Deed of Sale covering half of
the subject property in favor of all her 10 children, not in favor of petitioners alone.
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The Court ruled that all 10 siblings inherited the subject property and after
the respondents sold their aliquot share to the spouses Candelario, petitioners and
the spouses became co-owners of the same.
2. No, respondents counterclaim for partition is not barred by res judicata.
The doctrine of res judicata provides that the judgment in a first case is final
as to the claim or demand in controversy, between the parties and those privy with
them, not only as to every matter which was offered and received to sustain or
defeat the claim or demand, but as to any other admissible matter which must have
been offered for that purpose and all matters that could have been adjudged in that
case.
There is res judicata when the following requisites are present: (1) the formal
judgment or order must be final; (2) it must be a judgment or order on the merits,
that is, it was rendered after a consideration of the evidence or stipulations
submitted by the parties at the trial of the case; (3) it must have been rendered by
a court having jurisdiction over the subject matter and the parties; and (4) there
must be, between the first and second actions, identity of parties, of subject matter
and of cause of action.
The respondents have admitted that their previous petition for partition has
been dismissed and has attained finality. The subject property of said case and in
the present controversy are one and the same, and that in both cases, respondents
raise the same action for partition. And lastly, although respondent spouses
Candelario were not party-litigants in the earlier case for partition, there is identity
of parties not only when the parties in the case are the same, but also between
those in privity with them, such as between their successors-in-interest.
Under Section 3 of Rule 17 of the Rules of Court, the dismissal of a case for
failure to prosecute has the effect of adjudication on the merits, and is necessarily
understood to be with prejudice to the filing of another action, unless otherwise
provided in the order of dismissal. Petitioners claim that the order did not state it to
be without prejudice and thus, must be treated as dismissal on the merits.
However, dismissal with prejudice under Rule 17, Sec. 3 of the Rules of Court
cannot defeat the right of a co-owner to ask for partition at any time, provided that
there is no actual adjudication of ownership of shares yet. Under Art. 494 of the Civil
Code, 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.
It can be gleaned that the law generally does not favor the retention of coownership as a property relation, and is interested instead in ascertaining the coowners specific shares so as to prevent the allocation of portions to remain
perpetually in limbo.
Page 53 of 483

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Between dismissal with prejudice under Rule 17, Sec. 3 and the right granted
to co-owners under Art. 494 of the Civil Code, the latter must prevail. To construe
otherwise would diminish the substantive right of a co-owner through the
promulgation of procedural rules. Such a construction is not sanctioned by the
principle that a substantive law cannot be amended by a procedural rule.
The Court held that that Art. 494 is an exception to Rule 17, Sec. 3 of the
Rules of Court to the effect that even if the order of dismissal for failure to prosecute
is silent on whether or not it is with prejudice, it shall be deemed to be without
prejudice.
3. Yes, the Court of Appeals erred in approving the proposal partition submitted
by spouses Candelario.
Art. 496 provides that partition shall either be by agreement of the parties or
in accordance with the Rules of Court. In this case, the Agreement of Subdivision
allegedly executed by spouses Candelario and petitioners cannot serve as basis for
partition, for, as stated in the pre-trial order, respondents admitted that the
agreement was a falsity and that petitioners never took part in preparing the same.
The "agreement" was crafted without any consultation whatsoever or any attempt
to arrive at mutually acceptable terms with petitioners. It, therefore, lacked the
essential requisite of consent.
HERMINIO M. DE GUZMAN, FOR HIMSELF AND AS ATTORNEY-IN-FACT OF:
NILO M. DE GUZMAN, ANGELINO DE GUZMAN, JOSEFINO M. DE GUZMAN,
ESTRELLA M. DE GUZMAN, TERESITA DE GUZMAN, ELSA MARGARITA M. DE
GUZMAN, EVELYN M. DE GUZMAN, MA. NIMIA M. DE GUZMAN, ANTOLIN M.
DE GUZMAN, AND FERDINAND M. DE GUZMAN vs. TABANGAO REALTY
INCORPORATED
G.R. No. 154262, February 11, 2015, J. Leonardo-De Castro
The petitioners allege that they are the owners of the disputed property. This
allegation is anchored on the assertion that at the time of the death of their
parents, the disputed property is still under the latters name. The Supreme Court
ruled that for an action to quiet title to prosper, two indispensable requisites must
concur: (1) the plaintiff or complainant has a legal or equitable title or interest in
the real property subject of the action; and (2) the deed, claim, encumbrance, or
proceeding claimed to be casting a 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 Complaint in Civil Case No. TM-1118 failed to allege these two
requisites for an action to quiet title.
Facts:
The petitioners filed an action for quieting of title of a land they allegedly
owned against the respondent Tabangao Realty Incorporated. They allege that they
inherited the subject land from their parents and that at the time of the death of
their parents, the subject land was still on their parents name and thus, by
Page 54 of 483

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operation of law they are the alleged owners of the property. In their complaint they
also assert that the right or interest of Tabangao Realty over the subject property
can no longer be asserted by it because it is already barred by prescription and
laches. It is the contention of the petitioners that the failure of Tabangao Realty to
cause the consolidation of the title of the property in their name after the lapse of
13 years from the issuance of the Certificate of Sherrifs Sale operated to divest
Tabangao Realty of any right as to the property and therefore the title to the
property reverted back to their parents and was passed on to them by way of
inheritance.
The Regional Trial Court, however, ruled in favor of Tabangao Realty (it filed a
motion to dismiss the complaint) and dismissed the complaint of the petitioners on
the ground that the complaint states no cause of action. Hence, the current petition.
Issue:
Whether or not the complaint filed by the petitioner states no cause of action.
Ruling:
Yes. The Supreme Court affirmed the order of the RTC dismissing the
complaint filed by the petitioners. It found that the petitioners failed to allege the
necessary facts that would constitute a complaint for quieting of title.
Regarding the nature of the action filed before the trial court, quieting of title
is a common law remedy for the removal of any cloud upon or doubt or uncertainty
with respect to title to real property. Originating in equity jurisprudence, its purpose
is to secure x xx an adjudication that a claim of title to or an interest in property,
adverse to that of the complainant, is invalid, so that the complainant and those
claiming under him may be forever afterward free from any danger of hostile claim.
In an action for quieting of title, the competent court is tasked to determine the
respective rights of the complainant and other claimants, x xx 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 x xx.
concur: (1) the plaintiff or complainant has a legal or equitable title or interest in the
real property subject of the action; and (2) the deed, claim, encumbrance, or
proceeding claimed to be casting a cloud on his title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.9
Petitioners Complaint in Civil Case No. TM-1118 failed to allege these two
requisites for an action to quiet title.
Page 55 of 483

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Petitioners alleged in their Complaint that they were the children and only
heirs of the deceased spouses De Guzman and that the subject property was still
registered in spouses De Guzmans names under TCT No. 3531. However, these
allegations are insufficient to establish petitioners title to the subject property.
Equally notable is the absence of any allegation in the Complaint that Serafin
and/or Josefino, as the judgment obligors in Civil Case No. 120680, or their
successors-in-interest, redeemed the subject property from respondent within the
one-year redemption period, which, reckoned from the date of registration of the
Sheriffs Certificate of Sale on TCT No. 3531 on April 13, 1988, expired on April 13,
1989.
To start with, petitioners base their claim of legal title not on the strength of
any independent writing in their favor but simply and solely on respondent
Republics failure to secure the Certificate of Final Sale, execute an Affidavit of
Consolidation of Ownership and obtain a writ of possession over the property in
dispute within ten (10) years from the registration of the Certificate of Sale.
Petitioners reliance on the foregoing shortcomings or inactions of respondent
Republic cannot stand.
For one, it bears stressing that petitioners predecessors-in-interest lost
whatever right they had over land in question from the very moment they failed to
redeem it during the 1-year period of redemption. Certainly, the Republics failure to
execute the acts referred to by the petitioners within ten (10) years from the
registration of the Certificate of Sale cannot, in any way, operate to restore
whatever rights petitioners predecessors-in-interest had over the same. For sure,
petitioners have yet to cite any provision of law or rule of jurisprudence, and we are
not aware of any, to the effect that the failure of a buyer in a foreclosure sale to
secure a Certificate of Final Sale, execute an Affidavit of Consolidation of Ownership
and obtain a writ of possession over the property thus acquired, within ten (10)
years from the registration of the Certificate of Sale will operate to bring ownership
back to him whose property has been previously foreclosed and sold. x xx.
Quite the contrary, Section 33, Rule 39 of the 1997 Rules of Civil Procedure
explicitly provides that [u]pon the expiration of the right of redemption, the
purchaser or redemptioner shall be substituted to and acquire all the rights, title,
interest and claim of the judgment obligor to the property as of the time of the
levy.
Moreover, with the rule that the expiration of the 1-year redemption period
forecloses the obligors right to redeem and that the sale thereby becomes
absolute, the issuance thereafter of a final deed of sale is at best a mere formality
and mere confirmation of the title that is already vested in the purchaser.
Calacala thus settled that Rule 39, Section 33 of the 1997 Rules of Court can
be applied retroactively to cases still pending and undetermined at the time of its
passage,12 such as the present case. By virtue of said provision, the expiration of
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the one-year redemption period foreclosed the right to redeem of the spouses De
Guzman (as well as petitioners, as their successors-in-interest) and the sale of the
subject property to respondent became absolute, so that the issuance thereafter of
a final deed of sale and/or conveyance is at best a mere formality and mere
confirmation of the title that was already vested in respondent.
The allegations in petitioners Complaint also do not support the second
requisite for an action to quiet title, i.e., that the deed, claim, encumbrance or
proceeding alleged to cast cloud on a plaintiff's title is in fact invalid or inoperative
despite its prima facie appearance of validity or legal efficacy.
CLT REALTY DEVELOPMENT CORPORATION vs. PHIL-VILLE DEVELOPMENT
AND HOUSING CORPORATION, REPUBLIC OF THE PHILIPPINES (THROUGH
THE OFFICE OF THE SOLICITOR GENERAL) AND THE REGISTER OF DEEDS OF
METRO MANILA DISTRICT III, CALOOCAN
G.R. No. 160728, March 11, 2015, J. Leonardo-De Castro
Thus, both requisites in order for an
have been met in this case: (1) Phil-Ville
interest in the 16 parcels of land subject of
found to overlap titles to said properties
invalid.
action for quieting of title to prosper

had established its equitable title or
the action; and (2) TCT No. T-177013,
of Phil-Ville, was previously declared
Facts:
The controversy in the instant petition originated from a complaint for
quieting of title filed by Respondent Phil-Ville against CLT Realty and the Register of
Deeds of Metro Manila District III. Before the trial court, Phil-Ville claims that it is the
registered owner and actual possessor of sixteen (16) parcels of land in Baesa,
Caloocan City and that CLTs TCT No. T-177013 overlaps the said parcels of land as it
covers a vast tract of land denominated as Lot No. 26 of the Maysilo Estate. PhilVille related that it acquired the said parcels from the National Housing Authority
(NHA), which traced its title from OCT No. 994 registered on May 3, 1918, and that
CLT was not among the vendees to whom the NHA dealt the rest of the properties
within Lot No. 26.
For its part, CLT claims that it derived Lot 26 from Estelita Hipolito, who, in
turn, got her title from a certain Jose Dimson. It further alleged that Dimson
acquired an interest over Lot 26 as per court order issued by the CFI of Rizal in 1966
awarding him 25% interest as attorneys fees in the properties inherited by the
Heirs of Maria de la Concepcion Vidal, covered then by OCT No. 994 registered on
April 19, 1917, which includes the portions of the disputed Lot No. 26.
The trial court held that there was no doubt that the lots described in PhilVilles titles are clearly located within the large area of Lot No. 26 of the Maysilo
Estate, supposedly covered by CLTs TCT No. T-177013. In declaring Phil-Ville as
true, absolute and legitimate owner of the 16 parcels of land, among other
arguments, the court took note that when CLT purchased the land in 1988 from
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Hipolito, the latters title had an annotation which should have put CLT on guard on
the veracity of the proprietary interest, viz:
Pursuant to Ministry Opinion No. 239 dated November 4, 1982. Notice
is hereby given that this title is subject to the verification by the LRC
Verification Committee on questionable titles, plans, decrees and other
documents.
The court further elucidated that CLT has in a position to ascertain that the
attorneys lien of Dimson affecting the interests of the Heirs of de la Concepcion
Vidal remained unsettled. Ergo, [t]he acquisition of [Lot No. 26] by Estelita Hipolito
from Dimson as well as the subse-quent acquisition of the same lot by [CLT] from
Hipolito , were both likewise subject to the condition
CLT appealed this decision by the trial court nullifying its title to the CA. The
appellate court in its assailed decision and resolution ruled, among others, that CLT
is not an innocent transferee of whatever interest Dimson had on Lot No. 26
because it took said title of Dimson on condition that there remained undis-posed
portion of Lot No. 26 in the intestate estate of Maria De La Concepcion Vidal and
subject to the verification of the LRC Verification Committee.
Issue:
Whether or not CLTs TCT No. T-177013 imposes a cloud on Phil-Villes titles
correspon-ding to the 16 parceles of land in question, as provided in Art. 476 of the
Civil Code.
Ruling:
YES, the title of CLT must be finally nullified.
In Phil-Ville Development and Housing Corporation vs. Bonifacio, the Court
explained the nature of and requisites under [quieting of title] in the following
manner:
Quieting of title is a common law remedy for the removal of any cloud
upon, doubt, or uncertainty affecting title to real property. Whenever
there is a cloud on title to real property or any interest in real property
by reason of any instrument, record, claim, encumbrance, or
proceeding that is apparently valid or effective, but is, in truth and in
fact, invalid, ineffective, voidable, or unenforceable, and may be
prejudicial to said title, an action may be brought to remove such
cloud or to quiet the title. In such action, the competent court is tasked
to determine the respective rights of the complainant and the other
claimants, not only to place things in their proper places, and make
the claimant, who has no rights to said immovable, respect and not
disturb the one so entitled, but also for the benefit of both...
Page 58 of 483

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In order that an action for quieting of title may prosper, two requisites
must concur: (1) the plaintiff or complainant has a legal or equitable
title or interest in the real property subject of the action; and (2) the
deed, claim, encumbrance, or proceeding claimed 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.
xxxx
xxxx
Thus, the cloud on title consists of: (1) any instrument, record, claim,
encumbrance or proceeding; (2) which is apparently valid or effective;
(3) but is in truth and in fact invalid, ineffective, voidable, or
unenforceable; and (4) may be prejudicial to the title sought to be
quieted.
The trial court and the CA both arrived at the conclusion that Phil-Ville had a
valid title to the 16 parcels of land subject of the complaint, and that CLTs title is
invalid despite its prima facie appearance of validity. The Court is already bound by
the factual findings of the courts a quo.
The CA [ruled] based on the evidence presented on trial even prior to [the
Courts] issuance of the historically-significant en banc resolutions in the
consolidated cases, commonly entitled Manotok Realty, Inc. vs. CLT Realty
Development Corp., wherein the Court reconsidered and reversed its earlier
decision in the same case, as well as related, previously decided cases, referring to
OCT No. 994 ... There were two resolutions in said cases, one dated December 15,
2007 (the 2007 Manotok Resolution) and a subsequent one dated March 31, 2009
(the 2009 Manotok Resolution).
Of particular relevance to this present case is the ruling in the 2009 Manotok
Resolution that TCT No. T-177013, the certificate of title of herein CLT, who is also a
party to said consoli-dated cases, is null and void. Therefore, the cloud on Phil-Villes
16 titles subject matter of the complaint had already been removed.
In Manotok, it was established that the true date of OCT No. 994 is May 3,
1917, and that there is only one OCT No. 994. The decree of registration was issued
on April 19, 1917, and actually received for transcription by the Register of Deeds
on May 3, 1917. Thus, all the titles that traced its roots to the spurious OCT No. 994
dated April 19, 1917 were invalidated, including herein CLTs TCT No. T-177013. As
held by the Court:
It is evident from all three titles CLT's, Hipolitos and Dimsons
that the properties they purport to cover were originally registered on
the 19th day April, in the year [1917] in the Registration Book... Note,
as earlier established, there is no such OCT No. 994 originally
registered on 19 April 1917.
xxxx
xxxx
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From these premises, the Court is able to make the following binding
conclusions. First, there is only one OCT No. 994. As it appears on the
record, that mother title was received for transcription by the Register
of Deeds on 3 May 1917, and that should be the date which should be
reckoned as the date of registration of the title. It may also be
acknowledged, as appears on the title, that OCT No. 994 resulted from
the issuance of the decree of registration on 17 April 1917...
Second. Any title that traces its source to OCT No. 994 dated 17 April
1917 is void, for such mother title is inexistent. The fact that the
Dimson and CLT titles made specific reference to an OCT No. 994
dated 17 April 1917 casts doubt on the validity of such titles since they
refer to an inexistent OCT. This error alone is, in fact, sufficient to
invalidate the Dimson and CLT claims over the subject property if
singular reliance is placed by them on the dates appearing on their
respective titles.
As a matter of fact, in Alfonso vs. Office of the President and Phil-Ville
Development and Housing Corporation, the Court penalized the former register of
deeds of Caloocan who acquiesced to the change of the date of registration of OCT
No. 994 from May 3, 1917 to April 19, 1917, which wreaked havoc on our countrys
land titling system, and led to much confusion that continued to rear its ugly head
in many cases pending before the courts.
It has taken all three branches of government to correct the massive
confusion caused by the fake titles purportedly covering various portions of the
Maysilo Estate. In Manotok, the Court took note of the DOJ Report dated August 28,
1997 as well as the Senate Report dated May 25, 1998, which the Solicitor General
contended should be considered by the Court as evidence. xxx What the Court in
the 2007 Manotok Resolution did was to conduct its own investigation as to the
controversy, and not just rely on the reports presented by the Solicitor General from
both the executive and the legislative departments, and to remand the case to a
Special Division of the CA for reception of further evidence.
In the 2009 Manotok Resolution, the Court held that the Report (of the Special
Division) is a commendably exhaustive and pellucid analysis of the issues referred
to the Special Division and is a more than adequate basis for the Court to make
its final dispositions in the consoli-dated cases. [The Court quotes] the portions of
the 2009 Manotok Resolution referring to the CLT title, as follows:
The ultimate purpose of the inquiry undertaken by the [CA] was to
ascertain which of the four groups of claimants were entitled to claim
ownership over the subject properties to which they claimed title
thereto. One set of properties was disputed between CLT and the
Manotoks, while the other set was disputed between Araneta and the
Heirs of Dimson.
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xxxx
xxxx
Another property in Dimsons name, apparently taken from [Lot No.

26] of the Maysilo Estate, was later sold to Estelita Hipolito, who in turn
sold the same to CLT. Said property was registered by CLT under TCT
No. T- 177013, which also reflected, as its mother title, OCT No. 994
dated 19 April 1917. Said property claimed by CLT encroached on
property covered by titles in the name of the Manotoks. The Manotoks
traced their titles to TCT Nos. 4210 and 4211, both issued in 1918 and
both reflecting, as their mother title, OCT No. 994 dated 3 May 1917.
xxxx
xxxx
It is evident that both the Heirs of Dimson and CLT had primarily
relied on the validity of OCT No. 994 dated 19 April 1917 as the basis
of their claim of ownership. However, the Court in its 2007 Resolution
held that OCT No. 994 dated 19 April 1917 was inexistent. The
proceedings before the Special Division afforded the Heirs of Dimson
and CLT alike the opportunity to prove the validity of their respective
claims to title based on evidence other than claims to title the
inexistent 19 April 1917 OCT No. 994.
In view of the foregoing disquisitions, invalidating the titles of Dimson,
the title of CLT should also be declared a nullity inasmuch as the nullity
of the titles of Dimson necessarily upended CLTs propriety claims. As
earlier highlighted, CLT had anchored its claim on the strength of
Hipolitos title and that of [Dimsons title]. Remarkably and curiously
though, [Dimsons title] was never presented in evidence for purposes
of tracing the validity of titles of CLT. xxx.
Moreover, considering that the land title of CLT carried annotations
identical to those of Dimson and consequently included the defects in
Dimsons title, the fact that whatever typographical errors were not at
anytime cured by subsequent compliance with the administrative
requirements or subjected to administrative correction bolsters the
invalidity of the CLT title due to its complete and sole dependence on
the void Dimson title.
Thus, both requisites in order for an
have been met in this case: (1) Phil-Ville
interest in the 16 parcels of land subject of
found to overlap titles to said properties
invalid.
action for quieting of title to prosper

had established its equitable title or
the action; and (2) TCT No. T-177013,
of Phil-Ville, was previously declared
CO-OWNERSHIP
Page 61 of 483

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EXTRAORDINARY DEVELOPMENT CORPORATION vs. HERMINIA F. SAMSONBICO and ELY B. FLESTADO
G.R. No. 191090, October 13, 2014, J. Perez
A co-owner cannot rightfully dispose of a particular portion of a co-owned
property prior to partition among all the co-owners. However, this should not signify
that the vendee does not acquire anything at all in case a physically segregated
area of the co-owned lot is in fact sold to him. Since the co-owner/vendors
undivided interest could properly be the object of the contract of sale between the
parties, what the vendee obtains by virtue of such a sale are the same rights as the
vendor had as co-owner, in an ideal share equivalent to the consideration given
under their transaction. In other words, the vendee steps into the shoes of the
vendor as co-owner and acquires a proportionate abstract share in the property
held in common.
Facts:
Apolonio Ballesteros (Apolonio) and Maria Membrebe (Maria) were husband
and wife. They begot two (2) children, namely, Juan M. Ballesteros (Juan), who
married Leonarda Tambongco (Leonarda) and Irenea Ballesteros (Irenea), who
married Santiago Samson (Santiago).
During his lifetime, Apolonio owned a parcel of land consisting of 29,748
square meters situated at Barangay Pantok, Binangonan, Rizal. When Apolonio and
Maria died, the property was inherited by Juan and Irenea. When the latter died, the
heirs of Juan and Irenea became co-owners of the property.
On 16 April 2002, the heirs of Juan, without the consent of respondents, the
heirs of Irenea executed in favor of petitioner EDC a Deed of Absolute Sale covering
the subject property for P2,974,800.00. Prior to the sale, respondents claimed that
they learned that the property had been the subject of a contract to sell between
the heirs of Juan and EDC. On 7 March 2000, respondents wrote to EDC informing it
of the existence of coownership over the subject property. EDC wrote back that it
will look into the matter and asked respondents to further establish the basis of
their claims.
EDC was able to cause the registration of the Deed of Absolute Sale with the
Office of the Provincial Assessor Rizal and transfer the tax declaration over the
subject property in its name. This prompted respondents to file the Complaint for
Annulment of Contract and Reconveyance of Possession with Damages.
In its Answer, EDC alleged that it is a buyer in good faith and for value of the
subject property because it was of the honest belief that the heirs of Juan are the
only heirs of the late Apolonio. On the other hand, the heirs of Juan asserted that
respondents were aware of and were parties to the contract to sell entered into by
them and EDC. The heirs of Juan claimed that respondents received their share in
the downpayment made by EDC but they were both unpaid of the balance on the
cost of the land.
Page 62 of 483

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The RTC ruled in favor of respondents. EDC appealed to the Court of Appeals.
The Court of Appeals partially granted the appeal. The Court of Appeals ruled that
respondents were able to establish their co-ownership over one-half of the subject
property. The appellate court pointed out that the heirs of Juan categorically
admitted in their Answer, as well as during the hearing the existence of coownership. The appellate court agreed with the trial courts finding that the heirs of
Juan, as co-owners, could only alienate or convey to EDC their one-half portion of
the subject property which may be allotted to them in the division upon the
termination of the co-ownership. Thus, the sale will affect only their share but not
those of the other co-owners who did not consent to the sale. However, the
appellate court reversed the ruling of the trial court that the Deed of Absolute Sale
is null and void. According to the appellate court, the same is valid with respect to
the transfer of the rights of the co-owners sellers heirs of Juan over the one-half
portion of the subject property, thereby making EDC a co-owner thereof. Aggrieved,
EDC filed this present petition.
Issue:
Whether or not the Court of Appeals committed grave error in ruling that the
respondents are entitled to of the Property.
Ruling: No
As borne by the records, respondents were able to convincingly establish
their co-ownership over one-half of the subject property. Herminia has successfully
established her successional rights over the subject property through her clear
testimony and admitted by the opposing counsel.
In a contract of sale, it is essential that the seller is the owner of the property
he is selling. Under Article 1458 of the Civil Code, the principal obligation of a seller
is to transfer the ownership of the property sold. Also, Article 1459 of the Civil Code
provides that the thing must be licit and the vendor must have a right to transfer
the ownership thereof at the time it is delivered. The execution by appellants
Ballesteros of the Deed of Absolute Sale over the subject property which they do not
exclusively own but is admittedly co-owned by them together with the respondents,
was valid only to the extent of the formers undivided one-half share thereof, as
they had no title or interest to transfer the other one-half portion which pertains to
the respondents without the latters consent. It is an established principle that no
one can give what one does not have nemo dat quod non habet. Accordingly, one
can sell only what one owns or is authorized to sell, and the buyer can acquire no
more than what the seller can transfer legally. Thus, since appellant EDCs rights
over the subject property originated from sellers-appellants Ballesteros, said
corporation merely stepped into the shoes of its sellers and cannot have a better
right than what its sellers have. Indeed, a spring cannot rise higher than its source.
Moreover, EDC was given an ample opportunity to be heard through counsel. The
essence of due process is the right to be heard. Due process is satisfied when the
parties are afforded a fair and reasonable opportunity to explain their respective
Page 63 of 483

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sides of the controversy. Thus, when the party seeking due process was in fact
given several opportunities to be heard and air his side, but it is by his own fault or
choice he squanders these chances, then his cry for due process must fail.
Having established respondents co-ownership rights over the subject
property, we find no error in the appellate courts ruling sustaining the validity of
the Deed of Absolute Sale but only with respect to the rights of the heirs of Juan
over one-half of the property.
Article 493 of the Civil Code recognizes the absolute right of a co-owner to
freely dispose of his pro indiviso share as well as the fruits and other benefits arising
from that share, independently of the other coowners, thus:
Art. 493. Each co-owner shall have the full ownership of his part of the fruits
and benefits pertaining thereto, and he may therefore alienate, assign or mortgage
it, and even substitute another person in its enjoyment, except when personal rights
are involved. But the effect of the alienation or the mortgage, with respect to the
co-owners, shall be limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership.
In Spouses Del Campo v. Court of Appeals, we had the occasion to expound
the rights of a co-owner vis--vis the vendee, thus:
x x x Would the sale by a co-owner of a physical portion of an undivided
property held in common be valid? x x x
On the first issue, it seems plain to us that the trial court concluded that
petitioners could not have acquired ownership of the subject land which originally
formed part of Lot 162, on the ground that their alleged right springs from a void
sale transaction between Salome and Soledad. The mere fact that Salome
purportedly transferred a definite portion of the co-owned lot by metes and bounds
to Soledad, however, does not per se render the sale a nullity. This much is evident
under Article 493 of the Civil Code and pertinent jurisprudence on the matter. More
particularly in Lopez vs. Vda. De Cuaycong, et. al. which we find relevant, the Court,
speaking through Mr. Justice Bocobo, held that:
The fact that the agreement in question purported to sell a concrete portion
of the hacienda does not render the sale void, for it is a 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." (When a
thing is of no force as I do it, it shall have as much force as it can have.)
Applying this principle to the instant case, there can be no doubt that the
transaction entered into by Salome and Soledad could be legally recognized in its
entirety since the object of the sale did not even exceed the ideal shares held by
the former in the co-ownership. As a matter of fact, the deed of sale executed
between the parties expressly stipulated that the portion of Lot 162 sold to Soledad
would be taken from Salomes 4/16 undivided interest in said lot, which the latter
Page 64 of 483

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could validly transfer in whole or in part even without the consent of the other coowners. Salomes right to sell part of her undivided interest in the co-owned
property is absolute in accordance with the well-settled doctrine that a co-owner
has full ownership of his pro-indiviso share and has the right to alienate, assign or
mortgage it, and substitute another person in its enjoyment. Since Salomes clear
intention was to sell merely part of her aliquot share in Lot 162, in our view no valid
objection can be made against it and the sale can be given effect to the full extent.
We are not unaware of the principle that a co-owner cannot rightfully dispose
of a particular portion of a co-owned property prior to partition among all the coowners. However, this should not signify that the vendee does not acquire anything
at all in case a physically segregated area of the co-owned lot is in fact sold to him.
Since the co-owner/vendors undivided interest could properly be the object of the
contract of sale between the parties, what the vendee obtains by virtue of such a
sale are the same rights as the vendor had as co-owner, in an ideal share
equivalent to the consideration given under their transaction. In other words, the
vendee steps into the shoes of the vendor as co-owner and acquires a proportionate
abstract share in the property held in common.
VICENTE TORRES, JR., CARLOS VELEZ, AND THE HEIRS OF MARIANO VELEZ,
NAMELY: ANITA CHIONG VELEZ, ROBERT OSCAR CHIONG VELEZ, SARAH
JEAN CHIONG VELEZ AND TED CHIONG VELEZ vs. LORENZO LAPINID AND
JESUS VELEZ
G.R. No. 187987, November 26, 2014, J. Perez
Under Article 493 of the New Civil Code, a co-owner has an absolute
ownership of his undivided and pro-indiviso share in the co-owned property. He has
the right to alienate, assign and mortgage it, even to the extent of substituting a
third person in its enjoyment provided that no personal rights will be affected. In
this case, Jesus can validly alienate his co-owned property in favor of Lapinid, free
from any opposition from the co-owners. Lapinid, as a transferee, validly obtained
the same rights of Jesus from the date of the execution of a valid sale. Absent any
proof that the sale was not perfected, the validity of sale subsists. In essence,
Lapinid steps into the shoes of Jesus as co-owner of an ideal and proportionate
share in the property held in common. Thus, from the perfection of contract on 9
November 1997, Lapinid eventually became a co-owner of the property. Even
assuming that the petitioners are correct in their allegation that the disposition in
favor of Lapinid before partition was a concrete or definite portion, the validity of
sale still prevails.
Facts:
Vicente Torres, Jr. (Vicente), Mariano Velez (Mariano) and Carlos Velez
(Petitioners) filed a Complaint before RTC Cebu City praying for the nullification of
the sale of real property by respondent Jesus Velez (Jesus) in favor of Lapinid; the
recovery of possession and ownership of the property; and the payment of
damages.
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Petitioners alleged in their complaint that they, including Jesus, are co-owners
of several parcels of land including the disputed Lot. No. 4389 located at Cogon,
Carcar, Cebu. Sometime in 1993, Jesus filed an action for partition of the parcels of
land against the petitioners and other co-owners before Branch 21 of RTC Cebu City.
On 13 August 2001, a judgment was rendered based on a compromise
agreement signed by the parties wherein they agreed that Jesus, Mariano and
Vicente were jointly authorized to sell the said properties and receive the proceeds
thereof and distribute them to all the co-owners. However, the agreement was later
amended to exclude Jesus as an authorized seller. Petitioners inspected the property
and discovered that Lapinid was occupying a specific portion of the 3000 square
meters of Lot No. 4389 by virtue of a deed of sale executed by Jesus in favor of
Lapinid. It was pointed out by petitioners that as a consequence of what they
discovered,
a
forcible
entry
case
was
filed
against
Lapinid.
The petitioners prayed that the deed of sale be declared null and void arguing
that the sale of a definite portion of a co-owned property without notice to the other
co-owners is without force and effect. Further, they prayed for payment of rental
fees amounting to P1,000.00 per month from January 2004 or from the time of
deprivation of property in addition to attorneys fees and litigation expenses.
Jesus admitted that there was a partition case between him and the
petitioners filed in 1993 involving several parcels of land including the contested Lot
No. 4389. However, he insisted that as early as 6 November 1997, a motion was
signed by the co-owners (including the petitioners) wherein Lot No. 4389 was
agreed to be adjudicated to the co-owners belonging to the group of Jesus and the
other lots be divided to the other co-owners belonging to the group of Torres. When
the motion was filed and signed by the parties on 6 November 1997, his rights as a
majority co-owner (73%) of Lot No. 4389 became consolidated. Jesus averred that it
was unnecessary to give notice of the sale as the lot was already adjudicated in his
favor.
On his part, Lapinid admitted that a deed of sale was entered into between
him and Jesus pertaining to a parcel of land with an area of 3000 square meters.
However, he insisted on the validity of sale since Jesus showed him several deeds of
sale making him a majority owner of Lot No. 4389. He further denied that he
acquired a specific and definite portion of the questioned property, citing as
evidence the deed of sale which does not mention any boundaries or specific
portion. He explained that Jesus permitted him to occupy a portion not exceeding
3000 square meters conditioned on the result of the partition of the co-owners.
Regarding the forcible entry case, Jesus and Lapinid admitted that such case
was filed but the same was already dismissed by the MTC of Carcar, Cebu. In that
decision, it was ruled that the buyers, including Lapinid, were buyers in good faith
since a proof of ownership was shown to them by Jesus before buying the property.
The trial court dismissed the complaint of petitioners and nullifies the site
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assignment made by Jesus Velez in the Deed of Sale of Lorenzo Lapinids portion,
the exact location of which still has to be determined either by agreement of the coowners or by the Court in proper proceedings. Aggrieved, petitioners filed their
partial motion for reconsideration which was denied. Thereafter, they filed a notice
of appeal
Court of Appeals affirmed the decision of the trial court. It validated the sale
and ruled that the compromise agreement did not affect the validity of the sale
previously executed by Jesus and Lapinid. It likewise dismissed the claim for rental
payments, attorneys fees and litigation expenses of the petitioners.
Upon appeal before the Supreme Court, the petitioners echo the same
arguments posited before the lower courts.
Issue:
Whether Jesus, as a co-owner, can validly sell a portion of the property he coowns in favor of another person.
Ruling:
Admittedly, Jesus sold an area of land to Lapinid on 9 November 1997. To
simplify, the question now is whether Jesus, as a co-owner, can validly sell a portion
of the property he co-owns in favor of another person. The Court answers in the
affirmative.
A co-owner has an absolute ownership of his undivided and pro-indiviso share
in the co-owned property. He has the right to alienate, assign and mortgage it, even
to the extent of substituting a third person in its enjoyment provided that no
personal rights will be affected. This is evident from the provision of the Civil Code:
Art. 493. Each co-owner shall have the full ownership of his part and of
the fruits and benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even substitute another person in
its enjoyment, except when personal rights are involved. But the effect
of the alienation or the mortgage, with respect to the co-owners, shall
be limited to the portion which may be allotted to him in the division
upon the termination of the co-ownership.
A co-owner is an owner of the whole and over the whole he exercises the
right of dominion, but he is at the same time the owner of a portion which is truly
abstract. Hence, his co-owners have no right to enjoin a co-owner who intends to
alienate or substitute his abstract portion or substitute a third person in its
enjoyment.
In this case, Jesus can validly alienate his co-owned property in favor of
Lapinid, free from any opposition from the co-owners. Lapinid, as a transferee,
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validly obtained the same rights of Jesus from the date of the execution of a valid
sale. Absent any proof that the sale was not perfected, the validity of sale subsists.
In essence, Lapinid steps into the shoes of Jesus as co-owner of an ideal and
proportionate share in the property held in common. Thus, from the perfection of
contract on 9 November 1997, Lapinid eventually became a co-owner of the
property.
Even assuming that the petitioners are correct in their allegation that the
disposition in favor of Lapinid before partition was a concrete or definite portion, the
validity of sale still prevails.
In a catena of decisions, the Supreme Court had repeatedly held that no
individual can claim title to a definite or concrete portion before partition of coowned property. Each co-owner only possesses a right to sell or alienate his ideal
share after partition. However, in case he disposes his share before partition, such
disposition does not make the sale or alienation null and void. What will be affected
on the sale is only his proportionate share, subject to the results of the partition.
The co-owners who did not give their consent to the sale stand to be unaffected by
the alienation.
POSSESSION
POSSESSION AND THE KINDS THEREOF
NORMA V. JAVATE vs. SPOUSES RENATO J. TIOTUICO AND LERMA C.
TIOTUICO
G.R. No. 187606, March 09, 2015, J. Peralta
If the purchaser is a third party who acquired the property after the
redemption period, a hearing must be conducted to determine whether possession
over the subject property is still with the mortgagor or is already in the possession
of a third party holding the same adversely to the defaulting debtor or mortgagor.
In the instant case, while respondents' petition for the issuance of a writ of
possession was filed ex-parte, a hearing was, nonetheless, conducted when the
RTC gave petitioner her day in court by giving her the opportunity to file various
pleadings to oppose respondent's petition. Moreover, there is no dispute that
petitioner remained in possession of the subject property prior to the issuance of
the questioned writ of possession. It is, thus, clear that respondents' resort, as a
subsequent or third-party purchaser, the petition for the issuance of a writ of
possession is proper.
Facts:
Petitioner Norma V. Javate (Javate) was the owner of a one thousand square
meter parcel of land in Mabalacat, Pampanga, which she mortgaged to Guagua
Rural Bank (Bank) as security for the loan she obtained from the said Bank. Javate
failed to pay her obligation and the Bank foreclosed the mortgage. The subject lot
was sold at public auction where the Bank was the highest bidder. A certificate of
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sale was then issued in favor of the Bank. After the one-year redemption period has
expired without Javate having redeemed the disputed property, the Bank
consolidated its ownership over the same. As a consequence, the title covering the
said lot was canceled, and in lieu thereof, a new title was issued in the name of the
Bank. Subsequently, herein spouses Tiotuico bought the subject lot from the Bank. A
new title was later issued in the name of spouses Tiotuico.
Respondent spouses Renato and Lerma Tiotuico (spouses Tiotuico) filed a
Petition for the Issuance of a Writ of Possession with the Regional Trial Court (RTC) of
Angeles, City, Pampanga. The RTC ruled in spouses Tiotuicos' favor and ordered the
issuance of the writ prayed for. Javate appealed the RTC order.
Prior to the resolution of Javate's appeal, spouses Tiotuico filed a motion for
the issuance of a writ of possession pending appeal. The RTC issued an Order
granting spouses Tiotuico' motion. Javate filed a motion for reconsideration but the
RTC denied it. Javate then filed a petition for certiorari with the CA questioning the
issuance of the above writ. The CA denied Javate's petition. Javate's subsequent
motion for reconsideration was likewise denied.
Javate then filed a petition for review on certiorari with this Court. This Court's
First Division issued a Resolution denying the petition for review on certiorari. A
motion for reconsideration was filed by Javate, but the Court the motion. Thereafter,
the Court issued an Entry of Judgment, stating that the decision had become final
and executory. Meanwhile, spouses Tiotuico filed with the RTC a motion to
implement the Writ of Possession which was earlier issued by the said court. The
RTC granted spouses Tiotuico' motion. Javate filed a motion for reconsideration, but
the RTC denied it.
Javate then filed with the CA a special civil action for certiorari ascribing
grave abuse of discretion on the part of the RTC in allowing the implementation of
the questioned writ. In the presently assailed Decision, the CA dismissed
Javate's certiorari petition. The CA found that Javate has resorted to the filing of a
petition for certiorari as a scheme to delay the implementation of the disputed writ
of possession. In any case, the CA held that, as owners of the subject property,
respondents are entitled to its possession as a matter of right and that the issuance
of the questioned writ is merely a ministerial function on the part of the RTC. Javate
filed a Motion for Reconsideration, but the CA denied it. Hence, the present petition
for review on certiorari.
Javates basic contention is that Spouses Tiotuico cannot obtain possession of
the subject lot by the mere expedient of filing a petition for the issuance of a writ of
possession. Petitioner argues that under the law, the Bank, being the buyer of the
disputed lot during foreclosure sale, is the only one who is entitled, as a matter of
right, to the issuance of the said writ; that respondents, being subsequent buyers of
the subject property, should instead, resort to the appropriate judicial remedy,
which is ejectment or accion reivindicatoria in order to gain possession thereof.
Issue:
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Whether or not the respondents are entitled, as a matter of right, to the
issuance of a writ of possession when they merely bought the subject property
through private transaction and not through land registration proceedings, judicial
foreclosure and extrajudicial foreclosure.
Ruling:
Spouses Tiotuico were correct in asking the court to issue a writ of
possession.
In the recent case of Okabe v. Saturnino, the RTC issued a writ of possession
to enable a third-party purchaser to obtain possession of the subject property which
was extrajudicially foreclosed. This Court, applying the rules on execution sale in a
suppletory manner, sustained the issuance of the said writ.
In the instant case, while spouses Tiotiuico's petition for the issuance of a writ
of possession was filed ex-parte, a hearing was, nonetheless, conducted when the
RTC gave Javate her day in court by giving her the opportunity to file various
pleadings to oppose respondent's petition. To be heard does not mean verbal
argumentation alone inasmuch as one may be heard just as effectively through
written explanations, submissions or pleadings.
Moreover, there is no dispute that Javate remained in possession of the
subject property prior to the issuance of the questioned writ of possession. It is,
thus, clear that respondents' resort, as a subsequent or third-party purchaser, the
petition for the issuance of a writ of possession is proper.
In Roxas v. Buan, this Court has held that a writ of possession obtained by a
mortgagee-purchaser in a foreclosure sale, after the expiration of the redemption
period, may be enforced against the successor-in-interest of the mortgagor.
Conversely, this Court finds logic in ruling that the successor-in-interest of the
mortgagee-purchaser in a foreclosure sale, who already obtained title over the
foreclosed property, may be issued a writ of possession as against the mortgagor
who remains in possession of the subject property.
Finally, it bears to point out at this stage that the Court agrees with the CA
that Javate's certiorari petition filed with the CA questioning the implementation of
the subject writ of possession is a mere ploy to simply delay such implementation
considering that the writ was issued almost ten (10) years ago. Javate was already
given her day in court when she was earlier given the opportunity to file a suit to
question the legality of the issuance of the writ, which case eventually reached this
Court and was decided against Javate. Thus, when this Court upheld the trial court's
issuance of the writ of possession in favor of the respondents, which judgment had
become final and executory, there is no recourse other than to immediately proceed
with the implementation of the writ, otherwise, the same will be a useless paper
judgment. Verily, we find that the CA did not err in upholding the trial court's order
to implement the writ of possession issued in respondents' favor.
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ACQUISITION OF POSSESSION
ANACLETO C. MANGASER, REPRESENTED BY HIS ATTORNEY-IN-FACT
EUSTAQUIO DUGENIA vs. DIONISIO UGAY
G.R. No. 204926, December 03, 2014, J. Mendoza
Anacleto Mangaser filed Forcible entry against Ugay. However, the latter
contended that Mangaser has failed to prove prior physical possession over the
property. The court ruled that possession can be acquired by juridical acts. These
are acts to which the law gives the force of acts of possession. Examples of these
are donations, succession, execution and registration of public instruments,
inscription of possessory information titles and the like. The reason for this
exceptional rule is that possession in the eyes of the law does not mean that a man
has to have his feet on every square meter of ground before it can be said that he
is in possession. It is sufficient that petitioner was able to subject the property to
the action of his will.
Facts:
Anacleto Mangaser, represented by his attorney-in-fact, Eustaquio
Dugenia (petitioner), tiled a complaint for Forcible Entry with Damages against
Dionisio Ugay (respondent) before the Municipal Trial Court of Caba, La Union (MTC).
Anacleto Mangaser alleged that he was the registered owner and possessor of a
parcel of land situated in Santiago Sur, Caba, La Union, with an area of 10,632
square meters and covered by OCT No. RP-174 (FP-13787) and Tax Declaration No.
014-00707; that on October 31, 2006, Anacleto Mangaser discovered that Dionisio
Ugay stealthy intruded and occupied a portion of his property by constructing a
residential house thereon without his knowledge and consent; that he referred the
matter to the Office of Lupong Tagapamayapa for conciliation, but no settlement
was reached, hence, a certification to file action was issued by the Lupon; and that
demand letters were sent to Dionisio Ugay but he still refused to vacate the
premises, thus, he was constrained to seek judicial remedy. Dionisio Ugay denied
the material allegations of the complaint .MTC ruled in favor of Dionisio Ugay. It
stated that Anacleto Mangaser failed to adduce any evidence to prove that the lot
occupied by Dionisio Ugay was within his lot titled under OCT No. RP-174 ( 13789).
The MTC opined that Anacleto Mangaser could have presented a relocation survey,
which would have pinpointed the exact location of the house and fence put up by
respondent, and resolved the issue once and for all. It also explained that Anacleto
Mangaser failed to prove his prior physical possession of the subject property.
Issue:
Whether or not Anacleto Mangaser failed to prove prior physical possession
over the property
Ruling:
No. Anacleto Mangaser proved prior physical possession over the property
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For a forcible entry suit to prosper, the plaintiffs must allege and prove: (a)
that they have prior physical possession of the property; (b) that they were deprived
of possession either by force, intimidation, threat. strategy or stealth; and, (c) that
the action was filed within one (1) year from the time the owners or legal
possessors learned of their deprivation of the physical possession of the property. As
a rule, the word "possession" in forcible entry suits indeed refers to nothing more
than prior physical possession or possession de facto, not possession de jure or
legal possession in the sense contemplated in civil law. Title is not the issue, and the
absence of it "is not a ground for the courts to withhold relief from the parties in an
ejectment case."
The Court, however, has consistently ruled in a number of cases that while
prior physical possession is an indispensable requirement in forcible entry cases,
the dearth of merit in respondent's position is evident from the principle that
possession can be acquired not only by material occupation, but also by the fact
that a thing is subject to the action of one's will or by the proper acts and legal
formalities established for acquiring such right.
The case of Quizon v. Juan, which surprisingly was relied on by the CA, also
stressed this doctrine.
Possession can be acquired by juridical acts. These are acts to which the law
gives the force of acts of possession. Examples of these are donations, succession,
execution and registration of public instruments, inscription of possessory
information titles and the like. The reason for this exceptional rule is that possession
in the eyes of the law does not mean that a man has to have his feet on every
square meter of ground before it can be said that he is in possession. It is sufficient
that petitioner was able to subject the property to the action of his will.Here,
respondent failed to show that he falls under any of these circumstances. He could
not even say that the subject property was leased to him except that he promised
that he would vacate it if petitioner would be able to show the boundaries of the
titled lot.
In the case at bench, the Court finds that Anacleto Mangaser acquired
possession of the subject property by juridical act, specifically, through the issuance
of a free patent under Commonwealth Act No. 141 and its subsequent registration
with the Register of Deeds on March 18, 1987.
Moreover, his claim of possession is coupled with tax declarations. While tax
declarations are not conclusive proof of possession of a parcel of land, they are
good indicia of possession in the concept of an owner, for no one in his right mind
would be paying taxes for a property that is not in his actual or constructive
possession. Together with the Torrens title, the tax declarations dated 1995 onwards
presented by Anacleto Mangaser strengthens his claim of possession over the land
before his dispossession on October 31, 2006 by Ugay.
EFFECTS OF POSSESSION
PAUL P. GABRIEL, JR, et al. vs. CARMELING CRISOLOGO
When it is shown that the plaintiff in a case of accion publiciana had a valid
title issued in her name in 1967, within the period which the Supreme Court held
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that titles issued over the same properties were valid; that she has been paying the
realty taxes on the said properties since l969; that she likewise appointed an
administrator of the disputed lands, and more importantly, there is no question that
she offered to sell to petitioners the portions of the subject properties occupied by
them, then she deserves to be respected and restored to her lawful possession as
provided in Article 539 of the New Civil Code.
Facts:
Respondent Carmeling Crisologo filed with the MTCC a complaint for recovery
of possession with damages against petitioners Gabriel, Pulkera, Calwag and
Tingga-an, alleging that she was the registered owner of a parcel of land which were
unlawfully occupied by the petitioners, who constructed their houses thereon.
Crisologo, though her daughter, orally demanded the petitioners to vacate the
properties but the latter offered to buy the properties. Crisologo gave them time to
produce the money but petitioners reneged on their promise to buy and unlawfully
held and occupied the property. The petitioners contend that the titled of Crisologo
were declared void by the Supreme Court in the Republic v. Marcos cases; hence
she cannot have valid title and prior possession over the land. The petitioners, on
the other hand, had been in open, actual, exclusive, notorious, uninterrupted, and
continuous possession of the subject land, in good faith.
The MTCC ruled in favor of Crisologo and ordered the petitioners to vacate
the properties, dismantle their structures and pay rentals. Crisologo was the
registered owner of the properties while the petitioners were illegally occupying the
land. The RTC reversed and set aside the MTCC ruling, and held that the titles of
Crisologo were invalid. The CA set aside the RTC ruling and reinstated the MTCC,
holding that Crisologo was entitled to the possession of the land, as the same was
established when she purchased the properties in 1967.
Issue:
Did Petitioners have a better right of possession over Crisologo on the subject
parcels of land?
Ruling:
Accion Publiciana: its nature and purpose
Also known as accion plenaria de posesion, accion publiciana is an ordinary
civil proceeding to determine the better right of possession of realty independently
of title. It refers to an ejectment suit filed after the expiration of one year from the
accrual of the cause of action or from the unlawful withholding of possession of the
realty.
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The objective of the plaintiffs in accion publiciana is to recover possession
only, not ownership. When parties, however, raise the issue of ownership, the court
may pass upon the issue to determine who between the parties has the right to
possess the property. This adjudication, nonetheless, is not a final and binding
determination of the issue of ownership; it is only for the purpose of resolving the
issue of possession, where the issue of ownership is inseparably linked to the issue
of possession. The adjudication of the issue of ownership, being provisional, is not a
bar to an action between the same parties involving title to the property. The
adjudication, in short, is not conclusive on the issue of ownership.
In her complaint, Crisologo prayed that she be declared in prior actual
possession of the properties in dispute and that petitioners vacate the same and
demolish their houses therein. She alleged, among others, that she was the
registered owner of the subject parcels of land and that petitioners unlawfully
entered her properties by stealth, force and without her prior consent and
knowledge. Clearly, she primarily wanted to recover possession of the subject
parcels of land from petitioners. Hence, the case is an accion publiciana.
The nullity of the decrees of registration and certificates of titles in
Section 1 of P.D. No. 1271 is not absolute
Although Section 1 of P.D. No. 1271 invalidated decrees of registration and
certificates of title within the Baguio Townsite Reservation Case No. 1, GLRO Record
No. 211, the nullity, however, is not that sweeping. The said provision expressly
states that all certificates of titles issued on or before July 31, 1973 shall be
considered valid and the lands covered by them shall be deemed to have been
conveyed in fee simple to the registered owners upon 1) showing proof that the
land covered by the subject title is not within any government, public or quasipublic reservation, forest, military or otherwise, as certified by appropriating
government agencies; and 2) compliance by the title holder with the payment to
the Republic of the Philippines of the correct assessed value of the land within the
required period.
In the case at bench, the records show that the subject parcels of land were
registered on August 24, 1967. The titles are, thus, considered valid although
subject to the conditions set. But whether or not Crisologo complied with the said
conditions would not matter because, this would be a collateral attack on her
registered titles, as would be discussed later.
Crisologos certificates of title give her the better right to possess
the subject parcels of land.
It is settled that a Torrens title is evidence of indefeasible title to property in
favor of the person in whose name the title appears. It is conclusive evidence with
respect to the ownership of the land described therein. It is also settled that the
titleholder is entitled to all the attributes of ownership of the property, including
possession. Thus, in Arambulo v. Gungab, this Court declared that the age-old rule
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is that the person who has a Torrens title over a land is entitled to possession
thereof.
The records show that TCT No. T-1393517 and TCT No. T-1393618 bear the
name of Carmeling P. Crisologo, as the registered owner. Petitioners do not dispute
the fact that she has a Torrens title over the subject parcels of land.
Crisologos Torrens certificates of title are immune from a collateral
attack.
As a holder of a Torrens certificate of title, the law protects Crisologo from a
collateral attack on the same. Section 48 of P.D. No. 1529, otherwise known as the
Property Registration Decree, provides that a certificate of title cannot be the
subject of a collateral attack.
As the lawful possessor, Crisologo has the right to eject the
petitioners.
The Court agrees with the CA that the only question that needs to be
resolved in this suit to recover possession is who between the parties is entitled to
the physical or material possession of the subject parcels of land. Therefore, the
foremost relevant issue that needs to be determined here is simply possession, not
ownership.
The testimonial and documentary evidence on record prove that Crisologo
has a preferred claim of possession over that of petitioners. It cannot be denied that
she bought the subject properties from the previous owner in 1967, which was why
the transfer certificates of title were subsequently issued in her name. Records
further show that she has been paying the realty taxes on the said properties since l
969. She likewise appointed Isican as administrator of the disputed lands. More
importantly, there is no question that she offered to sell to petitioners the portions
of the subject prope1iies occupied by them. Hence, she deserves to be respected
and restored to her lawful possession as provided in Article 539 of the New Civil
Code.
PENTA PACIFIC REALTY CORPORATION vs. LEY CONSTRUCTION AND
DEVELOPMENT CORPORATION
G.R. No. 161589, November 24, 2014, J. Bersamin
Penta Pacific leased its properties to Ley Construction. Both parties then
entered into a contract to sell. Ley Construction failed to pay its amortizations
prompting Penta Pacific to file an action for ejectment. The CA affirmed the ruling of
the RTC that the MeTC had no jurisdiction over the case. In resolving, the Supreme
Court ruled that, a defendant's claim of possession de Jure or his averment of
ownership does not render the ejectment suit either accion publiciana or accion
reivindicatoria. The suit remains an accion interdictal, a summary proceeding that
can proceed independently of any claim of ownership. Even when the question of
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possession cannot be resolved without deciding the issue of ownership, the issue of
ownership is to be resolved only to determine the issue of possession.
Facts:
Penta Pacific Realty owned the 25th floor of the Pacific Star Building located
in Makati. Ley Construction leased 444.03 square meters through Penta Pacific
Realtys authorized agent, Century Properties Management, Inc. (Century
Properties). Under the terms of the contract of lease, Penta Pacific Realty gave the
Ley Construction possession of the subject property under a stipulation that in case
of Ley Constructions default in its monthly rentals, the Penta Pacific Realty could
immediately repossess the subject property.
On March 19, 1997, the Ley Construction expressed the intention to purchase
the entire 1,068.67 square meters, including the subject property. The parties
executed a contract to sell, denominated as a reservation agreement. Any failure on
Ley Constructions part to pay the full down payment, or deliver the post-dated
checks or pay the monthly amortization on the due date, shall entitle Penta Pacific
Realty, at its option, to impose a penalty interest at the rate of three percent (3%)
per month on the outstanding balance or to cancel this agreement without need of
any court action and to forfeit, in its favor, any reservation deposits or payments
already made on the unit, without prior notice.
After paying US$538,735.00, Ley Construction stopped paying the stipulated
monthly amortizations. Penta Pacific Realty then sent several demand letters asking
for the payment. In the letter dated February 4, 1999, Penta Pacific Realtys counsel
informed Ley Construction of the cancellation of the reservation agreement and the
forfeiture of the Ley Constructions payments; and demanded that Ley Construction
pay the rentals of P9,782,226.50 and vacate the subject property.
On July 9, 1999, the Penta Pacific Realty filed the complaint for ejectment in
the MeTC following Ley Constructions failure to comply with the demands to pay
and vacate. On January 12, 2000, the MeTC, ruling in favor of Penta Pacific Realty,
found that Ley Constructions lawful possession of the property had been by virtue
of the contract of lease, but had become unlawful when the Ley Construction had
failed to comply with its obligation to pay the monthly rentals. On appeal with the
RTC, the RTC rendered its judgment nullifying the MeTCs decision on the ground of
lack of jurisdiction, holding that the appropriate action was either accion publiciana
or accion reivindicatoria over which the MeTC had no jurisdiction. On appeal with
the Court of Appeals, the CA affirmed the judgment of the RTC. Hence, this petition.
Issue:
Whether or not the action is for unlawful detainer
Ruling:
The present action is an action for unlawful detainer.
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There are three kinds of real actions affecting title to or possession of real
property, or interest therein, namely: accion de reivindicacion, accion publiciana and
accion interdictal. The first seeks the recovery of ownership as well as possession of
realty. The second proposes to recover the right to possess and is a plenary action
in an ordinary civil proceeding. The third refers to the recovery of physical or actual
possession only (through a special civil action either for forcible entry or unlawful
detainer).
The Municipal Trial Court (MTC) has exclusive original jurisdiction over accion
interdictal. Until April 15, 1994, the MTC had no original jurisdiction over the other
possessory actions. By such date, its jurisdiction was expanded to vest it with
exclusive original jurisdiction over the other possessory actions ofaccion publiciana
and accion de reivindicacion where the assessed value of the realty involved did not
exceed P20,000.00, or, if the realty involved was in Metro Manila, such value did not
exceed P50,000.00. The expansion of jurisdiction was by virtue of the amendment
by Section 1 of Republic Act No. 7691.
A suit for unlawful detainer is premised on Section 1, Rule 70, 1997 Rules of
Civil Procedure, of which there are two kinds, namely: (1) that filed against a tenant,
and (2) that brought against a vendee or vendor, or other person unlawfully
withholding possession of any land or building after the expiration or termination of
the right to hold possession by virtue of any contract, express or implied.
"In an action for forcible entry or unlawful detainer, the main issue is
possession de facto, independently of any claim of ownership or possession de jure
that either party may set forth in his pleading." The plaintiff must prove that it was
in prior physical possession of the premises until it was deprived thereof by the
defendant. The principal issue must be possession de facto, or actual possession,
and ownership is merely ancillary to such issue. The summary character of the
proceedings is designed to quicken the determination of possession de facto in the
interest of preserving the peace of the community, but the summary proceedings
may not be proper to resolve ownership of the property. Consequently, any issue on
ownership arising in forcible entry or unlawful detainer is resolved only provisionally
for the purpose of determining the principal issue of possession. On the other hand,
regardless of the actual condition of the title to the property and whatever may be
the character of the plaintiffs prior possession, if it has in its favor priority in time, it
has the security that entitles it to remain on the property until it is lawfully ejected
through an accion publiciana or accion reivindicatoria by another having a better
right.
The aforequoted allegations of the complaint made out a case of unlawful
detainer, vesting the MeTC with exclusive original jurisdiction over the complaint. As
alleged therein,the cause of action of the Penta Pacific Realty was to recover
possession of the subject property from the Ley Construction upon the latters
failure to comply with the formers demand tovacate the subject property after the
latters right to remain thereon terminated by virtue of the demand to vacate.
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Indeed, the possession of the latter, although lawful at its commencement, became
unlawful upon its non-compliance with the formers demand to vacate.
A defendant's claim of possession de Jure or his averment of ownership does
not render the ejectment suit either accion publiciana or accion reivindicatoria. The
suit remains an accion interdictal, a summary proceeding that can proceed
independently of any claim of ownership. Even when the question of possession
cannot be resolved without deciding the issue of ownership, the issue of ownership
is to be resolved only to determine the issue of possession.
SUBIC BAY LEGEND RESORTS AND CASINOS, INC. vs. BERNARD C.
FERNANDEZ
is not unusual nor is it unlikely that respondent could be paid by his Chinese
client at the former's car shop with the casino chips in question; said transaction, if
not common, is nonetheless not unlawful. These chips are paid for anyway
petitioner would not have parted with the same if their corresponding
representative equivalent in legal tender, goodwill, or otherwise was not
received by it in return or exchange. Given this premise that casino chips are
it is with more reason that the Court should require petitioner to prove convincingly
and persuasively that the chips it confiscated from the Fernandez brothers were
indeed stolen from it; if so, any Tom, Dick or Harry in possession of genuine casino
chips is presumed to have paid for their representative value in exchange therefor.
If SBL cannot prove its loss, then Art. 559 cannot apply; the presumption that the
chips were exchanged for value remains.
Facts:
Bernard Fernandez filed a collection suit with damages against Petitioner
Subic Bay Legend (SBL). The controversy stems from the apprehension of the two
brothers of Fernandez, who went to and played in the casino operated by SBL. The
Fernandez brothers caught the attention of the casino management when they
enchased substantial number of casino chips, part of which valued at $5,900.00 is
being claimed by Bernard in the civil action.
SBL harps on the admission made by the Fernandez brothers, after they were
held for several hours without food and sleep, to the effect that they were acting in
complicity with a certain Martin Cabrera, a casino table inspector employed by SBL,
who gave the chips. Bernard, however, asserts that his brothers recanted their
statements on this alleged connivance. At any rate, he has shown that he lawfully
acquired the chips from a Chinese national who used the same as payment for the
car services he rendered.
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The trial court ruled in favor of Bernard as it found SBL to have failed to prove
that the chips were stolen. On appeal, the CA deciding against SBL, applied Art. 559
of the Civil Code by which Bernard is presumed to have legal title over the casino
chips and this extends to his brothers who are deemed possessors in good faith and
for value. Secondly, the absence of any criminal case against the supposed
mastermind, Cabrera, and the Fernandez brothers weakens the claim of alleged
theft. Lastly, the circumstances surrounding the confession of the Fernandez
brother, which violates their constitutional rights, puts much doubt on its veracity.
Issue:
Whether or not Bernard is the lawful owner of the casino chips in question.
Ruling:
YES, Bernard was able to show that he obtained, as it is the commonsensical
practice, the chips for sufficient consideration.
If petitioner should stick to its theory that Cabrera stole the subject casino
chips, then its failure to file a criminal case against the latter, including the
Fernandez brothers for that matter, up to this point certainly does not help to
convince the Court of its position, xxx. Indeed, for purposes of this case, there
appears to be no evidence on record that Cabrera stole the casino chips in
question; such conclusion came unilaterally from petitioner, and for it to use the
same as foundation to the claim that the Fernandez brothers and Bernard are
dealing in stolen chips is clearly irregular and unfair. Thus, there should be no basis
to suppose that the casino chips found in the Fernadez brothers possession were
stolen; SBL acted arbitrarily in confiscating the same without basis. xxx If it cannot
be proved, in the first place, that Cabrera stole these chips, then there is no more
reason to suppose that the Fernandez brothers were dealing in or possessed stolen
goods; unless the independent fact that Cabrera stole the chips can be proved, it
cannot be said that they must be confiscated when found to be in the Fernandez
brothers possession.
It is not even necessary to resolve whether the Fernandez brothers Joint
Affidavit was obtained by duress or otherwise; the document is irrelevant SBLs
cause, as it does not suggest at all that Cabrera stole the subject casino chips. At
most, it only shows that Cabrera gave the Fernandez brothers casino chips, if this
fact is true at all since such statement has since been recanted.
is not unusual nor is it unlikely that respondent could be paid by his Chinese
client at the former's car shop with the casino chips in question; said transaction, if
not common, is nonetheless not unlawful. These chips are paid for anyway
petitioner would not have parted with the same if their corresponding
representative equivalent in legal tender, goodwill, or otherwise was not
received by it in return or exchange. Given this premise that casino chips are
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it is with more reason that the Court should require petitioner to prove convincingly
and persuasively that the chips it confiscated from the Fernandez brothers were
indeed stolen from it; if so, any Tom, Dick or Harry in possession of genuine casino
chips is presumed to have paid for their representative value in exchange therefor.
If SBL cannot prove its loss, then Art. 559 cannot apply; the presumption that the
chips were exchanged for value remains.
EASEMENTS
EASEMENT OF RIGHT OF WAY
ALICIA B. REYES vs. SPOUSES VALENTIN RAMOS, FRANCISCO S. AND
ANATALIA
G.R. No. 194488, February 11, 2015, J. Leonen
The convenience of the dominant estate's owner is not the basis for granting
an easement of right of way, especially if the owner's needs may be satisfied
without imposing the easement. Thus, mere convenience for the dominant estate is
not what is required by law as the basis of setting up a compulsory easement.
Furthermore, based on the Ocular Inspection Report, petitioner's property had
another outlet to the highway. Access to the public highway can be satisfied without
imposing an easement on the spouses' property.
Facts:
Alicia B. Reyes, through Dolores B. Cinco, filed a complaint before the RTC,
for easement of right of way against Spouses Francisco S. Valentin and Anatalia
Ramos. In her complaint Reyes alleged that she was the registered owner of a 450square-meter parcel of land designated as Lot No. 3-B-12. The property used to be a
portion of Lot No. 3-B and was surrounded by estates belonging to other persons.
Reyes also alleged that Spouses Valentin and Ramoss 1,500-square-meter
property surrounded her property, and that it was the only adequate outlet from her
property to the highway. A 113-square-meter portion of said spouses' property was
also the "point least prejudicial to the them." The easement sought was the vacant
portion near the boundary of spouses other lot.
According to Reyes, her and the spouses' lots were previously owned by her
mother. The latters lot was given to Dominador Ramos who allegedly was
respondent spouses' predecessor-in-interest, her mother's brother and caretaker of
properties.
Only 500 square meters were given to Dominador and part of the 1,500
square meters was intended as a right of way. Dominador was tasked to prepare the
documents. But, instead of limiting the conveyance to himself to 500 square meters
of the property, he conveyed the whole 1,500 square meters, including that which
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was supposed to be the access to the barangay road.
Reyes mother only learned about what Dominador did when a meeting was
called in 1989 regarding the implementation of the Comprehensive Agrarian Reform
Program. She did not cause the recovery of her title because at that time, the
Register of Deeds of Bulacan was razed by fire, causing the destruction of the
documents covering the subject properties. Despite demands and willingness to pay
the amount, respondents refused to accede to Reyes claims.
In their Answer, spouses Valentin and Ramos contended that the isolation of
Reyes property was due to her mother's own act of subdividing the property among
her children without regard to the pendency of an agrarian case between her and
her tenants. The property chosen by Reyes as easement was also the most
burdensome for respondent spouses. Said Spouses pointed to an open space that
connected Reyes property to another public road.
The RTC ruled in dismissing the complaint, it found that Reyes proposed right
of way was not the least onerous to the servient estate of spouses Valentin and
Ramos. On appeal to the Court of Appeals, it affirmed the formers decision in toto.
Issue:
Whether Reyes has the compulsory easement of right of way over Spouses
Valentin and Ramos's property?
Ruling:
No, it failed to satisfy the requirements of an easement of right of way under
the Civil Code.
Based on provisions of the said code, the following requisites need to be
established before a person becomes entitled to demand the compulsory easement
of right of way: 1) an immovable is surrounded by other immovables belonging to
other persons, and is without adequate outlet to a public highway; 2) Payment of
proper indemnity by the owner of the surrounded immovable; 3) the isolation of the
immovable is not due to its owner's acts; and 4) the proposed easement of right of
way is established at the point least prejudicial to the servient estate, and insofar as
consistent with this rule, where the distance of the dominant estate to a public
highway may be the shortest.
We agree with the Regional Trial Court's and the Court of Appeals' findings
that Reyes failed to establish that there was no adequate outlet to the public
highway and that the proposed easement was the least prejudicial to respondents'
estate. There is an adequate exit to a public highway. Access to the public highway
can be satisfied without imposing an easement on the spouses' property.
In Dichoso, Jr. v. Marcos, that the convenience of the dominant estate's owner
is not the basis for granting an easement of right of way, especially if the owner's
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needs may be satisfied without imposing the easement. Thus, mere convenience for
the dominant estate is not what is required by law as the basis of setting up a
compulsory easement. Even in the face of necessity, if it can be satisfied without
imposing the easement, the same should not be imposed.
Based on the Ocular Inspection Report, Reyes' property had another outlet to
the highway. In between her property and the highway or road, however, is an
irrigation canal, which can be traversed by constructing a bridge, similar to what
was done by the owners of the nearby properties. There is, therefore, no need to
utilize respondents' property to serve petitioner's needs. Another adequate exit
exists. Reyes can use this outlet to access the public roads.
Reyes would have permanent structures such as the garage, garden, and
grotto already installed on respondent's property destroyed to accommodate her
preferred location for the right of way. The cost of having to destroy these
structures, coupled with the fact that there is an available outlet that can be utilized
for the right of way, negates a claim that respondents' property is the point least
prejudicial to the servient estate.
NUISANCE
LINDA RANA vs. TERESITA LEE WONG, SPS. SHIRLEY LEE ONG and RUBEN
ANG ONG and SPS. ROSARIO and WILSON UY; SPS. ROSARIO and WILSON
UY; WILSON UY as attorney-in-fact of TERESITA LEE WONG, and SPS.
SHIRLEY LEE ONG and RUBEN ANG ONG vs. SPS. REYNALDO and LINDA
LANA
G.R. No. 192861; G.R. No. 192862, June 30, 2014, J. Perlas-Bernabe
It is a standing jurisprudential rule that unless a nuisance is a nuisance per
se, it may not be summarily abated. Aside from the remedy of summary abatement
which should be taken under the parameters stated in Articles 704 (for public
nuisances) and 706 (for private nuisances) of the Civil Code, a private person whose
property right was invaded or unreasonably interfered with by the act, omission,
establishment, business or condition of the property of another may file a civil
action to recover personal damages. Abatement may be judicially sought through a
civil action therefor if the pertinent requirements under the Civil Code for summary
abatement, or the requisite that the nuisance is a nuisance per se, do not concur. To
note, the remedies of abatement and damages are cumulative; hence, both may be
demanded.
Facts:
Teresita Lee Wong (Wong) and Spouses Shirley and Ruben Ang Ong (Sps.
Ong) are co-owners pro-indiviso of a residential land (Wong-Ong property), abutting
a 10-meter wide subdivision road (subject road). On the opposite side of the subject
road, across the Wong-Ong property, are the adjacent lots of Spouses Wilson and
Rosario Uy (Sps. Uy) and Spouses Reynaldo and Linda Rana (Sps. Rana). The said
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lots follow a rolling terrain with the Rana property standing about two (2) meters
higher than and overlooking the Uy property, while the Wong-Ong property is at the
same level with the subject road.
Sometime in 1997, Sps. Rana elevated and cemented a portion of the subject
road that runs between the Rana and Wong-Ong properties in order to level the said
portion with their gate. Sps. Rana likewise backfilled a portion of the perimeter
fence separating the Rana and Uy properties without erecting a retaining wall that
would hold the weight of the added filling materials. Wong, Sps. Ong, and Sps. Uy
filed a Complaint for Abatement of Nuisance with Damages against Sps. Rana
before the RTC, docketed as Civil Case No. CEB-20893. They are seeking to: a)
declare the subject portion as a nuisance which affected the ingress and egress of
Wong and Sps. Ong to their lot in the usual and normal manner, such that they
now have to practically jump from the elevated road to gain access to their lot and
scale the same elevation in order to get out; b) declare the backfilling as a nuisance
considering that it poses a clear and present danger to the life and limb of the Uy
family arising from the premature weakening of Sps. Uys perimeter fence due to
the seeping of rain water from the Rana property that could cause its sudden
collapse. Sps. Rana countered that prior to the construction of their residence, there
was no existing road and they merely developed the subject portion which abuts
their gate in view of the rolling terrain. They claimed that Wong and Sps. Ong do not
have any need for the subject portion because their property is facing an existing
road.
Wong & Uy filed a Motion for Leave to be Allowed to Bring in Heavy
Equipment for the development of the Wong-Ong property with a view to the use of
the subject road as access to their lot which was later on granted by the RTC. They
proceeded to level the subject portion, which, in the process, hampered Sps. Ranas
ingress and egress to their residence, resulting too to the entrapment of their
vehicle inside their garage.
Meanwhile, Sps. Rana filed with another branch of the same trial court a
Complaintfor Recovery of Property and Damages against Sps. Uy, docketed as Civil
Case No. CEB-21296. They alleged that, they caused a resurvey of their property
which purportedly showed that Sps. Uy encroached upon an 11-square meter
portion along the common boundary of their properties. They prayed that Sps. Uy
be ordered to remove their fence along the common boundary and return the
encroached portion. Sps. Uy filed an Answer, averring that prior to putting up their
fence, they caused a relocation survey of their property and were, thus, confident
that their fence did not encroach upon the Rana property.
The RTC decided in the following cases. In Civil Case No. CEB-20893, the
trial court ruled (a) Sps. Rana, without prior consultation with the subdivision owner
or their neighbors, developed to their sole advantage the subject portion consisting
of one-half of the width of the 10-meter subject road by introducing filling materials,
and rip rapping the side of the road and that the said act denied Wong and Sps. Ong
the use of the subject portion and affected the market value of their property; (c)
Sps. Uy have no intention of using the subject portion for ingress or egress
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considering that they built a wall fronting the same; and (d) Wong, et al.s manner
of enforcing the RTC decision on the motion caused damage and injury to Sps. Rana
and amounted to bad faith. In view of these findings, the RTC declared that the
parties all acted in bad faith, and, therefore, no relief can be granted to them
against each other In Civil Case No. CEB-21296, the RTC dismissed both the
complaint and counterclaim for damages because of the failure of both parties to
substantiate their respective claims of bad faith against each other.
On appeal, in Civil Case No. CEB-20893, the CA found that (a) Sps. Ranas
act of elevating and cementing the subject portion curtailed the use and enjoyment
by Wong and Sps. Ong of their properties; (b) the undue demolition of the subject
portion by Wong, et al. hampered Sps. Ranas ingress and egress to their residence
and deprived them of the use of their vehicle which was entrapped in their garage;
and (c) both parties were equally at fault in causing damage and injury to each
other and, thus, are not entitled to the reliefs sought for. As for Civil Case No. CEB21296, the CA sustained the dismissal of the complaint as well as the parties
respective claims for damages for lack of legal and factual bases.
Hence this petition for review on certiorari. In G.R. No. 192861, petitioner
Linda Rana faults the RTC in (a) not finding Wong and Sps. Uy guilty of malice and
bad faith both in instituting Civil Case No. CEB-20893 and in erroneously
implementing the Order on the Motion. On the other hand, in G.R. No. 192862,
petitioners Wong, et al. fault the RTC in (a) applying the in pari delicto doctrine
against them and failing to abate the nuisance which still continues and actually
exists as Sps. Rana caused the same to be reconstructed and restored to their
prejudice, and (b) not finding Sps. Rana guilty of bad faith in instituting Civil Case
No. CEB- 21296 and ordering them to pay damages to petitioners Wong, et al.
Issue:
Whether or not the petitioners will prosper.
Ruling:
The petitions are partly meritorious.
Civil Case No. CEB-20893
Wong, et al. availed of the remedy of judicial abatement and damages
against Sps. Rana, claiming that both the elevated and cemented subject portion
and the subject backfilling are nuisances caused/created by the latter which
curtailed their use and enjoyment of their properties.
With respect to the elevated and cemented subject portion, the Court finds
that the same is not a nuisance per se. By its nature, it is not injurious to the
health or comfort of the community. It was built primarily to facilitate the ingress
and egress of Sps. Rana from their house which was admittedly located on a higher
elevation than the subject road and the adjoining Uy and Wong-Ong properties.
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Since the subject portion is not a nuisance per se (but actually a nuisance per
accidens) it cannot be summarily abated. As such, Wong, et al.s demolition of Sps.
Ranas subject portion, which was not sanctioned under the RTCs Order, remains
unwarranted. Sps. Ranas entitlement to the above-mentioned damages, however,
only stands in theory. This is because the actual award thereof is precluded by the
damage they themselves have caused Wong, et al. in view of their construction of
the subject portion. Sps. Rana, without prior consultation with Wong, et al. and to
their sole advantage, elevated and cemented almost hal fof the 10-meter wide
subject road. As homeowners of Peace Valley Subdivision, Wong, et al. maintain the
rights to the unobstructed use of and free passage over the subject road. By
constructing the subject portion, Sps. Rana introduced a nuisance per accidens that
particularly transgressed the aforesaid rights. Thus, for the vindication and
recognition of Wong, et al.s rights, Sps. Rana should be similarly held liable for
nominal damages. The awards of damages in favor of each party are OFFSET
against each other.
As for the subject backfilling touching the perimeter fence of the Uy property,
records show that the said fence was not designed to act as a retaining wall but
merely to withhold windload and its own load. Both the RTC and the CA found the
subject backfilling to have added pressure on the fence, consequently endangering
the safety of the occupants of the Uy property, especially considering the higher
elevation of the Rana property. With these findings, the Court thus agrees with the
courts a quo that there is a need for Linda Rana to construct a retaining wall which
would bear the weight and pressure of the filling materials introduced on their
property.
Civil Case No. CEB-21296
The Court found that the CA erred in affirming the RTCs dismissal thereof
considering that it was determined that Sps. Uy had actually encroached upon the
Rana property to the extent of 2 sq. m. Settled is the rule that in order that an
action for the recovery of property may prosper, the party prosecuting the same
need only prove the identity of the thing and his ownership thereof. In the present
cases, the report of the court-appointed commissioner, Atty. Pintor, who conducted
a relocation survey of the Rana and Uy properties identified and delineated the
boundaries of the two properties and showed that Sps. Uys perimeter fence
intruded on 2 sq. m. of the Rana property. Both the RTC and the CA relied upon the
said report; thus, absent any competent showing that the said finding was
erroneous, the Court sees no reason to deviate from the conclusions reached by the
courts a quo. Having sufficiently proven their claim, Sps. Rana are, therefore
entitled to the return of the 2 sq.m. encroached portion. Corollary thereto,
compliance by Linda Rana with the directive in Civil Case No. CEB-20893 to build a
retaining wall on their property shall be held in abeyance pending return of the
encroached portion.
MODES OF ACQUIRING OWNERSHIP
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DONATION
ESPERANZA C. CARINAN vs. SPOUSES GAVINO CUETO and CARMELITA
CUETO
G.R. No. 198636, October 8, 2014, J. Reyes
In order to sufficiently substantiate her claim that the money paid by the
respondents was actually a donation, petitioner should have also submitted in court
a copy of their written contract evincing such agreement. As earlier ruled by the
Court, a donation must comply with the mandatory formal requirements set forth by
law for its validity. When the subject of donation is purchase money, Article 748 of
the NCC is applicable. Accordingly, the donation of money as well as its acceptance
should be in writing. Otherwise, the donation is invalid for non-compliance with the
formal requisites prescribed by law.
Facts:
Spouses Gavino C. Cueto (Gavino) and Carmelita J. Cueto (respondents)

alleged that sometime in May 1986, Esperanza C. Carinan (Esperanza) and her
husband, Jose Carinan (Jose), acquired from one Roberto Ventura (Roberto) the
rights over a parcel of land under the name of the Government Service Insurance
System (GSIS), located in Bian, Laguna. Their transaction was covered by a Deed
of Assignment and Transfer of Rights with Assumption of Obligations. Esperanza and
Jose were to assume the payment of the applicable monthly amortizations for the
subject land to the GSIS. However, several amortizations remained unpaid by
Esperanza and Jose, resulting in an impending cancellation in 2005 of GSIS
conditional sale of the subject property to Roberto. Esperanza sought financial
assistance from her brother, Gavino. The respondents then paid from their conjugal
savings Esperanzas total obligation of P785,680.37 under the subject deed of
assignment.
The respondents alleged that Esperanza and Jazer undertook to execute a

Deed of Absolute Sale in favor of the respondents once the title over the subject
property was transferred to their names, subject to the condition that they would be
given the first option to buy it back within three years by reimbursing the expenses
incurred by the respondents on the property. 6 Besides satisfaction of the unpaid
amortizations to GSIS, the respondents paid for the transfer of the subject property
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from Roberto to Esperanza, and the renovation of the residential house erected on
the subject land, resulting in additional expenses of P515,000.00. TCT No. T-636804
already under the name of Esperanza was surrendered to the respondents.
Sometime in 2006, the respondents demanded from Esperanza and Jazer the
fulfillment of their commitment to transfer the subject property to the respondents
names through the execution of a deed of sale. When Esperanza and Jazer failed to
comply despite efforts for an amicable settlement, the respondents filed with the
Regional Trial Court (RTC) of Bian, Laguna the subject complaint for specific
performance with damages.
Esperanza and Jazer disputed these claims. They argued that there was
neither a written or verbal agreement for the transfer of the disputed property to
the respondents names, nor a promise for the repayment of the amounts that were
paid by the respondents. Esperanza believed that Gavino paid her outstanding
balance with the GSIS out of sheer generosity and pity upon her. She denied having
borrowed the respondents money because given her financial standing, she knew
that she could not afford to pay it back. Furthermore, to require her to execute a
deed of sale for the propertys full conveyance would totally disregard the payments
that she personally made for the purchase. Finally, Esperanza questioned Jazers
inclusion as a party to the case, claiming that he had no personal knowledge nor
was he privy to any negotiation with the respondents.
After hearing, RTC ruled in favor of the respondents and ordered Esperanza
and Jazer to pay the respondents: P927,182.12, representing the amount of P
785,680.37 [paid] by the [respondents] to the GSIS; and P 141,501.75 consisting of
the expenses in transferring the title to the name of Esperanza and Jazer plus the
cost of improvements introduced on the property plus attorneys fees. The RTC
emphasized that Esperanza and Jazer could not be compelled to convey the subject
property to the respondents. Even granting that a promise to sell was made by
Esperanza, the same was unenforceable as it was not reduced into writing. The
inclusion of Jazer in the complaint was sustained by the trial court, considering that
he was the son of Esperanza and the late Jose, whose estate had not yet been
settled. Jazer, thus, had an interest in the subject property and benefited from the
transaction. On appeal, CA affirmed the decision of the RTC, hence, this petition for
review on certiorari.
Issue:
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Whether there was a donation from the respondents in favor Esperanza.
Ruling: The petition is bereft of merit.
The Court adopts the RTCs and CAs finding that between Esperanza and the
respondents, there was a clear intention for a return of the amounts which the
respondents spent for the acquisition, transfer and renovation of the subject
property. The respondents then reasonably expected to get their money back from
Esperanza. Esperanzas claim that the expenses and payments in her behalf were
purely gratuitous remained unsupported by records. As the CA correctly observed:
Indeed, the absence of intention to be reimbursed is negated by

the facts of this case. [The respondents] conduct never at any time
intimated any intention to donate in favor of [Esperanza and Jazer]. A
donation is a simple act of liberality where a person gives freely of a
thing or right in favor of another, who accepts it (Article 725, New Civil
Code, as amended). But when a large amount of money is involved, as
in this case, this [c]ourt is constrained to take [Esperanza and Jazers]
claim of generosity by [the respondents] with more than a grain of salt.
Esperanzas refusal to pay back would likewise result in unjust enrichment, to

the clear disadvantage of the respondents. "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." While Esperanza claims that her
brothers generosity was the consideration for the respondents payment of her
obligations, this was not sufficiently established, that even the respondents
vehemently denied the allegation.
In order to sufficiently substantiate her claim that the money paid by the
respondents was actually a donation, Esperanza should have also submitted in court
a copy of their written contract evincing such agreement. Article 748 of the New
Civil Code (NCC), which applies to donations of money, is explicit on this point as it
reads:
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Art. 748. The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the thing or of
the document representing the right donated.
If the value of the personal property donated exceeds five thousand
pesos, the donation and the acceptance shall be made in writing. Otherwise,
the donation shall be void.
As the Court ruled in Moreo-Lentfer v. Wolff, a donation must comply with

the mandatory formal requirements set forth by law for its validity. When the
subject of donation is purchase money, Article 748 of the NCC is applicable.
Accordingly, the donation of money as well as its acceptance should be in writing.
Otherwise, the donation is invalid for non-compliance with the formal requisites
prescribed by law.
The respondents statement that they paid for Esperanzas obligations

because they wanted to help her did not contradict an understanding for the return
of the claimed amounts. Clearly, the aid then needed by Esperanza was for the
immediate production of the money that could pay for her obligations to the GSIS
and effect transfer of title, in order that her payments and interest over the property
would not be forfeited. The help accorded by the respondents corresponded to such
need. It did not follow that the respondents could no longer be allowed to later
demand the repayment. In disputing the claim against her, Esperanza imputed
deceit upon the respondents and claimed that they misled her into their real
intention behind the payment of her obligations and possession of TCT No. T636804. Deceit, however, is a serious charge which must be proven by more than
just bare allegations.
Although the Court affirms the trial and appellate courts' ruling that, first,
there was no donation in this case and, second, the respondents are entitled to a
return of the amounts which they spent for the subject property, it still cannot
sustain the respondents' plea for Esperanza's full conveyance of the subject
property. To impose the property's transfer to the respondents' names would totally
disregard Esperanza's interest and the payments which she made for the property's
purchase. Thus, the principal amount to be returned to the respondents shall only
pertain to the amounts that they actually paid or spent. The Court finds no cogent
reason to disturb the trial court's resolve to require in its Decision dated December
15, 2009, around four years after the sums were paid for the subject property's
acquisition and renovation, the immediate return of the borrowed amounts.
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Esperanza's plea for a reversal of the lower courts' rulings upon her claim of
co-ownership and allegation that the respondents were builders in bad faith cannot
be considered at this stage of the case. These claims raise factual issues which are
beyond the scope of a petition for review on certiorari. More importantly, such
defenses were not advanced by Esperanza during the proceedings with the trial and
appellate courts. Settled is the rule that "defenses not pleaded in the answer may
not be raised for the first time on appeal. A party cannot, on appeal, change
fundamentally the nature of the issue in the case. When a party deliberately adopts
a certain theory and the case is decided upon that theory in the court below, he will
not be permitted to change the same on appeal, because to permit him to do so
would be unfair to the adverse party."
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE SECRETARY OF
AGRICULTURE vs. FEDERICO DACLAN, JOSEFINA COLLADO, AND HER
HUSBAND FEDERICO DACLAN AND MINVILUZ DACLAN, AS SURVIVING
HEIRS OF DECEASED JOSE DACLAN
G.R. No. 197115 (consolidated), March 23, 2015, J. Del Castillo
The Daclans lament the supposed failure of the Province to provide
agricultural extension and on-site research services and facilities as required
under the IRR of the LGC of 1991, which failure they believe, constituted a violation
of the stipulation contained in the deeds of donation to develop and improve the
livestock industry of the country. Yet this cannot be made a ground for the reversion
of the donated lands; on the contrary, to allow such an argument would condone
undue interference by private individuals in the operations of government. The
deeds of donation merely stipulated that the donated lands shall be used for the
establishment of a breeding station and shall not be used for any other purpose,
and that in case of non-use, abandonment or cessation of the activities of the BAI,
possession or ownership shall automatically revert to the Daclans. It was never
stipulated that they may interfere in the management and operation of the
breeding station. Even then, they could not directly participate in the operations of
the breeding station.
Facts:
The controversy involved in the instant consolidated petition relates to the
demand of herein respondents- and petitioners-donors to return the four (4) parcels
of land they donated to the Republic, thru the Department of Agriculture (DA), in the
year 1972 for the establishment and operation of a breeding station in their area in
La Union. In 2003, the donors demanded back the properties considering that a
medical center was constructed on a portion of the disputed properties along with
the alleged cessation of the breeding station.
Consequently, the donors, herein Daclans, filed a complaint for specific
performance against the DA. During the trial, the Province of La Union represented
the Republic owing to the devolution of the management of the contested
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properties from the DA to the LGU in view of the LGC. Both the Province and DA
admitted that the operation of the breeding station has ceased considering that the
latter already transferred the management to the former. The RTC, however,
appreciating the evidence adduced, found that the LGU continued to operate the
breeding station contrary to the assertions of the Daclans and their consent to the
devolution of the responsibilities of the DA under the deed of donation to LGU is not
necessary. The CA, in setting aside this decision, took note that clearly the DA
and/or the LGU violated the stipulations under the deed of donation when it
permitted the construction of a medical center or the La Union Medical Center
(LUMC) to be exact.
Issue:
Whether or not the contested portion of the disputed properties may be
returned to the Daclans considering the alleged violation of the donee DA and its
successor, the LGU.
Ruling:
NO, the Court grants the petition of the Republic and thus rejecting the
reversion sought by the Daclans.
The preponderance of evidence points to the fact that the breeding station
remained operational even after its transfer from the Republic to the Province. The
activities of the [DA thru the Bureau of Animal Industry or BAI] did not cease even
after it was dissolved after the government adopted the policy of devolution under
the [LGU] of 1991; these activities were merely transferred to the Province. Thus,
the witnesses for the Daclans and the Republic uniformly declared that the breeding
station remained operational even after the [LGC] of 1991 was put into effect.
Particularly, Regional Director Reinerio Belarmino, Jr. of the [DA], Region 1 declared
that after the breeding station was transferred to the Province, he saw upon ocular
inspection that there remained six cows and fifty goats on the premises. Cresencia
Isibido testified that as Farm Foreman, she exercised supervision over her coemployees in the breeding station; that in 1989, there were six personnel assigned
at the breeding station; that from 1974 until 1989, she received her salary from the
BAI; that after devolution, she started receiving her salary from the Province; and
that even after devolution, the operation of the Agoo Breeding Station continued,
and goats, cattle and swine were being maintained thereat. Dr. Nida Gapuz, La
Union Provincial Veterinarian, said that natural as well as artificial insemination
activities were being conducted at the breeding station, as well as goat dispersal
and cattle production. Atty. Mauro Cabading, La Union Provincial Assessor, testified
that he was directed by the Governor and the Provincial Administrator to take
photographs of the breeding station in order to verify the complaint filed by the
Daclans; that he then proceeded to the Agoo Breeding Station; that he took
photographs of the animals cows and goats therein; and that the Province owned
said animals at the breeding station.
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As against the bare assertions of the Daclans that the breeding station was
abandoned and became non-operational, the testimonies of the above public
officers are credible. In the absence of any controverting evidence, the testimonies
of public officers are given full faith and credence, as they are presumed to have
acted in the regular performance of their official duties. Devolution cannot have
any effect on the donations made by the Daclans to the Republic. As defined,
devolution refers to the act by which the national government confers power and
authority upon the various local government units to perform specific functions and
responsibilities. It includes the transfer to local government units of the records,
equipment, and other assets and personnel of national agencies and offices
corresponding to the devolved powers, functions and responsibilities. While the
breeding station may have been transferred to the Province of La Union by the [DA]
as a consequence of devolution, it remained as such, and continued to function as a
breeding station; and the purpose for which the donations were made remained and
was carried out. Besides, the deeds of donation did not specifically prohibit the
subsequent transfer of the donated lands by the donee Republic. The Daclans
should bear in mind that contracts take effect between the parties, their assigns
and heirs, except in cases where the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation or by provision of law. Thus,
as a general rule, rights and obligations derived from contract are transmissible.
The Daclans lament the supposed failure of the Province to provide
agricultural extension and on-site research services and facilities as required
under the [IRR] of the [LGC] of 1991, which failure they believe, constituted a
violation of the stipulation contained in the deeds of donation to develop and
improve the livestock industry of the country. Yet this cannot be made a ground for
the reversion of the donated lands; on the contrary, to allow such an argument
would condone undue interference by private individuals in the operations of
government. The deeds of donation merely stipulated that the donated lands shall
be used for the establishment of a breeding station and shall not be used for any
other purpose, and that in case of non-use, abandonment or cessation of the
activities of the BAI, possession or ownership shall automatically revert to the
Daclans. It was never stipulated that they may interfere in the management and
operation of the breeding station. Even then, they could not directly partici-pate in
the operations of the breeding station.
Thus, even if the BAI ceased to exist or was abolished as an office, its
activities continued when its functions were devolved to the local government units
such as the Province of La Union. It cannot be said that the deeds of donation may
be nullified just by the fact that the BAI became defunct; its functions continued in
the government offices/local government units to which said functions were
devolved.
Lastly, the CA cannot validly order the return to the Daclans of the donated
1.5-hectare portion where the LUMC is situated, because such portion was not
donated by them. They admitted that the 1.5-hectare portion where the LUMC is
constructed does not form part of the lands they donated to the government, but
belonged to other donors who are not parties to the instant case. As far as the
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Daclans are concerned, whatever they donated remains part of the breeding station
and so long as it remains so, no right of reversion accrues to them. Only the original
owner-donor of the 1.5-hectare portion where the LUMC is constructed is entitled to
its return.
PRESCRIPTION
PRESCRIPTION OF ACTIONS
SPOUSES FRANCISCO SIERRA (substituted by DONATO, TERESITA,
TEODORA, LORENZA, LUCINA, IMELDA, VILMA, and MILAGROS SIERRA) and
ANTONINA SANTOS, SPOUSES ROSARIO SIERRA and EUSEBIO CALUMA
LEYVA, and SPOUSES SALOME SIERRA and FELIX GATLABAYAN (substituted
by BUENA VENTURA, ELPIDIO, PAULINO, CATALINA, GREGORIO, and
EDGARDO GATLABAYAN, LORETO REILLO, FERMINA PEREGRINA, and NIDA
HASHIMOTO) vs.PAIC SAVINGS AND MORTGAGE BANK, INC.
G.R. No. 197857, September 10, 2014, J. Perlas-Bernabe
Since the complaint for annulment was anchored on a claim of mistake, i.e.,
that petitioners are the borrowers under the loan secured by the mortgage, the
action should have been brought within four (4) years from its discovery. As
mortgagors desiring to attack a mortgage as invalid, petitioners should act with
reasonable promptness, else its unreasonable delay may amount to
ratification. Verily, to allow petitioners to assert their right to the subject properties
now after their unjustified failure to act within a reasonable time would be grossly
unfair to PSMB, and perforce should not be sanctioned. As such, petitioners' action
is already barred by laches, which, as case law holds, operates not really to
penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right
when to do so would result in a clearly inequitable situation.
Facts:
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On May 31, 1983, Goldstar Conglomerates, Inc. (GCI), represented by
Guillermo Zaldaga (Zaldaga), obtained from First Summa Savings and Mortgage
Bank (Summa Bank), now respondent Paic Savings and Mortgage Bank, Inc.
(PSMB), a loan in the amount of P1,500,000.00 as evidenced by a Loan
Agreement dated May 31, 1983. As security therefor, GCI executed in favor of PSMB
six (6) promissory notes in the aggregate amount ofP1,500,000.00 as well as a
Deed of Real Estate Mortgage over a parcel of land. As additional security,
petitioners Francisco Sierra, Rosario Sierra, and Spouses Felix Gatlabayan and
Salome Sierra mortgaged four(4) parcels of land in Antipolo City, covered by TCT
Nos. 308476, 308477, 308478, and 308479, and respectively registered in their
names (subject properties). Records show that after the signing of the mortgage
deed, Zaldaga gave petitioner Francisco Sierra four (4) managers checks with an
aggregate amount of P200,000.00, which were later successfully encashed, as well
as several post-dated checks.
Eventually, GCI defaulted in the payment of its loan to PSMB, thereby

prompting the latter to extrajudicially foreclose the mortgage on the subject
properties in accordance with Act No. 3135, as amended, with due notice to
petitioners. In the process, PSMB emerged as the highest bidder in the public
auction sale June 27, 1984. Since petitioners failed to redeem the subject properties
within the redemption period, their certificates of title were cancelled and new ones
were issued in PSMBs name.
On September 16, 1991, petitioners filed a complaint for the declaration of

nullity of the real estate mortgage and its extrajudicial foreclosure, and damages
against PSMB and Summa Bank before the RTC.
The RTC: (a) declared the subject deed and the extrajudicial foreclosure
proceedings null and void; (b) cancelled the certificates of title of PSMB; and (c)
directed the reinstatement of petitioners certificates of title.
Aggrieved, PSMB filed a motion for reconsideration, while petitioners filed a
motion for discretionary execution which were, however, denied. Dissatisfied, PSMB
interposed an appeal to the CA. The CA reversed and set aside the RTC Decision and
dismissed petitioners complaint for lack of merit. Unperturbed, petitioners filed the
instant petition.
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Petitioners insist that the CA erred in ruling that their action for nullification of
the subject deed had already prescribed, contending that the applicable provision is
the ten-year prescriptive period of mortgage actions under Article 1142 of the Civil
Code.
Issue:
Whether or not the CA erred in dismissing the complaint on the grounds of

prescription and laches.
Ruling:
The contention is bereft of merit.
Based on case law, a "mortgage action" refers to an action to enforce a right

necessarily arising from a mortgage. In the present case, petitioners are not
"enforcing" their rights under the mortgage but are, in fact, seeking to be relieved
therefrom. The complaint filed by petitioners is, therefore, not a mortgage action as
contemplated under Article 1142.
Considering, however, petitioners failure to establish that their consent to

the mortgage was vitiated, rendering them without a cause of action, much less a
right of action to annul the mortgage, the question of whether or not the complaint
has prescribed becomes merely academic.
In any event, even assuming that petitioners have a valid cause of action, the
four-year prescriptive period on voidable contracts shall apply. Since the complaint
for annulment was anchored on a claim of mistake, i.e., that petitioners are the
borrowers under the loan secured by the mortgage, the action should have been
brought within four (4) years from its discovery.
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The Court holds that laches applies.
As the records disclose, despite notice on June 19, 1984 of the scheduled
foreclosure sale, petitioners, for unexplained reasons, failed to impugn the real
estate mortgage and oppose the public auction sale for a period of more than seven
(7) years from said notice. As such, petitioners' action is already barred by laches,
which, as case law holds, operates not really to penalize neglect or sleeping on
one's rights, but rather to avoid recognizing a right when to do so would result in a
clearly inequitable situation. As mortgagors desiring to attack a mortgage as
invalid, petitioners should act with reasonable promptness, else its unreasonable
delay may amount to ratification. Verily, to allow petitioners to assert their right to
the subject properties now after their unjustified failure to act within a reasonable
time would be grossly unfair to PSMB, and perforce should not be sanctioned.
OBLIGATIONS
CLASSIFICATION OF OBLIGATIONS
PURE AND CONDITIONAL OBLIGATIONS
GOLDEN VALLEY EXPLORATION, INC. vs. PINKIAN MINING COMPANY and
COPPER VALLEY, INC.
G.R. No. 190080, June 11, 2014, J. Perlas-Bernabe
In reciprocal obligations, either party may rescind the contract upon the
others substantial breach of the obligation/s he had assumed thereunder. The basis
therefor is Article 1191 of the Civil Code. PMC rescinded the operating agreement
with GVEI due to failure of the latter to advance payment for actual cost. The court
ruled that in reciprocal obligations, either party may rescind the contract upon the
others substantial breach of the obligation/s he had assumed thereunder.
Facts:
PMC is the owner of 81 mining claims located in Kayapa, Nueva Vizcaya, 15 of
which were covered by Mining Lease Contract (MLC) No. MRD-56, while the
remaining 66 had pending applications for lease. On October 30, 1987, PMC entered
into an Operating Agreement (OA) with GVEI, granting the latter "full, exclusive and
irrevocable possession, use, occupancy , and control over the [mining claims], and
every matter pertaining to the examination, exploration, development and mining
of the [mining claims] and the processing and marketing of the products for a period
of 25 years.
Thereafter, PMC extra-judicially rescinded the OA upon GVEIs for failure of
GVEI to advance the actual cost for the perfection of the mining claims or for the
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acquisition of mining rights, cost of lease applications, lease surveys and legal
expenses incidental thereto; GVEIs non-reimbursement of the expenses incurred by
PMC General Manager Benjamin Saguid in connection with the visit of a financier to
the mineral property in 1996; its non-remittance of the US$300,000.00 received
from Excelsior Resources, Ltd.; its nondisclosure of contracts entered into with other
mining companies with respect to the mining claims; its being a mere
"promoter/broker" of PMCs mining claims instead of being the operator thereof; and
its nonperformance of the necessary works on the mining claims.
GVEI averred that its obligation to pay royalties to PMC arises only when the
mining claims are placed in commercial production which condition has not yet
taken place. It also reminded PMC of its prior payment of the amount ofP185,000.00
as future royalties in exchange for PMCs express waiver of any breach or default on
the part of GVEI.
PMC entered into a Memorandum of Agreement dated May 2, 2000 (MOA)
with CVI, whereby the latter was granted the right to "enter, possess, occupy and
control the mining claims" and "to explore and develop the mining claims, mine or
extract the ores, mill, process and beneficiate and/or dispose the mineral products
in any method or process," among others, for a period of 25 years.
Issue:
Whether or not there was a valid rescission of the Operating Agreement
Ruling:
Yes, there was a valid rescission of the Operating Agreement
In reciprocal obligations, either party may rescind the contract upon the
others substantial breach of the obligation/s he had assumed thereunder. The basis
therefor is Article 1191 of the Civil Code which states as follows:
Art. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
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This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with Articles 1385 and
1388 and the Mortgage Law.
More accurately referred to as resolution, the right of rescission under Article
1191 is predicated on a breach of faith that violates the reciprocity between parties
to the contract. This retaliatory remedy is given to the contracting party who suffers
the injurious breach on the premise that it is "unjust that a party be held bound to
fulfill his promises when the other violates his." As a general rule, the power to
rescind an obligation must be invoked judicially and cannot be exercised solely on a
partys own judgment that the other has committed a breach of the obligation. This
is so because rescission of a contract will not be permitted for a slight or casual
breach, but only for such substantial and fundamental violations as would defeat
the very object of the parties in making the agreement. As a well-established
exception, however, an injured party need not resort to court action in order to
rescind a contract when the contract itself provides that it may be revoked or
cancelled upon violation of its terms and conditions.
As elucidated in Froilan v. Pan Oriental Shipping Co. "there is nothing in the
law that prohibits the parties from entering into agreement that violation of the
terms of the contract would cause cancellation thereof, even without court
intervention." Similarly, in Dela Rama Steamship Co., Inc. v. Tan, it was held that
judicial permission to rescind an obligation is not necessary if a contract contains a
special provision granting the power of cancellation to a party.
With this in mind, the Court therefore affirms the correctness of the CAs
Decision upholding PMCs unilateral rescission of the OA due to GVEIs non-payment
of royalties considering the parties express stipulation in the OA that said
agreement may be cancelled on such ground. By expressly stipulating in the OA
that GVEIs non-payment of royalties would give PMC sufficient cause to cancel or
rescind the OA, the parties clearly had considered such violation to be a substantial
breach of their agreement. Thus, in view of the above-stated jurisprudence on the
matter, PMCs extra-judicial rescission of the OA based on the said ground was valid.
SWIRE REALTY DEVELOPMENT CORPORATION vs. JAYNE YU

The right of rescission of a party to an obligation under Article 1191 of the
Civil Code is predicated on a breach of faith by the other party who violates the
reciprocity between them. The breach contemplated in the said provision is the
obligors failure to comply with an existing obligation. When the obligor cannot
comply with what is incumbent upon it, the obligee may seek rescission and, in the
absence of any just cause for the court to determine the period of compliance, the
court shall decree the rescission. Thus, the delay in the completion of the project as
well as of the delay in the delivery of the unit are breaches of statutory and
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contractual obligations which entitle respondent to rescind the contract, demand a
refund and payment of damages.
Facts:
On September 24, 1997, Respondent Jane Yu (Yu) paid the full purchase price
of P7,519,371.80 for the unit while making a down payment of P20,000.00 for the
parking lot. However, notwithstanding full payment of the contract price, Petitioner
Swire Realty Development Corporation (Swire) failed to complete and deliver the
subject unit on time. This prompted Yu to file a Complaint for Rescission of Contract
with Damages before the Housing and Land Use Regulatory Board (HLURB)
Expanded National Capital Region Field Office (ENCRFO).
The HLURB ENCRFO rendered a Decision dismissing Yus complaint. It ruled
that rescission is not permitted for slight or casual breach of the contract but only
for such breaches as are substantial and fundamental as to defeat the object of the
parties in making the agreement. On the other hand, Yu is hereby directed to
immediately update her account insofar as the parking slot is concerned, without
interest, surcharges or penalties charged therein.
All other claims and counterclaims are hereby dismissed for lack of merit. Yu
then elevated the matter to the HLURB Board of Commissioners. The HLURB Board
of Commissioners reversed and set aside the ruling of the HLURB ENCRFO and
ordered the rescission of the Contract to Sell. Swire moved for reconsideration, but
the same was denied by the HLURB Board of Commissioners. Unfazed, Swire
appealed to the Office of the President (OP). The OP, through then Deputy Executive
Secretary Manuel Gaite, dismissed Swires appeal on the ground that it failed to
promptly file its appeal before the OP.
The OP, granted Swires motion and set aside Deputy Executive Secretary
Gaites decision. It held that after a careful and thorough evaluation and study of
the records of the case, the OP was more inclined to agree with the earlier decision
of the HLURB ENCRFO as it was more in accord with facts, law and jurisprudence
relevant to the case.
Yu sought reconsideration of said resolution, however, the same was denied
by the OP in a Resolution dated August 18, 2011. Consequently, Yu filed an appeal
to the CA. The CA granted Yus appeal and reversed and set aside the Order of the
OP. Swire moved for reconsideration, however, the CA denied the same.
Issue:
Whether or not rescission of the contract is proper in the instant case.
Ruling:
Article 1191 of the Civil Code sanctions the right to rescind the obligation in
the event that specific performance becomes impossible.
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The injured party may choose between the fulfillment and the rescission of
the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with Articles 1385 and 1388 and the
Mortgage Law.
Basic is the rule that the right of rescission of a party to an obligation under
Article 1191 of the Civil Code is predicated on a breach of faith by the other party
who violates the reciprocity between them. The breach contemplated in the said
provision is the obligors failure to comply with an existing obligation. When the
obligor cannot comply with what is incumbent upon it, the obligee may seek
rescission and, in the absence of any just cause for the court to determine the
period of compliance, the court shall decree the rescission.
In the instant case, the CA aptly found that the completion date of the
condominium unit was November 1998 pursuant to License No. 97-12-3202 dated
November 2, 1997 but was extended to December 1999 as per License to Sell No.
99-05-3401 dated May 8, 1999. However, at the time of the ocular inspection
conducted by the HLURB ENCRFO, the unit was not yet completely finished as the
kitchen cabinets and fixtures were not yet installed and the agreed amenities were
not yet available.
From the foregoing, it is evident that the report on the ocular inspection
conducted on the subject condominium project and subject unit shows that the
amenities under the approved plan have not yet been provided as of May 3, 2002,
and that the subject unit has not been delivered to Yu as of August 28, 2002, which
is beyond the period of development of December 1999 under the license to sell.
Incontrovertibly, petitioner had incurred delay in the performance of its obligation
amounting to breach of contract as it failed to finish and deliver the unit to Yu within
the stipulated period. The delay in the completion of the project as well as of the
delay in the delivery of the unit are breaches of statutory and contractual
obligations which entitle Yu to rescind the contract, demand a refund and payment
of damages.
OBLIGATIONS WITH PERIOD
ROWENA R. SALONTE vs. COMMISSION ON AUDIT, CHAIRPERSON MA.
GRACIA PULIDO-TAN, COMMISSIONER JUANITO G. ESPINO, JR.,
COMMISSIONER HEIDI L. MENDOZA, and FORTUNATA M. RUBICO, DIRECTOR
IV, COA COMMISSION SECRETARIAT
G.R. No. 207348, August 19, 2014, J. Velasco, Jr.,
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Obligations with a resolutory period take effect at once, but terminate upon
arrival of the day certain. A day certain is understood to be that which must
necessarily come, although it may not be known when. If the uncertainty consists in
whether the day will come or not, the obligation is conditional. In the instant case, a
plain reading of the Contract of Reclamation reveals that the six (6)-year period
provided for project completion, or termination of the contract was a mere estimate
and cannot be considered a period or a "day certain" in the context of Art. 1193. To
be clear, par. 15 of the Contract of Reclamation states: "the project is estimated to
be completed in six (6) years." The lapse of six (6) years from the perfection of the
contract did not, make the obligation to finish the reclamation project demandable,
such as to put the obligor in a state of actionable delay for its inability to finish.
Thus, F.F. Cruz cannot be deemed to be in delay.
Facts:
The City of Mandaue and F.F. Cruz and Co., Inc. (F.F. Cruz) entered into a
Contract of Reclamation in which F.F. Cruz agreed to undertake, at its own expense,
the reclamation of 180 hectares of foreshore and submerged lands from the
Cabahug Causeway in that city. The timetables, i.e., commencement of the contract
and project completion, provides:
Work on the reclamation shall commence not later than July 1989. The project is
estimated to be completed in six (6) years: (3 years for the dredge-filling and
seawall construction and 3 years for the infrastructures completion).
The parties also made a Memorandum of Agreement (MOA) whereby the City
of Mandaue allowed F.F. Cruz to put up structures on a portion of a parcel of land
owned by the city for the use of and to house F.F. Cruz personnel assigned at the
project site. The City of Mandaue and F.F. Cruz have agreed that upon the
completion of the Mandaue City Reclamation Project, all improvements introduced
by F.F. Cruz to the parcel of land owned by the City of Mandaue shall ipso facto
belong to the City of Mandaue.
Later developments saw the City of Mandaue undertaking the Metro Cebu
Development Project II (MCDP II), which required the widening of the Plaridel
Extension Mandaue Causeway. The structures built by F.F. Cruz subject of the MOA
stood in the direct path of the road widening project. DPWH and Samuel B. Darza,
MCDP II project director, entered into an Agreement to Demolish with F.F. Cruz
whereby the latter would demolish the improvements in return, receive the total
amount of PhP 1,084,836.42 in compensation.
Petitioner Rowena B. Rances (now Rowena RancesSolante), Human Resource
Management Officer III, prepared and, with the approval of Samuel B. Darza (Darza),
then issued Disbursement Voucher for PhP 1,084,836.42 in favor of F.F. Cruz.
Darza addressed a letter-complaint to the Office of the Ombudsman, inviting
attention to several irregularities regarding the implementation of MCDP II. The
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letter was referred to the COA for a team to audit the accounts of MCDP II. The audit
team issued Special Audit Office (SAO) Report which states:
F.F. Cruz and Company, Inc. was paid P1,084,836.42 for the cost of the
property affected by the widening of Plaridel Extension, Mandaue
Causeway. However, under Section 5 of its MOA with Mandaue City, the
former was no longer the lawful owner of the properties at the time the
payment was made.
The letter-complaint of Darza was upgraded as an Ombudsman case, the
Ombudsman, by Resolution subsequently dismiss the same for lack of merit.
The COA ruled that from the MOA, it is clear that the improvements
introduced by F.F. Cruz would be owned by the City upon completion of the project.
However, the project was not completed in 1995 and even in 1997 when MDCP paid
for these improvements. The fact that the reclamation project had not yet been
completed by F.F. Cruz in 1997 does not negate the right over such improvements
by the City. Hence, the instant petition.
Issue:
Who between the City of Mandaue and F.F. Cruz owned the properties during
the period that it was demolished?
Ruling:
The petition is meritorious. The COA and its audit team obviously misread the
relevant stipulations of the MOA in relation to the provisions on project completion
and termination of contract of the Mandaue-F.F. Cruz reclamation contract.
The COA is alleging that the Contract of Reclamation establishes an obligation
on the part of F.F. Cruz to finish the project within the allotted period of six (6) years
from contract execution in August 1989. The COA would conclude that after the six
(6)-year period, F.F. Cruz is automatically in delay, the contract considered as
completed, and the ownership of the structures built in accordance with the MOA
transferred to the City of Mandaue.
COAs argument is untenable.
The Civil Code provision on obligations with a period is relevant. Article 1193
thereof provides:
Article 1193. Obligations for whose fulfillment a day certain has been
fixed, shall be demandable only when that day comes.
Obligations with a resolutory period take effect at once, but terminate upon
arrival of the day certain.
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A day certain is understood to be that which must necessarily come, although
it may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation
is conditional, and it shall be regulated by the rules of the preceding Section.
A plain reading of the Contract of Reclamation reveals that the six (6)-year
period provided for project completion, or termination of the contract was a mere
estimate and cannot be considered a period or a "day certain" in the context of the
aforequoted Art. 1193. To be clear, par. 15 of the Contract of Reclamation states:
"the project is estimated to be completed in six (6) years." The lapse of six (6) years
from the perfection of the contract did not, make the obligation to finish the
reclamation project demandable, such as to put the obligor in a state of actionable
delay for its inability to finish. Thus, F.F. Cruz cannot be deemed to be in delay.
Even if we consider the allotted six (6) years within which F.F. Cruz was
supposed to complete the reclamation project, the lapse thereof does not
automatically mean that F.F. Cruz was in delay. The City of Mandaue never made a
demand for the fulfillment of its obligation under the Contract of Reclamation.
Article 1169 of the Civil Code on the interaction of demand and delay and the
exceptions to the requirement of demand relevantly states:
Article 1169. Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order
that delay may exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered
it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his obligation, delay by the other
begins.
In the instant case, the records are bereft of any document that the City of
Mandaue exacted from F.F. Cruz the fulfillment of its obligation under the
reclamation contract. Not one of the exceptions to the requisite demand under Art.
1169 is established.
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Since at the time of the demolition the said improvements actually belonged
to F.F. Cruz and the City of Mandaue has no claim whatsoever on the said payment
for the demolished improvements.
As it were, the Mandaue - F.F.Cruz MOA states that the structures built by F .F.
Cruz on the property of the city will belong to the latter only upon the completion of
the project. The completion of the project is a suspensive condition that has yet to
be fulfilled. Until the condition arises, ownership of the structures properly pertains
to F .F. Cruz.
The MOA does not state that the structures shall inure in ownership to the
City of Mandaue after the lapse of six (6) years from the execution of the Contract of
Reclamation. What the MOA does provide is that ownership of the structures shall
vest upon, or ipso facto belong to, the City of Mandaue when the Contract of
Reclamation shall have been completed. Logically, before such time, or until the
agreed reclamation project is actually finished, F.F. Cruz owns the structures. The
payment of compensation for the demolition thereof is justified. The disallowance of
the payment is without factual and legal basis. COA then gravely abused its
discretion when it decreed the disallowance.
NATURE AND EFFECT OF OBLIGATIONS
FEDERAL BUILDERS, INC. vs. FOUNDATION SPECIALISTS, INC.
In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals, as

regards particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows: When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code. In line with the recent circular of the
Monetary Board of the Bangko Sentral ng Pilipinas No. 799 (July 1, 2013), the Court
has modified the guidelines in Nacar v. Gallery Frames, wherein the interest due
shall itself earn legal interest from the time it is judicially demanded and in the
absence of stipulation, the rate of interest shall be 6% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code. This case, however, does not involve
acquiescence to the temporary use of a partys money but a performance of a
particular service, specifically the construction of the diaphragm wall, capping
beam, and guide walls of the Trafalgar Plaza. Thus, in the absence of any
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stipulation as to interest in the agreement between the parties herein, the matter of
interest award arising from the dispute in this case would actually fall under the
second paragraph of the above-quoted guidelines in the landmark case of Eastern
Shipping Lines, which necessitates the imposition of interest at the rate of 6%,
instead of the 12% imposed by the courts below. As to the rate of interest due
thereon, however, the Court notes that the same should be reduced to 6% per
annum considering the fact that the obligation involved herein does not partake of
a loan or forbearance of money.
Facts:
Federal Builders, Inc. (FBI) entered into an agreement with Foundation

Specialists, Inc. (FSI) whereby the latter, as subcontractor, undertook the
construction of the diaphragm wall, capping beam, and guide walls of the Trafalgar
Plaza located at Salcedo Village, Makati City (the Project), for a total contract price
of P7,400,000.00. Under the agreement, FBI was to pay a downpayment equivalent
to 20% of the contract price and the balance, through a progress billing every 15
days, payable not later than 1 week from presentation of the billing.
FSI filed a complaint for Sum of Money against FBI before the RTC of Makati
City seeking to collect the amount of P1,635,278.91, representing Billings No. 3 and
4, with accrued interest from August 1, 1991 plus moral and exemplary damages
with attorneys fees. In its complaint, FSI alleged that FBI refused to pay said
amount despite demand and its completion of 97% of the contracted works.
FBI claimed that FSI completed only 85% of the contracted works, failing to
finish the diaphragm wall and component works in accordance with the plans and
specifications and abandoning the jobsite. FBI maintains that because of FSIs
inadequacy, its schedule in finishing the Project has been delayed resulting in the
Project owners deferment of its own progress billings. It further interposed
counterclaims for amounts it spent for the remedial works on the alleged defects in
FSIs work.
After evaluating the evidence of both parties, the RTC ruled in favor of FSI.
Defendants counterclaim is denied for lack of factual and legal basis.
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CA affirmed the Decision of the lower court, but deleted the sum
of P279,585.00 representing the cost of undelivered cement and reduced the award
of attorneys fees to P50,000.00. CA explained that FSI failed to substantiate how
and in what manner it incurred the cost of cement by stressing that its claim was
not supported by actual receipts. Also, it found that while the trial court did not err
in awarding attorneys fees, the same should be reduced for being unconscionable
and excessive. On FBIs rejection of the 12% annual interest rate on the amount of
Billings 3 and 4.
Issue:
Whether or not the CA committed serious, reversible error when it imposed

the 12% legal interest from August 30, 1991 on the disputed claim of P1,024,600.00
less the amount of P33,354.40 despite the fact that there was no stipulation in the
agreement of the parties with regard to interest and despite the fact that their
agreement was not a "loan or forbearance of money.
Ruling:
The Court finds merit in the argument of FBI that the 12% interest rate is
inapplicable, since this case does not involve a loan or forbearance of money.
In the landmark case of Eastern Shipping Lines, Inc. v. Court of

Appeals, the Court laid down the following guidelines in computing legal interest:
With regard particularly to an award of interest in the concept of actual and

imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a

sum of money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
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time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of

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

final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
In line with the recent circular of the Monetary Board of the Bangko
Sentral ng Pilipinas (BSP-MB) No. 799, the Court has modified the guidelines in
Nacar v. Gallery Frames, as follows:
II. With regard particularly to an award of interest in the concept of actual and
1. When the obligation is breached, and it consists in the payment of a

sum of money, i.e., a loan or forbearance of money, the interest
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due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 6% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of

money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged. 3. When the judgment of
the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1
or paragraph 2, above, shall be 6% per annum from such finality
until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.
In addition to the above, judgments that have become final and

executory prior to July 1, 2013, shall not be disturbed and shall continue to be
implemented applying the rate of interest fixed therein. It should be noted,
however, that the new rate could only be applied prospectively and not
retroactively. Consequently, the twelve percent (12%) per annum legal interest shall
apply only until June 30, 2013. Come July 1, 2013, the new rate of six percent (6%)
per annum shall be the prevailing rate of interest when applicable. Thus, the need
to determine whether the obligation involved herein is a loan and forbearance of
money nonetheless exists.
Forbearance of money, goods or credits, therefore, refers to

arrangements other than loan agreements, where a person acquiesces to the
temporary use of his money, goods or credits pending the happening of certain
events or fulfillment of certain conditions. Consequently, if those conditions are
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breached, said person is entitled not only to the return of the principal amount paid,
but also to compensation for the use of his money which would be the same rate of
legal interest applicable to a loan since the use or deprivation of funds therein is
similar to a loan.
This case, however, does not involve an acquiescence to the temporary use
of a partys money but a performance of a particular service, specifically the
construction of the diaphragm wall, capping beam, and guide walls of the Trafalgar
Plaza.
A review of similar jurisprudence would tell that this Court had repeatedly
recognized this distinction and awarded interest at a rate of 6% on actual or
compensatory damages arising from a breach not only of construction
contracts, such as the one subject of this case, but also of contracts wherein one of
the parties reneged on its obligation to perform messengerial services, deliver
certain quantities of molasses, undertake the reforestation of a denuded forest land,
as well as breaches of contracts of carriage, and trucking agreements. The Court
have explained therein that the reason behind such is that said contracts do not
partake of loans or forbearance of money but are more in the nature of contracts of
service.
Thus, in the absence of any stipulation as to interest in the agreement

between the parties herein, the matter of interest award arising from the dispute in
this case would actually fall under the second paragraph of the above-quoted
guidelines in the landmark case of Eastern Shipping Lines, which necessitates the
imposition of interest at the rate of 6%, instead of the 12% imposed by the courts
below.
The 6% interest rate shall further be imposed from the finality of the
judgment herein until satisfaction thereof, in light of our recent ruling in Nacar v.
Gallery Frames. Note, however, that contrary to FBIs assertion, The Court finds no
error in the RTCs ruling that the interest shall begin to run from August 30, 1991 as
this is the date when FSI extrajudicially made its claim against FBI through a letter
demanding payment for its services.
In view of the foregoing, therefore, the Court finds no compelling reason to

disturb the factual findings of the RTC and the CA, which are fully supported by and
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deducible from, the evidence on record, insofar as the sum representing Billings 3
and 4 is concerned. As to the rate of interest due thereon, however, the Court note
that the same should be reduced to 6% per annum considering the fact that the
obligation involved herein does not partake of a loan or forbearance of money.
RODRIGO RIVERA vs. SPOUSES SALVADOR CHUA AND VIOLETA S. CHUA

G.R. No. 184458 (consolidated), January 14, 2015, J. Perez
There are four instances when demand is not necessary to constitute the
debtor in default: (1) when there is an express stipulation to that effect; (2) where
the law so provides; (3) when the period is the controlling motive or the principal
inducement for the creation of the obligation; and (4) where demand would be
useless. In the first two paragraphs, it is not sufficient that the law or obligation
fixes a date for performance; it must further state expressly that after the period
lapses, default will commence.
Corollary thereto, Art. 2209 solidifies the consequence of payment of interest
as an indemnity for damages when the obligor incurs in delay.
Art. 2209 is specifically applicable in this instance where: (1) the obligation is
for a sum of money; (2) the debtor, Rivera, incurred in delay when he failed to pay
on or before 31 Decem-ber 1995; and (3) the Promissory Note provides for an
indemnity for damages upon default of Rivera which is the payment of a 5%
monthly interest from the date of default.
Facts:
The parties were friends of long standing having known each other since
1973. In February 1995, Rivera obtained a loan from the Spouses Chua, in the tune
of PhP 120,000.00 embodied in a promissory note with stipulations as to monthly
interest from default and collec-tion fees. Three years have passed from the
maturity date, when Rivera issued two (2) checks in favor of Chua as payment for
the loan, which, upon presentment, were dishonored for the reason account
closed.
In their collection suit, Spouses Chua alleged that they have repeatedly
demanded payment from Rivera to no avail. In his Answer, Rivera claimed forgery of
the subject Promis-sory Note and denied his indebtedness thereunder. From the
MeTC to the CA, the monetary claim of Spouses Chua was sustained.
Issues:
1. Whether or not the assailed promissory note is a negotiable instrument
and thus de-mand is no longer necessary to hold the promissor liable
thereunder.
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2. Whether or not the courts a quo are correct in holding that Rivera is
liable for interest and not penalties.
Ruling:
1. NO, the promissory note is not a negotiable instrument and demand too is
no longer necessary because the law is explicit that when the debtor fails
to pay upon maturity date, when the obligation is due and demandable,
he therefore incurs delay.
Rivera argues that even assuming the validity of the Promissory Note,
demand was still necessary in order to charge him liable thereunder. Rivera argues
that it was grave error on the part of the appellate court to apply [Sec. 70 of the
NIL].
The Court agrees that the subject promissory note is not a negotiable
instrument and the provisions of the NIL do not apply to this case. Sec. 1 of the NIL
requires the concurrence of the following elements to be a negotiable instrument:
a) It must be in writing and signed by the maker or drawer;
b) Must contain an unconditional promise or order to pay a sum certain in
money;
c) Must be payable on demand, or at a fixed or determinable future time;
d) Must be payable to order or to bearer; and
e) Where the instrument is addressed to a drawee, he must be named or
otherwise indi-cated therein with reasonable certainty.
On the other hand, Sec. 184 of the NIL defines what negotiable promissory note
is:
Sec. 184. Promissory Note, Defined. A negotiable promissory note
within the mea-ning of this Act is an unconditional promise in writing
made by one person to another, signed by the maker, engaging to pay on
demand, or at a fixed or determinable future time, a sum certain in
money to order or to bearer. Where a note is drawn to the makers own
order, it is not complete until indorsed by him.
The Promissory Note in this case is made out to specific persons, herein
respondents, the Spouses Chua, and not to order or to bearer, or to the order of the
Spouses Chua as payees. However, even if Riveras Promissory Note is not a
negotiable instrument and therefore outside the coverage of Sec. 70 of the NIL
which provides that presentment for payment is not necessary to charge the person
liable on the instrument, Rivera is still liable under the terms of the Pro-missory
Note that he issued.
The Promissory Note is unequivocal about the date when the obligation falls
due and becomes demandable31 December 1995. As of 1 January 1996, Rivera
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had already incurred in delay when he failed to pay the amount of PhP 120,000.00
due to the Spouses Chua on 31 December 1995 under the Promissory Note.
Art. 1169 of the Civil Code explicitly provides:
Art. 1169. Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially demands from them
the fulfillment of their obli-gation.
However, the demand by the creditor shall not be necessary in order that
delay may exist:
1) When the obligation or the law expressly so declare; or
2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for
the establishment of the contract; or
3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform. In reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other
begins.
There are four instances when demand is not necessary to constitute the
debtor in default: (1) when there is an express stipulation to that effect; (2) where
the law so provides; (3) when the period is the controlling motive or the principal
inducement for the creation of the obligation; and (4) where demand would be
useless. In the first two paragraphs, it is not sufficient that the law or obligation
fixes a date for performance; it must further state expressly that after the period
lapses, default will commence.
Corollary thereto, Art. 2209 solidifies the consequence of payment of interest
as an indemnity for damages when the obligor incurs in delay:
Art. 2209. If the obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed
upon, and in the absence of stipulation, the legal interest, which is six
percent per annum.
Art. 2209 is specifically applicable in this instance where: (1) the obligation is
for a sum of money; (2) the debtor, Rivera, incurred in delay when he failed to pay
on or before 31 Decem-ber 1995; and (3) the Promissory Note provides for an
indemnity for damages upon default of Rivera which is the payment of a 5%
monthly interest from the date of default.
2. YES, Rivera is liable interest liabilities and not penalties.
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[The Court does] not consider the stipulation on payment of interest in this
case as a penal clause although Rivera, as obligor, assumed to pay additional 5%
monthly interest on the principal amount of PhP 120,000.00 upon default.
The penal clause is generally undertaken to insure performance and works as
either, or both, punishment and reparation. It is an exception to the general rules on
recovery of losses and damages. As an exception to the general rule, a penal clause
must be specifically set forth in the obligation.
In high relief, the stipulation in the Promissory Note is designated as payment
of interest, not as a penal clause, and is simply an indemnity for damages incurred
by the Spouses Chua because Rivera defaulted in the payment of the amount of PhP
120,000.00. The measure of damages for the Riveras delay is limited to the interest
stipulated in the Promissory Note. In apt instances, in default of stipulation, the
interest is that provided by law.
In this instance, the parties stipulated that in case of default, Rivera will pay
interest at the rate of 5% a month or 60% per annum. On this score, the appellate
court ruled:
It bears emphasizing that the undertaking based on the note clearly
states the date of payment to be 31 December 1995. Given this
circumstance, demand by the creditor is no longer necessary in order
that delay may exist since the contract itself already expressly so
declares. The mere failure of [Spouses Chua] to immediately demand or
collect payment of the value of the note does not exonerate [Rivera] from
his liability therefrom. Verily, the trial court committed no reversible error
when it imposed interest from 1 January 1996 on the ratiocination that
[Spouses Chua] were relieved from making demand under Art. 1169 of
the Civil Code.
xxxx xxxx
As observed by [Rivera], the stipulated interest of 5% per month or 60%
per annum in addition to legal interests and attorneys fees is, indeed,
highly iniquitous and unreasonable. Stipulated interest rates are illegal if
they are unconscionable and the Court is allowed to temper interest rates
when necessary. Since the interest rate agreed upon is void, the parties
are considered to have no stipulation regarding the interest rate, thus,
the rate of interest should be 12% per annum computed from the date of
judicial or extrajudicial demand.
The appellate court found the 5% a month or 60% per annum interest rate,
on top of the legal interest and attorneys fees, steep, tantamount to it being illegal,
iniquitous and uncons-cionable.
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At the time interest accrued from 1 January 1996, the date of default under
the Promissory Note, the then prevailing rate of legal interest was 12% per annum
under Central Bank (CB) Circular No. 416 in cases involving the loan or forbearance
of money. Thus, the legal interest accruing from the Promissory Note is 12% per
annum from the date of default on 1 January 1996.
However, the 12% per annum rate of legal interest is only applicable until 30
June 2013, before the advent and effectivity of [BSP] Circular No. 799, Series of
2013 reducing the rate of legal interest to 6% per annum. Pursuant to [the Courts]
ruling in Nacar vs. Gallery Frames, BSP Circular No. 799 is prospectively applied
from 1 July 2013. In short, the applicable rate of legal interest from 1 January 1996,
the date when Rivera defaulted, to date when this Decision becomes final and
executor is divided into two periods reflecting two rates of legal interest: (1) 12%
per annum from 1 January 1996 to 30 June 2013; and (2) 6% per annum froom 1
July 2013 to date when this Decision becomes final and executory.
As for the legal interest accruing from 11 June 1999, when judicial demand
was made, to the date when this Decision becomes final and executory, such is
likewise divided into two periods: (1) 12% per annum from 11 June 1999, the date of
judicial demand to 30 June 2013; and (2) 6% per annum from 1 July 2013 to date
when this Decision becomes final and executor.31 [The Court anchors the]
imposition of interest on interest due earning legal interest on Art. 2212 of the Civil
Code which provides that interest due shall earn legal interest from the time it is
judicially demanded, although the obligation may be silent on this point.
From the time of judicial demand, 11 June 1999, the actual amount owed by
Rivera to the Spouses Chua could already be determined with reasonable certainty
given the wording of the Promissory Note.
JOINT AND SOLIDARY OBLIGATION
SPOUSES
RODOLFO BEROT AND LILIA BEROT vs. FELIPE C. SIAPNO
G.R. No. 188944, July 9, 2014, CJ. Sereno
As previous ruled by the Court, The well entrenched rule is that solidary
obligations cannot be inferred lightly. They must be positively and clearly
expressed. A liability is solidary only when the obligation expressly so states, when
the law so provides or when the nature of the obligation so requires. Respondent
was not able to prove by a preponderance of evidence that petitioners' obligation to
him was solidary. Hence, applicable to this case is the presumption under the law
that the nature of the obligation herein can only be considered as joint. It is
incumbent upon the party alleging otherwise to prove with a preponderance of
evidence that petitioners' obligation under the loan contract is indeed solidary in
character.
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Facts:
Macaria Berot (or "Macaria") and spouses Rodolfo and Lilia Berot (Spouses
Berot) obtained a loan from Felipe C. Siapno (Siapno) payable within one year
together with interest thereon at the rate of 2% per annum from that date until fully
paid. As security for the loan, Macaria, and Spouses Berot mortgaged to Siapno a
parcel of land situated in Banaoang, Calasiao, Pangasinan in the names of Macaria
and her husband Pedro Berot (or "Pedro"), deceased. On June 23, 2003, Macaria
died.
Because of the mortgagors default, Siapno filed an action against them for
foreclosure of mortgag eand damages on in the RTC. In answer, Spouses Berot
alleged that the contested property was the inheritance of the former from his
deceased father, Pedro; that on said property is their family home; that the
mortgage is void as it was constituted over the family home without the consent of
their children, who are the beneficiaries thereof; that their obligation is only joint;
and that the lower court has no jurisdiction over Macaria for the reason that no
summons was served on her as she was already dead.
With leave of court, the complaint was amended by substituting the estate of
Macaria in her stead. Thus, the defendants named in the amended complaint are
now the "ESTATE OF MACARIA BEROT, represented by Rodolfo A. Berot, RODOLFO A.
BEROT and LILIA P. BEROT".
After trial, the lower court ruled in favor of Siapno, allowing the foreclosure if
the subject mortgage and order Spouses Berot to pay Siapno, within 90 days, the
amount of mortgage and the interest plus damages. If within the aforestated 90-day
period the Spouses Berot fail to pay Siapno, the sale of the property subject of the
mortgage shall be made and the proceeds of the sale to be delivered to Siapno to
cover the debt and charges mentioned above, and after such payments the excess,
if any shall be delivered to the Spouses Berot. Subsequent motion for
reconsideration was denied. On appeal, CA affirmed the decision of the RTC with
modification as to damages.
Issue:
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Whether the obligation entered into is joint.
Ruling:
The Court rules that it is joint.
Under Article 1207 of the Civil Code of the Philippines, the general rule is that
when there is a concurrence of two or more debtors under a single obligation, the
obligation is presumed to be joint:
Art. 1207. The concurrence of two or more creditors or of two or more
debtors in one and the same obligation does not imply that each one of the
former has a right to demand, orthat each one of the latter is bound to
render, entire compliance with the prestations. There is a solidary liability
only when the obligation expressly so states, or when the law or the nature of
the obligation requires solidarity.
The law further provides that to consider the obligation as solidary in nature,
it must expressly be stated as such, or the law or the nature of the obligation itself
must require solidarity. In PH Credit Corporation v. Court of Appeals, the Court held
that:
A solidary obligation is one in which each of the debtors is liable

for the entire obligation, and each of the creditors is entitled to
demand the satisfaction of the whole obligation from any or all of the
debtors. On the other hand, a joint obligation is one in which each
debtors is liable only for a proportionate part of the debt, and the
creditor is entitled to demand only a proportionate part of the credit
from each debtor. The well entrenched rule is that solidary obligations
cannot be inferred lightly. They must be positively and clearly
expressed. A liability is solidary "only when the obligation expressly so
states, when the law so provides or when the nature of the obligation
so requires."
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The testimony of petitioner Rodolfo only established that there was that
existing loan to respondent, and that the subject property was mortgaged as
security for the said obligation. His admission of the existence of the loan made him
and his late mother liable to respondent. We have examined the contents of the real
estate mortgagebut found no indication in the plain wordings of the instrument that
the debtors the late Macaria and herein petitioners had expressly intended to
make their obligation to respondent solidary in nature. Absent from the mortgage
are the express and indubitable terms characterizing the obligation as solidary.
Respondent was not able to prove by a preponderance of evidence that petitioners'
obligation to him was solidary. Hence, applicable to this case is the presumption
under the law that the nature of the obligation herein can only be considered as
joint. It is incumbent upon the party alleging otherwise to prove with a
preponderance of evidence that petitioners' obligation under the loan contract is
indeed solidary in character.
OLONGAPO CITY vs. SUBIC WATER AND SEWERAGE CO., INC.

G.R. No. 171626, August 6, 2014, J. Brion
Solidary liability must be expressly stated. In the present case, the joint and
several liability of Subic Water and OCWD was nowhere clear in the agreement. The
agreement simply and plainly stated that Olongapo City and OCWD were only
requesting Subic Water to be a co-maker, in view of its assumption of OCWDs water
operations. Under these circumstances, Olongapo City cannot proceed after Subic
Water for OCWDs unpaid obligations. The law explicitly states that solidary liability
is not presumed and must be expressly provided for. Not being a surety, Subic
Water is not an insurer of OCWDs obligations under the compromise agreement.
Facts:
The Olongapo City filed a complaint for sum of money and damages against
Olongapo City Water District (OCWD). It alleged that OCWD failed to pay its
electricity bills to Olongapo City and remit its payment under the contract to pay,
pursuant to OCWDs acquisition of Olongapo Citys water system. In the interim,
pursuant to a Joint Venture Agreement (JVA), Subic Water a new corporate entity
was incorporated.
Subic Water was granted the franchise to operate and to carry on the
business of providing water and sewerage services in the Subic Bay Free Port Zone,
as well as in Olongapo City. Hence, Subic Water took over OCWDs water operations
in Olongapo City. To finally settle their money claims against each other, Olongapo
City and OCWD entered into a compromise agreement.
The compromise agreement also contained a provision regarding the parties
request that Subic Water, Philippines, which took over the operations of the
defendant Olongapo City Water District be made the co-maker for OCWDs
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obligations. Mr. Noli Aldip, then chairman of Subic Water, acted as its representative
and signed the agreement on behalf of Subic Water.
To enforce the compromise agreement, Olongapo City filed a motion for the
issuance of a writ of execution with the RTC. It granted the motion, but did not issue
the corresponding writ of execution. Almost four years later, the Olongapo City,
prayed again for the issuance of a writ of execution against OCWD.
OCWDs former counsel, filed a manifestation alleging that OCWD had
already been dissolved and that Subic Water is now the former OCWD. Because of
this assertion, Subic Water also filed a manifestation informing the RTC that as
borne out by the articles of incorporation and general information sheet of Subic
Water defendant OCWD is not Subic Water. The manifestation also indicated that
OCWD was only a ten percent (10%) shareholder of Subic Water; and that its 10%
share was already in the process of being transferred to Olongapo City pursuant to a
Deed of Assignment .
The RTC granted the motion for execution and directed its issuance against
OCWD and/or Subic Water. The CA granted Subic Waters petition for certiorari and
reversed the trial courts rulings.
Issue:
Whether or not Subic Water could be held solidarily liable under the writ of
execution since it was identified as OCWDs co-maker in the compromise agreement
Ruling:
No, solidary liability must be expressly stated.
As the rule stands, solidary liability is not presumed. This stems from Art.
1207 of the Civil Code, which provides: There is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation
requires solidarity.
In the present case, the joint and several liability of Subic Water and OCWD
was nowhere clear in the agreement. The agreement simply and plainly stated that
Olongapo City and OCWD were only requesting Subic Water to be a co-maker, in
view of its assumption of OCWDs water operations. No evidence was presented to
show that such request was ever approved by Subic Waters board of directors.
Under these circumstances, Olongapo City cannot proceed after Subic Water
for OCWDs unpaid obligations. The law explicitly states that solidary liability is not
presumed and must be expressly provided for. Not being a surety, Subic Water is
not an insurer of OCWDs obligations under the compromise agreement. At best,
Subic Water was merely a guarantor against whom Olongapo City can claim,
provided it was first shown that: a) Olongapo City had already proceeded after the
properties of OCWD, the principal debtor; b) and despite this, the obligation under
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the compromise agreement, remains to be not fully satisfied. But Subic Water could
not also be recognized as a guarantor of OCWDs obligations.
EXTINGUISHMENT OF OBLIGATIONS
PAYMENT OR PERFORMANCE
NATIONAL POWER CORPORATION vs. LUCMAN M. IBRAHIM et al.
G.R. No. 175863, February 18, 2015, J. Perez
Article 1242 of the Civil Code is an exception to the rule that a valid payment
of an obligation can only be made to the person to whom such obligation is
rightfully owed. It contemplates a situation where a debtor pays a possessor of
credit i.e., someone who is not the real creditor but appears, under the
circumstances, to be the real creditor. In such scenario, the law considers the
payment to the possessor of credit as valid even as against the real creditor
taking into account the good faith of the debtor. Hence, NAPOCORs payment to
Mangondato of the fees and indemnity due for the subject land as a consequence of
the execution of Civil Case No. 605-92 and Civil Case No. 610-92 could still validly
extinguish its obligation to pay for the same even as against the Ibrahims and
Maruhoms.
Facts:
In 1978, National Power Corporation (NAPOCOR) took possession of a 21,995
square meter parcel of land in Marawi City for the purpose of building thereon a
hydroelectric power plant. Well, in truth, a portion of the said land is privately
owned by Macapanton K. Mangondato as evidenced by a TCT registered in the
latters name. When Mangondato discovered NAPOCORs occupation, Mangondato
demanded compensation for the subject land. At first, NAPOCOR rejected
Mangondatos claim but later on acquiesced and acknowledged Mangondatos right.
However, Mangondato and NAPOCOR failed to agree on the amount of just
compensation. Hence, Mangondato filed a complaint for reconveyance against
NAPOCOR. On the other hand, NAPOCOR filed an expropriation complaint before the
RTC. The RTC in its decision, upholding NAPOCORs right to expropriate the subject
land: and it denied Mangondatos claim for reconveyance. The RTC ordered
NAPOCOR to pay the amount of P21,995,000.00 as just compensation and a
monthly rentals of P15,000.00 per month with 12% interest per annum. Disagreeing
with the amount of just compensation, NAPOCOR filed an appeal with the Court of
Appeals.
While the appeal of NAPOCOR regarding just compensation was still pending
Lucman Ibrahim and Omar Maruhom filed a complaint against Mangondato and
NAPOCOR. Ibrahim and Maruhom asserted that they are the real owners of the
subject land being the lawful heirs of the original proprietor. They alleged that
Mangondato is merely holding the land in trust for them. As the real owners of the
land, they posited they should be the ones entitled to any rental fees or
expropriation indemnity that may be found due for the subject land. In the same
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complaint Ibrahim and Maruhom filed for an issuance of a TRO and a writ of
preliminary injunction enjoin NAPOCOR, during the pendency of the suit, from
making any payments to Mangondato. The RTC granted the TRO and writ of
preliminary injunction.
The appeal of NAPOCOR regarding just compensation was denied. The Court
of Appeals affirmed in toto the RTC decision. Hence, NAPOCOR filed a petition for
review on certiorari with the Supreme Court. The Supreme Court affirmed the
decision of the Court of Appeals. When the said decision of the Supreme Court
became final and executory, Mangondato filed a motion for execution against
NAPOCOR. NAPOCOR, however, pointed out the existence of a TRO and preliminary
injunction issued against any payment for the subject land, the same TRO and
preliminary issued prayed for by Ibrahim and Maruhom. The RTC denied said
defense and ordered the execution of the decision by issuing a notice of
garnishment against NAPOCORs bank accounts.
Back to the case of Ibrahim and Maruhom, the RTC finally rendered a decision
adjudging Ibrahim and Maruhom to be the true owners of the land. The RTC further
ruled that NAPOCOR and Mangondato are solidarily liable for the payment of just
compensation and monthly rentals from the subject land. NAPOCOR filed an appeal
with the CA regarding this decision. While the said appeal is still pending, Ibrahim
and Maruhom were able to secure a writ of execution pending appeal, hence,
Mangondatos money with the SSS were garnished. Ultimately, the CA affirmed the
RTC decision stating that Ibrahim and Maruhom are the true owners of the land.
Hence, this present appeal by NAPOCOR.
Issue:
Whether or not it is correct, in view of the facts and circumstances in this
case, to hold NAPOCOR liable in favor of the Ibrahims and Maruhoms for the rental
fees and expropriation indemnity adjudged due for the subject land
Ruling:
No, NAPOCOR is not liable to the Ibrahims and Maruhoms.
No bad faith may be taken against it in paying Mangondato the rental fees
and expropriation indemnity due the subject land.
The essence of bad faith consists in the deliberate commission of a wrong.
Indeed, the concept has often been equated with malicious or fraudulent motives,
yet distinguished from the mere unintentional wrongs resulting from mere simple
negligence or oversight. A finding of bad faith, thus, usually assumes the presence
of two (2) elements: first, that the actor knew or should have known that a
particular course of action is wrong or illegal, and second, that despite such actual
or imputable knowledge, the actor, voluntarily, consciously and out of his own free
will, proceeds with such course of action. Only with the concurrence of these two
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elements can the Court begin to consider that the wrong committed had been done
deliberately and, thus, in bad faith.
Branch 10 of the Marawi City RTC and the Court of Appeals erred in their
finding of bad faith because they have overlooked the utter significance of one
important fact: that NAPOCORs payment to Mangondato of the rental fees and
expropriation indemnity adjudged due for the subject land in Civil Case No. 605-92
and Civil Case No. 610-92, was required by the final and executory decision in the
said two cases and was compelled thru a writ of garnishment issued by the court
that rendered such decision. In other words, the payment to Mangondato was not a
product of a deliberate choice on the part of the NAPOCOR but was made only in
compliance to the lawful orders of a court with jurisdiction. Since NAPOCOR was
only acting under the lawful orders of a court in paying Mangondato, the Court finds
that no bad faith can be taken against it, even assuming that NAPOCOR may have
had prior knowledge about the claims of the Ibrahims and Maruhoms upon the
subject land and the TRO issued in Civil Case No. 967-93.
Either way, NAPOCOR cannot be made liable to the Ibrahims and Maruhoms:
First. If Mangondato is the real owner of the subject land, then the obligation by
NAPOCOR to pay for the rental fees and expropriation indemnity due the subject
land is already deemed extinguished by the
latters previous payment under the final judgment in Civil Case No. 605-92 and
Civil Case No. 610-92. This would be a simple case of an obligation being
extinguished through payment by the debtor to its creditor.63 Under this scenario,
the Ibrahims and Maruhoms would not even be entitled to receive anything from
anyone for the subject land. Hence, NAPOCOR cannot be held liable to the Ibrahims
and Maruhoms.
Second. the Court, however, can reach the same conclusion even if the
Ibrahims and Maruhoms turn out to be the real owners of the subject land. Should
the Ibrahims and Maruhoms turn out to be the real owners of the subject land,
NAPOCORs previous payment to Mangondato pursuant to Civil Case No. 605-92 and
Civil Case No. 610-92given the absence of bad faith on NAPOCORs part as
previously discussedmay nonetheless be considered as akin to a payment made
in good faith to a person in possession of credit per Article 1242 of the Civil
Code that, just the same, extinguishes its obligation to pay for the rental fees and
expropriation indemnity due for the subject land.
Article 1242 of the Civil Code is an exception to the rule that a valid payment
of an obligation can only be made to the person to whom such obligation is
rightfully owed. It contemplates a situation where a debtor pays a possessor of
credit i.e., someone who is not the real creditor but appears, under the
circumstances, to be the real creditor. In such scenario, the law considers the
payment to the possessor of credit as valid even as against the real creditor
taking into account the good faith of the debtor. Hence, NAPOCORs payment to
Mangondato of the fees and indemnity due for the subject land as a consequence of
the execution of Civil Case No. 605-92 and Civil Case No. 610-92 could still validly
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extinguish its obligation to pay for the same even as against the Ibrahims and
Maruhoms.
LEONARDO BOGNOT vs. RRI LENDING CORPORATION, REPRESENTED BY ITS
GENERAL MANAGER, DARIO J. BERNARDEZ
G.R. No. 180144, September 24, 2014, J. Brion
Payment: Although Article 1271 of the Civil Code provides for a legal
presumption of renunciation of action (in cases where a private document
evidencing a credit was voluntarily returned by the creditor to the debtor), this
presumption is merely prima facie and is not conclusive; the presumption loses
efficacy when faced with evidence to the contrary. The provision merely raises a
presumption, not of payment, but of the renunciation of the credit where more
convincing evidence would be required than what normally would be called for to
prove payment.
Novation: In order to give novation legal effect, the creditor should consent
to the substitution of a new debtor. Novation must be clearly and unequivocally
shown, and cannot be presumed.
Facts:
RRI Lending Corporation is an entity engaged in the business of lending
money to its borrowers within Metro Manila. Petitioner and his younger brother,
Rolando A. Bognot (Bognot siblings), applied for and obtained a loan of P500,000.00
from the respondent, payable on November 30, 1996. The loan was evidenced by a
promissory note and was secured by a post dated check dated November 30, 1996.
Evidence on record shows that the petitioner renewed the loan several times on a
monthly basis. He paid a renewal fee of P54,600.00 for each renewal, issued a new
post-dated check as security, and executed and/or renewed the promissory note
previously issued. The respondent on the other hand, cancelled and returned to the
petitioner the post-dated checks issued prior to their renewal.
Sometime in March 1997, the petitioner applied for another loan renewal. He
again executed as principal and signed Promissory Note payable on April 1, 1997;
his co-maker was again Rolando. Subsequently, the loan was again renewed on a
monthly basis until June 30, 1997. The petitioner purportedly paid the renewal fees
and issued a post-dated check dated June 30, 1997 as security. As had been done
in the past, the respondent superimposed the date June 30, 1997 on the upper
right portion of Promissory Note No. 97-035 to make it appear that it would mature
on the said date.
Several days before the loans maturity, Rolandos wife, Julieta Bognot (Mrs.
Bognot), went to the respondents office and applied for another renewal of the
loan. She issued in favor of the respondent a Promissory Note and International
Bank Exchange (IBE) Check No. 00012522 in the amount of P54,600.00 as renewal
fee. On the excuse that she needs to bring home the loan documents for the Bognot
siblings signatures and replacement, Mrs. Bognot asked the respondents clerk to
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release to her the promissory note. Mrs. Bognot, however, never returned these
documents nor issued a new post-dated check. Consequently, the respondent sent
the petitioner follow-up letters demanding payment of the loan, plus interest and
penalty charges. These demands went unheeded.
The respondent filed a complaint for sum of money before the RTC against
the Bognot siblings. The respondent mainly alleged that the loan renewal payable
on June 30, 1997 which the Bognot siblings applied for remained unpaid; that before
June 30, 1997, Mrs. Bognot applied for another loan extension and issued IBE Check
No. 00012522 as payment for the renewal fee; that Mrs. Bognot convinced the
respondents clerk to release to her the promissory note and the other loan
documents; that since Mrs. Bognot never issued any replacement check, no loan
extension took place and the loan, originally payable on June 30, 1997, became due
on this date; and despite repeated demands, the Bognot siblings failed to pay their
joint and solidary obligation. In his Answer, the petitioner claimed that the complaint
states no cause of action because the respondents claim had been paid, waived,
abandoned or otherwise extinguished. He denied being a party to any loan
application and/or renewal in May 1997.
The RTC ruled in the respondents favor and ordered the Bognot siblings to
pay the amount of the loan, plus interest and penalty charges. It considered the
wordings of the promissory note and found that the loan they contracted was joint
and solidary. It also noted that the petitioner signed the promissory note as a
principal (and not merely as a guarantor), while Rolando was the co-maker. On
appeal, the CA affirmed the RTCs findings. It found the petitioners defense of
payment untenable and unsupported by clear and convincing evidence. It observed
that the petitioner did not present any evidence showing that the check dated June
30, 1997 had, in fact, been encashed by the respondent and the proceeds applied
to the loan, or any official receipt evidencing the payment of the loan.
Issues:
1. Whether the CA committed a reversible error in holding the petitioner
solidarily liable with Rolando
2. Whether the petitioner is relieved from liability by reason of the material
alteration in the promissory note
3. Whether the parties obligation was extinguished by: (i) payment; and (ii)
novation by substitution of debtors.
Ruling:
1. Yes. Under the promissory note, the Bognot Siblings defined the parameters
of their obligation as follows:FOR VALUE RECEIVED, I/WE, jointly and
severally. Although the phrase jointly and severally in the promissory
note clearly and unmistakably provided for the solidary liability of the parties,
we note and stress that the promissory note is merely a photocopy of
the original, which was never produced.
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Under the best evidence rule, when the subject of inquiry is the contents of a
document, no evidence is admissible other than the original document itself
except in the instances mentioned in Section 3, Rule 130 of the Revised Rules
of Court. Other than the promissory note in question, the respondent has not
presented any other evidence to support a finding of solidary liability. As we
earlier noted, both lower courts completely relied on the note when they
found the Bognot siblings solidarily liable. The Court concludes that the
obligation to pay is only joint
2. No. The petitioner raised as defense the alleged material alteration of
Promissory Note. He alleged that the respondents superimposition of the due
date June 30, 1997 on the promissory note without his consent effectively
relieved him of liability. The defense is untenable. Although the respondent
did not dispute the fact of alteration, he nevertheless denied that the
alteration was done without the petitioners consent. Even assuming that the
note had indeed been tampered without the petitioners consent, the latter
cannot totally avoid payment of his obligation to the respondent based on the
contract of loan. The Bognot Siblings had applied for and were granted a loan
of P500,000.00 by the respondent. In fact, the petitioner himself admitted his
loan application. This loan was renewed several times by the petitioner, after
paying the renewal. Although the petitioner had insisted that the loan had
been extinguished, no other evidence was presented to prove payment other
than the cancelled and returned post-dated check. Petitioner cannot validly
deny his obligation and liability to the respondent solely on the ground that
the Promissory Note in question was tampered.
3. No to both. The petitioner failed to satisfactorily prove that his obligation had
already been extinguished by payment. Petitioner failed to present any
evidence that the respondent had in fact encashed his check and applied the
proceeds to the payment of the loan. Neither did he present official receipts
evidencing payment, nor any proof that the check had been dishonored.
Although Article 1271 of the Civil Code provides for a legal presumption of
renunciation of action (in cases where a private document evidencing a credit
was voluntarily returned by the creditor to the debtor), this presumption is
merely prima facie and is not conclusive; the presumption loses efficacy
when faced with evidence to the contrary. The provision merely raises a
presumption, not of payment, but of the renunciation of the
credit where more convincing evidence would be required than what
normally would be called for to prove payment. No cash payment was proven
by the petitioner. The cancellation and return of the check dated April 1,
1997, simply established his renewal of the loan not the fact of payment.
With respect to novation, petitioner contends that novation took place
through a substitution of debtors when Mrs. Bognot renewed the loan and
assumed the debt. He alleged that Mrs. Bognot assumed the obligation by
paying the renewal fees and charges, and by executing a new promissory
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note. He further claimed that she issued her own check to cover the renewal
fees, which fact, according to the petitioner, was done with the respondents
consent.
Contrary to the petitioners contention, Mrs. Bognot did not substitute the
petitioner as debtor. She merely attempted to renew the original loan by
executing a new promissory note and check. The purported one month
renewal of the loan, however, did not push through, as Mrs. Bognot did not
return the documents or issue a new post dated check. Since the loan was
not renewed for another month, the original due date, June 30, 1997,
continued to stand. More importantly, the respondent never agreed to release
the petitioner from his obligation. In order to give novation legal effect, the
creditor should consent to the substitution of a new debtor. Novation must
be clearly and unequivocally shown, and cannot be presumed.
Since the petitioner failed to show that the respondent assented to the
substitution, no valid novation took place with the effect of releasing the
petitioner
from
his
obligation
to
the
respondent.
Moreover, in the absence of showing that Mrs. Bognot and the respondent
had agreed to release the petitioner, the respondent can still enforce the
payment of the obligation against the original debtor. Mere acquiescence to
the renewal of the loan, when there is clearly no agreement to release the
petitioner from his responsibility, does not constitute novation.
ELIZABETH DEL CARMEN vs. SPOUSES RESTITUTO SABORDO and MIMA
MAHILUM-SABORDO
G.R. No. 181723, August 11, 2014, J. Peralta
It is settled that compliance with the requisites of a valid consignation is
mandatory. Failure to comply strictly with any of the requisites will render the
consignation void. One of these requisites is a valid prior tender of payment. In the
instant case, the SC finds no cogent reason to depart from the findings of the CA
and the RTC that Del Carmen and her co-heirs failed to make a prior valid tender of
payment to Sabordo.
Facts:
Sometime in 1961, the Suico spouses, along with several business partners,
entered into a business venture by establishing a rice and com mill. As part of their
capital, they obtained a loan from DBP, and to secure the said loan, four parcels of
land owned by the Suico spouses and another lot owned by their business partner,
Juliana Del Rosario, were mortgaged.
Subsequently, the Suico spouses and their business partners failed to pay
their loan obligations forcing DBP to foreclose the mortgage. After the Suico spouses
and their partners failed to redeem the foreclosed properties, DBP consolidated its
ownership over the same. Nonetheless, DBP later allowed the Suico spouses and
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Flores spouses, as substitutes for Juliana Del Rosario, to repurchase the subject lots
by way of a conditional sale for the sum of P240,571.00.
The Suico and Flores spouses were able to pay the downpayment and the
first monthly amortization, but no monthly installments were made thereafter.
Threatened with the cancellation of the conditional sale, the Suico and Flores
spouses sold their rights over the said properties to herein respondents Sabordo,
subject to the condition that the latter shall pay the balance of the sale price.
On September 3, 1974, Sabordo and the Suico and Flores spouses executed a
supplemental agreement whereby they affirmed that what was actually sold to
Sabordo were Lots 512 and 513, while Lots 506 and 514 were given to them as
usufructuaries. DBP approved the sale of rights of the Suico and Flores spouses in
favor of Sabordo. Subsequently, Sabordo were able to repurchase the foreclosed
properties of the Suico and Flores spouses.
On September 13, 1976, respondent Restituto Sabordo (Restituto) filed with
the then Court of First Instance of Negros Occidental an original action for
declaratory relief with damages and prayer for a writ of preliminary injunction
raising the issue of whether or not the Suico spouses have the right to recover from
Sabordo Lots 506 and 514.
The RTC ruled in favor of the Suico spouses directing that the latter have until
August 31, 1987 within which to redeem or buy back from respondents Lots 506 and
514. On appeal, the CA modified the RTC decision by giving the Suico spouses until
October 31, 1990 within which to exercise their option to purchase or redeem the
subject lots from respondents by paying the sum of P127,500.00.
The CA granted the Suico spouses an additional period of 90 days from notice
within which to exercise their option to purchase or redeem the disputed lots. In the
meantime, Toribio Suico (Toribio) died leaving his widow, Eufrocina, and several
others, including herein Del Carmen, as legal heirs. Later, they discovered that
Sabordo mortgaged Lots 506 and 514 with Republic Planters Bank (RPB) as security
for a loan which, subsequently, became delinquent.
Thereafter, claiming that they are ready with the payment of P127,500.00,
but alleging that they cannot determine as to whom such payment shall be made,
Del Carmen and her co-heirs filed a Complaint with the RTC seeking to compel
herein Sabordo and RPB to interplead and litigate between themselves their
respective interests on the abovementioned sum of money.
The Complaint also prayed that Sabordo be directed to substitute Lots 506
and 514 with other real estate properties as collateral for their outstanding
obligation with RPB and that the latter be ordered to accept the substitute collateral
and release the mortgage on Lots 506 and 514. Upon filing of their complaint, the
heirs of Toribio deposited the amount of P127,500.00 with the RTC.
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The RTC rendered judgment, dismissing the complaint of Del Carmen and her
co-heirs for lack of merit. Del Carmen and her co-heirs filed an appeal with the CA
contending that the judicial deposit or consignation of the amount of P127,500.00
was valid and binding and produced the effect of payment of the purchase price of
the subject lots. In its assailed Decision, the CA denied the above appeal for lack of
merit and affirmed the disputed RTC Decision.
Issue:
Whether or not the consignation which Del Carmen and her co-heirs made
was a judicial deposit based on a final judgment and, as such, does not require
compliance with the requirements of Articles 1256 and 1257 of the Civil Code
Ruling:
No, the petition lacks merit.
Consignation is the act of depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept or refuses to accept payment, and
it generally requires a prior tender of payment. It should be distinguished from
tender of payment which is the manifestation by the debtor to the creditor of his
desire to comply with his obligation, with the offer of immediate performance.
Tender is the antecedent of consignation, that is, an act preparatory to the
consignation, which is the principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain. Tender of payment may
be extrajudicial, while consignation is necessarily judicial, and the priority of the first
is the attempt to make a private settlement before proceeding to the solemnities of
consignation. Tender and consignation, where validly made, produces the effect of
payment and extinguishes the obligation.
In the instant case, Del Carmen and her co-heirs, upon making the deposit
with the RTC, did not ask the trial court that Sabordo be notified to receive the
amount that they have deposited. In fact, there was no tender of payment. Instead,
what Del Carmen and her co-heirs prayed for is that Sabordo and RPB be directed to
interplead with one another to determine their alleged respective rights over the
consigned amount; that Sabordo be likewise directed to substitute the subject lots
with other real properties as collateral for their loan with RPB and that RPB be also
directed to accept the substitute real properties as collateral for the said loan.
Nonetheless, the RTC correctly ruled that interpleader is not the proper remedy
because RPB did not make any claim whatsoever over the amount consigned by Del
Carmen and her co-heirs with the court.
Tender of payment involves a positive and unconditional act by the obligor of
offering legal tender currency as payment to the obligee for the formers obligation
and demanding that the latter accept the same. In the instant case, the Court finds
no cogent reason to depart from the findings of the CA and the RTC that Del Carmen
and her co-heirs failed to make a prior valid tender of payment to Sabordo.
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It is settled that compliance with the requisites of a valid consignation is
mandatory. Failure to comply strictly with any of the requisites will render the
consignation void. One of these requisites is a valid prior tender of payment.
Under Article 1256, the only instances where prior tender of payment is
excused are: (1) when the creditor is absent or unknown, or does not appear at the
place of payment; (2) when the creditor is incapacitated to receive the payment at
the time it is due; (3) when, without just cause, the creditor refuses to give a
receipt; (4) when two or more persons claim the same right to collect; and (5) when
the title of the obligation has been lost. None of these instances are present in the
instant case. Hence, the fact that the subject lots are in danger of being foreclosed
does not excuse petitioner and her co-heirs from tendering payment to
respondents, as directed by the court.
NETLINK COMPUTER INCORPORATED vs. ERIC DELMO
G.R No. 160827, June 18, 2014, J. Bersamin
As a general rule, all obligations shall be paid in Philippine currency. However,
the contracting parties may stipulate that foreign currencies may be used for
settling obligations. This notwithstanding, the practice of a company of paying its
sales agents in US dollars must be taken into consideration.
Facts:
On November 3, 1991, Netlink Computer, Inc. Products and Services hired
Eric S. Delmo as account manager. Delmo worked in the field most of the time. He
and his fellow account managers were not required to accomplish time cards to
record their personal presence in the office of Netlink. He requested payment of his
commissions, but Netlink refused and only gave him partial cash advances
chargeable to his commissions. Later on, Netlink began to nitpick and fault find, like
stressing his supposed absences and tardiness. In order to force him to resign,
Netlink issued several memoranda detailing his supposed infractions of the
companys attendance policy. Despite the memoranda, Delmo continued to
generate huge sales for Netlink. On November 28, 1996, Delmo was shocked when
he was refused entry into the company premises by the security guard pursuant to
a memorandum to that effect. This incident prompted Delmo to file a complaint for
illegal dismissal.
Netlink pointed out that Delmo had become very lax in his obligations, with
the other account managers eventually having outperformed him. Netlink asserted
that warning, reprimand, and suspension memoranda were given to employees who
violated company rules and regulations, but such actions were considered as a
necessary management tool to instill discipline. The CA ruled in favor of Delmo.
Netlink on the other hand appealed but only as to the judgment stating that
commission to be paid is to be in dollars.
Issue:
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Whether or not the payment of the commissions should be in US dollars.
Ruling:
Yes, it should.
As a general rule, all obligations shall be paid in Philippine currency. However,
the contracting parties may stipulate that foreign currencies may be used for
settling obligations.
In the case at bar, here was no written contract between Netlink and Delmo
stipulating that the latters commissions would be paid in US dollars. The absence of
the contractual stipulation notwithstanding, Netlink was still liable to pay Delmo in
US dollars because the practice of paying its sales agents in US dollars for their US
dollar-denominated sales had become a company policy. This was impliedly
admitted by Netlink when it did not refute the allegation that the commissions
earned by Delmo and its other sales agents had been paid in US dollars. Instead of
denying the allegation, Netlink only sought a declaration that the US dollar
commissions be paid using the exchange rate at the time of sale.
LOSS OF THE THING DUE
COMGLASCO CORPORATION/AGUILA GLASS vs. SANTOS CAR CHECK CENTER
CORPORATION
G.R. No. 202989, March 25, 2015, J. Reyes
Relying on Article 1267 of the Civil Code to justify its decision to preterminate its lease with respondent, petitioner invokes the 1997 Asian currency
crisis as causing it much difficulty in meeting its obligations. In Philippine National
Construction Corporation v. CA, the Court held that the payment of lease rentals
does not involve a prestation to do envisaged in Articles 1266 and 1267 which
has been rendered legally or physically impossible without the fault of the
obligor-lessor. Article 1267 speaks of a prestation involving service which has been
rendered so difficult by unforeseen subsequent events as to be manifestly beyond
the contemplation of the parties. To be sure, the Asian currency crisis befell the
region from July 1997 and for sometime thereafter, but petitioner cannot be
permitted to blame its difficulties on the said regional economic phenomenon
because it entered into the subject lease only on August 16, 2000, more than three
years after it began, and by then petitioner had known what business risks it
assumed when it opened a new shop in Iloilo City.
Facts:
Santos Car Check Center Corporation (Santos), owner of a showroom located
at 75 Delgado Street, in Iloilo City, leased out the said space to Comglasco
Corporation (Comglasco), an entity engaged in the sale, replacement and repair of
automobile windshields, for a period of five years at a monthly rental of P60,000.00
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for the first year, P66,000.00 on the second year, and P72,600.00 on the third
through fifth years. Subsequently, Comglasco advised Santos through a letter that it
was pre-terminating their lease contract effective December 1, 2001. Santos
refused to accede to the pre-termination, reminding Comglasco that their contract
was for five years. On January 15, 2002, Comglasco vacated the leased premises
and stopped paying any further rentals. Santos sent several demand letters, which
Comglasco completely ignored. Hence, Santos filed suit for breach of contract.
Summons and a copy of the complaint, along with the annexes, were served
on Comglasco on January 21, 2004, but it moved to dismiss the complaint for
improper service. The Regional Trial Court (RTC) of Iloilo City, dismissed the motion
and ordered the summons served anew. On June 28, 2004, Comglasco filed its
Answer. Santos moved for a judgment on the pleadings, which the RTC granted.
Thereafter, the trial court rendered its judgment in favor of Santos ordering
Comglasco to comply with its obligation under the Contract of Lease and to pay
Santos attorneys fees, expenses and damages.
Santos moved for execution pending Comglascos appeal, which the trial
court granted. On appeal, CA affirmed the judgement of the RTC but reduced the
award of attorneys fees to P100,000.00 and deleted the award of litigation
expenses and exemplary damages. Hence, this petition.
Issue:
Whether Comglasco was entitled to pre-terminate the contract
Ruling:
Comglasco maintains that the RTC was wrong to rule that its answer to
Santos complaint tendered no issue, or admitted the material allegations therein;
that the court should have heard it out on the reason it invoked to justify its action
to pre-terminate the parties lease; that therefore a summary judgment would have
been the proper recourse, after a hearing.
In Philippine National Construction Corporation v. CA (PNCC), which also
involves the termination of a lease of property by the lessee due to financial, as
well as technical, difficulties, the Court ruled:
The obligation to pay rentals or deliver the thing in a contract of lease
falls within the prestation to give; hence, it is not covered within the
scope of Article 1266. At any rate, the unforeseen event and causes
mentioned by petitioner are not the legal or physical impossibilities
contemplated in said article. Besides, petitioner failed to state
specifically the circumstances brought about by the abrupt change in
the political climate in the country except the alleged prevailing
uncertainties in government policies on infrastructure projects.
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The principle of rebus sic stantibus neither fits in with the facts of the case.
Under this theory, the parties stipulate in the light of certain prevailing conditions,
and once these conditions cease to exist, the contract also ceases to exist. This
theory is said to be the basis of Article 1267 of the Civil Code, which provides:
Art. 1267. When the service has become so difficult as to be manifestly
beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.
This article, which enunciates the doctrine of unforeseen events, is not,
however, an absolute application of the principle of rebus sic stantibus, which would
endanger the security of contractual relations. The parties to the contract must be
presumed to have assumed the risks of unfavorable developments. It is therefore
only in absolutely exceptional changes of circumstances that equity demands
assistance for the debtor.
In this case, Comglasco wants this Court to believe that the abrupt change in
the political climate of the country after the EDSA Revolution and its poor financial
condition rendered the performance of the lease contract impractical and inimical
to the corporate survival of the petitioner.
This Court cannot subscribe to this argument. Relying on Article 1267 of
the Civil Code to justify its decision to pre-terminate its lease with Santos,
Comglasco invokes the 1997 Asian currency crisis as causing it much difficulty in
meeting its obligations. But in PNCC, the Court held that the payment of lease
rentals does not involve a prestation to do envisaged in Articles 1266 and 1267
which has been rendered legally or physically impossible without the fault of
the obligor-lessor. Article 1267 speaks of a prestation involving service which has
been rendered so difficult by unforeseen subsequent events as to be manifestly
beyond the contemplation of the parties. To be sure, the Asian currency crisis befell
the region from July 1997 and for sometime thereafter, but Comglasco cannot be
permitted to blame its difficulties on the said regional economic phenomenon
because it entered into the subject lease only on August 16, 2000, more than three
years after it began, and by then Comglasco had known what business risks it
assumed when it opened a new shop in Iloilo City.
This situation is no different from the Courts finding in PNCC wherein PNCC
cited the assassination of Senator Benigno Aquino Jr. (Senator Aquino) on August 21,
1983 and the ensuing national political and economic crises as putting it in such a
difficult business climate that it should be deemed released from its lease contract.
The Court held that the political upheavals, turmoils, almost daily mass
demonstrations, unprecedented inflation, and peace and order deterioration which
followed Senator Aquinos death were a matter of judicial notice, yet despite this
business climate, PNCC knowingly entered into a lease with therein respondents on
November 18, 1985, doing so with open eyes of the deteriorating conditions of the
country. The Court rules now, as in PNCC, that there are no absolutely exceptional
changes of circumstances that equity demands assistance for the debtor.
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NOVATION
ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS vs. DAN T.
LIM, doing business under the name and style of QUALITY PAPERS &
PLASTIC PRODUCTS ENTERPRISES
G.R. No. 206806, June 25, 2014, J. Leonen
Arco Pulp and Paper had an alternative obligation whereby it would either
pay Dan T. Lim the value of the raw materials or deliver to him their finished
products of equivalent value. When petitioner Arco Pulp and Paper tendered a
check to Lim in partial payment for the scrap papers, they exercised their option to
pay the price. This choice was also shown by the terms of the memorandum of
agreement which declared in clear terms that the delivery of petitioner Arco Pulp
and Papers finished products would be to a third person, thereby extinguishing the
option to deliver the finished products of equivalent value to respondent. The trial
court erroneously ruled that the execution of the memorandum of agreement
constituted a novation of the contract between the parties. Novation extinguishes
an obligation between two parties when there is a substitution of objects or debtors
or when there is subrogation of the creditor. The consent of the creditor must be
secured for the novation to be valid. In this case, Lim was not privy to the
memorandum of agreement, thus, his conformity to the contract need not be
secured. If the memorandum of agreement was intended to novate the original
agreement between the parties, respondent must have first agreed to the
substitution of Eric Sy as his new debtor.
Facts:
Dan T. Lim works in the business of supplying scrap papers, cartons, and
other raw materials, under the name Quality Paper and Plastic Products,
Enterprises, to factories engaged in the paper mill business. Lim delivered scrap
papers worth 7,220,968.31 to Arco Pulp and Paper Company, Inc. through its Chief
Executive Officer and President, Candida A. Santos. The parties allegedly agreed
that Arco Pulp and Paper would either pay Dan T. Lim the value of the raw materials
or deliver to him their finished products of equivalent value.
Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and
Paper issued a post-dated check as partial payment, with the assurance that the
check would not bounce. When he deposited the check, it was dishonored for being
drawn against a closed account. On the same day, Arco Pulp and Paper and a
certain Eric Sy executed a memorandum of agreement where Arco Pulp and Paper
bound themselves to deliver their finished products to Megapack Container
Corporation, owned by Eric Sy, for his account. According to the memorandum, the
raw materials would be supplied by Dan T. Lim, through his company, Quality Paper
and Plastic Products.
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Despite repeated demands by Lim, Arco Pulp and Paper did not pay. Lim filed
a complaint for collection of sum of money with prayer for attachment with the RTC.
The trial court rendered a judgment in favor of Arco Pulp and Paper and dismissed
the complaint, holding that when Arco Pulp and Paper and Eric Sy entered into the
memorandum of agreement, novation took place, which extinguished Arco Pulp and
Papers obligation to. Lim. The CA reversed said decision.
Issue:
Whether or not the obligation between the parties was extinguished by
novation
Ruling:
No. The obligation between the parties was an alternative obligation.
The rule on alternative obligations is governed by Article 1199 of the Civil
Code, which states:
Article 1199. A person alternatively bound by different prestations
shall completely perform one of them. The creditor cannot be
compelled to receive part of one and part of the other undertaking.
"In an alternative obligation, there is more than one object, and the
fulfillment of one is sufficient, determined by the choice of the debtor who generally
has the right of election." The right of election is extinguished when the party who
may exercise that option categorically and unequivocally makes his or her choice
known.
The choice of the debtor must also be communicated to the creditor who
must receive notice of it since: The object of this notice is to give the creditor . . .
opportunity to express his consent, or to impugn the election made by the debtor,
and only after said notice shall the election take legal effect when consented by the
creditor, or if impugned by the latter, when declared proper by a competent court.
The appellate court correctly identified the obligation between the parties as
an alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving
the raw materials from respondent, would either pay him the price of the raw
materials or, in the alternative, deliver to him the finished products of equivalent
value.
When petitioner Arco Pulp and Paper tendered a check to respondent in
partial payment for the scrap papers, they exercised their option to pay the price.
Respondents receipt of the check and his subsequent act of depositing it
constituted his notice of petitioner Arco Pulp and Papers option to pay. This choice
was also shown by the terms of the memorandum of agreement, which was
executed on the same day. The memorandum declared in clear terms that the
delivery of petitioner Arco Pulp and Papers finished products would be to a third
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person, thereby extinguishing the option to deliver the finished products of
equivalent value to respondent.
The trial court erroneously ruled that the execution of the memorandum of
agreement constituted a novation of the contract between the parties. When
petitioner Arco Pulp and Paper opted instead to deliver the finished products to a
third person, it did not novate the original obligation between the parties.
The rules on novation are outlined in the Civil Code, thus:
Article 1291. Obligations may be modified by:
1. Changing their object or principal conditions;
2. Substituting the person of the debtor;
3. Subrogating a third person in the rights of the creditor.
Article 1292. In order that an obligation may be extinguished by
another which substitute the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new obligations
be on every point incompatible with each other. (1204)
Article 1293. Novation which consists in substituting a new debtor in
the place of the original one, may be made even without the
knowledge or against the will of the latter, but not without the consent
of the creditor. Payment by the new debtor gives him the rights
mentioned in Articles 1236 and 1237.
Novation extinguishes an obligation between two parties when there is a
substitution of objects or debtors or when there is subrogation of the creditor. It
occurs only when the new contract declares so "in unequivocal terms" or that "the
old and the new obligations be on every point incompatible with each other."
In general, there are two modes of substituting the person of the debtor: (1)
expromision and (2) delegacion. In expromision, the initiative for the change does
not come from and may even be made without the knowledge of the debtor,
since it consists of a third persons assumption of the obligation. As such, it logically
requires the consent of the third person and the creditor. In delegacion, the debtor
offers, and the creditor accepts, a third person who consents to the substitution and
assumes the obligation; thus, the consent of these three persons are necessary.
Both modes of substitution by the debtor require the consent of the creditor.
Novation may also be extinctive or modificatory. It is extinctive when an old
obligation is terminated by the creation of a new one that takes the place of the
former. It is merely modificatory when the old obligation subsists to the extent that
it remains compatible with the amendatory agreement. Whether extinctive or
modificatory, novation is made either by changing the object or the principal
conditions, referred to as objective or real novation; or by substituting the person of
the debtor or subrogating a third person to the rights of the creditor, an act known
Page 134 of 483

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as subjective or personal novation. For novation to take place, the following
requisites must concur:
1.
2.
3.
4.
There must be a previous valid obligation.

The parties concerned must agree to a new contract.
The old contract must be extinguished.
There must be a valid new contract.
The consent of the creditor must also be secured for the novation to be valid:
Novation must be expressly consented to. Moreover, the conflicting intention and
acts of the parties underscore the absence of any express disclosure or
circumstances with which to deduce a clear and unequivocal intent by the parties to
novate the old agreement.
In this case, respondent was not privy to the memorandum of agreement,
thus, his conformity to the contract need not be secured. If the memorandum of
agreement was intended to novate the original agreement between the parties,
respondent must have first agreed to the substitution of Eric Sy as his new debtor.
The memorandum of agreement must also state in clear and unequivocal terms
that it has replaced the original obligation of petitioner Arco Pulp and Paper to
respondent. Neither of these circumstances is present in this case.
Petitioner Arco Pulp and Papers act of tendering partial payment to
respondent also conflicts with their alleged intent to pass on their obligation to Eric
Sy. When respondent sent his letter of demand to petitioner Arco Pulp and Paper,
and not to Eric Sy, it showed that the former neither acknowledged nor consented
to the latter as his new debtor. These acts, when taken together, clearly show that
novation did not take place. Since there was no novation, petitioner Arco Pulp and
Papers obligation to respondent remains valid and existing. Petitioner Arco Pulp and
Paper, therefore, must still pay respondent the full amount of P7,220,968.31.
NOVATION BY SUBROGATION
FORT BONIFACIO DEVELOPMENT CORPORATION vs. VALENTIN L. FONG.
G.R. No. 209370, March 25, 2015, J. Perlas-Bernabe
By virtue of the Deed of Assignment, the assignee is deemed subrogated to
the rights and obligations of the assignor and is bound by exactly the same
conditions as those which bound the assignor. Accordingly, an assignee cannot
acquire greater rights than those pertaining to the assignor. The general rule is that
an assignee of a nonnegotiable chose in action acquires no greater right than what
was possessed by his assignor and simply stands into the shoes of the latter.55
Applying the foregoing, the Court finds that MS Maxco, as the Trade Contractor,
cannot assign or transfer any of its rights, obligations, or liabilities under the Trade
Contract without the written consent of FBDC
Facts:
Page 135 of 483

2015)
FBDC, a domestic corporation engaged in the real estate development
business, entered into a Trade Contract with MS Maxco Company, Inc. (MS Maxco),
then operating under the name L&M Maxco, Specialist Engineering Construction,
for the execution of the structural and partial architectural works of one of its
condominium projects in Taguig City, the Bonifacio Ridge Condominium (Project).
Under the Trade Contract, FBDC had the option to hire other contractors to
rectify any errors committed by MS Maxco by reason of its negligence, act,
omission, or default, as well as to deduct or set-off any amount from the contract
price in such cases. Hence, when MS Maxco incurred delays and failed to comply
with the terms of the Trade Contract, FBDC took over and hired other contractors to
complete the unfinished construction. Unfortunately, corrective work had to likewise
be done on the numerous defects and irregularities caused by MS Maxco, which cost
P11,567,779.12. The Trade Contract likewise provided that MS Maxco is prohibited
from assigning or transferring any of its rights, obligations, or liabilities under the
said Contract without the written consent of FBDC.
Sometime in April 2005, FBDC received a letter from the counsel of Fong
informing it that MS Maxco had already assigned its receivables from FBDC to him
(Fong) by virtue of a notarized Deed of Assignment. Said Deed of Assignment
includes the payment of the FDCs obligation to the latter, which amount was to be
taken from the retention money with FBDC.
Despite Fongs repeated requests, FBDC refused to deliver to Fong the
amount assigned by MS Maxco. This prompted Fong, doing business under the
name VF Industrial Sales to file the instant before the RTC, against MS Maxco or
FBDC. The RTC found FBDC liable to pay Fong. On appeal, the CA denied FBDCs
appeal and affirmed the RTC ruling. FBDCs motion for reconsideration was denied in
a Resolution, hence, this petition.
Issue:
Whether or not FBDC was bound by the Deed of Assignment between MS
Maxco and Fong, and even assuming that it was, whether or not FBDC was liable to
pay Fong the amount representing a portion of MS Maxcos retention money.
Ruling:
Case law states that when a person assigns his credit to another person, the
latter is deemed subrogated to the rights as well as to the obligations of the former.
By virtue of the Deed of Assignment, the assignee is deemed subrogated to the
rights and obligations of the assignor and is bound by exactly the same conditions
as those which bound the assignor. Accordingly, an assignee cannot acquire greater
rights than those pertaining to the assignor. The general rule is that an assignee of
a non-negotiable chose in action acquires no greater right than what was possessed
by his assignor and simply stands into the shoes of the latter.
Page 136 of 483

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Applying the foregoing, the Court finds that MS Maxco, as the Trade
Contractor, cannot assign or transfer any of its rights, obligations, or liabilities under
the Trade Contract without the written consent of FBDC, the Client, in view of Clause
19.0 on Assignment and Sub-letting of the Trade Contract between FBDC and MS
Maxco which explicitly requires the written consent of the Client [FBDC], assign or
transfer any of his rights, obligations or liabilities in sub-letting any portion of the
Works and such consent, if given, shall not relieve the Trade Contractor from any
liability or obligation under this Contract.
Fong, as mere assignee of MS Maxcos rights under the Trade Contract it had
previously entered with FBDC, i.e., the right to recover any credit owing to any
unutilized retention money, is equally bound by the foregoing provision and hence,
cannot validly enforce the same without FBDCs consent.
Without any proof showing that FBDC had consented to the assignment, Fong
cannot validly demand from FBDC the delivery of the sum of P1,577,115.90 that
was supposedly assigned to him by MS Maxco as a portion of its retention money
with FBDC. The practical efficacy of the assignment, although valid between Fong
and MS Maxco, remains contingent on FBDCs consent. Without the happening of
said condition, only MS Maxco, and not Fong, can collect on the credit. Note,
however, that this finding does not preclude any recourse that Fong may take
against MS Maxco. After all, an assignment of credit for a consideration and
covering a demandable sum of money is considered as a sale of personal property.
CONTRACTS
GENERAL PROVISIONS
SM LAND, INC. vs. BASES CONVERSION AND DEVELOPMENT AUTHORITY

AND ARNEL PACIANO D. CASANOVA, ESQ., IN HIS OFFICIAL CAPACITY AS
PRESIDENT AND CEO OF BCDA
G.R. No. 203655, August 13, 2014, J. Velasco Jr.
BCDA and SMLI have agreed to subject SMLIs Original Proposal to
Competitive Challenge. This agreement is the law between the contracting parties
with which they are required to comply in good faith. Verily, it is BCDAs subsequent
unilateral cancellation of this perfected contract which this Court deemed to have
been tainted with grave abuse of discretion. BCDA could not validly renege on its
Page 137 of 483

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obligation to subject the unsolicited proposal to a competitive challenge in view of
this perfected contract, and especially so after BCDA gave its assurance that it
would respect the rights that accrued in SMLIs favor arising from the same.
Facts:
Pursuant to RA 7227 or the Bases Conversion and Development Act of 1992,
the BCDA opened for disposition and development its Bonifacio South Property.
Jumping on the opportunity, petitioner SM Land, Inc. submitted to the BCDA an
unsolicited proposal for the development of the lot through a public-private joint
venture agreement.
Thereafter, the BCDA created a Joint Venture Selection Committee (JV-SC)
following the procedures prescribed NEDA JV Guidelines. The said committee
recommended the acceptance of the unsolicited proposal, which recommendation
was favorably acted upon by the BCDA. The BCDA communicated to petitioner its
acceptance of the unsolicited proposal. Despite its acceptance, however, the BCDA
clarified that its act should not be construed to bind the agency to enter into a joint
venture agreement with the petitioner but only constitutes an authorization granted
to the JV-SC to conduct detailed negotiations with petitioner SMLI.
The JV-SC and SMLI embarked on a series of detailed negotiations, and on July
23, 2010, SMLI submitted its final revised proposal with guaranteed secured
payments amounting to a total of PhP 25.9 billion. Afterwards, upon arriving at
mutually acceptable terms and conditions, a Certification of Successful Negotiations
was issued by the BCDA and signed by both parties. Through the said Certification,
the BCDA undertook to subject SMLIs Original Proposal to Competitive
Challenge and committed itself to commence the activities for the
solicitation for comparative proposals.
Instead of proceeding with the Competitive Challenge, the BCDA sent a letter
to SMLI, stating that it will welcome any voluntary and unconditional proposal to
improve the original offer, with the assurance that the BCDA will nonetheless
respect any right which may have accrued in favor of SMLI. However, the BCDA sent
a memorandum to the Office of the President categorically recommending the
termination of the Competitive Challenge.
Alarmed by this development, SMLI urged the BCDA to proceed with the
Competitive Challenge as agreed upon. However, the BCDA terminated the
Competitive Challenge altogether. Thereafter, the BCDA informed SMLI of the OPs
decision to subject the development of the subject property to public bidding. The
BCDA likewise caused the publication of an Invitation to Bid. This impelled SMLI to
file an Urgent Manifestation with Reiterative Motion to Resolve SMLIs Application
for Temporary Restraining Order and Preliminary Injunction on the same day. The
Court issued the TRO prayed for by petitioner and enjoined respondent BCDA from
proceeding with the new selection process for the development of the property.
Page 138 of 483

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The Court dated August 13, 2014, which granted the petition for certiorari
filed by SMLI and directed BCDA and its president to, among other things, subject
SMLIs duly accepted unsolicited proposal for the development of the Bonifacio
South Property to a competitive challenge. The gravamen of respondents motion is
that BCDA and SMLI do not have a contract that would bestow upon the latter the
right to demand that its unsolicited proposal be subjected to a competitive
challenge. Assuming arguendo the existence of such an agreement between the
parties, respondents contend that the same may be terminated by reasons of public
interest.
Issue:
Whether or not the BCDA gravely abused its discretion in unilaterally aborting
the Competitive Challenge, and in subjecting the development of the project to
public bidding.
Ruling:
The Court is not convinced.
There exists a valid agreement between SMLI and BCDA. There is,
between BCDA and SMLI, a perfected contracta source of rights and reciprocal
obligations on the part of both parties. Consequently, a breach thereof may give
rise
to
a
cause
of
action
against
the
erring
party.
The first requisite, consent, is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. In the
case at bar, when SMLI submitted the first Unsolicited Proposal to BCDA, the
submission constituted an offer to undertake the development of the subject
property. BCDA then entered into negotiations with SMLI until the BCDA
finally accepted the terms of the final unsolicited proposal. Then, to manifest
their assent to the terms thereof and their respective obligations, both parties
respectivelyaffixed their signatures on the Certification of Successful
Negotiations and had it notarized on August 6, 2010. The cause of the agreement
in the case at hand is their interest in the sale or acquisition and development of
the property and their undertaking to perform their respective obligations, among
others, as reflected in the Certificate of Successful Negotiations and in the TOR
issued by BCDA. When the BCDA Board issued, on August 6, 2010, the Certification
of Successful Negotiations, it not only accepted SMLIs Unsolicited Proposal and
declared SMLI eligible to enter into the proposed JV activity.
The elements of a valid contract being present, there thus exists between
SMLI and BCDA a perfected contract, embodied in the Certification of
Successful Negotiations, upon which certain rights and obligations spring
forth, including the commencement of activities for the solicitation for
comparative proposals.
Page 139 of 483

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The NEDA JV Guidelines has the force and effect of law. Under the
Administrative Code of 1987, acts of the President providing for rules of a general or
permanent character in implementation or execution of constitutional or statutory
powers shall be promulgated in Executive Orders (EOs). In other words, it is through
these orders that the President ensures that laws are faithfully executed, by handing
out instructions to subordinate executive officials and the public, in the form of
implementing rules and regulations, on how the law should be executed by
subordinate officials and complied with by the public.
For government contracts and procurement in the Philippines, then President
Gloria Macapagal-Arroyo issued EO 109. As its title indicates, EO 109 streamlined
the rules and procedures on the review and approval of all contracts of
departments, bureaus, offices and agencies of the government, including
government-owned and controlled corporations and their subsidiaries. The NEDA
issued the JV Guidelines providing the procedures for the coagulation of joint
ventures between the government and a private entity. In this regard, attention
must be drawn to the well-established rule that administrative issuances, such
as the NEDA JV Guidelines, duly promulgated pursuant to the rule-making
power granted by statute, have the force and effect of law.
CONSENT
ESSENTIAL REQUISITES
SPOUSES
VICTOR
AND
EDNA
BINUA vs.
LUCIA P.
ONG
G.R. No. 207176, June 18, 2014, J. Reyes
When a person was merely informed that she was convicted of an offense
and that caused her to seek measures to avoid criminal liability, the contracts
entered into by the said person cannot be considered executed under duress,
threat or intimidation. Also, the threat to prosecute for estafa not being an unjust
act, but rather a valid and legal act to enforce a claim, cannot at all be considered
as intimidation.
Facts:
Page 140 of 483

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Edna Binua was found guilty of estafa and was sentenced to imprisonment
from six (6) years and one (1) day of prision mayor, as minimum, to thirty (30) years
of reclusion perpetua, as maximum, for each conviction. Edna was also ordered to
pay the respondent the amount of P2,285,000.00, with ten percent (10%) interest,
and damages. To avoid criminal liability, Edna sought to settle her indebtedness
through the execution of separate real estate mortgages over petitioner Victors
properties.
Thereafter, petitioner Edna filed a motion for new trial, which was granted by
the RTC and subsequently ruled that the presentation of a promissory note novated
the original agreement between them into a civil obligation. Edna, however, failed
to settle her obligation, forcing the respondent to foreclose the mortgage on the
properties, with the latter as the highest bidder during the public sale.
Spouses Binua then filed an action to nullify the mortgage contracts, alleging
that the mortgage documents were "executed under duress, as the Spouses Binua
at the time of the execution of said deeds were still suffering from the effect of the
conviction of Edna, and could not have been freely entered into said contracts. The
RTC dismissed the complaint for lack of factual and legal merit holding that: "A
threat to enforce ones claim through competent authority, if the claim is just or
legal, does not vitiate consent." Spouses Binua appealed with the CA which was
denied. Hence, the present petition.
Issue:
Whether or not the mortgage documents were executed under duress, threat
or fear
Ruling:
No.
Page 141 of 483

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Article 1390(2) of the Civil Code provides that contracts where the consent is
vitiated by mistake, violence, intimidation, undue influence or fraud are voidable or
annullable. Article 1335 of the Civil Code, meanwhile, states that "[t]here is
intimidation when one of the contracting parties is compelled by a reasonable and
well-grounded fear of an imminent and grave evil upon his person or property, or
upon the person or property of his spouse, descendants or ascendants, to give his
consent." The same article, however, further states that "[a] threat to enforce ones
claim through competent authority, if the claim is just or legal, does not vitiate
consent."
In De Leon v. Court of Appeals, the Court held that in order that intimidation
may vitiate consent and render the contract invalid, the following requisites must
concur: (1) that the intimidation must be the determining cause of the contract, or
must have caused the consent to be given; (2) that the threatened act be unjust or
unlawful; (3) that the threat be real and serious, there being an evident
disproportion between the evil and the resistance which all men can offer, leading
to the choice of the contract as the lesser evil; and (4) that it produces a reasonable
and well-grounded fear from the fact that the person from whom it comes has the
necessary means or ability to inflict the threatened injury.
In cases involving mortgages, a preponderance of the evidence is essential to

establish its invalidity, and in order to show fraud, duress, or undue influence of a
mortgage, clear and convincing proof is necessary.
Based on the spouses own allegations, what the respondent did was merely
inform them of petitioner Ednas conviction in the criminal cases for estafa. It might
have evoked a sense of fear or dread on the petitioners part, but certainly there is
nothing unjust, unlawful or evil in the respondent's act. The petitioners also failed to
show how such information was used by the respondent in coercing them into
signing the mortgages. The petitioners must remember that petitioner Edna's
conviction was a result of a valid judicial process and even without the respondent
allegedly "ramming it into petitioner Victor's throat," petitioner Edna's imprisonment
would be a legal consequence of such conviction. In Callanta v. National Labor
Relations Commission, the Court stated that the threat to prosecute for estafa not
being an unjust act, but rather a valid and legal act to enforce a claim, cannot at all
be considered as intimidation. As correctly ruled by the CA, "[i]f the judgment of
conviction is the only basis of the spouses in saying that their consents were
vitiated, such will not suffice to nullify the real estate mortgages and the
subsequent foreclosure of the mortgaged properties. No proof was adduced to show
that [the respondent] used [force], duress, or threat to make Victor execute the real
estate mortgages."
Page 142 of 483

2015)
SPOUSES FRANCISCO SIERRA (substituted by DONATO, TERESITA,
TEODORA, LORENZA, LUCINA, IMELDA, VILMA, and MILAGROS SIERRA) and
ANTONINA SANTOS, SPOUSES ROSARIO SIERRA and EUSEBIO CALUMA
LEYVA, and SPOUSES SALOME SIERRA and FELIX GATLABAYAN (substituted
by BUENA VENTURA, ELPIDIO, PAULINO, CATALINA, GREGORIO, and
EDGARDO GATLABAYAN, LORETO REILLO, FERMINA PEREGRINA, and NIDA
HASHIMOTO) vs.PAIC SAVINGS AND MORTGAGE BANK, INC.
G.R. No. 197857, September 10, 2014, J. Perlas-Bernabe
One who alleges any defect or the lack of a valid consent contract must
establish the same by full, clear, and convincing evidence, not merely by
preponderance of evidence. The rule is that he who alleges mistake affecting a
transaction must substantiate his allegation, since it is presumed that a person
takes ordinary care of his concerns and that private transactions have been fair and
regular. Where mistake or error is alleged by parties who claim to have not had the
benefit of a good education, as in this case, they must establish that their personal
circumstances prevented them from giving their free, voluntary, and spontaneous
consent to a contract.
Facts:
On May 31, 1983, Goldstar Conglomerates, Inc. (GCI), represented by

Guillermo Zaldaga (Zaldaga), obtained from First Summa Savings and Mortgage
Bank (Summa Bank), now respondent Paic Savings and Mortgage Bank, Inc.
(PSMB), a loan in the amount of P1,500,000.00 as evidenced by a Loan
Agreement dated May 31, 1983. As security therefor, GCI executed in favor of PSMB
six (6) promissory notes in the aggregate amount ofP1,500,000.00 as well as a
Deed of Real Estate Mortgage over a parcel of land covered by Transfer Certificate
of Title (TCT) No. 308475. As additional security, petitioners Francisco Sierra,
Rosario Sierra, and Spouses Felix Gatlabayan and Salome Sierra mortgaged four(4)
parcels of land in Antipolo City, covered by TCT Nos. 308476, 308477, 308478, and
308479, and respectively registered in their names (subject properties). Records
show that after the signing of the mortgage deed, Zaldaga gave petitioner Francisco
Sierra four (4) managers checks with an aggregate amount of P200,000.00, which
were later successfully encashed, as well as several post-dated checks.
Eventually, GCI defaulted in the payment of its loan to PSMB, thereby

prompting the latter to extrajudicially foreclose the mortgage on the subject
Page 143 of 483

2015)
properties in accordance with Act No. 3135, as amended, with due notice to
petitioners. In the process, PSMB emerged as the highest bidder in the public
auction sale. Since petitioners failed to redeem the subject properties within the
redemption period, their certificates of title were cancelled and new ones were
issued in PSMBs name.
Petitioners filed a complaint for the declaration of nullity of the real estate
mortgage and its extrajudicial foreclosure, and damages against PSMB and Summa
Bank before the RTC.
In the said complaint, petitioners averred that under pressing need of money,
with very limited education and lacking proper instructions, they fell prey to a group
who misrepresented to have connections with Summa Bank and, thus, could help
them secure a loan. They were made to believe that they applied for a loan, the
proceeds of which would be released through checks drawn against Summa
Bank. Relying in good faith on the checks issued to them, petitioners unsuspectingly
signed a document denominated as Deed of Real Estate Mortgage (subject deed),
couched in highly technical legal terms, which was not interpreted in a
language/dialect known to them, and which was not accompanied by the loan
documents. However, when they presented for payment the earliest-dated checks
to the drawee bank, the same were dishonored for the reason "Account Closed."
Upon confrontation, some members of the group assured petitioners that there was
only a misunderstanding and that their certificates of titles would be
returned. Subsequently, petitioners learned that: (a) the loan account secured by
the real estate mortgage was in the nameof another person and not in their names
as they were made to understand; (b) despite lack of special authority from them,
foreclosure proceedings over the subject properties were initiated by PSMB and not
Summa Bank in whose favor the mortgage was executed; (c) the period of
redemption had already lapsed; and (d) the ownership over the subject properties
had already been consolidated in the name of PSMB. Petitioners likewise lamented
that they were not furnished copies of the loan and mortgage documents, or
notified/apprised of the assignment to PSMB, rendering them unable to comply with
their obligations under the subject deed. They further claimed that they were not
furnished a copy of the statement of account, which was bloated with
unconscionable and unlawful charges, assessments, and fees, nor a copy of the
petition for foreclosure prior to the precipitate extrajudicial foreclosure and auction
sale which failed to comply with the posting and notice requirements. In light of the
foregoing, petitioners prayed that the real estate mortgage and the subsequent
foreclosure proceedings, and all derivative titles and rights arising therefrom be
declared null and void ab initio, and that the subject properties be reconveyed back
to them, with further prayer for compensatory and exemplary damages, and
attorneys fees.
Page 144 of 483

2015)
The RTC: (a) declared the subject deed and the extrajudicial foreclosure
proceedings null and void; (b) cancelled the certificates of title of PSMB; and (c)
directed the reinstatement of petitioners certificates of title.
Aggrieved, PSMB filed a motion for reconsideration, while petitioners filed a
motion for discretionary execution which were, however, denied. Dissatisfied, PSMB
interposed an appeal to the CA. The CA reversed and set aside the RTC Decision and
dismissed petitioners complaint for lack of merit. Unperturbed, petitioners filed the
instant petition.
Issue:
Whether or not the CA erred in ruling that petitioners were aware that they
were mere accommodation mortgagors.
Ruling:
The Court finds petitioners claim of mistake or error (that they acted merely
as accommodation mortgagors) grounded on their "very limited education" and
"lack of proper instruction" not to be firmly supported by the evidence on record.
Time and again, the Court has stressed that allegations must be proven by
sufficient evidence because mere allegation is not evidence. Thus, one who alleges
any defect or the lack of a valid consent contract must establish the same by full,
clear, and convincing evidence, not merely by preponderance of evidence. The rule
is that he who alleges mistake affecting a transaction must substantiate his
allegation, since it is presumed that a person takes ordinary care of his concerns
and that private transactions have been fair and regular. Where mistake or error is
alleged by parties who claim to have not had the benefit of a good education, as in
this case, they must establish that their personal circumstances prevented them
from giving their free, voluntary, and spontaneous consent to a contract.
As correctly observed by the CA, the testimony of petitioner Francisco Sierra
as to petitioners respective educational backgrounds remained uncorroborated.
The other petitioners-signatories to the deed never testified that their educational
background prevented them from knowingly executing the subject deed as mere
Page 145 of 483

2015)
accommodation mortgagors. Petitioners claim of lack of "proper instruction on the
intricacies in securing the loan from the bank" is further belied by the fact that
petitioners Francisco and Rosario Sierra had previously mortgaged two (2) of the
subject properties twice to the Rural Bank of Antipolo. Moreover, petitioners did not:
(a) demand for any loan document containing the details of the transaction, i.e.,
monthly amortization, interest rate, added charges, etc., and the release of the
remaining amount of their alleged loan; and (b) offer to pay the purported partial
loan proceeds they received at any time, complaining thereof only in 1991 when
they filed their complaint. Indeed, the foregoing circumstances clearly show that
petitioners are aware that they were mere accommodation mortgagors, debunking
their claim that mistake vitiated their consent to the mortgage.
Thus, there being valid consent on the part of petitioners to act as
accommodation mortgagors, no reversible error was committed by the CA in setting
aside the RTCs Decision declaring the real estate mortgage as void for vices of
consent and awarding damages to petitioners.
ECE REALTY AND DEVELOPMENT INC. vs. RACHEL G. MANDAP

Petitioner questions the decision of the CA holding that it employed fraud to
induce respondent to enter a contract with it. The SC ruled that though petitioner
was guilty of fraud, such fraud however is not sufficient to nullify its contract with
respondent. Jurisprudence has shown that in order to constitute fraud that provides
basis to annul contracts, it must fulfill two conditions. First, the fraud must be dolo
causante or it must be fraud in obtaining the consent of the party. This is referred to
as causal fraud. Second, the fraud must be proven by clear and convincing
evidence and not merely by a preponderance thereof. In the present case,
respondent failed to prove that the misrepresentation made by petitioner was the
causal consideration or the principal inducement which led her into buying her unit
in the said condominium project. Such being the case, petitioners
misrepresentation in its advertisements does not constitute causal fraud which
would have been a valid basis in annulling the Contract to Sell between petitioner
and respondent.
Facts:
Petitioner ECE Realty (ECE) is a corporation engaged in the building and
development of condominium units. Sometime in 1995, it started the construction
of a condominium project called Central Park Condominium Building located along
Jorge St., Pasay City. However, printed advertisements were made indicating therein
that the said project was to be built in Makati City. Respondent Rachel G. Mandap
(Mandap) bought a unit from the above project. Subsequently, Mandap and the
representatives of ECE executed a Contract to Sell. In the said Contract, it was
indicated that the condominium project is located in Pasay City.
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Thereafter, Mandap wrote ECE a letter demanding the return of P422,500.00,
representing the payments she made, on the ground that she subsequently
discovered that the condominium project was being built in Pasay City and not in
Makati City as indicated in its printed advertisements.
However, instead of answering Mandap's letter, ECE sent her a written
communication informing her that her unit is ready for inspection and occupancy
should she decide to move in.
Treating the letter as a form of denial of her demand for the return of the sum
she had paid, Mandap filed a complaint with the Expanded National Capital Region
Field Office (ENCRFO) of the Housing and Land Use Regulatory Board (HLURB)
seeking the annulment of her contract with ECE, the return of her payments, and
damages.
The ENCRFO dismissed Mandap's complaint for lack of merit and directed the
parties to resume the fulfillment of the terms and conditions of their sales contract.
The ENCRFO held that respondent Mandap "failed to show or substantiate the legal
grounds that consist of a fraudulent or malicious dealing with her by ECE, such as,
the latter's employment of insidious words or machinations which induced or
entrapped her into the contract and which, without them, would not have
encouraged her to buy the unit. Both the HLURB Board of Commissioners and the
Office of the President affirmed the decision of the ENCRFO. The Court of Appeals,
however, reversed the decision and held that ECE employed fraud and machinations
to induce Mandap to enter into a contract with it. Hence, this petition.
Issue:
Whether or not ECE was guilty of fraud and if so, whether such fraud is
sufficient ground to nullify its contract with respondent.
Ruling:
Yes, petitioner ECE was guilty of fraud. Such fraud however is not sufficient to
nullify its contract with respondent Mandap.
Article 1338 of the Civil Code provides that "[t]here is fraud when through
insidious words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have agreed to."
In addition, under Article 1390 of the same Code, a contract is voidable or
annullable "where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud."
Also, Article 1344 of the same Code provides that "[i]n order that fraud may
make a contract voidable, it should be serious and should not have been employed
by both contracting parties." Jurisprudence has shown that in order to constitute
fraud that provides basis to annul contracts, it must fulfill two conditions.
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First, the fraud must be dolo causante or it must be fraud in obtaining the
consent of the party. This is referred to as causal fraud. The deceit must be serious.
The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent
person into error; that which cannot deceive a prudent person cannot be a ground
for nullity. The circumstances of each case should be considered, taking into account
the personal conditions of the victim.
Second, the fraud must be proven by clear and convincing evidence and not
merely by a preponderance thereof.
In the present case, this Court finds that petitioner ECE is guilty of false
representation of a fact. This is evidenced by its printed advertisements indicating
that its subject condominium project is located in Makati City when, in fact, it is in
Pasay City. The Court agrees with the Housing and Land Use Arbiter, the HLURB
Board of Commissioners, and the Office of the President, in condemning petitioner's
ECE deplorable act of making misrepresentations in its advertisements and in
issuing a stern warning that a repetition of this act shall be dealt with more severely.
However, insofar as the present case is concerned, the Court agrees with the
Housing and Land Use Arbiter, the HLURB Board of Commissioners, and the Office of
the President, that the misrepresentation made by petitioner ECE in its
advertisements does not constitute causal fraud which would have been a valid
basis in annulling the Contract to Sell between petitioner ECE and respondent
Mandap.
In his decision, the Housing and Land Use Arbiter found that respondent
Mandap failed to show that "the essential and/or moving factor that led Mandap to
give her consent and agree to buy the unit was precisely the project's advantageous
or unique location in Makati [City] to the exclusion of other places or cityx x x."
Both the HLURB Board of Commissioners and the Office of the President affirmed
the finding of the Arbiter and unanimously held that Mandap failed to prove that the
location of the said project was the causal consideration or the principal inducement
which led her into buying her unit in the said condominium project.
AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs, except
Emelinda R. Gualvez] and SALVADOR A. OROSCO, vs. SPS. DOMINGO and
EMELINDA REBUSQUILLO GUALVEZ and the CITY ASSESSOR OF LEGAZPI
CITY
G.R. No. 204029, June 4, 2014, J. Velasco, Jr.
The Deed of Absolute Sale executed by Avelina in favor of respondents was
correctly nullified and voided by the RTC. Avelina was not in the right position to
sell and transfer the absolute ownership of the subject property to respondents. As
she was not the sole heir of Eulalio and her Affidavit of Self-Adjudication is void, the
subject property is still subject to partition. Avelina, in fine, did not have the
absolute ownership of the subject property but only an aliquot portion. It is
apparent from the admissions of respondents and the records of this case that
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Avelina had no intention to transfer the ownership, of whatever extent, over the
property to respondents. Hence, the Deed of Absolute Sale is nothing more than a
simulated contract.
Facts:
Petitioners Avelina Abarientos Rebusquillo (Avelina) and Salvador Orosco
(Salvador) filed a Complaint for annulment and revocation of an Affidavit of SelfAdjudication and a Deed of Absolute Sale before the court. Petitioners alleged that
Avelina was one of the children of Eulalio Abarientos (Eulalio) and Victoria Villareal
(Victoria). Eulalio died intestate survived by his wife Victoria, six legitimate children,
and one illegitimate child and he left behind an untitled parcel of land in Legazpi
City.
In 2001, Avelina was made to sign two (2) documents by her daughter
Emelinda Rebusquillo-Gualvez (Emelinda) and her son-in-law Domingo Gualvez
(Domingo), respondents in this case, that the documents were needed for the titling
of the lot. In 2003, Avelina realized that what she signed was an Affidavit of SelfAdjudication and a Deed of Absolute Sale in favor of respondents. As respondents
ignored her when she tried to talk to them, Avelina filed in the RTC to declare null
and void the two (2) documents to reinstate and correct the injustice done to the
other heirs of Eulalio.
In their answer, respondents admitted that the execution of the Affidavit of
Self-Adjudication and the Deed of Sale was intended to facilitate the titling of the
subject property. Petitioner Avelina together with the other heirs brought out the
idea to respondent Emelinda to have the property registered. It was agreed that the
propertys tax declaration could be transferred to respondents Spouses Emelinda
and Domingo Gualvez who will spend all the cost subject to reimbursement; It was
agreed that all the heirs will be given their shares; That Avelina AbarientosRebusquillo with the consent of the other heirs signed an Affidavit of SelfAdjudication and a Deed of Absolute Sale in favor of respondents Gualvez.
The RTC ruled that the Affidavit of Self-Adjudication and the Deed of Absolute
Sale should be annulled on the ground that in the case of the Deed of Absolute Sale,
Avelina did not really intend to sell her share in the property as it was only executed
to facilitate the titling of such property.
Pending the resolution of respondents appeal, Avelina died intestate leaving
behind several living heirs including respondent Emelinda.
The appellate court reversed and set aside the Decision of the RTC. The CA
held that the RTC erred in annulling the Affidavit of Self-Adjudication on petitioners
allegation of the existence of the heirs of Eulalio, that issues on heirship must be
made in administration or intestate proceedings, not in an ordinary civil action. The
appellate court observed that the Deed of Absolute Sale cannot be nullified as it is a
notarized document that has in its favor the presumption of regularity and is
entitled to full faith and credit upon its face.
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Aggrieved by the CAs Decision, petitioner Avelina, as substituted by her heirs
except respondent Emelinda, and petitioner Salvador are now before this Court
ascribing reversible error on the part of the appellate court.
Issue:
Can Avelina executed a Deed of Absolute Sale even if she did not have the
absolute ownership of the subject property but only an aliquot portion thereof?
Ruling:
No, Avelina cannot validly executed a Deed of Absolute Sale not being the
sole heir.
In like manner, the Deed of Absolute Sale executed by Avelina in favor of
respondents was correctly nullified and voided by the RTC. Avelina was not in the
right position to sell and transfer the absolute ownership of the subject property to
respondents. As she was not the sole heir of Eulalio and her Affidavit of SelfAdjudication is void, the subject property is still subject to partition. Avelina, in fine,
did not have the absolute ownership of the subject property but only an aliquot
portion. What she could have transferred to respondents was only the ownership of
such aliquot portion. It is apparent from the admissions of respondents and the
records of this case that Avelina had no intention to transfer the ownership, of
whatever extent, over the property to respondents. Hence, the Deed of Absolute
Sale is nothing more than a simulated contract.
The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at all;
the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A
relative simulation, when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real agreement.
In Heirs of Policronio Ureta Sr. v. Heirs of Liberato Ureta, this Court explained
the concept of the simulation of contracts:
In absolute simulation, there is a colorable contract but it has no
substance as the parties have no intention to be bound by it. The main
characteristic of an absolute simulation is that the apparent contract is
not really desired or intended to produce legal effect or in any way
alter the juridical situation of the parties. As a result, an absolutely
simulated or fictitious contract is void, and the parties may recover
from each other what they may have given under the contract.
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However, if the parties state a false cause in the contract to conceal
their real agreement, the contract is relatively simulated and the
parties are still bound by their real agreement. Hence, where the
essential requisites of a contract are present and the simulation refers
only to the content or terms of the contract, the agreement is
absolutely binding and enforceable between the parties and their
successors in interest.
In the present case, the true intention of the parties in the execution of the
Deed of Absolute Sale is immediately apparent from respondents very own Answer
to petitioners Complaint. As respondents themselves acknowledge, the purpose of
the Deed of Absolute Sale was simply to "facilitate the titling of the property," not to
transfer the ownership of the lot to them. Furthermore, respondents concede that
petitioner Salvador remains in possession of the property and that there is no
indication that respondents ever took possession of the subject property after its
supposed purchase. Such failure to take exclusive possession of the subject
property or, in the alternative, to collect rentals from its possessor, is contrary to
the principle of ownership and is a clear badge of simulation that renders the whole
transaction void.
KINDS OF CONTRACTS
UNENFORCEABLE CONTRACTS
IGLESIA FILIPINA INDEPENDIENTE vs. HEIRS of BERNARDINO TAEZA
G.R. No. 179597, February 3, 2014, J. Peralta
Unenforceable contracts are those which cannot be enforced by a proper
action in court, unless they are ratified, because either they are entered into
without or in excess of authority or they do not comply with the statute of frauds or
both of the contracting parties do not possess the required legal capacity. In the
present case, however, respondents' predecessor-in-interest, Bernardino Taeza, had
already obtained a transfer certificate of title in his name over the property in
question. Since the person supposedly transferring ownership was not authorized to
do so, the property had evidently been acquired by mistake. This case clearly falls
under the category of unenforceable contracts mentioned in Article 1403,
paragraph (1) of the Civil Code, which provides, thus: (1) Those entered into in the
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name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers.
Facts:
Iglesia Filipina Independiente (IFI, for brevity), a duly registered religious
corporation, was the owner of a parcel of land described as Lot 3653, containing an
area of 31,038 square meters, situated at Ruyu (now Leonarda), Tuguegarao,
Cagayan, and covered by Original Certificate of Title No. P-8698. The said lot is
subdivided as follows: Lot Nos. 3653-A, 3653-B, 3653-C, and 3653-D. Lot Nos. 3653A and 3653-B, with a total area of 10,000 square meters, were likewise sold by Rev.
Macario Ga, in his capacity as the Supreme Bishop of the IFI, to Bernardino Taeza,
for the amount of P100,000.00, through installment, with mortgage to secure the
payment of the balance. Subsequently, the defendant allegedly completed the
payments.
Bernardino Taeza then occupied a portion of the land. The IFI allegedly
demanded the d Bernardino Taeza to vacate the said land which he failed to do. In
January 1990, a complaint for annulment of sale was filed by the plaintiff-appellee
IFI, this time through Supreme Bishop Most Rev. Tito Pasco, against the Bernardino
Taeza.
IFI maintains that there was no consent to the contract of sale as Supreme
Bishop Rev. Ga had no authority to give such consent. It emphasized that Article IV
(a) of their Canons provides that "All real properties of the Church located or
situated in such parish can be disposed of only with the approval and conformity of
the laymen's committee, the parish priest, the Diocesan Bishop, with sanction of the
Supreme Council, and finally with the approval of the Supreme Bishop, as
administrator of all the temporalities of the Church." It is alleged that the sale of the
property in question was done without the required approval and conformity of the
entities mentioned in the Canons; hence, IFI argues that the sale was null and void.
In the alternative, IFI contends that if the contract is not declared null and void, it
should nevertheless be found unenforceable, as the approval and conformity of the
other entities in their church was not obtained, as required by their Canons.
Issue:
Whether then Supreme Bishop Rev. Ga is authorized to enter into a contract
of sale in behalf of IFI
Ruling:
IFIs Canons, any sale of real property requires not just the consent of the
Supreme Bishop but also the concurrence of the laymen's committee, the parish
priest, and the Diocesan Bishop, as sanctioned by the Supreme Council. However,
IFI's Canons do not specify in what form the conformity of the other church entities
should be made known. Thus, as petitioner's witness stated, in practice, such
consent or approval may be assumed as a matter of fact, unless some opposition is
expressed.
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Here, the trial court found that the laymen's committee indeed made its
objection to the sale known to the Supreme Bishop. The CA, on the other hand,
glossed over the fact of such opposition from the laymen's committee, opining that
the consent of the Supreme Bishop to the sale was sufficient, especially since the
parish priest and the Diocesan Bishop voiced no objection to the sale. The Court
finds it erroneous for the CA to ignore the fact that the laymen's committee
objected to the sale of the lot in question. The Canons require that ALL the church
entities listed in Article IV (a) thereof should give its approval to the transaction.
Thus, when the Supreme Bishop executed the contract of sale of IFI's lot despite the
opposition made by the laymen's committee, he acted beyond his powers.
This case clearly falls under the category of unenforceable contracts
mentioned in Article 1403, paragraph (1) of the Civil Code, which provides, thus: (1)
Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
In Mercado v. Allied Banking Corporation, the Court explained that:
Unenforceable contracts are those which cannot be
proper action in court, unless they are ratified, because
entered into without or in excess of authority or they
with the statute of frauds or both of the contracting
possess the required legal capacity.
enforced by a
either they are
do not comply
parties do not
In the present case, however, respondents' predecessor-in-interest,

Bernardino Taeza, had already obtained a transfer certificate of title in his name
over the property in question. Since the person supposedly transferring ownership
was not authorized to do so, the property had evidently been acquired by mistake.
In Vda. de Esconde v. Court of Appeals, the Court affirmed the trial court's ruling
that the applicable provision of law in such cases is Article 1456 of the Civil Code
which states that "[i]f property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes." Thus, in Aznar Brothers
Realty Company v. Aying, citing Vda. de Esconde, the Court clarified the concept of
trust involved in said provision, to wit:
Construing this provision of the Civil Code, in Philippine National Bank v.
Court of Appeals, the Court stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense for in a typical trust, confidence is reposed in one person who is named a
trustee for the benefit of another who is called the cestui que trust, respecting
property which is held by the trustee for the benefit of the cestui que trust. A
constructive trust, unlike an express trust, does not emanate from, or generate a
fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by
confidential or fiduciary relations, in a constructive trust, there is neither a promise
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nor any fiduciary relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary.
SALES
ASSIGNMENT OF CREDIT
SPOUSES MICHELLE M. NOYNAY and NOEL S. NOYNAY vs. CITIHOMES
BUILDER AND DEVELOPMENT, INC.
G.R. No. 204160, September 22, 2014, J. Mendoza
The assignment of all contractual rights of an assignor in favor of an assignee
relegates the former to the status of a mere stranger to the jural relations
established under the contract to sell.
Facts:
On December 29, 2004, Citihomes and Spouses Noynay executed a contract
to sell covering the sale of a house and lot located in San Jose Del Monte, Bulacan
covered by Transfer Certificate of Title (TCT) No. T-43469. Under the terms of the
contract, the price of the property was fixed at P915,895.00, with a downpayment of
P183,179.00, and the remaining balance to be paid in 120 equal monthly
installments with an annual interest rate of 21% commencing on February 8, 2005
and every 8th day of the month thereafter.
Subsequently, on May 12, 2005, Citihomes executed the Deed of Assignment
of Claims and Accounts in favor of United Coconut Planters Bank on May 12, 2005.
Under the said agreement, UCPB purchased from Citihomes various accounts,
including the account of Spouses Noynay, for a consideration of P100,000,000.00. In
turn, Citihomes assigned its rights, titles, interests, and participation in various
contracts to sell with its buyers to UCPB.
In February of 2007, Spouses Noynay allegedly started to default in their
payments. On June 15, 2009, Citihomes sent its final demand letter asking Spouses
Noynay to vacate the premises due to their continued failure to pay the arrears.
Spouses Noynay did not heed the demand, forcing Citihomes to file the complaint
for unlawful detainer before the MTCC on July 29, 2009.
In its March 26, 2010 Decision, the MTCC dismissed the complaint. It
considered the annotation in the certificate of title, which was dated prior to the
filing of the complaint, which showed that Citihomes had executed the Assignment
favor of UCPB, as having the legal effect of divesting Citihomes of its interest and
right over the subject property. In its September 17, 2010 Decision, the RTC stated
that the MTCC erred in interpreting the deed of assignment as having the effect of
relinquishing all of Citihomes rights over the subject property.
Issue:
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Whether or not Citihomes had cause of action for ejectment against Spouses
Noynay
Ruling:
No, it did not.
The determination of whether Citihomes has a right to ask for the eviction of
Spouses Noynay entirely depends on the review of the Assignment of Claims and
Accounts it executed in favor of UCPB. If it turns out that what was assigned merely
covered the collectible amounts or receivables due from Spouses Noynay, Citihomes
would necessarily have the right to demand the latters eviction as only an aspect of
the contract to sell passed on to UCPB. Simply put, because an assignment covered
only credit dues, the relation between Citihomes as the seller and Spouses Noynay
as the buyer under their Contract to Sell remained. If on the other hand, it appears
that the assignment covered all of Citihomes rights, obligations and benefits in
favor of UCPB, the conclusion would certainly be different.
Clearly, the conclusion of the MTCC had factual and legal bases. Evident from
the tenor of the agreement was the intent on the part of Citihomes, as assignor, to
assign all of its rights and benefits in favor of UCPB. Specifically, what Citihomes did
was an assignment or transfer of all contractual rights arising from various contracts
to sell, including the subject contract to sell, with all the rights, obligations and
benefits appurtenant thereto in favor of UCPB for a consideration of
P100,000,000.00. Indeed, the intent was more than just an assignment of credit.
This intent to assign all rights under the contract to sell was even fortified by the
delivery of documents such as the pertinent contracts to sell and the TCTs. Had it
been the intent of Citihomes to assign merely its interest in the receivables due
from Spouses Noynay, the tenor of the deed of assignment would have been
couched in very specific terms.
In this case, the execution of the Assignment in favor of UCPB relegated
Citihomes to the status of a mere stranger to the jural relations established under
the contract to sell. With UCPB as the assignee, it is clear that Citihomes has ceased
to have any right to cancel the contract to sell with Spouses Noynay. Without this
right, which has been vested in UCPB, Citihomes undoubtedly had no cause of
action against Spouses Noynay.
SPOUSES CHIN KONG WONG CHOI AND ANA O. CHUA vs. UNITED COCONUT
PLANTERS BANK
G.R. No. 207747, March 11, 2015, J. Carpio
UCPB assigned accounts receivable to Primetown. Thereafter, Spouses filed a
complaint against the latter for refund for payment. The court ruled that the
agreement conveys the straightforward intention of Primetown to sell, assign,
transfer, convey and set over to UCPB the receivables, rights, titles, interests and
participation over the units covered by the contracts to sell. It explicitly
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excluded any and all liabilities and obligations, which Primetown assumed under the
contracts to sell. In every case, the obligations between assignor and assignee will
depend upon the judicial relation which is the basis of the assignment. An
assignment will be construed in accordance with the rules of construction governing
contracts generally, the primary object being always to ascertain and carry out the
intention of the parties. This intention is to be derived from a consideration of the
whole instrument, all parts of which should be given effect, and is to be sought in
the words and language employed.
Facts:
Spouses Chin Kong Wong Choi and Ana O. Chua (Spouses Choi) entered into a
Contract to Sell8 with Primetown Property Group, Inc. (Primetown), a domestic
corporation engaged in the business of condominium construction and real estate
development. The Contract to Sell provided that Spouses Choi agreed to buy
condominium unit no. A-322 in Kiener Hills Cebu (Kiener) from Primetown for a
consideration of P1,151,718.75, with a down payment of P100,000.00 and the
remaining balance payable in 40 equal monthly installments of P26,292.97 from 16
January 1997 to 16 April 2000.
On 23 April 1998, respondent United Coconut Planters Bank (UCPB) executed
a Memorandum of Agreement and Sale of Receivables and Assignment of Rights
and Interests (Agreement) with Primetown. The Agreement provided that
Primetown, in consideration of P748,000,000.00, assigned, transferred, conveyed
and set over unto [UCPB] all Accounts Receivables accruing from
[PrimetownsKiener] x xx together with the assignment of all its rights, titles,
interests and participation over the units covered by or arising from the Contracts to
Sell from which the Accounts Receivables have arisen. Included in the assigned
accounts receivable was the account of Spouses Choi, who proved payment of one
monthly amortization to UCPB on 3 February 1999.The Spouses Choi filed a
complaint for refund of money with interest and damages against Primetown and
UCPB before the Housing and Land Use Regulatory Board (HLURB) Regional Field
Office No. VI (RFO VI). Spouses Choi alleged that despite their full payment of the
purchase price, Primetown failed to finish the construction of Kiener and to deliver
the condominium unit to them.
Issue:
Whether under the Agreement between Primetown and UCPB, UCPB assumed
the liabilities and obligations of Primetown under its contract to sell with Spouses
Choi.
Ruling:
No. Primetown will not assume UCPB obligation to pay Sps Choi
An assignment of credit has been defined as an agreement by virtue of which
the owner of a credit, known as the assignor, by a legal cause - such as
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sale, dation in payment or exchange or donation - and without need of the debtors
consent, transfers that credit and its accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor
could have enforced it against the debtor. In every case, the obligations between
assignor and assignee will depend upon the judicial relation which is the basis of the
assignment.An assignment will be construed in accordance with the rules of
construction governing contracts generally, the primary object being always to
ascertain and carry out the intention of the parties.This intention is to be derived
from a consideration of the whole instrument, all parts of which should be given
effect, and is to be sought in the words and language employed.
In the present case, the Agreement between Primetown and UCPB provided
that Primetown, in consideration of P748,000,000.00, assigned, transferred,
conveyed and set over unto [UCPB] all Accounts Receivables accruing from
[PrimetownsKiener] x xx together with the assignment of all its rights, titles,
interests and participation over the units covered by or arising from the Contracts to
Sell from which the Accounts Receivables have arisen.
The Agreement conveys the straightforward intention of Primetown to sell,
assign, transfer, convey and set over to UCPB the receivables, rights, titles,
interests and participation over the units covered by the contracts to sell. It
explicitly excluded any and all liabilities and obligations, which Primetown assumed
under the contracts to sell.
The intention to exclude Primetowns liabilities and obligations is further
shown by Primetowns subsequent letters to the buyers, which stated that this
payment arrangement shall in no way cause any amendment of the other terms and
conditions, nor the cancellation of the Contract to Sell you have executed with
[Primetown].It is a basic rule that if the terms of a contract are clear and leave no
doubt upon the intention of the parties, the literal meaning shall control. The words
should be construed according to their ordinary meaning, unless something in the
assignment indicates that they are being used in a special sense.Furthermore, in
order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
CONDITIONAL SALE
SPOUSES JOSE C. ROQUE AND BEATRICE DELA CRUZ ROQUE, ET AL
vs. MA. PAMELA AGUADO, ET AL
G.R. No. 193787, April 7, 2014, J. Perlas- Bernabe
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by the owner
not to the party the seller contracted with, but to a third person. In a contract to
sell, there being no previous sale of the property, a third person buying such
property despite the fulfilment of the suspensive condition such as the full payment
of the purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the property. There is
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no doublesale in such case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-sellers title per se, but the
latter, of course, may be sued for damages by the intending buyer.
Facts:
Petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque)
and the original owners of the then unregistered Lot 18089,Rivero, et al. executed a
Deed of Conditional Sale of Real Property(1977 Deedof Conditional Sale) over a
portion of Lot 18089 for a consideration. The parties agreed that Sps. Roque shall
make an initial payment upon signing, while the remaining balance of the purchase
price shall be payable upon the registration of Lot 18089, as well as the segregation
and the concomitant issuance of a separate title over the subject portion in their
names. After the deeds execution, Sps. Roque took possession and introduced
improvements on the subject portion. The spouses failed to pay the remaining
balance of the price as agreed in the Conditional Deed of Sale.
Subsequently, Sabug Jr. applied for a free patent over the entire Lot 18089
and was eventually issued Original Certificate of Title in his name. Later, Sabug, Jr.,
through a Deed of Absolute Sale(1999 Deed of Absolute Sale), sold Lot 18089 to Ma.
Pamela P. Aguado (Aguado), who, in turn, caused the cancellation of OCT and the
issuance of Transfer Certificate of Title in her name. Thereafter, Aguado obtained an
P8, 000,000.00 loan from the Land Bank of the Philippines (Land Bank) secured by a
mortgage over Lot 18089.When she failed to pay her loan obligation, Land Bank
commenced extrajudicial foreclosure proceedings and eventually tendered the
highest bid in the auction sale. Upon Aguados failure to redeem the subject
property, Land Bank consolidated its ownership, and TCT was issued in its name.
Later, Sps. Roque filed a complaint for reconveyance, annulment of sale,
deed of real estate mortgage, foreclosure, and certificate of sale, and damages
before the RTC. RTC dismissed the complaint and found that the latter failed to
establish their ownership over the subject portion. On appeal, the Court of Appeals
(CA) affirmed the RTCs findings. Sps. Roque argued that being the first purchasers
and in actual possession of the disputed portion, they assert that they have a better
right over the portion of Lot 18089 and, hence, cannot be ousted therefrom by Land
Bank.
Isuue:
Whether or not the 1977 Deed of Conditional Sale is one of contract of sale
that vests title and ownership to Spouses Roque
Ruling:
No. Examining its provisions, the Court finds that the stipulation abovehighlighted shows that the 1977 Deed of Conditional Sale is actually in the nature of
a contract to sell and not one of sale contrary to Sps. Roques belief.
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No. Examining its provisions, the Court finds that the stipulation abovehighlighted shows that the 1977 Deed of Conditional Sale is actually in the nature of
a contract to sell and not one of sale contrary to Sps. Roques belief.
In this relation, it has been consistently ruled that where the seller promises
to execute a deed of absolute sale upon the completion by the buyer of the
payment of the purchase price, the contract is only a contract to sell even if their
agreement is denominated as a Deed of Conditional Sale, as in this case. This
treatment stems from the legal characterization of a contract to sell, that is, a
bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the subject property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, such as, the full payment of the purchase
price. Elsewise stated, in a contract to sell, ownership is retained by the vendor and
is not to pass to the vendee until full payment of the purchase price.
In contracts to sell the obligation of the seller to sell becomes demandable
only upon the happening of the suspensive condition, that is, the full payment of
the purchase price by the buyer. It is only upon the existence of the contract of sale
that the seller becomes obligated to transfer the ownership of the thing sold to the
buyer. Prior to the existence of the contract of sale, the seller is not obligated to
transfer the ownership to the buyer, even if there is a contract to sell between
them. Here, it is undisputed that Sps. Roque have not paid the final installment of
the purchase price as such, the condition which would have triggered the parties
obligation to enter into and thereby perfect a contract of sale in order to effectively
transfer the ownership of the subject portion from the sellers (i.e., Rivero, et al.) to
the buyers (Sps. Roque) cannot be deemed to have been fulfilled. Consequently, the
latter cannot validly claim ownership over the subject portion even if they had made
an initial payment and even took possession of the same.
DELIVERY
NFF INDUSTRIAL CORPORATION vs. G & L ASSOCIATED BROKERAGE
AND/OR GERARDO TRINIDAD
G.R. No. 178169, January 12, 2015, J. Peralta
Under the Civil Code, the vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale. The ownership
of thing sold is considered acquired by the vendee once it is delivered to him. Thus,
ownership does not pass by mere stipulation but only by delivery.In the Law on
Sales, delivery may be either actual or constructive, but both forms of delivery
contemplate "the absolute giving up of the control and custody of the property on
the part of the vendor, and the assumption of the same by the vendee."
Facts:
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Petitioner NFF Industrial Corporation is engaged in the business of
manufacturing bulk bags, while respondent G& L Associated Brokerage, Inc. is
among its customers.
According to NFF Industrial, G&L Associated ordered 1,000 pieces of bulk
bags from petitioner, at P380.00 per piece, payable within 30)days from delivery. In
the Purchase Order, an instruction was made that the bulk bags were for immediate
delivery to G & L Associated Brokerage, Inc., c/o Hi-Cement Corporation,
Norzagaray, Bulacan.Shortly thereafter, respondent company ordered an additional
1,000 pieces of bulk bags. NFF Industrial Corporation alleged that the
aforementioned deliveries were duly acknowledged. NFF Industrial Corporation also
averred that all the delivery receipts were rubber stamped, dated and signed by the
security guard-on-duty, as well as other representatives of respondent company. All
deliveries made were likewise covered by sales invoices. Based on the said invoices,
the total sales price is P760,000.00.
On the other hand, respondents alleged, it ordered from petitioner 1,000
pieces of bulk bags from petitioner at a unit price of P380.00 per piece. The said
bulk bags were to be used by respondent company for the purpose of hauling
cement from Hi-Cement Corporation at Norzagaray, Bulacan, to a dam project, the
respondent company having been designated as one of the many haulers at the HiCement Corporation. According to respondents, the Purchase Order specifically
provides that the bulk bags were to be delivered at Hi-Cement Corporation to Mr.
Raul Ambrosio, however, the ordered bulk bags were not delivered to respondent
company, the same not having been received by the authorized representative in
conformity with the terms of the Purchase Order. Meanwhile, 30 days elapsed from
the time the last alleged delivery was made but no payment was effected by
respondent company. This prompted petitioner to send a demand letter to
respondent company. As respondent company failed to respond to the demand
letter, petitioner followed up its claim from the former through a series of telephone
calls. As the demands remained unheeded, petitioner filed a complaint for sum of
money against respondents.
The RTC rendered a judgment in favor of NFF INDUSTRIAL CORPORATION and
against the G & L Associated Brokerage, Inc. The decision of the RTC was reversed
by CA. Hence, this appeal. Petitioner avers that it has delivered the bulk bags to
respondent company, which effectively placed the latter in control and possession
thereof, as in fact, respondent company had made use of the said bulk bags in the
ordinary course of its business activities.
Issue:
Whether or not there was valid delivery on the part of petitioner in
accordance with law, which would give rise to an obligation to pay on the part of
respondent for the value of the bulk bags.
Ruling:
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The Court found that there were various occasions of delivery by petitioner to
respondents, and the same was duly acknowledged by respondent Trinidad.It is
clear that petitioner has actually delivered the bulk bags to respondent
company, albeit the same was not delivered to the person named in the Purchase
Order. In addition, by allowing petitioners employee to pass through the guard-onduty, who allowed the entry of delivery into the premises of Hi-Cement, which is the
designated delivery site, respondents had effectively abandoned whatever
infirmities may have attended the delivery of the bulk bags. As a matter of fact, if
respondents were wary about the manner of delivery, such issue should have been
brought up immediately after the first delivery was made. Instead, Mr. Trinidad
acknowledged receipt of the first batch of the bulk bags and even followed up the
remaining balance of the orders for delivery.
The Court reiterated the correct decision of RTC:
Initial delivery of 400 pieces of bulk bags were made on July 31,
1999 and then followed by another delivery of additional bulk bags on
August 5, 1999 while the remaining 600 pieces of bags were delivered
on August 6, 1999 to complete the 2,000 pieces ordered by the
defendant. All these deliveries were made to defendants designated
address at G & L Associated Brokerage, Inc., C/O HI CEMENT
CORPORATION, NORZAGARAY BULACAN. These deliveries were
made in compliance with Hi-Cements standard/regular
operating procedure. It passed thru guard on duty, who
allowed the entry of delivery into the premises of Hi-Cement,
which is the designated delivery site and then a
representative of the defendant thereat received the
delivered items in behalf of the defendant.
However, the Court found merit in petitioners argument that despite its
failure to strictly comply with the instruction to deliver the bulk bags to the specified
person, acceptance of delivery may be inferred from the conduct of the
respondents. Accordingly, respondents may be held liable to pay for the price of the
bulk bags. The use by respondent of the bulk bags is an act of dominion, which is
inconsistent with the ownership of petitioner. The bulk bags delivered by petitioner
at the Union Cement Plant were actually used by respondents, and the Court cannot
allow respondents to enrich themselves at the expense of another. The evidence of
petitioner preponderantly established that there was valid delivery of bulk bags,
which gives rise to respondent companys corresponding obligation to pay therefor.
PURCHASE IN GOOD FAITH
RAUL SABERON, JOAN F. SABERON and JACQUELINE SABERON vs. OSCAR
VENTANILLA, JR., and CARMEN GLORIA D. VENTANILLA
G.R. No. 192669, April 21, 2014, J. Mendoza
While a third party may not be considered as innocent purchaser for value,
he can still rightfully claim for actual and compensatory damages, considering that
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he did not join the other defendants in their efforts to frustrate plaintiffs rights over
the disputed properties and who might well be an unwilling victim of the fraudulent
scheme employed by the other defendants.
Nonetheless, even if when no bad faith can be ascribed to the parties alike,
an equal footing of the parties necessarily tilts in favor of the superiority of the
notice of levy and the constructive notice against the whole world which the original
party to the contract of sale had produced and which effectively bound third
persons. Thus, the latter has two options available: 1) they may exercise the right
to appropriate after payment of indemnity representing the value of the
improvements introduced and the necessary and useful expenses defrayed on the
subject lots; or 2) they may forego payment of the said indemnity and instead,
oblige the Saberons to pay the price of the land.
Facts:
Manila Remnant Co., Inc. (MRCI) being the owner of several parcels of land
situated in Quezon City, constituting the subdivision known as Capitol Homes
Subdivision Nos. I and II. MRCI and A.U. Valencia & Co. Inc. (AUVC) executed two (2)
contracts to sell covering Lots 1 and 2 of Block 17, in favor of Oscar C. Ventanilla, Jr.
and Carmen Gloria D. Ventanilla (Ventanillas). The Ventanillas paid the down
payment as stipulated in the two (2) contracts.
Valencia (President of AUVC), holding out himself as president of MRCI, and
without the knowledge of the Ventanillas, resold the same property to Carlos
Crisostomo (Crisostomo), without any consideration. All the amounts paid by the
latter were deposited in Valencias bank account and remitted to MRCI as payments
of Crisostomo. The Ventanillas continued to pay the monthly installment. It was not
until March 1978 when the Ventanillas discovered Valencias deception. To their
shock, their names as lot buyers did not appear in MRCIs records. Instead, MRCI
showed them a copy of the contract to sell signed by Valencia, in favor of
Crisostomo. MRCI refused the Ventanillas offer to pay for the remainder of the
contract price.
Aggrieved, the Ventanillas commenced an action for specific performance,
annulment of deeds and damages against MRCI, AUVC, and Crisostomo where
Crisostomo was declared in default for his failure to file an answer. The CFI Quezon
City rendered a decision declaring the contracts to sell in favor of the Ventanillas as
valid and subsisting, and annulling the contract to sell in favor of Crisostomo. The
Ventanillas moved for the issuance of a writ of execution which was issued and
served upon MRCI.
The Ventanillas accepted the amount of P210,000.00 as damages and
attorneys fees but rejected the reimbursement offered by MRCI in lieu of the
execution of the absolute deed of sale alleging it to be void, fraudulent, and in
contempt of court. Because of this, the Ventanillas were constrained to go to court
to seek the annulment of the deed of sale executed between MRCI and Marquez as
well as the deed of sale between Marquez and the Saberons, as the fruits of void
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conveyances with the Regional Trial Court which rendered a decision in favour of
plaintiffs, the spouses Ventanillas. This was affirmed by the CA.
With the RTC and the CA rulings against their title over the properties, the
Saberons now come to the Court with their vehement insistence that they were
purchasers in good faith and for value. Before purchasing the lots, they exercised
due diligence and found no encumbrance or annotations on the said titles, other
than restrictions for construction and negotiation At the same time, the Ventanillas
also failed to rebut the presumption of their good faith as there was no showing that
they confederated with MRCI and its officers to deprive the Ventanillas of their right
over the subject properties.
Issues:
1. Whether or not the Ventanillas registration of the notice of levy had
produced constructive notice that would bind third persons including the
Saberons despite the failure of the ROD-QC to annotate the same in the
certificates of title.
2. Whether or not Saberons could be deemed purchasers in good faith.
Ruling:
1. Yes, their notice of levy had produced constructive notice.
In ultimately ruling for the Ventanillas, the courts a quo focused on the
superiority of their notice of levy and the constructive notice against the whole
world which it had produced and which effectively bound third persons including the
Saberons. The Court explicitly declared that MRCIs transaction with Marquez
"cannot prevail over the final and executory judgment ordering MRCI to execute an
absolute deed of sale in favor of the Ventanillas.
These favorable findings prompted the Ventanillas to register the notice of
levy on the properties. The records show that on the strength of a final and
executory decision by the Court, they successfully obtained a writ of execution from
the RTC and a notice of levy was then entered, albeit on the primary entry book
only. The contract to sell to Marquez was registered on May 21, 1991, while the
notice of levy was issued ten (10) days later, or on May 31, 1991. In February 1992,
MRCI executed the Deed of Sale with Marquez, under whose name the clean titles,
sans the notice of levy, were issued. A year later, or on March 11, 1992, MRCI
registered the deed of sale to Marquez who later sold the same property to the
Saberons.
This complex situation could have been avoided if it were not for the failure of
ROD Cleofe to carry over the notice of levy to Marquezs title, serving as a senior
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encumbrance that might have dissuaded the Saberons from purchasing the
properties.
It is undeniable, therefore, that no title was transferred to Marquez upon the
annotation of the contract to sell on MRCIs title. As correctly found by the trial
court, the contract to sell cannot be substituted by the Deed of Absolute Sale as a
"mere conclusion" of the previous contract since the owners of the properties under
the two instruments are different. Considering that the deed of sale in favor of
Marquez was of later registration, the notice of levy should have been carried over
to the title as a senior encumbrance.
From the foregoing, ROD Cleofes theory that a deed of sale, as a mere
conclusion of a contract to sell, turns into a senior encumbrance which may surpass
a notice of levy, has no leg to stand on. It was, in fact, properly rejected by the
courts a quo. Verily, the controversy at hand arose not from the Ventanillas fault,
but from ROD Cleofes misplaced understanding of his duty under the law. Surely,
the Ventanillas had every right to presume that the Register of Deeds would carry
over the notice of levy to subsequent titles covering the subject properties. The
notice was registered precisely to bind the properties and to serve as caution to
third persons who might potentially deal with the property under the custody of the
law.
While the Court is not unmindful that a buyer is charged with notice only of
such burdens and claims as are annotated on the title, the RTC and the CA are both
correct in applying the rule as to the effects of involuntary registration. In cases of
voluntary registration of documents, an innocent purchaser for value of registered
land becomes the registered owner, and, in contemplation of law the holder of a
certificate of title, the moment he presents and files a duly notarized and valid deed
of sale and the same is entered in the day book and at the same time he surrenders
or presents the owner's duplicate certificate of title covering the land sold and pays
the registration fees, because what remains to be done lies not within his power to
perform. The Register of Deeds is duty bound to perform it. In cases of involuntary
registration, an entry thereof in the day book is a sufficient notice to all persons
even if the owner's duplicate certificate of title is not presented to the register of
deeds. Therefore, in the registration of an attachment, levy upon execution, notice
of lis pendens, and the like, the entry thereof in the day book is a sufficient notice to
all persons of such adverse claim.
In the case at bench, the notice of levy covering the subject property was
annotated in the entry book of the ROD QC prior to the issuance of a TCT in the
name of the Saberons. Clearly, the Ventanillas levy was placed on record prior to
the sale. This shows the superiority and preference in rights of the Ventanillas over
the property as against the Saberons.
2. No, they are not buyer in good faith but no fault can be attributed to
them.
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The RTC was correct when it pointed out that Saberons suspicion should have
been aroused by the circumstance that Marquez, who was not engaged in the buyand-sell business and had the property for only a few months, would offer the same
for sale. Although the RTC found that the Saberons may not be considered as
innocent purchasers for value because of this circumstance, it, nonetheless, ruled
that they, who might well be unwilling victims of the fraudulent scheme employed
by MRCI and Marquez, were entitled to actual and compensatory damages.
The Saberons could not be said to have authored the entanglement they
found themselves in. No fault can be attributed to them for relying on the face of
the title presented by Marquez. This is bolstered by the fact that the RTC decision
shows no categorical finding that the Saberons purchase of the lots from Marquez
was tainted with bad faith. That the Saberons should have harbored doubts against
Marquez is too high a standard to impose on a buyer of titled land. This is in
consonance to the rule that the one who deals with property registered under the
Torrens system is charged with notice only of such burdens and claims as are
annotated on the title. All persons dealing with property covered by Torrens
certificate of title are not required to explore further than what the Torrens title upon
its face indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto. These rules remain as essential features of
the Torrens system. The present case does not entail a modification or overturning
of these principles.
Suffice it to say, no bad faith can be ascribed to the parties alike.
Nevertheless, the equal footing of the parties necessarily tilts in favor of the
superiority of the Ventanillas notice of levy, as discussed.
This Court is not convinced that defendants Saberon took part in the
fraudulent scheme employed by the other defendants against the plaintiffs.
Although they may not be considered as innocent purchasers for value shown in the
discussion above, this Court is not ready to conclude that the Saberons joined the
other defendants in their efforts to frustrate plaintiffs rights over the disputed
properties. On the contrary, they may be considered victims of the same fraudulent
employed by defendants MRCI and Marquez, and thus can rightfully claim damages
from the same.
Consequently, Article 448 in relation to Article 546 of the Civil Code will apply.
Thus, the two options available to the Ventanillas: 1) they may exercise the right to
appropriate after payment of indemnity representing the value of the improvements
introduced and the necessary and useful expenses defrayed on the subject lots; or
2) they may forego payment of the said indemnity and instead, oblige the Saberons
to pay the price of the land.
Should the Ventanillas elect to appropriate the improvements, the trial court
is ordered to determine the value of the improvements and the necessary and
useful expenses after hearing and reception of evidence. Should the Ventanillas,
however, pursue the option to oblige the Saberons to pay the "price of the land,"
the trial court is ordered to determine said price to be paid to the V entanillas.
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KRYSTLE REALTY DEVELOPMENT CORPORATION, rep. by CHAIRMAN OF THE
BOARD, WILLIAM C. CU vs. DOMINGO ALIBIN, as substituted by his heirs
G.R. No. 196117/G.R. No. 196129, August 13, 2014, J. Perlas-Bernabe
One is considered a buyer in bad faith not only when he purchases real
estate with knowledge of a defect or lack of title in his seller but also when he has
knowledge of facts which should have alerted him to conduct further inquiry or
investigation, as Krystle Realty in this case. Further, as one asserting the status of a
buyer in good faith and for value, it had the burden of proving such status, which
goes beyond a mere invocation of the ordinary presumption of good faith.
The agreement of the parties to submit the determination of the genuineness
of Domingos signature to a handwriting expert of the NBI does not, authorize the
RTC to accept the findings of such expert.The opinion of a handwriting expert,
therefore, does not mandatorily bind the court, the expert's function being to place
before the court data upon which it can form its own opinion.
Facts:
Domingo Alibinowned an undivided one-half portion of Lot No. 1680
containing an aggregate area of 9,188 square meters, situated at Tahao, Legazpi
City, Albay, and registered in his name and that of Mariano Rodrigueza under OCT
No. 0-206. On the strength of a contract to sell which was notarized on July 10, 1962
and a Deed of Sale dated August 23, 1962 purporting to convey Domingos one-half
share of the said lot to CaridadRodrigueza, as well as a Deed of Absolute Sale dated
August 23, 1962 whereby Mariano and Caridad transferred their respective rights to
the subject lot infavor of petitioner Krystle Realty Development Corporation the
original certificate of title was cancelled. In lieu thereof, three TCTs were issued all
on the same day of December 5, 1994, as follows: TCT Nos. 40467 and 40468 in the
names of the Rodriguezas at one-half (1/2) share each, and TCT No. 4046911 in the
name of Krystle Realty covering the entire lot.
Claiming that he had not sold his share to Caridad nor received any
consideration for the alleged transfer, and that the signature on the deed of sale
was not his, Domingo sought to annul the said deed, as well as TCT Nos. 40467,
40468, and 40469, before the RTC of Legazpi City. He died, however, during the
pendency of the case, and was consequently substituted by his heirs. Caridad, on
the other hand, insisted that she had paid Domingo in two (2) installments: 500.00
as down payment on July 10, 1962, and the balance of 400.00 on August 23, 1962
during which he signed the Deed of Sale. She then took possession of Domingos
one-half (1/2) portion of the subject lot and declared the same for taxation
purposes. Krystle Realty claimed that it was a purchaser in good faith, and that the
action, should be directed against Caridad. In addition, it argued that the action of
respondents had already prescribed considering that the questioned deed of sale
between Caridad and Domingo was executed on August 23, 1962, whereas the
latters complaint was filed only on February 15, 1995.
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Caridad likewise died, and was substituted first by her brother, Mariano, and
upon the latters death, by RufinoRodrigueza.The parties agreed to submit to a
handwriting expert of the National Bureau of Investigation the determination of the
genuineness of Domingos signature on the deed of sale. the NBI issued Questioned
Document Report stating that the questioned and the standard/sample signatures of
Domingo submitted to it for examination were written by one and the same person.
After due trial, the RTC of Legazpi City rendered a Decision annulling the
Deed of Sale dated August 23, 1962.The CA affirmed the findingsof the RTC in a
Decision on the ground that respondents were able to establish that the Deed of
Sale dated August 23, 1962 was not valid and, hence, should be annulled. The CA
concluded that Krystle Realty and the Rodriguezas were "obviously in cahoots" with
the formerRegister of Deeds of Legazpi City, Atty. Elmer A. Raeses. Krystle Realty
and Caridad, as substituted by RufinoRodrigueza, instituted this petition.
Issue:
Whether or not the CA correctly affirmed the nullification of the Deedof Sale
dated August 23, 1962 and the declaration of Krystle Realty as a purchaser in bad
faith
Ruling:
Yes, the CA correctly affirmed the RTC decision.
Contrary to the contention of Krystle, the CA has not overlooked any relevant
fact which, if properly considered, would justify a different conclusion. That the
parties herein agreed to submit the determination of the genuineness of Domingos
signature to a handwriting expert of the NBI does not, by any stretch of the
imagination,authorize the RTC to accept the findings of such expert hook, line, and
sinker. The trial court is the most capable trier of facts and, as such, should not
abdicate its judicial duty to decide. The authenticity of a signature is a matter that is
not so highly technical as to preclude a judge from examining the signature himself
and ruling upon the question of whether the signature on a document is forged or
not. The opinion of a handwriting expert, therefore, does not mandatorily bind the
court, the expert's function being to place before the court data upon which it can
form its own opinion.In this case, both the RTC and the CA unanimously concluded
that the questioned signature on the Deed of Sale dated August 23, 1962 is
different from the standard signatures of Domingo as appearing on documents
submitted in evidence by CaridadRodrigueza. Absent any cogent reasonto deviate
from such finding of forgery, which is the basis for the annulment of the said deed,
the same should be deemed conclusive and binding upon the Court.
On Krystle Realtys claim that it is a buyer in good faith, the Court finds that
the latter cannot veer away from the admission of its representative, Mr. William Cu,
that he was aware of Domingos interest in the subject lot, and that Caridad had no
title in her name at the time of the sale, thus, giving rise to the conclusion that it
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Krystle Realty had been reasonably apprised of the ownership controversy over the
subject lot. This notwithstanding, records show that Krystle Realty proceeded with
the transaction without further examining the sellers title and thus, could not claim
to have purchased the subject lot in good faith. One is considered a buyer in bad
faith not only when he purchases real estate with knowledge of a defect or lack of
titlein his seller but also when he has knowledge of facts which should have alerted
him to conduct further inquiry or investigation, as Krystle Realty in this case.
Further, as one asserting the status of a buyer in good faith and for value, it had the
burden of proving such status, which goes beyond a mere invocation of the ordinary
presumption of good faith.
The Court likewise rejects the belated claim of res judicata anchored on the
dismissal of the petition for certiorariin G.R. No. 127995 filed by Domingo as per its
Resolution dated April 28, 1997, which became final and executory on June 16,
1997.43 As the records disclose, petitioners never raised this issue in the appeal in
CA-G.R. CV No. 54912 before the CA, and even in the subsequent proceedings
before the RTC and the CA in CA-G.R. CV No. 92765.44 Settled is the rule that points
of law, theories, issues and arguments not brought to the attention of the lower
court need not be considered by a reviewing court, as they cannot be raised for the
first time at that late stage. Basic considerations of fairness and due process impel
this rule.
SALE OF SAME THING/S TO DIFFERENT VENDEES
ORION SAVINGS BANKvs. SHIGEKANE SUZUKI
G.R. No. 205487, November 12, 2014, J. Brion
The petitioner asserts that it has a better right of ownership over the
disputed property in the case at bar by virtue of a Dacion En Pago. The Supreme
Court ruled that the most prominent index of simulation is the complete absence of
an attempt on the part of the vendee to assert his rights of ownership over the
property in question. After the sale, the vendee should have entered the land and
occupied the premises.
Facts:
The respondent Suzuki purchased a condominium unit and a parking space
from a Korean nation named Kang. The CCT did not reflect any encumbrances.
Hence, Suzuki pushed through with the sale and caused the execution of a Deed of
Sale in his favor. Kang made representations that he would subsequently deliver the
CCT to Suzuki. Meanwhile, Suzuki took physical possession over the property.
The CCT was never delivered to Suzuki which caused him to investigate and
look into the title of Kang. He found out that the condominium he bought was also a
subject of a DacionEn Pago between petitioner Orion Savings Bank. Because of this,
Suzuki filed with the register of deeds an adverse claim to protect his interest. On
the part of Orion, it asserted that it became the owner of the said unit because Kang
had defaulted in his payment.
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Suzuki then filed an action for specific performance and damages against
Kang and Orion. The Regional Trial Court ruled in favor of Suzuki and ordered Orion
and Kang to deliver the ownership of the unit to him. The Court of Appeals affirmed
the decision of the RTC. Hence, the current petition.
Issue:
Who between petitioner Orion Savings Bank and Suzuki has a better right in
the condominium unit and parking lot disputed in the case at bar.
Ruling:
The petitioner Suzuki shall be deemed as the rightful owner of the disputed
property. The Supreme Court anchored this decision on the conclusion that Orion
failed to provide sufficient evidence to support its claim that a Dacion En Pago has
been duly executed between it and Kang.
Article 1544 of the New Civil Code of the Philippines provides that:
ART. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
Although Orion claims priority in right under the principle of prius tempore,
potior jure (i.e., first in time, stronger in right), it failed to prove the existence and
due execution of the Dacion en Pago in its favor. Even if we consider Exhibit 5 and
its submarkings and Exhibit 12 in the present petition, the copious inconsistencies
and contradictions in the testimonial and documentary evidence of Orion, militate
against the conclusion that the Dacion en Pago was duly executed.
First, there appears to be no due and demandable obligation when the
Dacion en Pago was executed, contrary to the allegations of Orion. Orions witness
Perez tried to impress upon the RTC that Kang was in default in his P1,800,000.00
loan.Second, Perez, the supposed person who prepared the Dacion en Pago,
appears to only have a vague idea of the transaction he supposedly prepared. Third,
the Dacion en Pago, mentioned that the P1,800,000.00 loan was secured by a real
estate mortgage. However, no document was ever presented to prove this real
estate mortgage aside from it being mentioned in the Dacion en Pago itself. Fourth,
the Dacion en Pago was first mentioned only two (2) months after Suzuki and Samin
demanded the delivery of the titles sometime in August 2003, and after Suzuki
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caused the annotation of his affidavit of adverse claim. Records show that it was
only on October 9, 2003, when Orion, through its counsel, Cristobal Balbin Mapile&
Associates first spoke of the Dacion en Pago. Not even Perez mentioned any Dacion
en Pago on October 1, 2003, when he personally received a letter demanding the
delivery of the titles. Instead, Perez refused to accept the letter and opted to first
consult with his lawyer. Fifth, it is undisputed that notwithstanding the supposed
execution of the Dacion en Pago on February 2, 2003, Kang remained in possession
of the condominium unit. In fact, nothing in the records shows that Orion even
bothered to take possession of the property even six (6) months after the supposed
date of execution of the Dacion en Pago. Kang was even able to transfer possession
of the condominium unit to Suzuki, who then made immediate improvements
thereon. If Orion really purchased the condominium unit on February 2, 2003 and
claimed to be its true owner, why did it not assert its ownership immediately after
the alleged sale took place? Why did it have to assert its ownership only after
Suzuki demanded the delivery of the titles? These gaps have remained unanswered
and unfilled.
The most prominent index of simulation is the complete absence of an
attempt on the part of the vendee to assert his rights of ownership over the
property in question. After the sale, the vendee should have entered the land and
occupied the premises. The absence of any attempt on the part of Orion to assert
its right of dominion over the property allegedly sold to it is a clear badge of fraud.
That notwithstanding the execution of the Dacion en Pago, Kang remained in
possession of the disputed condominium unit from the time of the execution of the
Dacion en Pago until the propertys subsequent transfer to Suzuki unmistakably
strengthens the fictitious nature of the Dacion en Pago.
These circumstances, aside from the glaring inconsistencies in the
documents and testimony of Orions witness, indubitably prove the spurious nature
of the Dacion en Pago.
CONTRACT OF SALE
SKUNAC CORPORATION and ALFONSO F. ENRIQUEZ vs. ROBERTO S.
SYLIANTENG and CAESAR S. SYLIANTENG
G.R. No. 205879, April 23, 2014, J. Peralta
Indeed, not being an heir of Luis, Romeo never acquired any right
whatsoever over the subject lots even if he was able to subsequently obtain a title
in his name. It is a well-settled principle that no one can give what one does not
have, nemo dat quod non habet. One can sell only what one owns or is authorized
to sell, and the buyer can acquire no more right than what the seller can transfer
legally.
Facts:
The dispute in this case involves two parcels of land located in San Juan City
which was previously registered in the name of Luis Pujalte.
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Roberto Sylianteng and Caesar Sylianteng based their claim of ownership
over the subject lots a Deed of Absolute Sale executed in their favor by their
mother, Emerenciana Sylianteng. It was further alleged that Emerenciana acquired
the lots from the late Luis Pujalte.
On the other hand, Skunac Corporation and Alfonso Enriquez claim that
Romeo Pujalte who was declared as the sole heir of Luis Pujalte sold the lots to
Skunac and Enriquez.
Roberto and Cesar Sylianteng contended that they have a better right to the
lots in question because the transactions conveying the same preceded those
claimed by Skunac and Enriquez and they could not be considered as innocent
purchasers in good faith and for value because they had prior knowledge of the
previous transactions as annotated on the titles covering the subject lots.
Skunac and Enriquez for their part, maintain that Syliantengs acquired the
lots under questionable circumstances appearing that there was no copy of the
Deed of Sale between Emerenciana and Luis Pujalte, on file with the Office of the
Register of Deeds.
Issue:
Whether Emerenciana validly acquired the subject lots from Luis Pujalte, in
turn whether Roberto Sylianteng and Caesar Sylianteng validly acquired the same
lots from Emerenciana
Ruling:
Yes.
Evidence shows that Romeo who sold the land to Skunac and Alfonso
Enriquez never became the owner of the subject properties for two reasons.
First, the disputed lots were already sold by Luis Pujalte during his lifetime.
Thus these parcels of land no longer formed part of his estate when he died.
Romeos sale of the disputed lots to Skunac and Alfonso Enriquez was not affirmed
by the estate court, because the subject parcels of land were not among those
included in the estate at the time Romeo was appointed as administrator.
Second, even if granting the subject lots formed part of the estate of Luis, it
was subsequently proven in a separate case that Romeo is not an heir. In a criminal
case filed against Romeo, it was proven that his claim of heirship is spurious.
Indeed, not being an heir of Luis, Romeo never acquired any right whatsoever over
the subject lots even if he was able to subsequently obtain a title in his name. It is a
well-settled principle that no one can give what one does not have, nemo dat quod
non habet. One can sell only what one owns or is authorized to sell, and the buyer
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can acquire no more right than what the seller can transfer legally. Since Romeo has
no right to the subject lots, petitioners, who simply stepped into the shoes of
Romeo, in turn, acquired no rights to the same.
HEIRS OR REYNALDO DELA ROSA, Namely: TEOFISTA DELA ROSA,
JOSEPHINE SANTIAGO AND JOSEPH DELA ROSA vs. MARIO A. BA
TONGBACAL, IRENEO BATONGBACAL, JOCELYN BA TONGBACAL, NESTOR
BATONGBACAL AND LOURDES BA TONGBACAL
G.R. No. 179205, July 30, 2014, J. Perez
The primary consideration in determining the true nature of a contract is the
intention of the parties. If the words of a contract appear to contravene the evident
intention of the parties, the latter shall prevail. Such intention is determined not
only from the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties. Such that when the contract
denominated as Resibo reveals that nothing therein suggests, even remotely, that
the subject property was given to secure a monetary obligation but an intent to sell
his share in the property, said contract is a contract of sale and not an equitable
mortgage.
Facts:
The subject property consists of a parcel of land situated in Barrio Saog,
Marilao, Bulacan denominated as Lot No. 1, and registered under Transfer Certificate
of Title (TCT) No. T-1074494 under the names of Reynaldo Dela Rosa (Reynaldo),
Eduardo Dela Rosa (Eduardo), Araceli Dela Rosa (Araceli) and Zenaida Dela Rosa
(Zenaida).
Sometime in 1984, Reynaldo offered to sell the subject property to Guillermo
Batongbacal (Guillermo) and Mario Batongbacal (Mario) for P50.00 per square meter
or for a total of P187,500.00. Pursuant to the agreement, Reynaldo received an
advance payment of P31,500.00 leaving a balance of P156,000.00. As shown in the
document denominated as Resibo and signed by Reynaldo on 18 February 1987, the
parties agreed that the amount of P20,000.00 as part of the advance payment shall
be paid upon the delivery of the Special Power-of-Attorney (SPA), which would
authorize Reynaldo to alienate the subject property on behalf of his co-owners and
siblings namely, Eduardo, Araceli and Zenaida. The balance thereon shall be paid
in P10,000.00 monthly installments until the purchase price is fully settled.
Subsequent to the execution of the said agreement, Mario and Guillermo, on
their own instance, initiated a survey to segregate the area of 3,750 square meters
from the whole area covered by TCT No. T-107449, delineating the boundaries of the
subdivided parts. Consequently, Guillermo and Mario initiated an action for Specific
Performance or Rescission and Damages before the Regional Trial Court (RTC) of
Malolos, Bulacan, seeking to enforce their Contract to Sell dated 18 February 1987.
To protect their rights on the subject property, Mario and Guillermo filed a Notice of
Lis Pendens registering their claim on the certificate of title covering the entire
property.
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Reynaldo in his Answer countered that the purported Contract to Sell is void,
because he never gave his consent thereto. Reynaldo insisted that he was made to
understand that the contract between him and the Batongbacals was merely an
equitable mortgage whereby it was agreed that the latter will loan to him the
amount of P3 l ,500.00 payable once he receives his share in the proceeds of the
sale of the land registered under TCT No. T-107449.
For failure of Mario and Guillermo as plaintiffs therein to adduce sufficient
evidence to support their complaint, the RTC dismissed it which was subsequently
affirmed by the Court of Appeals. In seeking modification of the appellate court's
decision, Mario and Guillermo pointed out that the title of the subject property has
not yet been transferred to third persons, and thus, Reynaldo can still be compelled
to execute a deed of conveyance over his undivided share of the entire property.
The Court of Appeals granted the Motion for Reconsideration of Mario and Guillermo
and directed Reynaldo to convey the subject property to them.
Issue:
Whether or not the contract entered into by parties was a Contract to Sell or
an equitable mortgage.
Ruling:
It is a contract of sale.
An equitable mortgage is defined as one although lacking in some formality,
or form or words, or other requisites demanded by a statute, nevertheless reveals
the intention of the parties to charge real property as security for a debt, and
contains nothing impossible or contrary to law. For the presumption of an equitable
mortgage to arise, two requisites must concur: (1) that the parties entered into a
contract denominated as a sale; and (2) the intention was to secure an existing debt
by way of mortgage. Consequently, the non-payment of the debt when due gives
the mortgagee the right to foreclose the mortgage, sell the property and apply the
proceeds of the sale for the satisfaction of the loan obligation. While there is no
single test to determine whether the deed of absolute sale on its face is really a
simple loan accommodation secured by a mortgage, the Civil Code, however,
enumerates several instances when a contract is presumed to be an equitable
mortgage, to wit:
Article 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
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(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by
the vendee as rent or otherwise shall be considered as interest which shall be
subject to the usury laws.
A perusal of the contract denominated as Resibo reveals the utter frailty of
petitioners' position because nothing therein suggests, even remotely, that the
subject property was given to secure a monetary obligation. The terms of the
contract set forth in no uncertain terms that the instrument was executed with the
intention of transferring the ownership of the subject property to the buyer in
exchange for the price. Nowhere in the deed is it indicated that the transfer was
merely intended to secure a debt obligation. On the contrary, the document clearly
indicates the intent of Reynaldo to sell his share in the property. The primary
consideration in determining the true nature of a contract is the intention of the
parties. If the words of a contract appear to contravene the evident intention of the
parties, the latter shall prevail. Such intention is determined not only from the
express terms of their agreement, but also from the contemporaneous and
subsequent acts of the parties. That the parties intended some other acts or
contracts apart from the express terms of the agreement, was not proven by
Reynaldo during the trial or by his heirs herein. Beyond their bare and
uncorroborated asseverations that the contract failed to express the true intention
of the parties, the record is bereft of any evidence indicative that there was an
equitable mortgage.
Neither could the allegation of gross inadequacy of the price carry the day for
the petitioners.1wphi1 It must be underscored at this point that the subject of the
Contract to Sell was limited only to '14 pro-indiviso share of Reynaldo consisting an
area of 3,750 square meter and not the entire 15,001-square meter parcel of land.
As a co-owner of the subject property, Reynaldo's right to sell, assign or mortgage
his ideal share in the property held in common is sanctioned by law. The applicable
law is Article 493 of the New Civil Code, which spells out the rights of co-owners
over a co-owned property. Pursuant to this law, a co-owner has the right to alienate
his proindiviso share in the co-owned property even without the consent of his
coowners. This right is absolute and in accordance with the well-settled doctrine
that a co-owner has a full ownership of his pro-indiviso share and has the right to
alienate, assign or mortgage it, and substitute another person for its enjoyment. In
other words, the law does not prohibit a co-owner from selling, alienating,
mortgaging his ideal share in the property held in common.
In the same breadth, a co-owner cannot be compelled by the court to give
their consent to the sale of his share in a co-owned property. In the language of
Rodriguez v. Court of first Instance of Rizal, "each party is the sole judge of what is
good for him." (Underscoring ours). Thus, even if the impression of the Court of
Appeals were true, i.e., that the entire property has been sold to thirds persons,
such sale could not have affected the right of Mario and Guillermo to recover the
property from Reynaldo. In view of the nature of co-ownership, the Comi of Appeals
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correctly ruled that the terms in the Contract to Sell, which limited the subject to
Reynaldo's ideal share in the property held in common is perfectly valid and
binding.
In fact, no authority from the other co-owners is necessary for such
disposition to be valid as he is afforded by the law full ownership of his paii and of
the fruits and benefits pertaining thereto. A condition set forth in a sale contract
requiring a co-owner to secure an authority from his co-owners for the alienation of
his share, as seemingly indicated in this case, should be considered mere
surplusage and docs not, in any way, affect the validity or the enforceability of the
contract.
A contract of sale is a consensual contract, which becomes valid and binding
upon the meeting of minds of the parties on the price and the object of the
sale. The mere inadequacy of the price docs not affect its validity when both parties
are in a position to form an independent judgment concerning the transaction,
unless fraud, mistake or undue influence indicative of a defect in consent is present.
A contract may consequently be annulled on the ground of vitiated consent and not
due to the inadequacy of the price. In the case at bar, however, no evidence to
prove fraud, mistake or undue influence indicative of vitiated consent is attendant.
As the parties invoking equitable mortgage, the Heirs of Reynaldo did not
even come close to proving that the parties intended to charge the property as
security for a debt, leaving us with no other choice but to uphold the stipulations in
the contract. Basic is the rule that if the terms of the contract are clear and leave no
doubt upon the intention of the parties, the literal meaning of its stipulations shall
control, we find that the Court of Appeals cannot be faulted for ruling, in
modification of its original judgment, that the sale effected by Reynaldo of his
undivided share in the property is valid and enforceable.
JUAN P. CABRERA vs. HENRY YSAAC
G.R. No. 166790, November 19, 2014, J. Leonen
Unless all the co-owners have agreed to partition their property, none of
them may sell a definite portion of the land. The co-owner may only sell his or her
proportionate interest in the co-ownership. A contract of sale which purports to sell
a specific or definite portion of unpartitioned land is null and void ab initio.
At best, the agreement between Juan and Henry is a contract to sell, not a
contract of sale. A contract to sell is a promise to sell an object, subject to
suspensive conditions. Without the fulfillment of these suspensive conditions, the
sale does not operate to determine the obligation of the seller to deliver the object.
A co-owner could enter into a contract to sell a definite portion of the
property. Such contract is still subject to the suspensive condition of the partition of
the property, and that the other co-owners agree that the part subject of the
contract to sell vests in favor of the co-owners buyer. Hence, the co-owners
consent is an important factor for the sale to ripen.
Facts:
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The heirs of Luis and Matilde Ysaac co-owned a 5,517-square-meter parcel of
land in Sabang, Naga City. One of the co-owners is respondent, Henry Ysaac.
Henry leased out portions of the property to several lessees. Juan Cabrera
leased a 95sq.m portion of the land since 1986.
Henry offered to sell the 95sq.m land to Juan. He told Henry that the land was
too small for his needs and in order to address Juan concerns, Henry include the 2
adjoining lands that Henry was then leasing to the Borbe family and the Espiritu
family. But Henry warned Juan that the sale for those two parcels could only proceed
if the two families agree to it. Juan accepted the new offer. Henry demanded for an
initial payment of P1,500.00, which Juan paid.
According to Juan, Henry informed him that the Borbe family and the Espiritu
family were no longer interested in purchasing the properties they were leasing.
Juan tried to pay the balance of the purchase price to Henry. However,at that time,
Henry was in the United States. The only person in Henry residence was his wife.
The wife refused to accept Juans payment.
In September 1993, Juan alleged that Henry approached him, requesting to
reduce the land in their transaction. Part of the land was going to be made into a
barangay walkway, and another part was being occupied by a family that was
difficult to eject. Juan agreed to the proposal.
Juan intended to pay the amount due for the payment of the lot. However, Henry
was in Manila. Once more, Henry's wife refused to receive the payment because of
lack of authority from her husband.
Henrys counsel, wrote a letter addressed to Juans counsel, informing that
his client is rescinding the contract of sale because Juan failed to pay the balance of
the purchase price of the land. The letter also stated that Juans initial payment of
P1,500.00 and the payment of P6,100.00 were going to be applied as payment for
overdue rent of the land Juan was leasing from Henry. Juan went to Henrys house to
settle the matter. Henry told Juan that he could no longer sell the property because
the new administrator of the property was his brother, Franklin.
Juan decided to file a specific performance, and prayed for the execution of a
formal deed of sale and for the transfer of the title of the property in his name. He
tendered the sum of P69,650.00 to the clerk of court as payment of the remaining
balance.
Before the RTC decided the case, Franklin sold their property to the local
government of Naga City which will be a project for the urban poor. During the trial,
Corazon Borbe of the Borbe family testified that contrary to what Juan claimed, her
family never agreed to sell the land they were formerly leasing from Henry in favor
of Juan. The Borbe family bought the property from Naga Citys urban poor program
after the sale between the Ysaacs and the local government.
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The RTC ruled that the contract of sale between Juan and Henry was duly
rescinded when the former failed to pay the balance of the purchase price in the
period agreed upon. The RTC found that there was no evidence that the other lot
occupants agreed to sell to Juan.
The Court of Appeals agreed with the RTC that there was a perfected contract
of sale between Juan and Henry. However, it also ruled that the contract of sale was
not validly rescinded. For the rescission to be valid under Article 1592 of the Civil
Code, it should have been done through a judicial or notarial act and not merely
through a letter.
Issues:
1) Whether or not there was a valid contract of sale between Henry and Juan;
2) Whether or not the contract was terminated through rescission;
3) Whether or not there was a double sale in this case.
Ruling:
The petition should be denied.
1) There was no valid contract of sale between Juan and Henry.
We find that there was no contract of sale. It was null ab initio.
As defined by the Civil Code, "a contract is a meeting of minds between two
persons whereby one binds himself, to give something or to render some service."
For there to be a valid contract, there must be consent of the contracting parties, an
object certain which is the subject matter of the contract, and cause of the
obligation which is established. Sale is a special contract. The seller obligates
himself to deliver a determinate thing and to transfer its ownership to the buyer. In
turn, the buyer pays for a price certain in money or its equivalent. A "contract of
sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price." The seller and buyer must agree as
to the certain thing that will be subject of the sale as well as the price in which the
thing will be sold. The thing to be sold is the object of the contract, while the price is
the cause or consideration.
The object of a valid sales contract must be owned by the seller. If the seller
is not the owner, the seller must be authorized by the owner to sell the object.
Specific rules attach when the seller co-owns the object of the contract. Sale of a
portion of the property is considered an alteration of the thing owned in common.
Such disposition requires the unanimous consent of the other co-owners. The rules
also allow a co-owner to alienate his or her part in the co-ownership.
If the alienation precedes the partition, the co-owner cannot sell a definite
portion of the land without consent from his or her co-owners. He or she could only
sell the undivided interest of the co-owned property. Prior to partition, a sale of a
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definite portion of common property requires the consent of all co-owners because
it operates to partition the land with respect to the co-owner selling his or her share.
The object of the sales contract between Henry and Juan was a definite
portion of a co-owned parcel of land. At the time of the sale, the entire property was
still held in common. The rules allow Henry to sell his undivided interest in the coownership. However, this was not the object of the sale between him and petitioner.
The object of the sale was a definite portion. Henry has "no right to sell or alienate a
concrete, specific or determinate part of the thing owned in common, because his
right over the thing is represented by quota or ideal portion without any physical
adjudication."
There was no showing that Henry was authorized by his co-owners to sell the
portion of land occupied by Juan, the Espiritu family, or the Borbe family. Without
the consent of his co-owners, Henry could not sell a definite portion of the co-owned
property.
At best, the agreement between Juan and Henry is a contract to sell, not a
contract of sale. A contract to sell is a promise to sell an object, subject to
suspensive conditions. Without the fulfillment of these suspensive conditions, the
sale does not operate to determine the obligation of the seller to deliver the object.
A co-owner could enter into a contract to sell a definite portion of the
property. Such contract is still subject to the suspensive condition of the partition of
the property, and that the other co-owners agree that the part subject of the
contract to sell vests in favor of the co-owners buyer. Hence, the co-owners
consent is an important factor for the sale to ripen.
2) A non-existent contract cannot be a source of obligations, and it cannot be
enforced by the courts
We rule in favor of Henry.
The absence of a contract of sale means that there is no source of obligations
for Henry, as seller, or Juan, as buyer. Rescission is impossible because there is no
contract to rescind.
Even if we assume that Henry had full ownership of the property and that he
agreed to sell a portion of the property to Juan, the letter was enough to cancel the
contract to sell. Generally, "the power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent on him."
For the sale of immovable property, the following provision governs its
rescission:
Article 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission
of the contract shall take place, the vendee may pay, even after the expiration of
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the period, as long as no demand for rescission of the contract has been made upon
him either judicially or by notarial act. After the demand, the court may not grant
him a new term.
This provision contemplates (1) a contract of sale of an immovable property
and (2) a stipulation in the contract that failure to pay the price at the time agreed
upon will cause the rescission of the contract. The vendee or the buyer can still pay
even after the time agreed upon, if the agreement between the parties has these
requisites. This right of the vendee to pay ceases when the vendor or the seller
demands the rescission of the contract judicially or extra judicially. In case of an
extra judicial demand to rescind the contract, it should be notarized.
Hence, this provision does not apply if it is not a contract of sale of an
immovable property and merely a contract to sell an immovable property. A
contract to sell is "where the ownership or title is retained by the seller and is not to
pass until the full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach, casual or serious, but simply an event
that prevented the obligation of the vendor to convey title from acquiring binding
force."
In Manuel v. Rodriguez this court categorically stated that Article 1592 "does
not apply to a contract to sell or promise to sell, where title remains with the vendor
until fulfillment to a positive suspensive condition, such as full payment of the
price." This court upheld that the contract to sell was validly cancelled through the
non-payment of Eusebio Manuel. The same conclusion applies in this case.
The law does not prescribe a form to rescind a contract to sell immovable
property. In Manuel, the non-payment operated to cancel the contract. If mere nonpayment is enough to cancel a contract to sell, the letter given to Juans lawyer is
also an acceptable form of rescinding the contract. The law does not require
notarization for a letter to rescind a contract to sell immovable property.
Notarization is only required if a contract of sale is being rescinded.
Juan argued that he was willing to comply with the suspensive condition on
the contract to sell because he was ready to pay the balance of the purchase price
on June 15, 1992. However, his argument is unmeritorious. As ruled by the RTC Juan
should have resorted to the various modes of consignment when Henrys wife
refused to accept the payment on Juans behalf.
Even if we assumed that the contract between Juan and Henry were
perfected, the strict requisites in Article 1592 did not apply because the only
perfected contract was a contract to sell, not a contract of sale. The courts cannot
enforce the right of Juan to buy Henrys property.
3) The question of double sale also becomes moot and academic.
There was no valid sale between Juan and Henry, while there was a valid sale
between the local government of Naga City and Henry and his co-owners. Since
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there is only one valid sale, the rule on double sales under Article 1544 of the Civil
Code does not apply.
We rule that petitioner is entitled to the return of the amount of money
because he paid it as consideration for ownership of the land. Since the ownership
of the land could not be transferred to him, the money he paid for that purpose
must be returned to him. Otherwise, respondent will be unjustly enriched. Henrys
claim for rent in arrears is a separate cause of action from this case. It was not
proven during trial if Juan's rental liability is due, or if it is already liquidated and
demandable.
EARNEST MONEY
FIRST OPTIMA REALTY CORPORATION vs. SECURITRON SECURITY
SERVICES, INC.
In a potential sale transaction, the prior payment of earnest money even

before the property owner can agree to sell his property is irregular, and cannot be
used to bind the owner to the obligations of a seller under an otherwise perfected
contract of sale; to cite a well-worn clich, the carriage cannot be placed before the
horse. Securitrons sending of the February 4, 2005 letter to FORC which contains
earnest money constitutes a mere reiteration of its original offer which was already
rejected previously. FORC can never be made to push through a sale which they
never agreed to in the first place.
Facts:
Petitioner First Optima Realty Corporation (FORC) is a domestic corporation

engaged in the real estate business. It is the registered owner of a 256-square
meter parcel of land with improvements located in Pasay City, covered by Transfer
Certificate of Title No. 125318 (the subject property). Respondent Securitron
Security Services, Inc., (Securitron) on the other hand, is a domestic corporation
with offices located beside the subject property. Looking to expand its business and
add to its existing offices, Securitron through its General Manager, Antonio Eleazar
(Eleazar) sent a December 9, 2004 Letter addressed to FORC through its
Executive Vice-President, Carolina T. Young (Young) offering to purchase the
subject property at P6,000.00 per square meter. A series of telephone calls ensued,
but only between Eleazar and Youngs secretary; Eleazar likewise personally
negotiated with a certain Maria Remoso (Remoso), who was an employee of FORC.
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At this point, Eleazar was unable to personally negotiate with Young or the FORCs
board of directors.
Sometime thereafter, Eleazar personally went to FORCs office offering to pay

for the subject property in cash, which he already brought with him. However,
Young declined to accept payment, saying that she still needed to secure her
sisters advice on the matter. She likewise informed Eleazar that prior approval of
FORCs Board of Directors was required for the transaction, to which remark Eleazar
replied that Securitron shall instead await such approval. On February 4, 2005,
Securitron sent a Letter of even date to FORC. It was accompanied by Philippine
National Bank Check No. 24677 (the subject check), issued for P100,000.00 and
made payable to FORC. The letter states Antonio Eleazar is tendering P100,000.00
as earnest money.
Thereafter, Securitron through counsel demanded in writing that FORC

proceed with the sale of the property. On April 18, 2006, Securitron filed with the
Pasay RTC a civil case against FORC for specific performance with damages to
compel the latter to consummate the supposed sale of the subject property. In its
Answer with Compulsory Counterclaim, FORC argued that it never agreed to sell the
subject property; that its board of directors did not authorize the sale thereof to
Securitron, as no corresponding board resolution to such effect was issued; that the
Securitrons P100,000.00 check payment cannot be considered as earnest money
for the subject property, since said payment was merely coursed through FORCs
receiving clerk, who was forced to accept the same; and that Securitron was simply
motivated by a desire to acquire the subject property at any cost. Thus, FORC
prayed for the dismissal of the case.
In ruling for the Securitron, the trial court held that FORCs acceptance of
P100,000.00 earnest money indicated the existence of a perfected contract of sale
between the parties; that there is no showing that when Securitron gave the
February 4, 2005 letter and check to FORCs receiving clerk, the latter was harassed
or forced to accept the same. On September 30, 2011, the CA issued the assailed
Decision affirming the trial courts February 16, 2009 Decision. Hence, this petition.
Issue:
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Whether the money Securiton delivered to First Optima Realty Corporation
was earnest money thereby providing a perfected contract of sale
Ruling:
No. The trial and appellate courts failed to appreciate that Securitrons offer
to purchase the subject property was never accepted by the FORC at any instance,
even after negotiations were held between them. Thus, as between them, there is
no sale to speak of. When there is merely an offer by one party without
acceptance of the other, there is no contract.
Securitrons subsequent sending of the February 4, 2005 letter and check to

FORC without awaiting the approval of FORCs board of directors and Youngs
decision, or without making a new offer constitutes a mere reiteration of its
original offer which was already rejected previously; thus, FORC was under no
obligation to reply to the February 4, 2005 letter. It would be absurd to require a
party to reject the very same offer each and every time it is made; otherwise, a
perfected contract of sale could simply arise from the failure to reject the same offer
made for the hundredth time. Thus, said letter cannot be considered as evidence of
a perfected sale, which does not exist in the first place; no binding obligation on the
part of the FORC to sell its property arose as a consequence. Under Art. 1482 of the
Civil Code, there must first be a perfected contract of sale before we can speak of
earnest money. Where the parties merely exchanged offers and counter-offers, no
contract is perfected since they did not yet give their consent to such offers.
Earnest money applies to a perfected sale.
In a potential sale transaction, the prior payment of earnest money even

before the property owner can agree to sell his property is irregular, and cannot be
used to bind the owner to the obligations of a seller under an otherwise perfected
contract of sale; to cite a well-worn clich, the carriage cannot be placed before the
horse. The property owner-prospective seller may not be legally obliged to enter
into a sale with a prospective buyer through the latters employment of
questionable practices which prevent the owner from freely giving his consent to
the transaction; this constitutes a palpable transgression of the prospective sellers
rights of ownership over his property, an anomaly which the Court will certainly not
condone. An agreement where the prior free consent of one party thereto is
withheld or suppressed will be struck down, and the Court shall always endeavor to
protect a property owners rights against devious practices that put his property in
danger of being lost or unduly disposed without his prior knowledge or consent.
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FORGERY
SERCONSISION R. MENDOZA vs. AURORA MENDOZA FERMIN
G.R. No. 177235, July 7, 2014, J.Peralta
Fermin filed a case for Annulment of Deed of Absolute Sale, Transfer
Certificate of Title and Damages alleging that the signature of her father was
forged. While the Court recognize that the technical nature of the procedure in
examining forged documents calls for handwriting experts, resort to these experts
is not mandatory or indispensable, because a finding of forgery does not depend
entirely on their testimonies. Judges must also exercise independent judgment in
determining the authenticity or genuineness of the signatures in question, and not
rely merely on the testimonies of handwriting experts.
Facts:
Leonardo G. Mendoza, allegedly married to Serconsision R. Mendoza, died on
November 25, 1986. In the testate proceedings of her fathers estate, Aurora
Mendoza Fermin, being the legitimate and eldest daughter of Leonardo, was
appointed as one of the administratix. Sometime in 1990, when Fermin was the one
preparing an inventory of the properties of her late father, she discovered that her
father and Mendoza purportedly sold the said property to one Eduardo C. Sanchez
as evidenced by a Deed of Absolute Sale dated September 22, 1986. However, the
Deed of Absolute Sale was registered with the Register of Deeds for the City of
Paraaque only on April 30, 1991, or five (5) years after the alleged transfer.
On March 19, 1992, Fermin filed a case for Annulment of Deed of Absolute
Sale, Transfer Certificate of Title and Damages alleging that the signature of her
father was forged. The RTC rendered a decision finding that there was no forgery
and declaring the sale of the property as valid. The CA reversed the decision of the
RTC.
Mendoza denied that the signatures of Leonardo on the Deed of Absolute Sale
were forgeries. To augment her position, she presented an expert witness, a
document examiner of PNP, who testified that there is no forgery.
Issue:
Whether or not the signature was forged
Ruling:
Yes.
With regard to the issue on forgery, the general rule is, the same cannot be
presumed and must be proved by clear, positive and convincing evidence; the
burden of proof of which lies on the party alleging forgery. The best evidence of a
forged signature in the instrument is the instrument itself reflecting the alleged
forged signature. The fact of forgery can only be established by comparison
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between the alleged forged signature and the authentic and genuine signature of
the person whose signature is theorized upon to have been forged.
A scrutiny of the comparison charts of the NBI handwriting expert witness
and the PNP handwriting expert witness, would reveal that there are marked
differences between Leonardos signature on the Deed of Absolute Sale vis--vis the
specimen signatures submitted by the parties.
While the Court recognize that the technical nature of the procedure in examining
forged documents calls for handwriting experts, resort to these experts is not
mandatory or indispensable, because a finding of forgery does not depend entirely
on their testimonies. Judges must also exercise independent judgment in
determining the authenticity or genuineness of the signatures in question, and not
rely merely on the testimonies of handwriting experts.
Although there is no direct evidence to prove forgery, preponderance of
evidence indubitably favors the respondent. Preponderance of evidence is the
weight, credit, and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term greater weight of the evidence or
greater weight of the credible evidence. It is evidence which is more convincing to
the court as worthier of belief than that which is offered in opposition thereto.
Being a forgery, the Deed of Absolute Sale conveyed nothing in favor of Eduardo C.
Sanchez, as claimed by Mendoza.
Considering that the questioned sale was concluded on September 22, 1986,
before the Family Code took effect, the transaction could still be aptly governed by
the then governing provisions of the Civil Code. Article 173 provides that the wife
may, during the marriage, and within ten years from the transaction questioned,
ask the courts for the annulment of any contract of the husband entered into
without her consent, when such consent is required, or any act or contract of the
husband which tends to defraud her or impair her interest in the conjugal
partnership property. Should the wife fail to exercise this right, she or her heirs,
after the dissolution of the marriage, may demand the value of the property
fraudulently alienated by the husband.
RECISSION
BANK OF THE PHILIPPINE ISLANDS vs. VICENTE VICTOR C. SANCHEZ ET
AL./GENEROSO TULAGAN ET AL. vs. VICENTE VICTOR C. SANCHEZ ET
AL./REYNALDO V. MANIWANG vs. VICENTE VICTOR C. SANCHEZ and FELISA
GARCIA YAP
G.R. No. 179518, G.R. No. 179835, G.R. No. 179954, November 19, 2014, J.
Velasco Jr.
The failure of TSEI to pay the consideration for the sale of the subject
property entitled the Sanchezes to rescind the Agreement. And in view of the
finding that the intervenors acted in bad faith in purchasing the property, the
subsequent transfer in their favor did not and cannot bar rescission. Contrary to the
contention of BPI, although the case was originally an action for rescission, it
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became a direct attack on the title, certainly there is no indication that when the
Sanchezes filed their complaint with the RTC they already knew of the existence of
TCT 383697.
Facts:
Vicente Victor C. Sanchez, Kenneth Nereo Sanchez and Imelda C. V da. De
Sanchez owned a parcel of land located at No. 10 Panay Avenue, Quezon City
consisting of 900 square meters. The property was registered under TCT 156254 of
the Registry of Deeds of Quezon City. On October 10, 1988, Jesus V. Garcia, doing
business under the name TransAmerican Sales and Exposition, Inc., wrote a letter to
Vicente offering to buy the Subject Property for One Million Eight Hundred Thousand
Pesos under subject terms and conditions. The offer was good for only seven (7)
days. The period elapsed with the parties failing to come to an agreement.
Sometime in the third week of October 1988, Felisa Yap, the widow of Kenneth
Nereo Sanchez, and Garcia had a meeting at the Quezon City Sports Club wherein
the parties agreed to the sale of the subject property. Pursuant to this agreement,
Yap turned over to Garcia the original owners copy of TCT 156254, the copy of the
filed Application for Restitution of Title to the property, and copies of all receipts for
the payment of real estate taxes on the property,while Garcia paid Yap 50,000 as
earnest money.
Afterwards, Yap required the occupants of the subject property to vacate the
same. Immediately after it was vacated, Garcia, without Yaps knowledge and
consent, took possession of the lot and installed his own caretaker thereon with
strict instructions not to allow anyone to enter the property. Yap later learned that
Garcia had also demolished the house on the property and advertised the
construction and sale of "Trans American Townhouse V" thereon. The foregoing
developments notwithstanding and despite numerous demands, Garcia failed to pay
the balance of the purchase price as agreed upon.
Yap was informed that the checks representing the purchase price of the
subject property were ready but that Vicente must pick up his checks personally.
However, out of the six (6) checks that were presented to them, four (4) of them
were post-dated, further delaying their overdue payment. In order to properly
document such check payments, the parties executed an Agreement dated
December 8, 1988, which relevantly provide: That the total consideration of sale of
the rights, interest, participation and title of the Yap and Vicente of the aforestated
parcel of land to Garcia shall be One Million Eight Hundred Fifty Thousand Pesos
(P1,850,000.00), Philippine Currency, payable in check.That the parties hereto
agree that once the aforestated checks are honored by the bank and encashed by
the payees thereof, the First and Second Parties shall execute an EXTRA-JUDICIAL
SETTLEMENT OF ESTATE WITH SALE distributing and dividing among themselves.
Subsequently, the first four (4) checks were deposited with no issue. However, the
last two (2) checks, amounting toP400,000 each, were dishonored for the reason of
"DAIF" or drawn against insufficient funds.Thus, Yap wrote a letter to Garcia
informing him that the two (2) checks were dishonored and asking that the checks
be replaced within five (5) days from receipt of the letter. Such request was left
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unheeded. Yap informed Garcia in a letter that she and Vicente were rescinding the
Agreement while demanding the return of the original owners copy of TCT 156254.
This prompted Garcia to offer two (2) managers checks in the aggregate amount
of P300,000 which Yap flatly refused, reiterating the rescission of their Agreement
and demanding for the return of all documents entrusted to Garcia through a
January 21, 1989 letter.
Garcias counsel, Atty. Francisco Beato, Jr, informed Yap that they had an
agreement that the P800,000 balance of the purchase price was due to be paid by
Garcia only upon Yap and Vicentes payment of the realty, inheritance and capital
gains taxes due on the transfer of the property. Thus, Garcia effectively refused to
return the documents and to vacate the subject property. Yap referred Beatos letter
to her own counsel, Atty. Julian S. Yap, who wrote back in a letter refuting the claim
of Garcia that the P800,000 was not yet due and reiterating their decision to rescind
the Agreement and demanding that Garcia vacate the property and return the
documents that were surrendered to him by Yap. On February 19, 1989, Yap and
Vicente discovered that Garcia posted an advertisement in the classified ads of the
Manila Bulletin offering to sell units at the Trans American Townhouse V situated at
the subject property. Thus, on February 27, 1989, Atty. Yap wrote the Housing and
Land Use Regulatory Board (HLURB) informing the latter of the existing public
advertisement of TSEI offering for sale townhouses illegally constructed on the
subject property and urging the HLURB to cancel any existing permit or license to
sell the said townhouse units or to deny any application therefor. On March 17,
1989, the HLURB issued a Cease and Desist Order (CDO) enjoining TSEI and Garcia
from further developing and selling the townhouses.
In a delayed response to the CDO, TSEI wrote a letter to the HLURB alleging
that only ground leveling works were being undertaken on the project. Yap and
Vicente also inquired from the City Building Official of Quezon City, in a letter the
office found that the construction on the subject property was indeed illegal and at
its 5% initial stage. Yap also wrote a letter to the Register of Deeds in Quezon City
informing it that TCT 156254 was no longer in their possession and requesting that
the office clear the matter with them first before acting on any transaction
pertaining to the subject property. Then, on August 21, 1989, Yap filed a formal
complain twith the Office of the City Building Official of Quezon City. However, both
Garcia and TSEI failed to attend the said hearing. Thereafter, Yap and Vicente, in his
own behalf and representing the heirs of Imelda C.Vda. De Sanchez, RTC in Quezon
City a Complaint for the rescission of contract, restitution and damages with prayer
for TRO/preliminary injunction against TSEI and Garcia.
Meanwhile, Garcia managed to cause the cancellation of TCT 156254 and its
replacement with TCT 383697 in the name of TSEI. TCT 383697, however, bore the
date of issuance as June 9, 1988,way before the parties agreed on the sale
sometime in October 1988. Garcia apparently used TCT 383697 to entice several
buyers to buy the townhouse units being constructed by TSEI on the subject lot.
Claiming to have bought townhouse units sometime in early 1989, the following
intervened in the instant case: the spouses Jose and Visitacion Caminas, Reynaldo V.
Maniwang, Generoso C. Tulagan, Varied Traders Concept, Inc, and Arturo Marquez.
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TSEI left the townhouse units unfinished, leaving these intervenors to finish their
townhouses by themselves. Notably, except for the Absolute Deeds of Sale
executed between TSEI and VTCI, all the other intervenors contracts conveying
townhouses in their favor identified their purchased lots as covered by TCT 156254.
Far East Bank and Trust Company entered into a Loan Agreement with TSEI
secured by a Real Estate Mortgage over TCT 156254.FEBTC later merged with the
Bank of the Philippine Islands with the latter as the surviving bank. Garcia
purportedly explained to FEBTC that the parties were still in the process of
transferring the title. Garcia submitted a copy of TCT 383697 in TSEIs name. Upon
default, FEBTC foreclosed the subject lot and had the Foreclosure Certificate of Sale
annotated on TCT 383697. The RTC rendered a Decision in favor of the Sanchezes.
The CA rendered, the assailed Decision affirming the RTC Decision with
modifications.
Issue:
1. Whether or not there was a valid rescission of the Agreement between the
Sanchezes and TSEI/Garcia.
2. Whether or not TCT 383697 in the name of TSEI may be cancelled.
Ruling:
1. No, rescission of the Agreement was not barred by the subsequent
transfer.
The injured party may choose between the fulfillment and the rescission of
the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible. In this case, indemnity for damages may be demanded from the person
causing the loss. In the extant case, the failure of TSEI to pay the consideration for
the sale of the subject property entitled the Sanchezes to rescind the Agreement.
And in view of the finding that the intervenors acted in bad faith in purchasing the
property, the subsequent transfer in their favor did not and cannot bar rescission.
Moreover, bad faith on the part of TSEI, Garcia and the intervenors leads to
the application of Articles 449-450 of the New Civil Code. Consequently, the
Sanchezes have the following options: (1) acquire the property with the townhouses
and other buildings and improvements that may be thereon without indemnifying
TSEI or the intervenors; (2) demand from TSEI or the intervenors to demolish what
has been built on the property at the expense of TSEI or the intervenors; or (3) ask
the intervenors to pay the price of the land.
2. No, the suit is not a collateral attack on TSEIs title.
An action is deemed an attack on a title when the object of the action or
proceeding is to nullify the title, and thus challenge the judgment pursuant to which
the title was decreed. The attack is direct when the object of the action is to annul
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or set aside such judgment, or enjoin its enforcement. On the other hand, the attack
is indirect or collateral when, in an action to obtain a different relief, an attack on
the judgment is nevertheless made as an incident thereof.In the instant case,
contrary tothe contention of BPI, although the case was originally an action for
rescission, it became a direct attack on TCT 383697. To be sure, there is no
indication that when the Sanchezes filed their complaint with the RTC they already
knew of the existence of TCT 383697. However, when they were confronted with the
title through the filing of the various Answers of the intervenors, the Sanchezes
directly stated that the title was a fake.
EXTINGUISHMENT OF DEBT
EAGLE RIDGE DEVELOPMENT CORPORATION, MARCELO N. NAVAL and
CRISPIN I. OBEN vs. CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC.
Cameron Grandville filed a motion for reconsideration for the April 10, 2013
decision of the Supreme Court. It argues that the right of Eagle Ridge Development
to extinguish the obligation has already lapsed. However, the Court in resolving this
case stated that nder the circumstances of this case, the 30-day period under
Article 1634 within which Eagle Ridge Developments could exercise their right to
extinguish their debt should begin to run only from the time they were informed of
the actual price paid by the assignee for the transfer of their debt.
Facts:
This case is a motion for reconsideration of the decision of the Supreme
Court. Cameron Granville 3 Asset Management (Cameron Granville), Inc. filed a
motion for reconsideration of the Courts April 10, 2013 decision, which reversed
and set aside the Court of Appeals' resolutions and ordered Cameron Granville to
produce the Loan Sale and Purchase Agreement (LSPA).
The facts stated herein are the corresponding arguments of both parties.
Cameron Granville in its motion for reconsideration poses the following
arguments; first, there was no "insistent refusal" on its part to present the LSPA, but
that Eagle Ridge Developments filed their motion for production way out of time,
even beyond the protracted pre-trial.
Second, that even assuming arguendo that Art. 1634 of the New Civil Code is
applicable, the Eagle Ridge Developments are still liable to pay because pursuant to
Article 1634, they should have exercised their right of extinguishment within 30
days from the substitution of Export and Industry Bank or EIB (the original creditor)
by Cameron Granville in December 2006. According to Cameron Granville, the trial
court order "granting the substitution constituted sufficient judicial demand as
contemplated under Article 1634." Also, maintaining that the LSPA is immaterial or
irrelevant to the case, Cameron Granville contends that the "[o]rder of substitution
settled the issue of [Cameron Granvilles] standing before the [c]ourt and its right to
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fill in the shoes of [EIB]." It argues that the production of the LSPA will neither
prevent Cameron Granville from pursuing its claim of 10,232,998.00, exclusive of
interests and penalties, from Eagle Ridge Development EDC, nor write off Eagle
Ridge Development EDCs liability to Cameron Granville.
Cameron Granville also contends that: (1) the production of the LSPA will
violate the parol evidence rule under Rule 130, Section 9 of the Rules of Court; (2)
the LSPA is a privileged/confidential bank document; and (3) under the Special
Purpose Vehicle Act.
On the other hand, Eagle Ridge Development posits the following arguments.
They argue that their motion for production was not filed out of time, and "[t]here is
no proscription, under Rule 27 or any provision of the Rules of Court, from filing
motions for production, beyond the pre-trial.
Moreover, Eagle Ridge Development argues that there was a valid transfer of
the loan obligation of Eagle Ridge Development EDC, Article 1634 is applicable and,
therefore, Eagle Ridge Developments must be informed of the actual transfer price,
which information may only be supplied by the LSPA. Eagle Ridge Developments
next argue that the parol evidence rule is not applicable to them because they were
not parties to the deed of assignment, and "they cannot be prevented from seeking
evidence to determine the complete terms of the Deed of Assignment." Besides, the
deed of assignment made express reference to the LSPA, hence, the latter cannot
be considered as extrinsic to it.
Issue:
Whether or not the Eagle Ridge Developments right to extinguish the debt
has already lapsed
Ruling:
The right to extinguish the debt has not yet lapsed.
Under the last paragraph of Article 1634, the debtor may extinguish his or
her debt within 30 days from the date the assignee demands payment. In this case,
insofar as the actual parties to the deed of assignment are concerned, no demand
has yet been made, and the 30-day period did not begin to run. Indeed, Eagle Ridge
Developments assailed before the trial court the validity of the deed of assignment
on the grounds that it did not comply with the mandatory requirements of the
Special Purpose Vehicle Act, and it referred to Cameron Granville Asset Management
(SPV-AMC), Inc., as the assignee, and not Cameron Granville Cameron Granville 3
Asset Management, Inc. The law requires that payment should be made only "to the
person in whose favor the obligation has been constituted, or his [or her] successor
in interest, or any person authorized to receive it." It was held that payment made
to a person who is not the creditor, his or her successor-in-interest, or a person who
is authorized to receive payment, even through error or good faith, is not effective
payment which will bind the creditor or release the debtor from the obligation to
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pay. Therefore, it was important for Eagle Ridge Developments to determine for sure
the proper assignee of the EIB credit or who to pay, in order to effectively extinguish
their debt.
Moreover, even assuming that Cameron Granville is the proper assignee of
the EIB credit, Eagle Ridge Developments could not exercise their right of
extinguishment because they were not informed of the consideration paid for the
assignment.
Cameron Granville must, pursuant to Article 1634 of the Civil Code, disclose
how much it paid to acquire the EIB credit, so that Eagle Ridge Developments could
make the corresponding offer to pay, by way of redemption, the same amount in
final settlement of their obligation.
Under the circumstances of this case, the 30-day period under Article 1634
within which Eagle Ridge Developments could exercise their right to extinguish their
debt should begin to run only from the time they were informed of the actual price
paid by the assignee for the transfer of their debt.
P.D. 957
THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE
AMBROSIO ROTAIRO (SUBSTITUTED BY HIS SPOUSE MARIA RONSAYRO
ROTAIRO, AND HIS CHILDREN FELINA ROTAIRO, ERLINDA ROTAIRO CRUZ,
EUDOSIA ROTAIRO CRIZALDO, NIEVES ROTAIRO TUBIG, REMEDIOS ROTAIRO
MACAHILIG, FELISA ROTAIRO TORREVILLAS, AND CRISENCIO R. ROTAIRO,
MARCIANA TIBAY, EUGENIO PUNZALAN, AND VICENTE DEL ROSARIO vs.
ROVIRA ALCANTARA AND VICTOR ALCANTARA
G.R. No. 173632, September 29, 2014, J. Reyes
In this case, the contract to sell between Rotairo and Ignacio & Company was
entered into in 1970, and the agreement was fully consummated with Rotairos
completion of payments and the execution of the Deed of Sale in his favor in 1979.
Clearly, P.D. No. 957 (Sale of Subdivision Lots and Condominiums) is applicable in
this case.
It was error for the CA to rule that the retroactive application of P.D. No. 957
is warranted only where the subdivision is mortgaged after buyers have purchased
individual lots. According to the CA, the purpose of Sec. 18 requiring notice of the
mortgage to the buyers is to give the buyer the option to pay the installments
directly to the mortgagee; hence, if the subdivision is mortgaged before the lots are
sold, then there are no buyers to notify. What the CA overlooked is that Sec. 21
requires the owner or developer of the subdivision project to complete compliance
with its obliga-tions within two years from 1976. The two-year compliance provides
the developer the opportunity to comply with its obligation to notify the buyers of
the existence of the mortgage, and conse-quently, for the latter to exercise their
option to pay the installments directly to the mortgagee.
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Facts:
In 1988, Respondent Rovira Alcantara instituted an action for the recovery of
possession of a parcel of land situated in Cainta, Rizal. She disclosed that the
property was formerly owned by his father, Victor Alcantara (Alcantara), and Alfredo
Ignacio, who mortgaged the property to Pilipinas Bank and Trust Company in 1968.
Through their firm, Ignacio & Company, the two were able to parcel out the property
and separately sold the subdivided lots to different buyers. One of the buyers was
Ambrosio Rotairo (Rotairo) who took the property identified as Lot C-1 and
completed the payments therefor on September 25, 1979. However, Alcantara and
Ignacio earlier defaulted in their loan obligation with Pilipinas Bank which led to the
foreclosure of the mortgage. Without redemption being made, title was consolidated
in the name of Pilipinas Bank and it later sold the property in a Deed of Absolute
Sale dated June 6, 1975 to Rovira, who happens to be the daughter of Alcantara.
The RTC ruled that the transaction between Ignacio & Company and Rotairo
was covered by P.D. No. 957. Thus, Rovira, as successor-in-interest of Wilfredo S.
Ignacio [and Victor Alcantara] was well aware of the condition of the property which
she bought from the Pilipinas Bank, because she lives near the land, and at the time
she purchased it she was aware of the existing houses or structures on the land.
She was, therefore, not entitled to the relief prayed for in her complaint.
On appeal, the CA set aside the RTC decision and ordered the turnover of
possession of the property to Rovira. The CA held that P.D. No. 957 is not applicable
since the mortgage was constituted prior to the sale to Rotairo and so the law does
not confer more rights to an unregistered buyer like him, as against a registered
prior mortgagee like Pilipinas Bank and its buyer, Rovira.
Issue:
Whether or not the provisions of P.D. No. 957 should be applied in the instant
case.
Ruling:
YES, by express terms of P.D. No. 957, technically, it should be applied in this
case.
The retroactive application of P.D. No. 957 to transactions entered into prior
to its enactment in 1976 is already settled. In Eugenio v. Exec. Sec. Drilon, which
involved a land purchase agreement entered into in 1972, the Court stated that the
unmistakeable intent of the legislature is to have P.D. No. 957 operate
retrospectively even to contracts and transactions entered into prior to its
enactment.
In this case, the contract to sell between Rotairo and Ignacio & Company was
entered into in 1970, and the agreement was fully consummated with Rotairos
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completion of payments and the execution of the Deed of Sale in his favor in 1979.
Clearly, P.D. No. 957 is applicable in this case.
It was error for the CA to rule that the retroactive application of P.D. No. 957
is warranted only where the subdivision is mortgaged after buyers have purchased
individual lots. According to the CA, the purpose of Sec. 18 requiring notice of the
mortgage to the buyers is to give the buyer the option to pay the installments
directly to the mortgagee; hence, if the subdivision is mortgaged before the lots are
sold, then there are no buyers to notify. What the CA overlooked is that Sec. 21
requires the owner or developer of the subdivision project to complete compliance
with its obligations within two years from 1976. The two-year compliance provides
the developer the opportunity to comply with its obligation to notify the buyers of
the existence of the mortgage, and consequently, for the latter to exercise their
option to pay the installments directly to the mortgagee.
Nevertheless, such concomitant obligation of the developer under Sec. 21 did
not arise in this case. It must be noted that at the time of the enactment of P.D. No.
957 in 1976 and as early as 1974, Pilipinas Bank had already foreclosed the
mortgage and bought the properties in the foreclosure sale. There was no
mortgage to speak of such that Rotairo should be notified thereof so that he could
properly exercise his option to pay the installments directly to Pilipinas Bank.
SUCCESSION
GENERAL PROVISIONS
NORA B. CALALANG-PARULAN and ELVIRA B. CALALANG vs.
ROSARIO CALALANG-GARCIA, LEONORA CALALANG-SABILE, and CARLITO S.
CALALANG
G.R. No. 184148, June 9, 2014, J. Villarama, Jr.
It is hornbook doctrine that successional rights are vested only at the time of
death. Article 777 of the New Civil Code provides that "the rights to the succession
are transmitted from the moment of the death of the decedent. Thus, in this case, it
is only upon the death of Pedro Calalang on December 27, 1989 that his heirs
acquired their respective inheritances, entitling them to their pro indiviso shares to
his whole estate. At the time of the sale of the disputed property, the rights to the
succession were not yet bestowed upon the heirs of Pedro Calalang. And absent
clear and convincing evidence that the sale was fraudulent or not duly supported by
valuable consideration (in effect an officious donation inter vivos), the respondents
have no right to question the sale of the disputed property on the ground that their
father deprived them of their respective shares. Well to remember, fraud must be
established by clear and convincing evidence.
Facts:
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Rosario Calalang-Garcia, Leonora Calalang-Sabile, and Carlito S. Calalang
(Respondents) asserted their ownership over a certain parcel of land against Nora B.
Calalang-Parulan and Elvira B. Calalang (Petitioners). The said lot was allegedly
acquired by the respondents from their mother Encarnacion Silverio, through
succession as the latters compulsory heirs.
Respondents alleged that their father, Pedro Calalang (Pedro) contracted two
marriages during his lifetime. The first marriage was with their mother Encarnacion
Silverio. During the subsistence of this marriage, their parents acquired the abovementioned parcel of land from their maternal grandmother Francisca Silverio.
Despite enjoying continuous possession of the land, however, their parents failed to
register the same. The first marriage was dissolved with the death of Encarnacion
Silverio.
Pedro entered into a second marriage with Elvira B. Calalang who then gave
birth to Nora B. Calalang-Parulan and Rolando Calalang. According to the
respondents, it was only during this time that Pedro Calalang filed an application for
free patent over the parcel of land with the Bureau of Lands. Pedro Calalang
committed fraud in such application by claiming sole and exclusive ownership over
the land since 1935 and concealing the fact that he had three children with his first
spouse. As a result, the Register of Deeds of Bulacan issued the Original Certificate
of Title (OCT) No. P-2871 in favor of Pedro only.
Pedro sold the said parcel of land to Nora B. Calalang-Parulan (Nora).
Accordingly, the Register of Deeds of Bulacan cancelled OCT No. P-2871 and issued
Transfer Certificate of Title (TCT) No. 283321 in the name of Nora. On December 27,
1989, Pedro Calalang died.
Respondents assailed the validity of TCT No. 283321 on two grounds. First,
the respondents argued that the sale of the land was void because Pedro failed to
obtain the consent of the respondents who were co-owners of the same. Second,
the sale was absolutely simulated as Nora did not have the capacity to pay for the
consideration stated in the Deed of Sale.
Petitioners argued that the parcel of land was acquired during the second
marriage of Pedro Calalang with Elvira B. Calalang. They stressed that OCT No. P2871 itself stated that it was issued in the name of "Pedro Calalang, married to
Elvira Berba Calalang." Thus, the property belonged to the conjugal partnership of
the spouses Pedro and Elvira Calalang. The petitioners likewise denied the
allegation that the sale of the land was absolutely simulated as Nora was gainfully
employed in Spain at the time of the sale.
RTC rendered a decision in favor of the plaintiffs and against the defendants.
The trial court declared that the parcel of land was jointly acquired by the spouses
Pedro Calalang and Encarnacion Silverio from the parents of the latter. Thus, it was
part of the conjugal property of the first marriage of Pedro Calalang. The trial court
then ordered all of Pedros share to be given to Nora B. Calalang-Parulan on account
of the sale.
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The CA reversed the factual findings of the trial court and held that Pedro
Calalang was the sole and exclusive owner of the subject parcel of land. Firstly, it
held that there was insufficient evidence to prove that the disputed property was
indeed jointly acquired from the parents of Encarnacion Silverio during the first
marriage. Secondly, the CA upheld the indefeasibility of OCT No. P-2871. It held that
although the free patent was issued in the name of "Pedro Calalang, married to
Elvira Berba Calalang" this phrase was merely descriptive of the civil status of Pedro
Calalang at the time of the registration of the disputed property.
Issue:
Whether or not CA erred in ruling that Pedro Calalang deprived his heirs of
their respective shares over the disputed property when he alienated the same.
Ruling:
Yes. The CA therefore erred in ruling that Pedro Calalang deprived his heirs of
their respective shares over the disputed property when he alienated the same.
It is hornbook doctrine that successional rights are vested only at the time of
death. Article 777 of the New Civil Code provides that "the rights to the succession
are transmitted from the moment of the death of the decedent.
The principle of transmission as of the time of the predecessor's death is
basic in our Civil Code, and is supported by other related articles. Thus, the capacity
of the heir is determined as of the time the decedent died (Art. 1034); the legitime
is to be computed as of the same moment (Art. 908), and so is the in officiousness
of the donation inter vivos (Art. 771). Similarly, the legacies of credit and remission
are valid only in the amount due and outstanding at the death of the testator (Art.
935), and the fruits accruing after that instant are deemed to pertain to the legatee
(Art. 948).
Thus, it is only upon the death of Pedro Calalang on December 27, 1989 that
his heirs acquired their respective inheritances, entitling them to their pro indiviso
shares to his whole estate. At the time of the sale of the disputed property, the
rights to the succession were not yet bestowed upon the heirs of Pedro Calalang.
And absent clear and convincing evidence that the sale was fraudulent or not duly
supported by valuable consideration (in effect an in officious donation inter vivas),
the respondents have no right to question the sale of the disputed property on the
ground that their father deprived them of their respective shares. Well to remember,
fraud must be established by clear and convincing evidence. Mere preponderance of
evidence is not even adequate to prove fraud. The Complaint for Annulment of Sale
and Reconveyance of Property must therefore be dismissed.
PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION
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SPOUSES DOMINADOR MARCOS and GLORIA MARCOS, vs. HEIRS OF ISIDRO
BANGI and GENOVEVA DICCION, represented by NOLITO SABIANO
Partition is the separation, division and assignment of a thing held in
common among those to whom it may belong. Every act which is intended to put
an end to indivision among co-heirs and legatees or devisees is deemed to be a
partition. Partition may be inferred from circumstances sufficiently strong to
support the presumption. Thus, after a long possession in severalty, a deed of
partition may be presumed. The evidence presented by the parties indubitably
show that, after the death of Alipio, his heirs Eusebio, Espedita and Jose Bangi
had orally partitioned his estate, including the subject property, which was assigned
to Eusebio. Accordingly, considering that Eusebio already owned the subject
property at the time he sold the one-third portion thereof.
Facts:
On June 26, 1998, the heirs of Isidro Bangi (Isidro) and Genoveva Diccion
(Genoveva), filed with the RTC a complaint for the annulment of documents,
cancellation of transfer certificates of titles, restoration of original certificate of title
and recovery of ownership plus damages against spouses Dominador Marcos
(Dominador) and Gloria Marcos (Gloria). Likewise impleaded in the said complaint
are spouses Jose Dilla (Jose) and Pacita Dilla (Pacita), Ceasaria Alap (Ceasaria), and
spouses Emilio Sumajit (Emilio) and Zenaida Sumajit (Zenaida).
In their complaint, the respondents averred that on November 5, 1943, their
parents, Isidro and Genoveva, bought the one-third portion of a 2,138-square meter
parcel of land situated in San Manuel, Pangasinan and covered by Original
Certificate of Title (OCT) (subject property) from Eusebio Bangi (Eusebio), as
evidenced by a Deed of Absolute Sale executed by the latter. OCT was registered in
the name of Alipio Bangi (Alipio), Eusebios father. After the sale, the respondents
claimed that Isidro and Genoveva took possession of the subject property until they
passed away. The respondents then took possession of the same.
Further, the respondents alleged that sometime in 1998, they learned that
the title to the subject property, including the portion sold to Isidro and Genoveva,
was transferred to herein petitioner Dominador, Primo Alap (Primo), Ceasarias
husband, Jose, and Emilio through a Deed of Absolute Sale dated August 10, 1995,
supposedly executed by Alipio with the consent of his wife Ramona Diccion
(Ramona). The respondents claimed that the said deed of absolute sale is a forgery
since Alipio died in 1918 while Ramona passed away on June 13, 1957.
Consequently, by virtue of the alleged Deed of Absolute Sale dated August
10, 1995, OCT was cancelled and Transfer Certificate of Title (TCT) was issued to
Dominador, Primo, Jose and Emilio. On November 21, 1995, Primo, Jose and Emilio
executed another deed of absolute sale over the same property in favor of herein
petitioners. The said TCT was then cancelled and a new TCT was issued in the
names of herein petitioners. The respondents claimed that the Deed of Absolute
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Sale dated November 21, 1995 was likewise a forgery since Primo could not have
signed the same on the said date since he died on January 29, 1972.
The petitioners, in their Answer, claimed that their father Eusebio could not
have validly sold the one-third portion of the subject property to Isidro and
Genoveva. They explained that Eusebio supposedly acquired the parcel of land
covered by OCT No. 22361 by virtue of a donation propter nuptias from his father
Alipio when he married Ildefonsa Compay (Ildefonsa) in 1928. They claimed that
the donation propter nuptias in favor of Eusebio was fictitious since Alipio died in
1918 and that, in any case, the said donation, even if not fictitious, is void since the
same was not registered.
The RTC opined that the Deed of Absolute Sale dated August 10, 1995 is a
nullity; that the same was falsified considering that Alipio could not have executed
the same in the said date since he died in 1918. Consequently, all the documents
and certificates of title issued as a consequence of the Deed of Absolute Sale dated
August 10, 1995 are void.
On September 30, 2008, the CA rendered the herein assailed Decision, which
affirmed the Decision dated March 26, 2007 of the RTC. The CA upheld the
petitioners claim that the supposed donation propter nuptias of the subject
property in favor of Eusebio from his parents was not sufficiently established. The
CA pointed out that the purported Deed of Donation was not recorded in the
Register of Deeds; that there is no showing that the said donation was made in a
public instrument as required by the Spanish Civil Code, the law in effect at the time
of the supposed donation in favor of Eusebio.
Issue:
Whether or not the CA committed reversible error in affirming the RTC
Decision, which upheld the Deed of Absolute Sale dated November 5, 1943 over the
one-third portion of the subject property executed by Eusebio in favor of the
spouses Isidro and Genoveva.
Ruling:
No. The petition is denied.
Ultimately, the resolution of the instant controversy is hinged upon the
question of whether the heirs of Alipio had already effected a partition of his estate
prior to the sale of the one-third portion of the subject property to the spouses Isidro
and Genoveva on November 5, 1943. However, the foregoing question is a factual
question, which this Court may not pass upon in a petition for review under Rule 45
of the Rules of Court.
Even granting arguendo that the petition falls under any of the exceptions
justifying a factual review of the findings of the appellate court, the petition cannot
prosper. The Court is of the opinion, and so holds, that the CA did not commit any
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reversible error in ruling that an oral partition of the estate of Alipio had already
been effected by his heirs prior to the sale by Eusebio of the one-third portion of the
subject property to the spouses Isidro and Genoveva on November 5, 1943.
Partition is the separation, division and assignment of a thing held in common
among those to whom it may belong. Every act which is intended to put an end to
indivision among co-heirs and legatees or devisees is deemed to be a partition.
Partition may be inferred from circumstances sufficiently strong to support the
presumption. Thus, after a long possession in severalty, a deed of partition may be
presumed.
The evidence presented by the parties indubitably show that, after the death
of Alipio, his heirs Eusebio, Espedita and Jose Bangi had orally partitioned his
estate, including the subject property, which was assigned to Eusebio.
Accordingly, considering that Eusebio already owned the subject property at
the time he sold the one-third portion thereof to the spouses Isidro and Genoveva
on November 5, 1943, having been assigned the same pursuant to the oral partition
of the estate of Alipio effected by his heirs, the lower courts correctly nullified the
Deeds of Absolute Sale dated August 10, 1995 and November 21, 1995.
AGENCY
SPECIAL POWER OF ATTORNEY
SPOUSES ROLANDO AND HERMINIA SALVADOR vs. SPOUSES ROGELIO AND
ELIZABETH RABAJA AND ROSARIO GONZALES,
According to Article 1990 of the New Civil Code, insofar as third persons are
concerned, an act is deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the power of attorney, as written.
In this case, Spouses Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney before they
transacted with her principal. And when Gonzales presented the SPA to Spouses
Rabaja, the latter had no reason not to rely on it.
Facts:
Spouses Rabaja learned that Spouses Salvador were looking for a buyer of
their land where Spouses Rabaja also leased. Spouses Rabaja and Spouses Salvador
then entered into a contract of sale wherein Gonzales, administrator of the subject
property, received the considerations paid by Spouses Rabaja pursuant to the
Special Power of Attorney issued by Spouses Salvador in favor of Gonzales.
Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja
that they did not receive any payment from Gonzales. This prompted Spouses
Rabaja to suspend further payment of the purchase price. Spouses Rabaja filed an
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action
for rescission
of
contract
against Spouses Salvador and
Gonzales.
In their complaint, the Spouses Rabajas demanded the rescission of the

contract to sell praying that the amount of P950,000.00 they previously paid to
Spouses Salvador be returned to them. They likewise prayed that damages be
awarded due to the contractual breach committed by Spouses Salvador. Spouses
Salvador filed their answer with counterclaim and cross-claimcontending that there
was no meeting of the minds between the parties and that the SPA in favor of
Gonzales was falsified. In fact, they filed a case for falsification against Gonzales,
but it was dismissed because the original of the alleged falsified SPA could not be
produced. They further averred that they did not receive any payment from Spouses
Rabaja through Gonzales. In her defense, Gonzales filed her answerstating that the
SPA was not falsified and that the payments of Spouses Rabaja amounting to
P950,000.00 were all handed over to Spouses Salvador.
Issue:
Whether or not Gonzales, as agent of Spouses Salvador, could validly receive
the payments of Spouses Rabaja.
Ruling:
Yes.
The Following provisions of the New Civil Code provides:
Art. 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms
of the power of attorney, as written, even if the agent has in fact exceeded the
limits of his authority according to an understanding between the principal and the
agent.
Art. 1902. A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions
as regards the agency. Private or secret orders and instructions of the principal do
not prejudice third persons who have relied upon the power of attorney or
instructions shown them.
Art. 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.
According to Article 1990 of the New Civil Code, insofar as third persons are
concerned, an act is deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the power of attorney, as written.
In this case, Spouses Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney before they
transacted with her principal. And when Gonzales presented the SPA to Spouses
Rabaja, the latter had no reason not to rely on it.
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The law mandates an agent to act within the scope of his authority which
what appears in the written terms of the power of attorney granted upon him. The
Court holds that, indeed, Gonzales acted within the scope of her authority. The SPA
precisely stated that she could administer the property, negotiate the sale and
collect any document and all payments related to the subject property. As the agent
acted within the scope of his authority, the principal must comply with all the
obligations. Considering that it was not shown that Gonzales exceeded her authority
or that she expressly bound herself to be liable, then she could not be considered
personally and solidarily liable with the principal, Spouses Salvador.
TRUST
IMPLIED TRUST
JOSE JUAN TONG, ET AL.vs.GO TIAT KUN, ET AL.
G.R. No. 196023, April 21, 2014, J.Reyes
The Court is in conformity with the finding of the trial court that an implied
resulting trust was created as provided under the first sentence of Article
1448which is sometimes referred to as a purchase money resulting trust, the
elements of which are: (a) an actual payment of money, property or services, or an
equivalent, constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust. In this case, the petitioners
have shown that the two elements are present. Luis, Sr. was merely a trustee of
Juan Tong and the petitioners in relation to the subject property, and it was Juan
Tong who provided the money for the purchase of Lot 998 but the corresponding
transfer certificate of title was placed in the name of Luis, Sr.
Facts:
The petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong)
and SyUn (Spouses Juan Tong). Completing the ten children of Spouses Juan Tong is
the deceased Luis Juan Tong, Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go
Tiat Kun, and their children, Leon, Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being
already dead, is survived by his wife, Roma Cokee Juan Tong who are the
respondents.
Sometime in 1957, Juan Tong informed them of his intention to purchase Lot
998 to be used for the familys lumber business. However, since he was a Chinese
citizen and was disqualified from acquiring the said lot, the title to the property will
be registered in the name of his eldest son, Luis, Sr., who at that time was already
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of age and was the only Filipino citizen among his children. Subsequently, Juan Tong
bought Lot 998 from the heirs of Jose Ascencio. Accordingly, TCT No. 10346 was
issued by the Register of Deeds in the name of Luis, Sr.
SyUn and Juan Tong later on died intestate on 1984, and 1990, respectively.
Meanwhile, on 1981, Luis, Sr. died and the respondents, being his surviving heirs,
claimed ownership over Lot 998 by succession, alleging that no trust agreement
exists and it was Luis, Sr. who bought Lot 998. On 1982, the respondents executed a
Deed of Extra-Judicial Settlement of Estate of Luis, Sr., adjudicating unto themselves
Lot 998 and claiming that the said lot is the conjugal property of Luis, Sr., and his
wife, which the Juvenile and Domestic Relations Court of Iloilo City approved. Later
on, the said deed was registered causing the cancellation of TCT No. 10346 and the
issuance of TCT No. T-60231 in the name of the respondents.Subsequently, the
respondents agreed to subdivide Lot 998. After Lot 998 was subdivided, Luis, Jr.
sold Lot 998-B to Fine Rock Development Corporation (FRDC), which in turn sold the
same to Visayas Goodwill Credit Corporation (VGCC). It was only after the
petitioners received a letter from VGCC, on 1995, that they discovered about the
breach of the trust agreement committed by the respondents.To protect their rights,
the petitioners filed an action for Annulment of Sales, Titles, Reconveyance and
Damages of Lot 998-B against Luis, Jr., FRDC and VGCC. On 1997, the trial court
ruledin favor of the petitioners which were later affirmed by the CA and this
Court on appeal. Consequently, Lot 998-B was reconveyed to the petitioners and
TCT No. T-14839 was issued under their names including the late Luis, Sr.
Then, on 2001, Go Tiat Kun ( wife of Luis Sr.) executed a Deed of Sale of
Undivided Interest over Lot 998-A in favor of her children, Leon, Mary, Lilia, Tomas,
and the late Jaime. Hence, on August 2, 2005, the petitioners filed the instant case
for Nullification of Titles, and Deeds of Extra-judicial Settlement and Sale and
Damages claiming as owners of Lot 998-A.
Issue:
1. Whether or not there was an implied resulting trust constituted over Lot
998 when Juan Tong purchased the property and registered it in the name of Luis,
Sr.
2. Whether or not the petitioners action are barred by prescription, estoppel
and laches.
Ruling:
1. Yes.
The appellate courts conclusion that an express trust was created because there
was a direct and positive act by Juan Tong to create a trust must inevitably yield to
the clear and positive evidence on record which showed that what was truly created
was an implied resulting trust. As what has been fully established, in view of the
mutual trust and confidence existing between said parties who are family members,
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the only reason why Lot 998 was registered in the name of Luis, Sr. was to facilitate
the purchase of the said property to be used in the familys lumber business since
Luis, Sr. is the only Filipino Citizen in the Juan Tong family at that time. As the
registered owner of Lot 998, it is only natural that tax declarations and the
corresponding tax payment receipts be in the name of Luis, Sr. so as to effect
payment thereof.
The principle of a resulting trust is based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and are
presumed always to have been contemplated by the parties. They arise from the
nature or circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity to hold
his legal title for the benefit of another. On the other hand, a constructive trust,
unlike an express trust, does not emanate from, or generate a fiduciary relation.
Constructive trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good conscience, to hold.
Guided by the foregoing definitions, the Court is in conformity with the finding of
the trial court that an implied resulting trust was created as provided under the first
sentence of Article 1448which is sometimes referred to as a purchase money
resulting trust, the elements of which are: (a) an actual payment of money, property
or services, or an equivalent, constituting valuable consideration; and (b) such
consideration must be furnished by the alleged beneficiary of a resulting trust. Here,
the petitioners have shown that the two elements are present in the instant case.
Luis, Sr. was merely a trustee of Juan Tong and the petitioners in relation to the
subject property, and it was Juan Tong who provided the money for the purchase of
Lot 998 but the corresponding transfer certificate of title was placed in the name of
Luis, Sr.
2. No.
As a rule, implied resulting trusts do not prescribe except when the trustee
repudiates the trust.Further, the action to reconvey does not prescribe so long as
the property stands in the name of the trustee. It should be noted that the title of
Lot 998 was still registered in the name of Luis Sr. even when he predeceased Juan
Tong. Considering that the implied trust has been repudiated through such death,
Lot 998 cannot be included in his estate except only insofar as his undivided share
thereof is concerned. It is well-settled that title to property does not vest ownership
but it is a mere proof that such property has been registered. And, the fact that the
petitioners are in possession of all the tax receipts and tax declarations of Lot 998
all the more amplify their claim of ownership over Lot 998-A. Although these tax
declarations or realty tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of
owner, for no one in his right mind would be paying taxes for a property that is not
in his actual or at least constructive possession. Such realty tax payments
constitute proof that the holder has a claim of title over the property. Therefore, the
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action for reconveyance of Lot 998-A, which forms part of Lot 998, is imprescriptible
and the petitioners are not estopped from claiming ownership thereof.
Moreso, when the petitioners received a letter from VGCC, and discovered about
the breach of the trust agreement committed by the heirs of Luis, Sr., they
immediately instituted an action to protect their rights, as well as upon learning that
respondent Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998A in favor of her children. Clearly, no delay may be attributed to them. The doctrine
of laches is not strictly applied between near relatives, and the fact that the parties
are connected by ties of blood or marriage tends to excuse an otherwise
unreasonable delay.
CREDIT TRANSACTIONS
LOAN
INTEREST RATE
CONRADO A. LIM vs. HMR PHILIPPINES, INC., TERESA SANTOS-CASTRO,
HENRY BUNAG AND NELSON CAMILLER
G.R. No. 201483, August 04, 2014, J.Mendoza
Lim argues that legal interest in accordance with the case of Eastern
Shipping must also be awarded. The rules on legal interest in Eastern
Shipping have, however, been recently modified by Nacar in accordance with
Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) Circular No. 799, which
became effective on July 1, 2013. Pertinently, it amended the rate of legal interest
in judgments from 12% to 6% per annum, with the qualification that the new rate
be applied prospectively. Thus, the 12% per annum legal interest in judgments
under Eastern Shipping shall apply only until June 30, 2013, and the new rate of
6% per annum shall be applied from July 1, 2013 onwards.
Facts:
Petitioner Conrado A. Lim filed a case for illegal dismissal and money claims
against respondents, HMR Philippines, Inc. (HMR) and its officers, Teresa G. SantosCastro, Henry G. Bunag and Nelson S. Camiller. The Labor Arbiter (LA) dismissed the
complaint for lack of merit but later on the NLRC reversed the LA and declared Lim
to have been illegally dismissed. The dispositive portion of the NLRC decision reads
among others that the HMR is hereby ordered to pay the complainant-appellant his
full backwages, reckoned from his dismissal on February 3, 2001 up to the
promulgation of this Decision. The Computation and Research Unit (CRU) of this
Commission is hereby directed to compute the backwages and the 10% annual
increase from 1998 to 2000.
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Both Lim and HMR filed their respective petitions for certiorari before the CA
which were consolidated. On November 15, 2005, the CA affirmed the NLRC
decision with modification. On February 7, 2007, the Supreme Court dismissed the
petition for certiorarifiled by HMR assailing the November 15, 2005 CA decision.
Entry of judgment was ordered on July 27, 2007. Subsequently, Lim moved for
execution and the Computation and Research Unit (CRU) of the NLRC computed the
total award to amount to P2,020,053.46, which computed the backwages from
February 3, 2001, the date of the illegal dismissal, up to October 31, 2007, the date
of actual reinstatement.
HMR opposed the computation arguing that the backwages should be
computed until April 11, 2003 only, the date of promulgation of the NLRC decision,
as stated in the dispositive portion of the NLRC decision. It also noted that the 10%
annual increase was computed from 1998 to 2007, instead of only from 1998 to
2000 as decreed.
Issue:
Whether or not the interest in accordance with Eastern Shipping should be
awarded
Ruling:
No.
Lim argues that legal interest in accordance with the case of Eastern
Shipping must also be awarded, as follows:
1. the unpaid 10% annual increase from 1998 to 2000 shall earn a 6% interest
annually starting 1998 until October 23, 2003 (Entry of Judgment of the April
11, 2003 NLRC decision); and 12% legal interest per annum thereafter until
the same is fully paid; and
2. the backwages, 13th month pay as well as unpaid vacation and sick leaves
shall earn a 6% per annum interest starting at the time of petitioners illegal
dismissal on February 3, 2001 until October 23, 2003; and 12% legal
interest per annumt hereafter until the same is fully paid.
The rules on legal interest in Eastern Shipping have, however, been recently
modified by Nacar in accordance with Bangko Sentral ng Pilipinas Monetary Board
(BSP-MB) Circular No. 799, which became effective on July 1, 2013. Pertinently, it
amended the rate of legal interest in judgments from 12% to 6% per annum, with
the qualification that the new rate be applied prospectively. Thus, the 12% per
annum legal interest in judgments under Eastern Shipping shall apply only until June
30, 2013, and the new rate of 6% per annum shall be applied from July 1, 2013
onwards.
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Lim also prays that he be awarded interest at a rate of 6% per annum on the
amounts awarded from the time they became legally due him until entry of
judgment, presumably under the second paragraph in Eastern Shipping (which was
not modified by Nacar), which states:
When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall,
in any case, be on the amount finally adjudged.
It is plain from the above that the interest of 6% per annum for obligations
not constituting a loan or forbearance of money is one that may be imposed at the
discretion of the court. This form of interest is not mandatory but discretionary in
nature and therefore, not necessarily owing to the petitioner in the present case.
ECE REALTY and DEVELOPMENT, INC. vs. HAYDYN HERNANDEZ
G.R. No. 212689, August 6, 2014, J. Reyes
There is no doubt that ECE incurred in delay in delivering the subject
condominium unit, for which reason the trial court was justified in awarding interest
to Hernandez from the filing of his complaint. There being no stipulation as to
interest, under Article 2209 the imposable rate is six percent (6%) by way of
damages. Section 1 of Resolution No. 796 of the Monetary Board of the Bangko
Sentral ng Pilipinas dated May 16, 2013 provides: "The rate of interest for the loan
or forbearance of any money, goods or credits and the rate allowed in judgments, in
the absence of an express contract as to such rate of interest, shall be six percent
(6%) per annum." Thus, the rate of interest to be imposed from finality of
judgments is now back at six percent (6%), the rate provided in Article 2209 of the
Civil Code.
Facts:
On September 7, 2006, Haydyn Hernandez filed a Complaint for specific
performance, with damages, against Emir Realty and Development Corporation
(EMIR) and ECE Realty and Development Incorporated (ECE) before the Housing and
Land Use Regulatory Board Expanded National Capital Region Field Office (HLURBRegional Office). Hernandez alleged that ECE and EMIR, engaged in condominium
development and marketing, respectively, sold tohim a 30-square meter
condominium unit in the "Harrison Mansion" described as Unit 808.
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In the parties Contract to Sell dated November 5, 1997, EMIR and ECE
promised that Unit 808 would be ready for occupancy by December 31, 1999. EMIR
and ECE failed to deliver Unit 808 to Hernandez on December 31, 1999, by which
date he had already paid a total of P452,551.65.
The HLURB-Regional Office ordered EMIR and ECE to reimburse Hernandez
the amount of P452,551.65, plus legal interest, from the filing of the complaint. The
HLURB Board of Commissioners upheld the HLURB-Regional Office but dropped EMIR
as defendant. ECE appealed to the OP, but the OP dismissed ECEs appeal.
On petition for review to the CA, ECE argued that the OP erred in affirming
the rescission of the parties contract to sell and the order to refund Hernandezs
payments with legal interest from filing of the complaint. ECE pointed out that
Hernandez did not ask for rescission and refund on account of the delay in the
delivery of Unit 808, but only for a reduction in the price. It further argued that
interest may be imposed only from finality of judgment.
In upholding the OP, the CA cited Section 23 of Presidential Decree (P.D.) No.
957 (Regulating the Sale of Subdivision Lots and Condominiums, Providing for
Penalties for Violations Thereof). The CA then ruled that under P.D. No. 957, when
the owner of the subdivision or condominium fails to develop the same according to
the plan within the period agreed, the buyer, after notifying the owner, may desist
from paying the balance, and may demand the reimbursement of all that he has
paid.
On the imposition of six percent (6%)interest, the appellate court cites
Eastern Shipping Lines, Inc. v. Court of Appeals and in Fil-Estate Properties, Inc. v.
Spouses Go, the amount to be refunded being neither a loan nor a forbearance of
money, goods or credit.
Issue:
Whether or not the rate of interest to be imposed from finality of judgments is
now back at six percent (6%), the rate provided in Article 2209 of the Civil Code
Ruling:
Yes, the rate of twelve percent (12%) per annum from finality of the judgment
until satisfaction has been brought back to six percent (6%).
Article 2209 of the New Civil Code provides that "If the obligation consists in
the payment of a sum of money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is
six per cent per annum."
There is no doubt that ECE incurred in delay in delivering the subject
condominium unit, for which reason the trial court was justified in awarding interest
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to Hernandez from the filing of his complaint. There being no stipulation as to
interest, under Article 2209 the imposable rate is six percent (6%) by way of
damages, following the guidelines laid down in the landmark case of Eastern
Shipping Lines v. Court of Appeals:
II. With regard particularly to an award of interest in the concept of actual and
1. When the obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the courtat the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially or extrajudicially(Art. 1169,
Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.
Thus, from the finality of the judgment awarding a sum of money until it is
satisfied, the award shall be considered a forbearance of credit, regardless of
whether the award in fact pertained to one.
Pursuant to Central Bank Circular No. 416 issued on July 29, 1974, in the
absence of written stipulation the interest rate to be imposed in judgments
involving a forbearance of credit was twelve percent (12%) per annum, up from six
percent (6%) under Article 2209 of the Civil Code. This was reiterated in Central
Bank Circular No. 905, which suspended the effectivity of the Usury Law beginning
on January 1, 1983.
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But since July 1, 2013, the rate of twelve percent (12%) per annum from
finality of the judgment until satisfaction has been brought back to six percent (6%).
Section 1 of Resolution No. 796 of the Monetary Board of the BangkoSentral
ng Pilipinas dated May 16, 2013 provides: "The rate of interest for the loan or
forbearance of any money, goods or credits and the rate allowed in judgments, in
the absence of an express contract as to such rate of interest, shall be six percent
(6%) per annum."
Thus, the rate of interest to be imposed from finality of judgments is now
back at six percent (6%), the rate provided in Article 2209 of the Civil Code.
The SC modified the decision of the CA and ordered ECE Realty and
Development, Inc. to pay Haydyn Hernandez P452,551.65 representing the total
amount he paid to petitioner ECE Realty and Development Incorporated, plus six
percent (6%) interest per annum from September 7, 2006 until finality hereof by
way of actual and compensatory damages. From finality until full satisfaction, the
total amount due now compounded with interest due from September 7, 2006 up to
finality, shall likewise earn interest at six percent (6%) per annum until fully paid.
ANCHOR SAVINGS BANK vs. PINZMAN REALTY AND DEVELOPMENT
CORPORATION, MARYLIN MANALAC AND RENATO GONZALES
G.R. No. 192304, August 13, 2014, J. Villarama Jr.
It is jurisprudential axiom that a foreclosure sale arising from a usurious
mortgage cannot be given legal effect. This Court has previously struck down a
foreclosure sale where the amount declared as mortgage indebtedness involved
excessive, unreasonable, and unconscionable interest charges. In no uncertain
terms, this Court ruled that a mortgagor cannot be legally compelled to pay for a
grossly inflated loan.In the case at bar, the unlawful interest charge which led to the
amount demandedwill result to the invalidity of the subsequent foreclosure sale.
Facts:
Sometime in December 1997, the Pinzman et al. obtained a loan from the
Anchor Savings Bank in the amount of P3,000,000 secured by a real estate
mortgage over parcels of land located in Cubao, Quezon City which were registered
in the name of MarylinMafialac. Mafialac executed a Promissory Note and Disclosure
Statement in favor of the Anchor in the total amount of P3,308,447.74 which
amount already included payment for three months interest. The loan documents
stipulated that the first installment shall be for P148,640 and will be due on
December 26, 1997, the second installment will be for the same amount and shall
be due on January 26, 1998, and the third installment will be for P3,011,167.74 and
will be due on February 26, 1998.
The Promissory Note and Disclosure Statement imposed a monthly 5% late
payment charge, 25% attorneys fees, and 25% liquidated damages in case of
unpaid installments on the part of Maalac. The proceeds of the loan were released
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to Maalac who then issued three checks for the payment of monthly installments
to the Anchor. The first check was for P144,000 and was for the first installment.
The second check in the same amount was for the second installment. Finally, the
third check in the amount of P3,300,000. However, among the three checks, only
the first one was cleared for payment, and the Pinzman et al. incurred an
outstanding balance of P3,012,252.32 which they failed to settle.
Pinzman et al. received a Second Notice of Extrajudicial Sale for the
satisfaction of an obligation, which amounted to P4,577,269.42, excluding penalties,
charges, attorneys fees and costs of foreclosure. The assailed foreclosure sale was
held where the Anchor emerged as the highest bidder of the disputed properties,
and a Certificate of Sale was issued in favor of the Anchor. Still, Maalac allegedly
tried to settle the loan but was surprised when Anchor issued a Statement of
Account stating that, Pinzman Realty owed the Anchor P12,525,673.44
As Maalac failed to redeem the properties, ownership of the foreclosed
properties was eventually consolidated in Anchors name. Anchor later succeeded in
acquiring certificates of title over the disputed properties. Pinzman et al. filed a
Complaint for the Annulment of Extrajudicial Foreclosure of Mortgaged Properties,
Auction Sale, Certificate of Sale and Damages against the Anchor before the RTC.
The Pinzmanprayed for the nullification of the foreclosure sale alleging that the
amount demanded in the Notice of Extrajudicial Sale was exorbitant and excessive.
The RTC dismissed the complaint and found that the Pinzman et al. did not question
the compliance of the Anchor with the procedural requirements for extrajudicial
foreclosure. On appeal, the CA reversed and set aside the court a quo. The CA
declared that the loan agreement as embodied in the Promissory Note and
Disclosure Statement failed to stipulate a rate of interest. The CA held that said rate
was excessive, iniquitous, unconscionable and blatantly contrary to law and morals.
Issue:
Whether or not the imposition of usurious interest rates on a loan obligation
secured by a real estate mortgage will result in the invalidity of the subsequent
foreclosure sale of the mortgage
Ruling:
No, the usurious interest will result to the invalidity of the foreclosure sale.
It is jurisprudential axiom that a foreclosure sale arising from a usurious
mortgage cannot be given legal effect. This Court has previously struck down a
foreclosure sale where the amount declared as mortgage indebtedness involved
excessive, unreasonable, and unconscionable interestcharges. In no uncertain
terms, this Court ruled that a mortgagor cannot be legally compelled to pay for a
grossly inflated loan.
Recently this Court affirmed the above doctrinal pronouncements as we also
nullified a foreclosure proceeding where the amount demanded as outstanding
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loanwas clearly overstated due to exorbitant interest rates. In the case at bar, the
unlawful interest charge which led to the demand for P4,577,269.42 as stated in the
Notice of Extrajudicial Sale resulted in the invalidity of the subsequent foreclosure
sale held on June 1, 1999.Pinzman et al. cannot beobliged to pay an inflated or
overstated mortgage indebtedness on account of excessive interest charges without
offending the basic tenetsof due process and equity.
The argument of Anchor that defects in the Notice of Sale cannot affect the
validity of the foreclosure sale cannot be given credence. In relying on a long litany
of cases, Anchor failed to realize that the issue in those cases was the validity of the
Notice of Sale per se. Meanwhile, in the present case, the issue is the validity of the
foreclosure sale in view of the presence of usurious interest charges.
ROLANDO C. DE LA PAZ vs. L & J DEVELOPMENT COMPANY
When a person granted an unsecured loan without a maturity date in favor of
a corporation and its president and general manager (who is a lawyer) without
reducing the loan transaction in writing, the creditor cannot enforce payment of 6%
monthly interest. The payments of the debtor to the creditor must be considered as
payment of the principal amount of the loan because Article 1956 was not complied
with. In addition, even if the interest was in writing, it cannot be collected because
it is unconscionable.
Facts:
Petitioner Rolando De La Paz lent P 350,000.00 without any security to
respondent L & J Development Company (L & J), with Atty. Salonga as its president
and general manager. Ronaldo had never known Atty. Salonga prior to the
transaction, and lent him the money when he learned from his associate that Atty.
Salonga and L&J needed money to finish their projects. The loan, with no specified
maturity date, carried a 6% monthly interest, upon the suggestion of Atty. Salonga.
The loan transaction was also not reduced into writing. From December 2000 to
August 2003, L&J paid interest to Rolando. When L&J failed to pay despite repeated
demands, Rolando filed a complaint for collection of sum of money with damages.
L&J and Atty. Salonga claimed that they failed to pay the debt due to financial
difficulties, and that Rolando cannot enforce the 6% monthly interest for being
unconscionable andshocking to the morals. Hence, the payments already made
should be applied tothe P350,000.00 principal loan.
The MeTCupheld the 6% monthlyinterest. In so ruling, it ratiocinated that
since L&J agreed thereto and voluntarilypaid the interest at such rate from 2000 to
2003, it is already estopped fromimpugning the same. Nonetheless, for reasons of
equity, the said court reduced theinterest rate to 12% per annum on the remaining
principal obligation ofP350,000.00. The RTC affirmed the MeTC, but the CA reversed
the RTC. The parties failed to stipulate in writing the impositionof interest on the
loan. Hence, no interest shall be due thereon pursuant to Article1956 of the Civil
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Code. And even if payment of interest has been stipulated inwriting, the 6%
monthly interest is still outrightly illegal and unconscionablebecause it is contrary to
morals, if not against the law. Being void, this cannot beratified and may be set up
by the debtor as defense. For these reasons, Rolandocannot collect any interest
even if L&J offered to pay interest.
Issue:
Was the 6% monthly interest valid?
Ruling:
The lack of a written stipulation to payinterest on the loaned
amount disallowsa creditor from charging monetaryinterest.
Here, it is undisputed that the parties did not put down in writing
theiragreement. Thus, no interest is due. The collection of interest without
anystipulation in writing is prohibited by law.
But Rolando asserts that his situation deserves an exception to theapplication
of Article 1956. He blames Atty. Salonga for the lack of a writtendocument, claiming
that said lawyer used his legal knowledge to dupe him.Rolando thus imputes bad
faith on the part of L&J and Atty. Salonga. The Court,however, finds no deception on
the part of L&J and Atty. Salonga. For one,despite the lack of a document stipulating
the payment of interest, L&Jnevertheless devotedly paid interests on the loan. It
only stopped when it sufferedfrom financial difficulties that prevented it from
continuously paying the 6%monthly rate. For another, regardless of Atty. Salongas
profession, Rolando whois an architect and an educated man himself could have
been a more reasonablyprudent person under the circumstances. To top it all, he
admitted that he had noprior communication with Atty. Salonga. Despite Atty.
Salonga being a completestranger, he immediately trusted him and lent his
company P350,000.00, asignificant amount. Moreover, as the creditor, he could
have requested or requiredthat all the terms and conditions of the loan agreement,
which include thepayment of interest, be put down in writing to ensure that he and
L&J are on thesame page. Rolando had a choice of not acceding and to insist that
their contractbe put in written form as this will favor and safeguard him as a
lender.Unfortunately, he did not. It must be stressed that [c]ourts cannot follow
oneevery step of his life and extricate him from bad bargains, protect him
fromunwise investments, relieve him from one-sided contracts, or annul the effects
offoolish acts. Courts cannot constitute themselves guardians of persons who are
not legally incompetent.
It may be raised that L&J is estopped from questioning the interest
rateconsidering that it has been paying Rolando interest at such rate for more than
twoand a half years. In fact, in its pleadings before the MeTC and the RTC, L&Jmerely
prayed for the reduction of interest from 6% monthly to 1% monthly or12% per
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annum. However, in Ching v. Nicdao, the daily payments of the debtorto the lender
were considered as payment of the principal amount of the loanbecause Article
1956 was not complied with. This was notwithstanding thedebtors admission that
the payments made were for the interests due. The Courtcategorically stated
therein that estoppel cannot give validity to an act that isprohibited by law or one
that is against public policy.
Even if the payment of interest has beenreduced in writing, a 6%
monthlyinterest rate on a loan is unconscionable,regardless of who
between the partiesproposed the rate.
Time and again, it has been ruled in a plethora of cases that
stipulatedinterest rates of 3% per month and higher, are excessive,
iniquitous,unconscionable and exorbitant. Such stipulations are void for being
contrary tomorals, if not against the law. The Court, however, stresses that these
rates shallbe invalidated and shall be reduced only in cases where the terms of the
loans areopen-ended, and where the interest rates are applied for an indefinite
period.Hence, the imposition of a specific sum of P40,000.00 a month for six months
ona P1,000,000.00 loan is not considered unconscionable.30 In the case at
bench,there is no specified period as to the payment of the loan. Hence, levying
6%monthly or 72% interest per annum is definitely outrageous and inordinate.
The situation that it was the debtor who insisted on the interest rate will
notexempt Rolando from a ruling that the rate is void. As this Court cited in
AsianCathay Finance and Leasing Corporation v. Gravador, the imposition of
anunconscionable rate of interest on a money debt, even if knowingly
andvoluntarily assumed, is immoral and unjust. It is tantamount to a
repugnantspoliation and an iniquitous deprivation of property, repulsive to the
commonsense of man.Indeed, voluntariness does not make the stipulation on an
unconscionable interest valid.
As exhaustibly discussed, no monetary interest is due Rolando pursuant
toArticle 1956. The CA thus correctly adjudged that the excess interest
paymentsmade by L&J should be applied to its principal loan. As computed by the
CA,Rolando is bound to return the excess payment of P226,000.00 to L&J
followingthe principle of solutioindebiti.
However, pursuant to Central Bank Circular No. 799 s. 2013 which tookeffect
on July 1, 2013, the interest imposed by the CA must be accordinglymodified. The
P226,000.00 which Rolando is ordered to pay L&J shall earn aninterest of 6% per
annum from the finality of this Decision.
SUN LIFE OF CANADA (PHILIPPINES), INC. vs. SANDRA TAN KIT and The
Estate of the Deceased NORBERTO TAN KIT
G.R. No. 183272, October 15, 2014, J.Del Castillo
Monetary interest refers to the compensation set by the parties for the use or
forbearance of money. No such interest shall be due unless it has been expressly
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stipulated in writing. On the other hand, compensatory interest refers to the
penalty or indemnity for damages imposed by law or by the courts.This being the
case and judging from the tenor of the CA, there can be no other conclusion than
that the interest imposed by the appellate-court is in the nature of compensatory
interest.
Facts:
Sandra Tan Kit (Tan Kit) is the widow and designated beneficiary of Norbeto
Tan Kit (Norberto), whose application for a life insurance policy, with face value of
P300,000.00, was granted by Sun Life on October 28, 1999. On February 19,2001,
or within the two-year contestability period, Norberto died of disseminated gastric
carcinoma. Consequently, Tan Kit filed a claim under the subject policy.
In a Letter dated September 3, 2001, Sun Life of Canada (Philippines), Inc.
(Sun Life) denied TanKits claim on account of Norbertos failure to fully and
faithfully disclose in his insurance application certain material and relevant
information about his health and smoking history. Specifically, Norberto answered
No to the question inquiring whether he had smoked cigarettes or cigars within
the last 12 months prior to filling out said application. However, the medical report
of Dr. Anna Chua (Dr. Chua), one of the several physicians that Norberto consulted
for his illness, reveals that he was a smoker and had only stopped smoking in
August1999. According to Sun Life, its underwriters would not have approved
Norbertos application for life insurance had they been given the correct
information. Believing that the policy is null and void, Sun Life opined that its
liability is limited to the refund of all the premiums paid. Accordingly, it enclosed n
the said letter a check for P13,080.93 representing the premium refund.
In a letter dated September 13, 2001, Tan Kit refused to accept the check and
insisted on the payment of the insurance proceeds.
On October 4, 2002, Sun Life filed a Complaint for Rescission of Insurance
Contract before the Regional Trial Court (RTC) of Makati City.
The RTC ruled in favor of Tan Kit because the RTC opined that the affidavit of
Dr. Chua, presented as part of Sun Lifes evidence and which confirmed the fact that
the insured was a smoker and only stopped smoking a year ago [1999], is hearsay
since Dr. Chua did not testify in court. Further, since Norberto had a subsisting
insurance policy with Sun Life during his application for insurance subject of this
case, it was incumbent upon Sun Life to ascertain the health condition of Norberto
considering the additional burden that it was assuming. Lastly, Sun Life did not
comply with the requirements for rescission of insurance contract.
On appeal, the CA reversed and set aside the RTCs ruling in its Decision
dated October 17, 2007.From the records, the CA found that prior to his death,
Norberto had consulted two physicians, Dr. Chua on August 19, 2000, and Dr. John
Ledesma(Dr. Ledesma) on December 28, 2000, to whom he confided that he had
stopped smoking only in 1999. At the time therefore that he applied for insurance
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policy on October 28, 1999, there is no truth to his claim that he did not smoke
cigarettes within 12 months prior to the said application. The CA thus held that
Norberto isguilty of concealment which misled Sun Life in forming its estimates of
the risks of the insurance policy. This gave Sun Life the right to rescind the
insurance contract which it properly exercised in this case.
Accordingly, Sun Life is ordered to reimburse Tan Kit the sumof P13,080.93
representing the premium paid by the insured with interest at the rate of 12% per
annum from the time of the death of the insured until fully paid.
Issue:
Whether Sun Life is liable to pay interest on the premium to be refunded to
Tan Kit
Ruling:
No. Sun Life is not liable to pay compensatory interest.
There are two kinds of interest monetary and compensatory.
Monetary interest refers to the compensation set by the parties for the use
or forbearance of money. No such interest shall be due unless it has been
expressly stipulated in writing. On the other hand, compensatory interest refers to
the penalty or indemnity for damages imposed by law or by the courts. The
interest mentioned in Articles 2209 and 2212 of the Civil Code applies to
compensatory interest.
Clearly and contrary to Tan Kits assertion, the interest imposed by the CA is
not monetary interest because aside from the fact that there is no use or
forbearance of money involved in this case, the subject interest was not one which
was agreed upon by the parties in writing. This being the case and judging from the
tenor of the CA, there can be no other conclusion than that the interest imposed by
the appellate-court is in the nature of compensatory interest.
In this case, it is undisputed that simultaneous to its giving of notice to Tan
Kit that it was rescinding the policy due to concealment, Sun Life tendered the
refund of premium by attaching to the said notice a check representing the amount
of refund. However, Tan Kit refused to accept the same since they were seeking for
the release of the proceeds of the policy. Because of this discord, Sun Life filed for
judicial rescission of the contract. Sun Life, after receiving an adverse judgment
from the RTC, appealed to the CA. And as may be recalled, the appellate court found
Norberto guilty of concealment and thus upheld the rescission of the insurance
contract and consequently decreed the obligation of Sun Life to return to Tan Kit the
premium paid by Norberto. Moreover, we find that Sun Life did not incur delay or
unjustifiably deny the claim.
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Based on the foregoing, we find that Sun Life properly complied with its
obligation under the law and contract. Hence, it should not be made liable to pay
compensatory interest.
SPOUSES TAGUMPAY N. ALBOS AND AIDA C. ALBOS vs. SPOUSES NESTOR
M. EMBISAN AND ILUMINADA A. EMBISAN, DEPUTY SHERIFF MARINO V.
CACHERO, AND THE REGISTER OF DEEDS OF QUEZON CITY
G.R. No. 210831, November 26, 2014, J. Velasco Jr.
The compounding of interest should be in writing. Article 1956 of the New
Civil Code, which refers to monetary interest provides that No interest shall be due
unless it has been expressly stipulated in writing. As mandated by the foregoing
provision, payment of monetary interest shall be due only if: (1) there was an
express stipulation for the payment of interest; and (2) the agreement for such
payment was reduced in writing.
The imposition of an unconscionable rate of interest on a money debt, even if
knowingly and voluntarily assumed, is immoral and unjust.
In the case at bar, it is undisputed that the parties have agreed for the loan
to earn 5% monthly interest, the stipulation to that effect put in writing. When the
petitioners defaulted, the period for payment was extended, carrying over the
terms of the original loan agreement, including the 5% simple interest. However, by
the third extension of the loan, respondent spouses decided to alter the agreement
by changing the manner of earning interest rate, compounding it beginning June
1986. This is apparent from the Statement of Account prepared by the spouses
Embisan themselves. Thus, Spouses Embisan, having imposed, unilaterally at that,
the compounded interest rate, had the correlative duty of clarifying and reducing in
writing how the said interest shall be earned. Having failed to do so, the silence of
the agreement on the manner of earning interest is a valid argument for prohibiting
them from charging interest at a compounded rate.
Facts:
Spouses Tagumpay Albos and Aida Albos (spouses Albos) entered into an
agreement, denominated as Loan with Real Estate Mortgage, with respondent
spouses Nestor and Iluminada Embisan (spouses Embisan) in the amount of
P84,000.00 payable within 90 days with a monthly interest rate of 5%. To secure the
indebtedness, petitioners mortgaged to the spouses Embisan a parcel of land in
Project 3, Quezon City, measuring around 207.6 square meters and registered under
their name, as evidenced by TCT No. 257697.
For failure to settle their account upon maturity, Aida Albos requested and
was given an extension of eleven months, or until December 17, 1985, within which
to pay the loan obligation. However, spouses Albos once again defaulted and
another extension of five (5) months, or until May 17, 1986, was set.
May 17, 1986 came and went but the obligation remained unpaid. Thus,
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when the spouses Albos requested a third extension, as will later be alleged by the
spouses Embisan, an additional eight (8) months was granted on the condition that
the monthly 5% interest from then on, i.e. June 1986 onwards, will be compounded.
This stipulation, however, was not reduced in writing.
On February 9, 1987, respondent spouses addressed a letter to petitioners
demanding the payment of P234,021.90, representing the unpaid balance and
interests from the loan. This was followed by another letter of the same tenor, but
this time demanding from the petitioners the obligation due amounting to
P258,009.15.
Obviously in a bid to prevent the foreclosure of their mortgaged property,
petitioners paid respondent spouses the sum of P44,500.00 on October 2, 1987. The
spouses Embisan accepted the partial payment of the principal loan amount owed
to them, which, based on the Statement of Account the spouses Embisan prepared,
by that time, has already ballooned to P296,658.70.
Due to spouses Albos failure to settle their indebtedness, spouses Embisan
proceeded to extra-judicially foreclose the mortgaged property. Spouses Embisan
were the highest bidders and were later issued a Sheriffs Certificate of Sale. The
property was never redeemed, and so the spouses Embisan executed an Affidavit of
Consolidation over the property.
Spouses Albos filed a complaint for the annulment of the Loan with Real
Estate Mortgage, Certificate of Sale, Affidavit of Consolidation, Deed of Final Sale,
and Contract of Lease before the Regional Trial Court of Quezon City (RTC).RTC
dismissed the complaint for lack of merit.
On appeal, Spouses Albos argued that the imposition by the respondent
spouses of a 5% compounded interest on the loan, without the petitioners consent
or knowledge, is fraudulent and contrary to public morals. While spouses Embisan
insisted that the compounding of the interest was agreed upon as a condition for
the third and final extension of time given for the petitioners to make good their
promise to pay.
CA held that inasmuch as the request for the third extensionfor another
eight monthswas made after the expiration of one year and four months from
when the payment first became due, the agreement to compound the interest was
just and reasonable
Issues:
1. Whether or not there is no documentary proof to show that the petitioners
agreed in writing to the imposition of the 5% compounded monthly interest,
contrary to Article 1956 of the Civil Code
2. Whether or not the 5% compounded monthly interest unilaterally imposed by
Spouses Embisan on the petitioners is excessive, exorbitant, oppressive,
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iniquitous and unconscionable, therefore, the same is void for being contrary to
law and morals
3. Whether or not the extra-judicial foreclosure proceedings should be nullified for
being based on an allegedly erroneous computation of the loans interest.
Ruling:
The petition is meritorious.
1. The compounding of interest should be in writing.
Article 1956 of the New Civil Code, which refers to monetary interest,
provides:
Article 1956. No interest shall be due unless it has been
expressly stipulated in writing.
As mandated by the foregoing provision, payment of monetary
interest shall be due only if: (1) there was an express stipulation
for the payment of interest; and (2) the agreement for such
payment was reduced in writing.
Thus, the Court has held that collection of interest without any stipulation
thereof in writing is prohibited by law.In the case at bar, it is undisputed that the
parties have agreed for the loan to earn 5% monthly interest,the stipulation to
that effect put in writing. When the petitioners defaulted, the period for payment
was extended, carrying over the terms of the original loan agreement, including
the 5% simple interest. However, by the third extension of the loan, respondent
spouses decided to alter the agreement by changing the manner of earning
interest rate, compounding it beginning June 1986. This is apparent from the
Statement of Account prepared by the spouses Embisan themselves.
Given the circumstances, the Court rules that the first requirementthat
there be an express stipulation for the payment of interestis not sufficiently
complied with, for purposes of imposing compounded interest on the loan. The
requirement does not only entail reducing in writing the interest rate to be
earned but also the manner of earning the same, if it is to be compounded.
Failure to specify the manner of earning interest, however, shall not
automatically render the stipulation imposing the interest rate void since it is
readily apparent from the contract itself that the parties herein agreed for the
loan to bear interest. Instead, in default of any stipulation on the manner of
earning interest, simple interest shall accrue.
Settled is the rule that ambiguities in a contract are interpreted against the
party that caused the ambiguity. Any ambiguity in a contract whose terms are
susceptible of different interpretations must be read against the party who
drafted it. In the extant case, Spouses Embisan, having imposed, unilaterally at
that, the compounded interest rate, had the correlative duty of clarifying and
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reducing in writing how the said interest shall be earned. Having failed to do so,
the silence of the agreement on the manner of earning interest is a valid
argument for prohibiting them from charging interest at a compounded rate.
2. Imposing 5% monthly
unconscionable.
interest,
whether
compounded
or
simple,
is
Nevertheless, even if there was such an agreement that interest will be

compounded, the Court agrees with the petitioners that the 5% monthly rate, be
it simple or compounded, written or verbal, is void for being too exorbitant, thus
running afoul of Article 1306 of the New Civil Code, which provides:
Article 1306. The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, or
public policy.
As case law instructs, the imposition of an unconscionable rate of interest on
a money debt, even if knowingly and voluntarily assumed, is immoral and unjust.
It is tantamount to a repugnant spoliation and an iniquitous deprivation of
property, repulsive to the common sense of man. It has no support in law, in
principles of justice, or in the human conscience nor is there any reason
whatsoever which may justify such imposition as righteous and as one that may
be sustained within the sphere of public or private morals
3. The foreclosure sale should be nullified.
In view of the above disquisitions, the Court is constrained to nullify the
foreclosure proceedings with respect to the mortgaged property in this case,
following the doctrine in Heirs of Zoilo and Primitiva Espiritu v. Landrito.In Heirs
of Espiritu, the spouses Maximo and Paz Landrito, sometime in 1986, borrowed
from the spouses Zoilo and Primitiva Espiritu the amount of P350,000.00,
secured by a real estate mortgage. Because of the Landritos continued inability
to pay the loan, the due date for payment was extended on the condition that
the interest that has already accrued shall, from then on, form part of the
principal. As such, after the third extension, the principal amounted to
P874,125.00 in only two years. Despite the extensions, however, the debt
remained unpaid, prompting the spouses Espiritu to foreclose the mortgaged
property.
The foreclosure proceeding in Heirs of Espiritu, however, was eventually
nullified by this Court because the Landritos were deprived of the opportunity to
settle the debt, in view of the overstated amount demanded from them. As held
by the Court, since the Spouses Landrito, the debtors in this case, were not given
an opportunity to settle their debt, at the correct amount and without the
iniquitous interest imposed, no foreclosure proceedings may be instituted. A
judgment ordering a foreclosure sale is conditioned upon a finding on the correct
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amount of the unpaid obligation and the failure of the debtor to pay the said
amount. In this case, it has not yet been shown that the Spouses Landrito had
already failed to pay the correct amount of the debt and, therefore, a foreclosure
sale cannot be conducted in order to answer for the unpaid debt.
As a result, the subsequent registration of the foreclosure sale cannot transfer
any rights over the mortgaged property to the Spouses Espiritu. The registration
of the foreclosure sale, herein declared invalid, cannot vest title over the
mortgaged property.
Applying Espiritu, the extra-judicial foreclosure of the mortgaged property
dated October 12, 1987 is declared null, void, and of no legal effect.
CONTRACT OF LOAN
PHILIPPINE NATIONAL BANK vs. SPOUSES EDUARDO AND MA. ROSARIO
TAJONERA AND EDUAROSA REALTY DEVELOPMENT, INC.
The agreement between PNB and [Spouses Tajonera] was one of a loan.
Under the law, a loan requires the delivery of money or any other consumable
object by one party to another who acquires ownership thereof, on the condition
that the same amount or quality shall be paid. Loan is a reciprocal obligation, as it
arises from the same cause where one party is the creditor, and the other the
debtor. The obligation of one party in a reciprocal obligation is dependent upon the
obligation of the other, and the performance should ideally be simultaneous. This
means that in a loan, the creditor should release the full loan amount and the
debtor repays it when it becomes due and demandable.
PNB, not having released the balance of the last loan proceeds in accordance
with the 3rd Amendment had no right to demand from [Spouses Tajoneras]
compliance with their own obligation under the loan. Indeed, if a party in a
reciprocal contract like a loan does not perform its obligation, the other party
cannot be obliged to perform what is expected of them while the other's obligation
remains unfulfilled.
Facts:
Respondent Eduarosa Realty (or ERDI) was engaged in realty construction
and sale of condominium buildings. In addition to her capacity as Vice President,
Mrs. Tajonera performed the duties of marketing director of ERDI, which includes
dealing with banks, suppliers and contractors. ERDI, through Rosario, obtained loans
from Petitioner PNB and entered into several credit agreements to finance the
completion of the construction of its 20-storey project in Roxas Boulevard,
Paranaque City.
Pursuant to the Credit Agreement, PNB extended to ERDI the amount of
PhP60,000, 000.00, which was secured by a REM consisting of three (3) parcels of
land with an aggregate area of 1,352 square meters situated in Roxas Boulevard,
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Paranaque City. In addition, the loan was secured by the assignment of proceeds of
contract receivables arising from the sale of condominium units to be constructed
on the mortgaged Paranaque properties.
Thereafter, the Credit Agreement was amended and/or extended thrice by
the parties. For the 1st amendment, PNB gave an additional loan of
PhP40,000,000.00 while it received from ERDI another security in the form of the
conjugal property of Spouses Tajonera in Greenhills. For the 3 rd amendment, an
additional loan of PhP55,000,000.00 was released to ERDI.
On September 30, 1994, ERDIs liabilities with PNB already ballooned to
PhP211,935, 067.40.9. Consequently, PNB sought the foreclosure of the Greenhills
property and eventually the property was not redeemed by ERDI, thus, paving the
way for the former to consolidate its title over the same.
Spouses Tajonera then filed a complaint against PNB for annulment of sale,
cancellation of title, cancellation of mortgage, and damages before the RTC. They
alleged, among others, that the mortgage obligation had been novated and the
foreclosure proceedings were defective. In response, PNB asserts the other way
around as the obligations of Spouses Tajonera remained subsisting and considering
also that they were able to fully utilize the credit extended to them.
The RTC annulled the mortgage contract constituted over the Greenhills
property on the ground of breach of contract on the part of PNB by violating the
credit agreements. The CA for its part denied the appeal of PNB and upheld the
decision of the RTC with modification as to the deletion of the award of moral and
exemplary damages.
Issue:
Whether or not the annulment of the mortgage contract constituted over the
Greenhills property is proper under the circumstances of this case.
Ruling:
YES, the annulment of the contract is warranted by PNBs violations of its
undertakings stated on the main contract.
PNB contends that the Supplement to the REM was supported by sufficient
and valuable consideration because the loan proceeds secured by it under the 3 rd
Amendment had been substantially released to [Spouses Tajonera]. Contrary to the
findings of the courts below, PNB insists that there was no breach, substantial or
otherwise, of its contractual obligation when it did not release the remaining
balance of the approved loan to the respondents considering that the latter had no
history of any payment either on interest or principal of the loan.
The agreement between PNB and [Spouses Tajonera] was one of a loan.
Under the law, a loan requires the delivery of money or any other consumable
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object by one party to another who acquires ownership thereof, on the condition
that the same amount or quality shall be paid. Loan is a reciprocal obligation, as it
arises from the same cause where one party is the creditor, and the other the
debtor. The obligation of one party in a reciprocal obligation is dependent upon the
obligation of the other, and the performance should ideally be simultaneous. This
means that in a loan, the creditor should release the full loan amount and the
debtor repays it when it becomes due and demandable.
PNB, not having released the balance of the last loan proceeds in accordance
with the 3rd Amendment had no right to demand from [Spouses Tajoneras]
compliance with their own obligation under the loan. Indeed, if a party in a
reciprocal contract like a loan does not perform its obligation, the other party cannot
be obliged to perform what is expected of them while the other's obligation remains
unfulfilled.
When PNB and the respondents entered into the 1st, 2nd and 3rd
Amendments , they undertook reciprocal obligations. In reciprocal obligations, the
obligation or promise of each party is the consideration for that of the other; and
when one party has performed or is ready and willing to perform his part of the
contract, the other party who has not performed or is not ready and willing to
perform incurs in delay. The promise of the respondents to pay was the
consideration for the obligation of PNB to furnish the PhP40,000,000.00 additional
loan under the 1st Amendment as well as the PhP55,000,000.00 the second
additional loan under the 3rd Amendment. When the respondents executed the
Supplement to REM covering their Greenhills property, they signified their
willingness to pay the additional loans. It should be noted, as correctly found by the
CA, that the Supplement to REM was constituted not only as security for the
execution of the 1st Amendment but also in consideration of the 2nd and 3rd
Amendments.
The obligation of PNB was to furnish the PhP55,000,000.00 additional loan
accrued on November 3, 1993, the date the parties entered into the 3 rd
Amendment. Thus, PNBs delay in furnishing the entire additional loan started from
the said date. Considering that PNB refused to release the total amount of the
additional loan granted to ERDI under the 3 rd Amendment amounting to
PhP39,503,088.84, the CA was correct in affirming the RTCs conclusion that there
was no sufficient valuable consideration in the execution of the Supplement to REM.
Equally without merit is PNBs reliance on the case of Sps. Omengan v. PNB.
The said case finds no application inasmuch as the circumstances in that case are
not in all fours with the present case. In Omengan case, there was no actual
meeting of the minds with respect to the conditionally approved additional loan as
the condition attached to the increase in borrowers credit line was not
acknowledged and accepted by them. Hence, there being no perfected contract
over the increase in credit line, it was held that no breach of contract could be
attributed to PNB in not releasing the additional loan. In the present case, there was
a perfected contract in so far as the 3rd Amendment was concerned. Thus, PNBs
action in not releasing the entire amount of the additional loan was not justified.
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Still in the said case, at the time the original loan was approved, the title to
the property offered as collateral appeared to pertain exclusively to Spouses
Omengan. By the time the application for increase was considered, PNB had
acquired information that the said property, although in the name of spouses
petitioners was owned in co-ownership. The Court justified PNBs act of withholding
the release of the additional loan because it already had reason to suspect the
spouses claim of exclusive ownership over the mortgaged collateral. In this case,
[Spouses Tajonera] were unquestionably the exclusive owners of the mortgaged
property (Greenhills property) at the time the initial and the additional loans were
approved.
PHILIPPINE NATIONAL BANK vs. SPOUSES EDUARDO AND MA. ROSARIO
TAJONERA and EDUAROSA REALTY DEVELOPMENT, INC.
A loan requires the delivery of money or any other consumable object by one
party to another who acquires ownership thereof, on the condition that the same
amount orquality shall be paid. Loan is a reciprocal obligation, as it arises from the
same causewhere one party is the creditor, and the other the debtor. The obligation
of one party in a reciprocal obligation is dependent upon the obligation of the other,
and the performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amountand the debtor repays it when it
becomes due and demandable.
Facts:
Respondent Eduarosa Realty Development, Inc. (ERDI) was engaged in realty
construction and sale of condominium buildings while Rosario is the Vice-President
or ERDI. ERDI, through Rosario, obtained loans from petitioner Philippine National
Bank (PNB)and entered into several credit agreements to finance the completion of
the construction of their 20-storey Eduarosa Tower Condominium. Pursuant to the
Credit Agreement, the principal amount of loan extended by PNB to ERDI was
P60,000,000.00. As security for the initial loan, ERDI executed the Real Estate
Mortgage (REM) consisting of 3 parcels of land covered by TCT Nos. 38845, 38846
and 38847 registered in the name of ERDI (Paranaque properties).In addition, the
loan was secured by the assignment of proceeds of contract receivables arising
from the sale of condominium units to be constructed on the mortgaged Paranaque
properties.
On January 31, 1992, ERDI executed an amendment to the Credit

Agreementand obtained an additional loan of PP40,000,000.00. As additional
security to the increased amounts of loan, the respondent spouses lot situated in
Greenhills, San Juan, Metro Manila (Greenhills property) was mortgaged in favor of
PNB. A Second Amendment to Credit Agreementwas executed by the parties to
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extend the repayment dates of the loan and the additional loan subject to the terms
set forth in the said agreement. A Third Amendment to the Credit Agreement was
entered into by the parties wherein PNB granted an additional loan of
PP55,000,000.00 to ERDI, subject to several conditions stated in the said
agreement.
ERDIs
outstanding
loan
obligation
with
PNB
amounted
to P211,935,067.40. ERDI failed to settle its obligation. As a consequence, PNB filed
an application for foreclosure of the Greenhills property. As the highest bidder, PNB
was issued the Certificate of Sale. Upon ERDIs failure to redeem the property, PNB
consolidated its title and caused the cancellation of TCT No. 29733.A new title was
issued in the name of PNB.
Respondents filed a complaint against PNB for annulment of sale, cancellation

oftitle, cancellation of mortgage, and damages before the RTC. Respondents alleged
that: the title to the mortgaged property that was transferred to PNB as a
consequence of the foreclosure proceedings was null and void as their mortgage
obligation had been novated and no new loans were released to them, in violation
of the provisions of the Supplement to REM; the foreclosure proceedings were
defective due to PNBs failure to send personal notice to the respondent spouses;
PNBs delay in the release of loan proceeds under the credit agreements caused the
non-completion of the condominium project; and the properties mortgaged under
the original mortgage contract covering the respondents condominium titles should
now be discharged, as the property of the respondent spouses had already been
foreclosed.In its Answer with Counterclaim, PNB denied the respondents allegations
and raised the following defenses: 1) the mortgage contract was supported by
valuable consideration a sthe loan proceeds under the credit agreements were fully
released to them; 2) there was no novation of the contract; 3) demand letters were
given to and duly received by the respondents; and 4) the sufficiency of the
mortgage over the condominium titles cannot be determined because the court has
no jurisdiction over such issue.
The RTC annulled the mortgage contract constituted over the Greenhills
property on the ground of breach of contract on the part of PNB by violating the
credit agreements. The CA agreed with the RTC ruling. There was, according to the
CA, breach of contract on the part of PNB that warranted the annulment and
cancellation of the Supplement to REM covering the Greenhills property. Further, the
CA rejected PNBs claim that its refusal to release the balance of the last loan was
due to the respondents failure to comply with the undertaking of bringing new
investors with additional collaterals to secure the additional loan as such
requirement was not categorically stated in the terms of the credit agreement. Also,
such claim was belied by PNBs own witness who testified that the reason for its
refusal to release was simply the respondents failure to settle their amortization.
Hence, this appeal.PNB insists that there was no breach, substantial or otherwise, of
its contractual obligation when it did not release the remaining balance of the
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approved loan to the respondents considering that the latter had no history of any
payment either on interest or principal of the loan.
Issue:
Whether the CA erred in annulling the mortgage contract constituted over the
Greenhills property of the respondents.
Ruling:
The agreement between PNB and the respondents was one of a loan.PNB, not
having released the balance of the last loan proceeds in accordance with the Third
Amendment had no right to demand from the respondents compliance with their
own obligation under the loan. Indeed, if a party in a reciprocal contract like a loan
does not perform its obligation, the other party cannot be obliged to perform what is
expected of them while the other's obligation remains unfulfilled.
When PNB and the respondents entered into the First, Second and Third they
undertook reciprocal obligations.The promise of the respondents to pay was the
consideration for the obligation of PNB to furnish the P40,000,000.00 additional loan
under the First Amendment as well as theP55,000,000.00 the second additional loan
under the Third Amendment. When the respondents executed the Supplement to
REM covering their Greenhills property, they signified their willingness to pay the
additional loans. The Supplement to REM was constituted not only as security for
the execution of the First Amendment but also in consideration of the Second and
Third Amendments.
The obligation of PNB was to furnish the P55,000,000.00 additional loan
accrued on November 3, 1993, the date the parties entered into the Third
Amendment. Thus, PNBs delay in furnishing the entire additional loan started from
the said date.Considering that PNB refused to release the total amount of the
additional loan granted to ERDI under the Third Amendment amounting
to P39,503,088.84, the CA was correct in affirming the RTCs conclusion that there
was no sufficient valuable consideration in the execution of the Supplement to
REM.Undoubtedly, PNB breached its contractual obligation when it failed to release
to Appellees the remaining balance. The petition is DENIED.
CHECKS
NEIL B. AGUILAR AND RUBEN CALIMBAS vs. LIGHTBRINGERS CREDIT
COOPERATIVE
G.R. No. 209605, January 12, 2015, J. Mendoza
The Court holds that there was indeed a contract of loan between the
petitioners and respondent. The signatures of the petitioners were present on both
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the PNB checks and the cash disbursement vouchers. The checks were also made
payable to the order of the petitioners. The Court pointed out that a check functions
more than a promissory note since it not only contains an undertaking to pay an
amount of money but is an "order addressed to a bank and partakes of a
representation that the drawer has funds on deposit against which the check is
drawn, sufficient to ensure payment upon its presentation to the bank."
Facts:
This case stemmed from the three (3) complaints for sum of money separately
filed by respondent Lightbringers Credit Cooperative against petitioners Aguilar and
Calimbas, and one Perlita Tantiangco. The complaints alleged that Tantiangco,
Aguilar and Calimbas were members of the cooperative who borrowed the following
funds:
1. In Civil Case No. 1428, Tantiangco allegedly borrowed P206,315.71 as
evidenced by Cash Disbursement Voucher No. 4010 but the net loan was only
P45,862.00 as supported by PNB Check No. 0000005133.
2. In Civil Case No. 1429, petitioner Calimbas allegedly borrowed P202,800.18
as evidenced by Cash Disbursement Voucher No. 3962 but the net loan was
only P60,024.00 as supported by PNB Check No. 0000005088;
3. In Civil Case No. 1430, petitioner Aguilar allegedly borrowed P126,849.00 as
evidenced by Cash Disbursement Voucher No. 3902 but the net loan was only
P76,152.00 as supported by PNB Check No. 0000005026;
In their answers, Petitioners claimed that the discrepancy between the
principal amount of the loan evidenced by the cash disbursement voucher and the
net amount of loan reflected in the PNB checks showed that they never borrowed
the amounts being collected. They also asserted that no interest could be claimed
because
there
was
no
written
agreement
as
to
its
imposition.
On the scheduled pre-trial conference, only Lightbringers Credit Cooperative
and its counsel appeared. The MCTC then allowed Lightbringers to present
evidence ex parte. It presented Fernando Manalili, its incumbent General Manager,
as its sole witness. In his testimony, Manalili explained that the discrepancy
between the amounts of the loan reflected in the checks and those in the cash
disbursement vouchers were due to the accumulated interests from previous
outstanding obligations, withheld share capital, as well as the service and
miscellaneous fees.
The MCTC dismissed the complaint against Tantiangco because there was no
showing that she received the amount being claimed. Moreover, the PNB check was
made payable to cash and was encashed by a certain Violeta Aguilar. There was,
however, no evidence that she gave the proceeds to Tantiangco. Further, the dates
indicated in the cash disbursement voucher and the PNB check varied from each
other and suggested that the voucher could refer to a different loan.
The MCTC however, found both Calimbas and Aguilar liable to respondent for
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their respective debts. The PNB checks issued to the petitioners proved the
existence of the loan transactions. Their receipts of the loan were proven by their
signatures appearing on the dorsal portions of the checks as well as on the cash
disbursement vouchers. As a matter of practice, banks would allow the encashment
of checks only by the named payee and subject to the presentation of proper
identification. Nonetheless, the MCTC ruled that only the amount shown in the PNB
check must be awarded because respondent failed to present its bookkeeper to
justify the higher amounts being claimed. The RTC affirmed the MCTC decisions. The
CA dismissed the petition on the ground that it was formally defective.
Issue:
Whether or not there was a contract of loan between Lightbringers and the
petitioners
Ruling:
Yes. The Court holds that there was indeed a contract of loan between the
petitioners and respondent. The Court agrees with the findings of fact of the MCTC
and the RTC that a check was a sufficient evidence of a loan transaction. The
findings of fact of the trial court, its calibration of the testimonies of the witnesses
and its assessment of the probative weight thereof, as well as its conclusions
anchored on the findings are accorded high respect, if not conclusive effect.
The case of Pua v. Spouses Lo Bun Tiong discussed the weight of a check as
an evidence of a loan:
In Pacheco v. Court of Appeals, this Court has expressly recognized that a
check constitutes an evidence of indebtedness and is a veritable proof of an
obligation. Hence, it can be used in lieu of and for the same purpose as a
promissory note. In fact, in the seminal case of Lozano v. Martinez, We pointed out
that a check functions more than a promissory note since it not only contains an
undertaking to pay an amount of money but is an "order addressed to a bank and
partakes of a representation that the drawer has funds on deposit against which the
check is drawn, sufficient to ensure payment upon its presentation to the bank."
This Court reiterated this rule in the relatively recent Lim v. Mindanao Wines and
Liquour Galleria stating that a check, the entries of which are in writing, could prove
a loan transaction.
There is no dispute that the signatures of the petitioners were present on
both the PNB checks and the cash disbursement vouchers. The checks were also
made payable to the order of the petitioners. Hence, respondent can properly
demand that they pay the amounts borrowed. If the petitioners believe that there is
some other bogus scheme afoot, then they must institute a separate action against
the responsible personalities. Otherwise, the Court can only rule on the evidence on
record in the case at bench, applying the appropriate laws and jurisprudence.
MORTGAGE
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EQUITABLE MORTGAGE
SPS. FELIPE SOLITARIOS and JULIA TORDA vs. SPS. GASTON JAQUE and
LILIA JAQUE
G.R. No. 199852, November 12, 2014, J. Velasco, Jr.
A transaction is deemed to be an equitable mortgage, not an absolute sale,
when a party have remained in possession of the subject property and exercised
acts of ownership over the lot even after the purported absolute sale and it could be
gleaned from the intention of the parties that the transaction is intended secure the
payment of a debt.
Facts:
In a Complaint for Ownership and Recovery of Possession with the RTC of

Calbayog City, the respondents spouses Jaque alleged that they purchased Lot 4089
from the petitioners, spouses Solitarios in stages. According to respondents, they
initially bought one-half of the said lot. This sale is allegedly evidenced by a
notarized Deed of Sale. Two months later, the spouses Solitarios supposedly
mortgaged the remaining half of the lot to the Jaques via a Real Estate Mortgage
(REM), to secure a loan.
After almost two (2) years, the spouses Solitarios finally agreed to sell the
mortgaged half. However, instead of executing a separate deed of sale for the
second half, they executed a Deed of Sale for the whole lot to save on taxes, by
making it appear that the consideration for the sale of the entire lot was only
P12,000.00 when the Jaques actually paid P19,000.00 in cash and condoned the
spouses Solitarios P3,000.00 loan. On the basis of this second notarized deed, the
Jaques had OCT No. 1249 cancelled and registered Lot 4089 in their name under
Transfer Certificate of Title (TCT) No. 745.
In spite of the sale, the Jaques, supposedly out of pity for the spouses
Solitarios, allowed the latter to retain possession of Lot 4089, subject only to the
condition that the spouses Solitarios will regularly deliver a portion of the propertys
produce. In an alleged breach of their agreement, however, the spouses Solitarios
stopped delivering any produce sometime in 2000. Worse, the spouses Solitarios
even claimed ownership over Lot 4089. Thus, the Jaques filed the adverted
complaint with the RTC.
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For their part, the spouses Solitarios denied selling Lot 4089 and explained
that they merely mortgaged the same to the Jaques after the latter helped them
redeem the land from the Philippine National Bank (PNB).
On April 15, 2004, the RTC rendered a Decision upholding the validity of the
deeds of sale in question and TCT No. 745, rejecting the allegations of forgery and
fraud. On appeal, the CA reversed and set aside the RTC Decision, rejecting the trial
courts holding that the contract between the parties constituted an equitable
mortgage.
Issue:
Whether or not the parties effectively entered into a contract of absolute sale
or anequitable mortgage of Lot 4089.
Ruling:
It is a contract of equitable mortgage.
There is no single conclusive test to determine whether a deed of sale,

absolute on its face, is really a simple loan accommodation secured by a
mortgage. However, Article 1602 in relation to Article 1604 of the Civil Code
enumerates several instances when a contract, purporting to be, and in fact styled
as, an absolute sale, is presumed to be an equitable mortgage, thus:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(2) When the vendor remains in possession as lessee or otherwise;
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With the foregoing in mind, the Court thus declares that the transaction
between the parties of the present case is actually one of equitable mortgage
pursuant to the foregoing provisions of the Civil Code. It has never denied by
respondents that the petitioners, the spouses Solitarios, have remained in
possession of the subject property and exercised acts of ownership over the said lot
even after the purported absolute sale of Lot 4089.
During the period material to the present controversy, the petitioners,

spouses Solitarios, retained actual possession of the property. This was never
disputed. If the transaction had really been one of sale, as the Jaques claim, they
should have asserted their rights for the immediate delivery and possession of the
lot instead of allowing the spouses Solitarios to freely stay in the premises for
almost seventeen (17) years from the time of the purported sale until their filing
ofthe complaint. Human conduct and experience reveal that an actual owner of a
productive land will not allow the passage of a long period of time, as in this case,
without asserting his rights of ownership.
Furthermore, the fact that defendants witness Leonora Solitarios [Felipes

sister] resides and has a house in the land in question without having been
disturbed by the plaintiffs and the fact that the plaintiffs never have a tenant in the
land even if they reside in Cebu City also show in some manner that they are not
really the owners of the land, but the defendants.
Aside from remaining in possession of the subject property, it can also be

gleaned from the circumstances of the case that the intention of the parties was for
the transaction to secure the payment of a debt.
To stress, Article 1602(6) of the Civil Code provides that a transaction is

presumed to be an equitable mortgage:
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the payment of a
debt or the performance of any other obligation.
This provision may very well be applied in this case. There is sufficient basis
to indulge in the presumption that the transaction between the parties was that of
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an equitable mortgage and that the spouses Solitarios never wanted to sell the
same to the Jaques.
The Jaques extended two loans to the spouses Solitarios, who in exchange,
offered to the former the subject property, not to transfer ownership thereto, but to
merely secure the payment of their debts. This may be deduced from the
testimonies of both Felipe Solitarios and Gaston Jaque, revealing the fact that they
agreed upon terms for the payment of the loans, in particular, the sharing in the
produce of the lot.
Verily, the fact that the parties agreed on payment terms is inconsistent with
the claim of the Jaques that when the spouses Solitarios executed the questioned
deeds of sale they had no other intention but to transfer ownership over the subject
property. Thus, there is ground to presume that the transaction between the parties
was an equitable mortgage and not a sale. There is nothing in the records sufficient
enough to overturn this presumption.
Finally, the Court cannot allow the transfer of ownership o f Lot 4098 to the
Jaques as it would amount to condoning the prohibited practice of pactum
comissorium. Article 2088 of the Civil Code clearly provides that a creditor cannot
appropriate or consolidate ownership over a mortgaged property merely upon
failure of the mortgagor to pay a debt obligation.
Indeed, all the circumstances, taken together, are familiar badges of an

equitable mortgage. Private respondents could not in a pactum commissorium
fashion appropriate the disputed property for themselves as they appeared to have
done; otherwise, their act will not be countenanced by this Court being contrary to
goodmorals and public policy hence void. If they wish to secure a perfect title over
the mortgaged property, they should do so in accordance with law, i.e., by
foreclosing the mortgage and buying the property in the auction sale.
It does not appear, under the premises, that the Jaques availed themselves of
the remedy of foreclosure, or that they bought the subject property in an auction
sale after the spouses Solitarios failed to pay their debt obligation. What seems
clear is that the Jaques took advantage of the spouses Solitarios intellectual and
educational deficiency and urgent need of money and made it appear that the latter
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executed in their favor the questioned Deeds of Sale, thereby automatically
appropriating unto themselves the subject property upon their debtors default.
Further, it can be gleaned from the testimony of Gaston Jaque that when the
spouses Solitarios failed to pay their loan of P3,000.00, reflected in the July 15, 1981
REM covering the remaining half of the subject property, the Jaques did not
foreclose the mortgage and purchase the said lot in an auction sale. Rather, they
supposedly bought the lot directly from the spouses Solitarios and offset the loan
amount against a portion of the supposed purchase price they agreed upon.
Indubitably, the subject property was transferred to the Jaques in a prohibited

pactum commisorium manner and, therefore, void. Thus, the foregoing transaction
and the registration of the deeds of sale, by virtue of which the Jaques were able to
obtain the impugned TCT No. 745 must be declared void.
REAL ESTATE MORTGAGE
PHILIPPINE NATIONAL BANK vs. JOSE GARCIA and CHILDREN et al.
G.R. No. 182839, June 2, 2014, J. Brion
The Amendment of Real Estate Mortgage constituted by Jose Sr. over the
entire property without his co-owners' consent is not necessarily void in its entirety.
The right of the PNB as mortgagee is limited though only to the portion which may
be allotted to Jose Sr. in the event of a division and liquidation of the subject
property. Registration of a property alone in the name of one spouse does not
destroy its conjugal nature. What is material is the time when the property was
acquired.
Facts:
The subject of the case is a parcel of residential land with all its
improvements located in Barrio Olango, Mallig, Isabela. The land is covered by TCT
No. T-44422 under the name of Jose Garcia Sr. who acquired the subject property
during his marriage with Ligaya Garcia.Ligaya died on January 21, 1987.The
marriage of Jose Sr. and Ligaya produced the following children: Nora, Jose Jr., Bobby
and Jimmy, all surnamed Garcia, who are the respondents in the present case.In
1989, the spouses Rogelio and Celedonia Garcia obtained a loan facility from the
Philippine National Bankfor P150,000.00. The loan was secured by a Real Estate
Mortgage over their property covered by TCT No. 177585. The spouses Garcia
increased their loan to P220,000.00 and eventually to P600,000.00. As security for
the increased loan, they offered their property covered by TCT No. 75324 and the
subject property covered by TCT No. T-44422.
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Jose Sr. agreed to accommodate the spouses Garcia by offering the subject
property as additional collateral security for the latters increased loan. Jose Sr.
executed Special Powers of Attorney, expressly authorizing the Spouses Garcia to
apply for, borrow, or secure any loan from PNB, and to convey and transfer the
subject property by way of mortgage. Jose Sr. also executed an Amendment of Real
Estate Mortgage in favor of the PNB. The SPAs and the Amendment of Real Estate
Mortgage are both inscribed on TCT No. T-44422. All of these transactions, however,
were without the knowledge and consent of Jose Sr.s children.On maturity of the
loan on April 20,1994, the spouses Garcia failed to pay their loan to the petitioner
bank despite repeated demands.
The Jose Garcias children et al. filed before the RTC a Complaint for Nullity of
the Amendment of Real Estate Mortgage, Damages with Preliminary Injunction
against the spouses Garcia and the PNB. They claimed that the Amendment of Real
Estate Mortgage was null and void as to respondents Nora, Jose Jr., Bobby and
Jimmy as they were not parties to the contract. The Jose Garcias children et al.
alleged that the subject property was a conjugal property of Jose Sr. and his
deceased spouse, Ligaya, as they acquired the subject property during their
marriage; that upon Ligayas death, Jose Sr., together with his children Nora, Jose Jr.,
Bobby and Jimmy, by law, became owners pro indiviso of the subject property; that
the petitioner bank was at fault for not including Jose Sr. as payee to the check
representing the loan despite its knowledge that Jose Sr. was a signatory to the real
estate mortgage; that the real estate mortgage executed by Jose Sr. could not bind
his children as they did not give their consent or approval to the encumbrance. The
Spouses Garcia alleged that Jose Sr. was indebted to them in the amount of
P133,800.00. To settle this indebtedness, Jose Sr. volunteered to give the subject
property as additional security for their loan to PNB. PNB claimed that the mortgage
was made in good faith and for value. It alleged that the real estate mortgage over
the properties was duly registered and inscribed on their titles and was thus binding
on the whole world. Nora, Jose Jr., Bobby and Jimmy executed an SPA authorizing
Jose Sr. to act as their attorney-in-fact during the pretrial of the case.
The RTC dismissed the complaint for lack of cause of action. The respondents
disagreed with the RTC ruling and elevated the case to the CA via an ordinary
appeal.CA ruled that the encumbrance Jose Sr. made over the entire conjugal
property, without his childrens conformity, was null and void because a mere part
owner could not alienate the shares of the other co-owners. It ruled that Jose Sr.
could not escape liability from the mortgage since he voluntarily bound himself as
the Spouses Garcias accommodation mortgagor.
Issue:
1. Whether or not the CAs finding that the subject property was Conjugal in
nature.
2. Whether or not the mortgage in its entirety should be declared valid.
Ruling:
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1. The subject property is Conjugal.
All property acquired during marriage is presumed conjugal. Since Jose Sr. and
Ligaya were married prior to the effectivity of the Family Code, their property
relations were governed by the conjugal partnership of gains as provided under
Article 119 of the Civil Code. In his testimony, Jose Sr. admitted that at the time he
acquired the land through sale, he was already married. Registration of the subject
property in the name of one spouse does not destroy the presumption that the
property is conjugal. Registration of a property alone in the name of one spouse
does not destroy its conjugal nature. What is material is the time when the property
was acquired. The registration of the property is not conclusive evidence of the
exclusive ownership of the husband or the wife. Although the property appears to
be registered in the name of the husband, it has the inherent character of conjugal
property if it was acquired for valuable consideration during marriage. In order to
rebut the presumptive conjugal nature of the property, the petitioner must present
strong, clear and convincing evidence of exclusive ownership of one of the spouses.
The burden of proving that the property belongs exclusively to the wife or to the
husband rests upon the party asserting it.
2. No, mortgage is limited though only to the portion which may be allotted to
Jose Sr.
The conjugal partnership was converted into an implied ordinary coownership upon the death of Ligaya. Consequently, the conjugal partnership was
converted into an implied ordinary co-ownership between the surviving spouse, on
the one hand, and the heirs of the deceased, on the other. Should a co-owner
alienate or mortgage the co-owned property itself, the alienation or mortgage shall
remain valid but only to the extent of the portion which may be allotted to him in
the division upon the termination of the co-ownership.
In the present case, Jose Sr. constituted the mortgage over the entire subject
property after the death of Ligaya, but before the liquidation of the conjugal
partnership. While under Article 493 of the Civil Code, even if he had the right to
freely mortgage or even sell his undivided interest in the disputed property, he
could not dispose of or mortgage the entire property without his childrens consent.
As correctly emphasized by the trial court, Jose Sr.s right in the subject property is
limited only to his share in the conjugal partnership as well as his share as an heir
on the other half of the estate which is his deceased spouses share. Accordingly,
the mortgage contract is void insofar as it extends to the undivided shares of his
children because they did not give their consent to the transaction.
RURAL BANK OF CABADBARAN, INC. vs. JORGITA A. MELECIO-YAP, LILIA
MELECIO PACIFICO (deceased, substituted by her only child ERILL*ISAAC
M. PACIFICO, JR.), REYNALDO A. MELECIO DELOSO, and SARAH MELECIO
PALMA-GIL
G.R. No. 178451, July 30, 2014, J. Perlas-Bernabe
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When a bank relied on a forged SPA, it has the burden to prove its
authenticity and due execution as when there is a defect in the notarization of a
document, the clear and convincing evidentiary standard normally attached to a
duly-notarized document is dispensed with, and the measure to test the validity of
such document is preponderance of evidence.
However, where a mortgage is not valid due to a forged SPA, the principal
obligation which it guarantees is not thereby rendered null and void. What is lost is
merely the right to foreclose the mortgage as a special remedy for satisfying or
settling the indebtedness which is the principal obligation. In case of nullity, the
mortgage deed remains as evidence or proof of a personal obligation of the debtor
and the amount due to the creditor may be enforced in an ordinary action.
The partial invalidity of the subject real estate mortgage brought about by
the forged status of the subject SPA would not, therefore, result into the partial
invalidation of the loan obligation principally entered into by the parties; thus,
absent any cogent reason to hold otherwise, the need for the recomputation of said
loan obligation should be dispensed with.
Facts:
Erna Melecio-Mantala (Erna) and respondents Jorgita A. Melecio-Yap (Jorgita),
Lilia Melecio Pacifico (Lilia), Reynaldo A. Melecio, Rosie Melecio-Deloso (Rosie), and
Sarah Melecio Palma-Gil (Sarah) are the children of the late spouses Melecio
(Melecio Heirs). They inherited a 3,044 square meter-residential lot located in
Tolosa, Cabadbaran, Agusan del Norte, together with the ancestral house and two
(2) other structures erected thereon (subject properties). The administration and
management of the said properties were left to the care of Erna who was then
residing in their ancestral home.
The Melecio Heirs purportedly executed a notarized Special Power of Attorney
(SPA)7authorizing Erna to apply for a loan with petitioner Rural Bank of Cabadbaran,
Inc. (RBCI) and mortgage the subject properties. Armed with the said SPA, Erna
applied for and was granted a commercial loan by RBCI. The loan was secured by a
Real Estate Mortgage over the subject properties. Erna, however, defaulted in the
payment of her loan obligation when it fell due, causing RBCI to extra-judicially
foreclose the mortgaged properties in accordance with Act No. 3135, as amended.
In the process, RBCI emerged as the highest bidder in the public auction.
In view of respondents refusal to vacate the premises, RBCI applied for and
was issued a writ of possession. The writ of Possession was, thereafter, served and
returned duly satisfied and complied with by the Sheriff who turned over the subject
properties to RBCI.
Consequently, respondents filed a complaint for declaration of nullity of
documents, recovery of possession and ownership, and damages with prayer for the
issuance of a writ of preliminary injunction against Spouses Erna and Bonifacio
Mantala (Sps. Mantala), RBCI, the Office of the Provincial Sheriff, and Spouses
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Jimmyrando and Teresita Morales (Sps. Morales). They alleged that they did not
participate in the execution of the said SPA and prayed that the same, as well as the
mortgage contract, the writ of possession, the sheriffs turn-over receipt, and all
derivative titles, documents, issuances, and registrations arising therefrom be
declared null and void and that the subject properties be reconveyed back to them.
Having relied on the SPA, RBCI invoked the defense of a mortgagee in good faith
whose subsequent ownership and possession of the subject properties must be
respected.
The RTC of Butuan City rendered a decision in favor of RBCI, declaring the
real estate mortgage and the consequential foreclosure proceedings to be valid and
binding against respondents, notwithstanding the allegation of forgery in the
questioned documents. However, CA reversed the RTC Decision, finding that Erna
had no authority to mortgage the subject properties to RBCI since the SPA was
actually a forgery, and, hence, null and void.
Issues:
1. Whether or not the presumption of regularity accorded to the notarized SPA
was rebutted by clear and convincing evidence.
2. Whether or not the principal obligation subsists notwithstanding the illegality
of the mortgage.
3. Whether or not the respondents are guilty of laches and, thus, estopped from
questioning the validity of the real estate mortgage and subsequent
foreclosure proceedings.
4. Whether or not RBCI can be considered as a mortgagee in good faith.
Ruling:
1. No, it was not.
Generally, a notarized document carries the evidentiary weight conferred
upon it with respect to its due execution, and documents acknowledged before a
notary public have in their favor the presumption of regularity which may only be
rebutted by clear and convincing evidence. However, the presumptions that attach
to notarized documents can be affirmed only so long as it is beyond dispute that the
notarization was regular. A defective notarization will strip the document of its
public character and reduce it to a private document. Hence, when there is a defect
in the notarization of a document, the clear and convincing evidentiary standard
normally attached to a duly-notarized document is dispensed with, and the measure
to test the validity of such document is preponderance of evidence.
In the present case, RBCI failed to show that the subject SPA which it relied
upon as proof of Ernas ostensible authority to mortgage the entirety of the subject
properties was regularly notarized. Aside from the respondents who denied having
participated in the execution and notarization of the subject SPA, the witnesses to
the instrument, i.e., Guendelyn Lopez Salas- Montaus and Carmelita Cayeta Bunga,
categorically denied having appeared before Notary Public Alan M. Famador (Atty.
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Famador) on August 24, 1990 to witness the respondents sign the SPA in the notary
publics presence. Despite this irregularity, RBCI did not present Atty. Famador to
refute the same and establish the authenticity of the contested SPA. It may not be
amiss to point out that the principal function of a notary public is to authenticate
documents. When a notary public certifies to the due execution and delivery of a
document under his hand and seal, he gives the document the force of evidence.
Thus, having failed to sufficiently establish the regularity in the execution of
the SPA, the presumption of regularity accorded by law to notarized documents can
no longer apply and the questioned SPA is to be examined under the parameters of
Section 20, Rule 132 of the Rules of Court which provides that "[b]efore any private
document offered as authentic is received in evidence, its due execution and
authenticity must be proved either (a) [b]y anyone who saw the document executed
or written, or (b) [b]y evidence of the genuineness of the signature or handwriting of
the maker."
Correspondingly, the burden falls upon RBCI to prove the authenticity and
due execution of the subject SPA. In the case at bar, RBCI merely relied on the
presumption of authenticity and due execution accorded to a notarized document,
without presenting any other evidence to bolster their case. However, these
presumptions had been overcome and effectively negated by respondents claims of
forgery which had been duly substantiated by them through their testimonial and
documentary evidence. Hence, absent any cogent reason to the contrary, the Court
hereby sustains the CAs conclusion that respondents were able to prove, by
preponderance of evidence, that the subject SPA was a forgery.
To be clear, the above-stated conclusion is only made with respect to the
subject SPA and not the Extra-Judicial Adjudication Documents as the latter should
be excluded from any forgery analysis since they were not among those documents
sought to be nullified by respondents in its complaint. Yet, the forged status of the
subject SPA alone is already enough for the Court to declare the real estate
mortgage contract null and void but only with respect to the shares of the other coowners (i.e., respondents) whose consent thereto was not actually procured by
Erna. While Erna, as herself a co-owner, by virtue of Article 493 of the Civil
Code, had the right to mortgage or even sell her undivided interest in the said
properties, she, could not, however, dispose of or mortgage the subject properties
in their entirety without the consent of the other co-owners. Accordingly, the
validity of the subject real estate mortgage and the subsequent foreclosure
proceedings therefore conducted in favor of RBCI should be limited only to the
portion which may be allotted to it (as the successor-in-interest of Erna) in the event
of partition.
2. Yes, the principal obligation subsists.
Indeed, where a mortgage is not valid, the principal obligation which it
guarantees is not thereby rendered null and void. That obligation matures and
becomes demandable in accordance with the stipulation pertaining to it. Under the
foregoing circumstances, what is lost is merely the right to foreclose the mortgage
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as a special remedy for satisfying or settling the indebtedness which is the principal
obligation. In case of nullity, the mortgage deed remains as evidence or proof of a
personal obligation of the debtor and the amount due to the creditor may be
enforced in an ordinary action.
Based on the foregoing, the partial invalidity of the subject real estate
mortgage brought about by the forged status of the subject SPA would not,
therefore, result into the partial invalidation of the loan obligation principally
entered into by RBCI and Sps. Mantala; thus, absent any cogent reason to hold
otherwise, the need for the recomputation of said loan obligation should be
dispensed with.
3. No, RBCI is not a buyer in good faith.
Two reasons impel this conclusion: first, the doctrine of mortgagee in good
faith applies only to lands registered under the Torrens system and not to
unregistered lands, as the properties in suit; 71 and second, the principle is
inapplicable to banking institutions which are behooved to exercise greater care and
prudence before entering into a mortgage contract. Hence, the ascertainment of the
status or condition of properties offered as security for loans must be a standard
and an indispensable part of its operations.
In this case, RBCI failed to observe the required level of caution in
ascertaining the genuineness of the SPA considering that Erna owns only an aliquot
part of the properties offered as security for the loan. It should not have simply
relied on the face of the documents submitted since its undertaking to lend a
considerable amount of money as a banking institution requires a greater degree of
diligence. Hence, its rights as mortgagee and, now, as co-owner, should only be
limited to Ernas share to the subject properties and not, absent the other coowners consent, to its entirety.
4. No, respondents are not barred by laches.
Laches is principally a doctrine of equity. It is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned or declined to assert it. In this case, the complaint
for nullification of the SPA was filed before the RTC on April 17,1996, or barely three
years from respondents' discovery of the averred forgery in 1993, which is within
the four-year prescriptive period provided under Article 1146 74 of the Civil Code to
institute an action upon the injury to their rights over the subject properties. A delay
within the prescriptive period is sanctioned by law and is not considered to be a
delay that would bar relief. Laches applies only in the absence of a statutory
prescriptive period. Furthermore, the doctrine of laches cannot be used to defeat
justice or perpetrate fraud and injustice. It is the more prudent rule that courts,
under the principle of equity, will not be guided or bound strictly by the statute of
limitations or the doctrine of laches when by doing so, manifest wrong or injustice
would result, as in this case.
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Neither is there estoppel. Under Article 1431 of the Civil Code, an essential
element of estoppel is that the person invoking it has been influenced and has
relied on the representations or conduct of the person sought to be estopped. Said
element is, however, wanting in this case.1wphi1
LEONARDO C. CASTILLO, represented by LENNARD V. CASTILLO vs.
SECURITY BANK CORPORATION, JRC POULTRY FARMS or SPOUSES LEON C.
CASTILLO, JR., and TERESITA FLORESCASTILLO
G.R. No. 196118, July 30, 2014, J. Peralta
In a real estate mortgage, allegations of forgery, like all other allegations,
must be proved by clear, positive, and convincing evidence by the party alleging it.
But even if there is variation on the date of issuance of the Community Tax
Certificate (CTC) as indicated on the notarization of the alleged SPA and on the day
it was actually secured, such defect in the SPA does not automatically render it
invalid. Defective notarization will simply strip the document of its public character
and reduce it to a private instrument, but nonetheless, binding, provided its validity
is established by preponderance of evidence.
The law 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.
Facts:
Petitioner Leonardo C. Castillo and respondent Leon C. Castillo, Jr. are siblings.
Leon and Teresita Flores-Castillo (the Spouses Castillo) were doing business under
the name of JRC Poultry Farms. Sometime in 1994, the Spouses Castillo obtained a
loan from respondent SBC in the amount of P45,000,000.00. To secure said loan,
they executed a real estate mortgage on over eleven (11) parcels of land belonging
to different members of the Castillo family and which are all located in San Pablo
City. They also procured a second loan amounting to P2,500,000.00, which was
covered by a mortgage on a land in Pasay City.
Subsequently, the Spouses Castillo failed to settle the loan, prompting SBC to
proceed with the foreclosure of the properties. SBC was then adjudged as the
winning bidder in the foreclosure sale. Thereafter, they were able to redeem the
foreclosed properties, with the exception of the lots covered by Torrens Certificate of
Title (TCT) Nos. 28302 and 28297.
Leonardo filed a complaint for the partial annulment of the real estate
mortgage. He alleged that he owns the property covered by TCT No. 28297 and that
the Spouses Castillo used it as one of the collaterals for a loan without his consent.
He contested his supposed Special Power of Attorney (SPA) in Leons favor, claiming
that it is falsified. According to him, the date of issuance of his Community Tax
Certificate (CTC) as indicated on the notarization of said SPA is January 11, 1993,
when he only secured the same on May 17, 1993. He also assailed the foreclosure
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of the lots under TCT Nos.20030 and 10073 which were still registered in the name
of their deceased father.
The RTC of San Pablo City ruled in Leonardos favor, declaring as null and void
the Real Estate Mortgage dated August 5, 1994, the Memorandum of Agreement
dated October 28, 1997 and the Certificate of Sale dated August 27, 1999 insofar as
plaintiffs property with Transfer Certificate of Title No. T-28297 is concerned. The CA
reversed and set aside the RTC Decision, essentially ruling that the real estate
mortgage is valid.
Issue:
Whether or not the real estate mortgage constituted over the property under
TCT No T-28297 is valid and binding
Ruling:
Yes, the real estate mortgage is valid and binding.
The following are the legal requisites for a mortgage to be valid:
(1) It must be constituted to secure the fulfilment of a principal obligation;
(2) The mortgagor must be the absolute owner of the thing mortgaged;
(3) The persons constituting the mortgage must have the free disposal of their
property, and in the absence thereof, they should be legally authorized for the
purpose.
Leonardo asserts that his signature in the SPA authorizing his brother, Leon,
to mortgage his property covered by TCT No. T-28297 was falsified. He claims that
he was in America at the time of its execution. As proof of the forgery, he focuses on
his alleged CTC used for the notarization of the SPA on May 5, 1993 and points out
that it appears to have been issued on January 11, 1993 when, in fact, he only
obtained it on May 17, 1993.
But it is a settled rule that allegations of forgery, like all other allegations,
must be proved by clear, positive, and convincing evidence by the party alleging it.
It should not be presumed, but must be established by comparing the alleged
forged signature with the genuine signatures.
Here, Leonardo simply relied on his self-serving declarations and refused to
present further corroborative evidence, saying that the falsified document itself is
the best evidence. He did not even bother comparing the alleged forged signature
on the SPA with samples of his real and actual signature. What he consistently
utilized as lone support for his allegation was the supposed discrepancy on the date
of issuance of his CTC as reflected on the subject SPAs notarial acknowledgment.
On the contrary, in view of the great ease with which CTCs are obtained these
days, there is reasonable ground to believe that, as the CA correctly observed, the
CTC could have been issued with the space for the date left blank and Leonardo
merely filled it up to accommodate his assertions. Also, upon careful examination,
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the handwriting appearing on the space for the date of issuance is different from
that on the computation of fees, which in turn was consistent with the rest of the
writings on the document. He did not likewise attempt to show any evidence that
would back up his claim that at the time of the execution of the SPA on May 5, 1993,
he was actually in America and therefore could not have possibly appeared and
signed the document before the notary.
And even if the Court were to assume, simply for the sake of argument, that
Leonardo indeed secured his CTC only on May 17, 1993, this does not automatically
render the SPA invalid. The appellate court aptly held that defective notarization will
simply strip the document of its public character and reduce it to a private
instrument, but nonetheless, binding, provided its validity is established by
preponderance of evidence.
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.
Here, the preponderance of evidence indubitably tilts in favor of the
respondents, still making the SPA binding between the parties even with the
aforementioned assumed irregularity. There are several telling circumstances that
would clearly demonstrate that Leonardo was aware of the mortgage and he indeed
executed the SPA to entrust Leon with the mortgage of his property. Leon had in his
possession all the titles covering the eleven (11) properties mortgaged, including
that of Leonardo. Leonardo and the rest of their relatives could not have just blindly
ceded their respective TCTs to Leon. It is likewise ridiculous how Leonardo seemed
to have been totally oblivious to the status of his property for eight (8) long years,
and would only find out about the mortgage and foreclosure from a nephew who
himself had consented to the mortgage of his own lot. Considering the lapse of time
from the alleged forgery on May 5, 1993 and the mortgage on August 5, 1994, to
the foreclosure on July 29, 1999, and to the supposed discovery in 2001, it appears
that the suit is a mere afterthought or a last-ditch effort on Leonardos part to
extend his hold over his property and to prevent SBC from consolidating ownership
over the same. More importantly, Leonardo himself admitted on cross-examination
that he granted Leon authority to mortgage, only that, according to him, he thought
it was going to be with China Bank, and not SBC. But as the CA noted, there is no
mention of a certain bank in the subject SPA with which Leon must specifically deal.
Leon, therefore, was simply acting within the bounds of the SPAs authority when he
mortgaged the lot to SBC.
True, banks and other financing institutions, in entering into mortgage
contracts, are expected to exercise due diligence. The ascertainment of the status
or condition of a property offered to it as security for a loan must be a standard and
indispensable part of its operations. In this case, however, no evidence was
presented to show that SBC was remiss in the exercise of the standard care and
prudence required of it or that it was negligent in accepting the mortgage. SBC
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could not likewise be faulted for relying on the presumption of regularity of the
notarized SPA when it entered into the subject mortgage agreement.
ROLANDO ROBLES, REPRESENTED BY ATTY. CLARA C. ESPIRITU vs.
FERNANDO FIDEL YAPCINCO, PATROCINIO B. YAPCINCO, MARIA CORAZON
B. YAPCINCO, and MARIA ASUNCION B. YAPCINCO-FRONDA
G.R. No. 169569, October 22, 2014, J. Bersamin
The effect of the failure of Apolinario Cruz, the predecessor-in-interest of
Rolando Robles, petitioner to this case, to obtain the judicial confirmation was only
to prevent the title to the property from being transferred to him. For sure, such
failure did not give rise to any right in favor of the mortgagor or the respondents as
his successors-in-interest to take back the property already validly sold through
public auction. Nor did such failure invalidate the foreclosure proceedings. To
maintain otherwise would render nugatory the judicial foreclosure and foreclosure
sale, thus unduly disturbing judicial stability.
Facts:
The dispute involves the ownership of a judicially-foreclosed parcel of land
sold at a public auction, but which sale was not judicially confirmed. On one side is
the petitioner Rolando Robles, the successor in interest of the purchaser in the
public auction, and, on the other, the heirs of the mortgagor, who never manifested
interest in redeeming the property from the time of the foreclosure.
RTC ruled in favor of the petitioner Rolando Robles. It further pronounced that
the respondents could not claim to have no knowledge that the property in litis was
no longer part of the estate of the late Fernando F. Yapcinco; that one of them had
substituted the late Fernando F. Yapcinco in the judicial foreclosure proceedings, and
even appealed the adverse decision to the CA; that they could not argue that they
were not bound by the foreclosure of the mortgage due to the nonregistration of the
certificate of sale because as between the parties registration was not a requisite
for the validity of the foreclosure; and that they did not redeem the property until
the present.
On February 24, 2005, the CA promulgated its assailed decision, reversing
the judgment of the RTC, and holding that due to the nonregistration of the
certificate of sale, the period of redemption did not commence to run. Hence, this
petition.
Issue:
Whether the lack of confirmation of title after foreclosure of the mortgage
affects the title of the purchaser in the sale
Ruling:
No.
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It was not denied that Fernando F. Yapcinco, as the mortgagor, did not pay his
obligation, and that his default led to the filing of the action for judicial foreclosure
against him, in which he actively participated in the proceedings, and upon his
death was substituted by the administratrix of his estate. In the end, the decision in
the action for judicial foreclosure called for the holding of the public sale of the
mortgaged property. Due to the subsequent failure of the estate of Fernando F.
Yapcinco to exercise the equity of redemption, the property was sold at the public
sale, and Apolinario Cruz was declared the highest bidder. Under the circumstances,
the respondents as the successors-in-interest of Fernando F. Yapcinco were fully
bound by that decision and by the result of the ensuing foreclosure sale. Although
the respondents admitted the existence of the mortgage, they somehow denied
knowledge of its foreclosure. Yet, in asserting their superior right to the property,
they relied on and cited the entry dated February 11, 1992 concerning the release
of mortgage inscribed on TCT No. 20458. This duplicity the Court cannot
countenance. Being the heirs and successors-in-interest of the late Fernando F.
Yapcinco, they could not repudiate the foreclosure sale and its consequences, and
escape such consequences that bound and concluded their predecessor-in-interest
whose shoes they only stepped into.40 Given their position on the lack of judicial
confirmation of the sale in favor of Apolinario Cruz, they should have extinguished
the mortgage by exercising their equity of redemption through paying the secured
debt. They did not do so, and, instead, they sought the annulment of TCT No.
243719 and caused the issuance of another title in their name.
Even assuming that there was no foreclosure of the mortgage, such that the
respondents did not need to exercise the equity of redemption, the legal obligation
to pay off the mortgage indebtedness in favor of Apolinario Cruz nonetheless
devolved on them and the estate of Fernando F. Yapcinco. They could not sincerely
rely on the entry about the release or cancellation of the mortgage in TCT No.
20458, because such entry appeared to be unfounded in the face of the lack of any
showing by them that either they or the estate of Fernando F. Yapcinco had settled
the obligation
The effect of the failure of Apolinario Cruz to obtain the judicial confirmation
was only to prevent the title to the property from being transferred to him. For sure,
such failure did not give rise to any right in favor of the mortgagor or the
respondents as his successors-in-interest to take back the property already validly
sold through public auction. Nor did such failure invalidate the foreclosure
proceedings. To maintain otherwise would render nugatory the judicial foreclosure
and foreclosure sale, thus unduly disturbing judicial stability. The non-transfer of the
title notwithstanding, Apolinario Cruz as the purchaser should not be deprived of the
property purchased at the foreclosure sale. With the respondents having been fully
aware of the mortgage, and being legally bound by the judicial foreclosure and
consequent public sale, and in view of the unquestioned possession by Apolinario
Cruz and his successors-in-interest (including the petitioner) from the time of the
foreclosure sale until the present, the respondents could not assert any better right
to the property. It would be the height of inequity to still permit them to regain the
property on the basis alone of the lack of judicial confirmation of the sale. After all,
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under the applicable rule earlier cited, the judicial confirmation operated only "to
divest the rights of all the parties to the action and to vest their rights in the
purchaser, subject to such rights of redemption as may be allowed by law."
SPOUSES JOSE O. GATUSLAO AND ERMILA LEONILA LIMSIACOGATUSLAO
vs. LEO RAY V. YANSON
Yanson, as a transferee or successor-in-interest of PNB by virtue of the
contract of sale between them, is considered to have stepped into the shoes of
PNB. As such, he is necessarily entitled to avail of the provisions of Section 7 of Act
No. 3135. Verily, one of the rights that PNB acquired as purchaser of the subject
properties at the public auction sale, which it could validly convey by way of its
subsequent sale of the same to respondent, is the availment of a writ of
possession. This can be deduced from the stipulation that [t]he [v]endee further
agrees to undertake, at xxx his expense, the ejectment of any occupant of the
[p]roperty. Accordingly, Yanson filed the contentious ex parte motion for a writ of
possession to eject Spouses Gatuslao therefrom and take possession of the subject
properties.
Further, respondent may rightfully take possession of the subject properties
through a writ of possession, even if he was not the actual buyer thereof at the
public auction sale, in consonance with the Courts ruling in Ermitao v. Paglas. The
Court ruled that after the expiration of the redemption period without redemption
having been made by petitioner, respondent became the owner thereof and
consolidation of title becomes a right. Being already then the owner, respondent
became entitled to possession. Petitioner already lost his possessory right over the
property after the expiration of the said period.
Facts:
Ermila Leonila Limsiaco-Gatuslao is the daughter of the late Felicisimo
Limsiaco (Limsiaco) who died intestate on February 7, 1989. Limsiaco was the
registered owner of two parcels of land with improvements in the City of Bacolod.
Limsiaco mortgaged the said lots along with the house standing thereon to
Philippine National Bank (PNB). Upon Limsiacos failure to pay, PNB extrajudicially
foreclosed on the mortgage and caused the properties sale at a public auction on
June 24, 1991 where it emerged as the highest bidder. When the one-year
redemption period expired without Limsiacos estate redeeming the properties, PNB
caused the consolidation of titles in its name. Subsequently, PNB conveyed the
subject properties in favor of Leo Ray V. Yanson (Yanson). Then, as a registered
owner in fee simple of the contested properties, Yanson filed with the RTC an ExParte Motion for Writ of Possession pursuant to Section 7 of Act No. 3135.
On the other hand, spouses Jose O. Gatuslao and Ermila Leonila LimsiacoGatuslao (Spouses Gatuslao) argued that Yanson is not entitled to the issuance of
an ex-parte writ of possession since he was not the buyer of the subject properties
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at the public auction sale and only purchased the same through a subsequent sale
made by PNB. Not being the purchaser at the public auction sale, Yanson cannot
file and be granted an ex parte motion for a writ of possession. Spouses Gatuslao
also asserted that the intestate estate of Limsiaco has already instituted an action
for annulment of foreclosure of mortgage and auction sale affecting the contested
properties. They argued that the existence of the said civil suit bars the issuance of
the writ of possession and that whatever rights and interests respondent may have
acquired from PNB by virtue of the sale are still subject to the outcome of the said
case.
The RTC granted the issuance of the writ of possession, hence, Yanson moved
to execute the possessory writ while Spouses Gatuslao filed with this Court the
present
Petition
for
Review
on Certiorari.
Issues:
1. Whether a pending action for annulment of foreclosure of mortgage and
the corresponding sale at public auction of the subject properties operates
as a bar to the issuance of a writ of possession;
2. Whether Spouses Gatuslao may be evicted by a mere ex parte writ of
possession as they were not parties to the foreclosure, thus, denied of due
process.
3. Whether Yanson may avail a writ of possession as he is not the purchaser
at the public auction sale, pursuant to Sec. 7 of Act No. 3135.
Ruling: The Petition is denied.
1. It is settled that the issuance of a Writ of Possession may not be stayed by a
pending action for annulment of mortgage or the foreclosure itself.
In BPI Family Savings Bank, Inc. v. Golden Power Diesel Sales Center, Inc., the
Court reiterates the long-standing rule that:
[I]t is settled that a pending action for annulment of mortgage or
foreclosure sale does not stay the issuance of the writ of possession. The trial
court, where the application for a writ of possession is filed, does not need to
look into the validity of the mortgage or the manner of its foreclosure. The
purchaser is entitled to a writ of possession without prejudice to the outcome
of the pending annulment case.
This is in line with the ministerial character of the possessory writ. Thus,
in Bank of the Philippine Islands v. Tarampi, it was held:
To stress the ministerial character of the writ of possession, the
Court has disallowed injunction to prohibit its issuance, just as it has held
that its issuance may not be stayed by a pending action for
annulment
of
mortgage
or
the
foreclosure
itself.
Clearly then, until the foreclosure sale of the property in question is
annulled by a court of competent jurisdiction, the issuance of a writ
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of possession remains the ministerial duty of the trial court. The
same is true with its implementation; otherwise, the writ will be a
useless paper judgment a result inimical to the mandate of Act No.
3135 to vest possession in the purchaser immediately.
2. Spouses Gatuslao are not strangers or third parties to the foreclosure sale;
they were not deprived of due process.
Upon the expiration of the period to redeem and no redemption was made,
the purchaser, as confirmed owner, has the absolute right to possess the land and
the issuance of the writ of possession becomes a ministerial duty of the court upon
proper application and proof of title.
Where the extrajudicially foreclosed real property is in the possession of a
third party who is holding the same adversely to the judgment debtor or mortgagor,
the RTCs duty to issue a writ of possession in favor of the purchaser of said real
property ceases to be ministerial and, as such, may no longer proceed ex parte. In
such a case, the trial court must order a hearing to determine the nature of the
adverse possession. For this exception to apply, however, it is not enough that the
property is in the possession of a third party, the property must also be held by the
third party adversely to the judgment debtor or mortgagor, such as a co-owner,
agricultural tenant or usufructuary.
In this case, Spouses Gatuslao do not fall under any of the above examples of
such a third party holding the subject properties adversely to the mortgagor; nor is
their claim to their right of possession analogous to the foregoing situations.
Admittedly, they are the mortgagor Limsiacos heirs. It was precisely because of
Limsiacos death that petitioners obtained the right to possess the subject
properties and, as such, are considered transferees or successors-in-interest of the
right of possession of the latter. As Limsiacos successors-in-interest, petitioners
merely stepped into his shoes and are, thus, compelled not only to acknowledge
but, more importantly, to respect the mortgage he had earlier executed in favor of
respondent.38 They cannot effectively assert that their right of possession is
adverse to that of Limsiaco as they do not have an independent right of possession
other than what they acquired from him. 39 Not being third parties who have a right
contrary to that of the mortgagor, the trial court was thus justified in issuing the writ
and in ordering its implementation.
3. Respondent is entitled to the issuance of writ of possession.
Yanson, as a transferee or successor-in-interest of PNB by virtue of the
contract of sale between them, is considered to have stepped into the shoes of PNB.
As such, he is necessarily entitled to avail of the provisions of Section 7 of Act No.
3135, as amended, as if he is PNB. This is apparent in the Deed of Absolute Sale
between the two, viz:
1.
The Vendor hereby sells, transfer[s] and convey[s] unto[, and]
in favor of the Vendee, and the latters assigns and successors-in-interest,
all of the formers rights and title to, interests and participation in the
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Property on an AS IS, WHERE IS basis. It is thus understood that the Vendee has
inspected the Property and has ascertained its condition.
xxxx
3.
The Vendor is selling only whatever rights and title to,
interests and participation it has acquired over the Property, and the
Vendee hereby acknowledges full knowledge of the nature and extent of the
Vendors rights and title to, [and] interests and participation in the Property.
4.
x x x The Vendee further agrees to undertake, at its/his/her
expense, the ejectment of any occupant of the Property.
Verily, one of the rights that PNB acquired as purchaser of the subject
properties at the public auction sale, which it could validly convey by way of its
subsequent sale of the same to respondent, is the availment of a writ of
possession. This can be deduced from the above-quoted stipulation that [t]he
[v]endee further agrees to undertake, at xxx his expense, the ejectment of any
occupant of the [p]roperty. Accordingly, Yanson filed the contentious ex parte
motion for a writ of possession to eject Spouses Gatuslao therefrom and take
possession of the subject properties.
Further, respondent may rightfully take possession of the subject properties
through a writ of possession, even if he was not the actual buyer thereof at the
public auction sale, in consonance with our ruling in Ermitao v. Paglas. In the said
case, therein respondent was petitioners lessee in a residential property owned by
the latter. During the lifetime of the lease, respondent learned that petitioner
mortgaged the subject property in favor of Charlie Yap (Yap) who eventually
foreclosed the same. Yap was the purchaser thereof in an extrajudicial foreclosure
sale. Respondent ultimately bought the property from Yap. However, it was
stipulated in the deed of sale that the property was still subject to petitioners right
of redemption. Subsequently and despite written demands to pay the amounts
corresponding to her monthly rental of the subject property, respondent did not
anymore pay rents. Meanwhile, petitioners period to redeem the foreclosed
property expired on February 23, 2001. Several months after, petitioner filed a case
for unlawful detainer against respondent. When the case reached this Court, it
ruled that therein respondents basis for denying petitioners claim for rent was
insufficient as the latter, during the period for which payment of rent was being
demanded, was still the owner of the foreclosed property. This is because at that
time, the period of redemption has not yet expired. Thus, petitioner was still
entitled to the physical possession thereof subject, however, to the purchasers
right to petition the court to give him possession and to file a bond pursuant to the
provisions of Section 7 of Act No. 3135, as amended. However, after the expiration
of the redemption period without redemption having been made by petitioner,
respondent became the owner thereof and consolidation of title becomes a right.
Being already then the owner, respondent became entitled to possession.
Consequently, petitioners ejectment suit was held to have been rendered moot by
the expiration of the period of redemption without petitioner redeeming the
properties. This is considering that petitioner already lost his possessory right over
the property after the expiration of the said period.
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Although the main issue in Ermitao was whether respondent was correct in
refusing to pay rent to petitioner on the basis of her having bought the latters
foreclosed property from whom it was mortgaged, the case is enlightening as it
acknowledged respondents right, as a subsequent buyer of the properties from the
actual purchaser of the same in the public auction sale, to possess the property
after the expiration of the period to redeem sans any redemption. Verily, Ermitao
demonstrates the applicability of the provisions of Section 7 of Act No. 3135 to such
a subsequent purchaser like respondent in the present case.
ATTY. LEO N. CAUBANG vs. JESUS G. CRISOLOGO AND NANETTE B.
CRISOLOGO
In an extrajudicial foreclosure of a real estate mortgage, failure to comply
with the publication requirement by the mortgagee brought by the failure of its
lawyer to make an effort to inquire as to whether the Oriental Daily Examiner was
indeed a newspaper of general circulation, as required by law, and as a result, the
mortgagee became the sole bidder, will invalidate the notice and render the sale
voidable. The principal object of a notice of sale in a foreclosure of mortgage is to
notify the mortgagor and to inform the public generally of the nature and condition
of the property to be sold, and of the time, place, and terms of the sale. These are
given to secure bidders and prevent a sacrifice of the property.
Facts:
Respondent spouses Jesus and Nannette Crisologo obtained an Express Loan
in the amount of P200,000.00 from PDCP Development Bank Inc. Subsequently, the
Spouses Crisologo acquired a Term Loan from the same bank of P1,500,000.00
covered by a Loan Agreement. The spouses mortgaged their property for security
on both loans. Upon release of the Term Loan, they were able to pay the Express
Loan, however, after few installments for the other loans the spouses defaulted in
the amortizations. The spouses failed to pay the bank despite the latters several
demands.
The spouses received a detailed breakdown of their outstanding obligation
and found the charges to be excessive prompting them to write a letter to the bank.
They proposed to pay their loan in full with a request that the interest and penalty
charges be waived but the bank sent a letter denying the spouses counter-offer
and demanding payment of the loan. For failure to settle the account, the bank
recommended the foreclosure of the mortgage thus filed a petition.
Petitioner Leo Caubang, as Notary Public, prepared the Notices of Sale,
announcing the foreclosure of the real estate mortgage and the sale of the
mortgaged property at public auction. He posted the said notices in three public
places: the Barangay Hall of Matina, City Hall of Davao, and Bangkerohan Public
Market. Publication was, likewise, made in theOriental Daily Examiner, one of the
local newspapers in Davao City. Caubang conducted the auction sale of the
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mortgaged property, with the bank as the only bidder. Thereafter, a Certificate of
Sale in favor of the bank was issued.
Later, the Spouses Crisologo were surprised to learn that their mortgaged
property had already been sold to the bank. Thus, they filed a Complaint for Nullity
of Extrajudicial Foreclosure and Auction Sale and Damages against PDCP Bank and
Caubang.
The Davao RTC rendered a Decision nullifying the extrajudicial foreclosure of
the real estate mortgage for failure to comply with the publication requirement. The
Spouses Crisologo appealed before the CA, seeking a partial modification of the RTC
Decision, insofar as their claims for moral and exemplary damages, attorneys fees,
and costs of suit were concerned which was later granted.
Issue:
Whether or not the sale of the mortgage property conducted by petitioner
Caubang is valid?
Ruling:
No, it is not valid.
Under Section 3 of Act No. 3135: Section 3. Notice of sale; posting; when
publication required. Notice shall be given by posting notices of the sale for not
less than twenty days in at least three public places of the municipality or city
where the property is situated, and if such property is worth more than four hundred
pesos, such notices shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality or city.
Caubang never made an effort to inquire as to whether the Oriental Daily
Examiner was indeed a newspaper of general circulation, as required by law. It was
shown that the Oriental Daily Examiner is not even on the list of newspapers
accredited to publish legal notices, as recorded in the Davao RTCs Office of the
Clerk of Court. It also has no paying subscribers and it would only publish whenever
there are customers. Since there was no proper publication of the notice of sale,
the Spouses Crisologo, as well as the rest of the general public, were never
informed that the mortgaged property was about to be foreclosed and auctioned.
As a result, PDCP Bank became the sole bidder. This allowed the bank to bid for a
very low price and go after the spouses for a bigger amount as deficiency.
The principal object of a notice of sale in a foreclosure of mortgage is not so
much to notify the mortgagor as to inform the public generally of the nature and
condition of the property to be sold, and of the time, place, and terms of the sale.
These are given to secure bidders and prevent a sacrifice of the property.
Therefore, statutory provisions governing publication of notice of mortgage
foreclosure sales must be strictly complied with and slight deviations therefrom will
invalidate the notice and render the sale, at the very least, voidable. Failure to
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advertise a mortgage foreclosure sale in compliance with the statutory
requirements constitutes a jurisdictional defect, and any substantial error in a notice
of sale will render the notice insufficient and will consequently vitiate the sale.
Since it was Caubang who caused the improper publication of the notices which, in
turn, compelled the Spouses Crisologo to litigate and incur expenses involving the
declaration of nullity of the auction sale for the protection of their interest on the
property, the CA aptly held that Caubang shall be the one liable for the spouses
claim for litigation expenses and attorneys fees.
EXTRA JUDICIAL FORECLOSURE
SPOUSES RODOLFO and MARCELINA GUEVARRA vs. THE COMMONER
LENDING CORPORATION, INC.
G.R. No. 204672, J. Perlas-Bernabe
In an extra-judicial foreclosure of registered land acquired under a free
patent, the mortgagor may redeem the property within two (2) years from the date
of foreclosure if the land is mortgaged to a rural bank under Republic Act No. (RA)
720, as amended, otherwise known as the Rural Banks Act, or within one (1) year
from the registration of the certificate of sale if the land is mortgaged to parties
other than rural banks pursuant to Act No. 3135. If the mortgagor fails to exercise
such right, he or his heirs may still repurchase the property within five (5) years
from the expiration of the redemption period pursuant to Section 119 of the Public
Land Act. The RTC and CA both correctly ruled that Sps. Guevarras right to
repurchase the subject property had not yet expired when Cadastral Case No. 122
was filed on September 8, 2005.
Facts:
Sps. Guevarra obtained a P320,000.00 loan from The Commoner Lending
Corporation (TCLC), which was secured by a real estate mortgage over a 5,532
square meter parcel of land, emanating from a free patent granted to Sps. Guevarra
on February 25, 1986.
Sps. Guevarra, defaulted in the payment of their loan, prompting TCLC to
extra-judicially foreclose the mortgage on the subject property in accordance with
Act No. 3135, as amended. TCLC emerged as the highest bidder at the public
auction sale for the bid amount of 150,000.00 and on August 25, 2000, the
certificate of sale was registered with the Registry of Deeds of Iloilo.
Sps. Guevarra failed to redeem the subject property within the one-year
reglementary period, which led to the cancellation of the title and the issuance of a
new Transfer Certificate of Title in the name of TCLC. Thereafter, TCLC demanded
that Sps. Guevarra vacate the property, but to no avail.
TCLC applied for a writ of possession before the RTC, docketed as Cadastral
Case No. 118. Sps. Guevarra opposed the same by challenging the validity of the
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foreclosure proceedings due to failure of TCLC to comply with the notice and
publication requirements. Sps. Guevarra also assailed the issuance by the Sheriff of
a Final Deed of Sale to be premature, as they were still entitled to redeem the
subject property within five (5) years from the expiration of the one-year period to
repurchase.
Sps. Guevarra filed before the RTC a petition for redemption, docketed as
Cadastral Case No. 122, maintaining that the redemption period did not expire on
August 25, 2001, or one (1) year from the registration of the certificate of sale, but
will still expire five (5) years therefrom, or on August 25, 2006. They averred that
they pleaded to be allowed to redeem the subject property but TCLC unjustifiably
refused the same, constraining them to file said petition, offering to redeem the
subject property at 150,000.00, plus one percent (1%) interest per month for five
(5) years from August 25, 2000, or in the amount of 240,000.00 which they
consigned to the RTC.
Cadastral Case Nos. 118 and 122 were later consolidated.
The RTC granted TCLCs petition in Cadastral Case No. 118, resulting in the
issuance of the Writ of Possession and Notice to Vacate which were duly served
upon Sps. Guevarra. The latter filed a motion for reconsideration and Motion to Hold
in Abeyance the Implementation of the Writ of Possession.
The RTC denied the motion for reconsideration in Cadastral Case No. 118, but
granted Sps. Guevarras petition in Cadastral Case No. 122. RTC recognized Sps.
Guevarras right to repurchase the subject property, pointing out that they were
able to file their petition within the five-year period provided under Section 119 of
Commonwealth Act No. 141, otherwise known as the Public Land Act (Public Land
Act). The RTC directed TCLC to reconvey the subject property to Sps. Guevarra and
execute the deed of reconveyance upon payment of the purchase price of
150,000.00, plus one percent (1%) interest per month from the date of the auction
sale on June 15, 2000 up to August 8, 2006, as well as the tax assessments and
foreclosure expenses.
Dissatisfied, TCLC filed a motion for reconsideration which was denied; thus,
it filed an appeal before the CA.
The CA affirmed the RTC, upholding Sps. Guevarras right to repurchase the
subject property pursuant to Section 119 of the Public Land Act, with modification
that the same be conditioned upon the payment of the purchase price fixed by
TCLC. It ruled that after the expiration of the redemption period, the present owner,
i.e., TCLC, has the discretion to set a higher price.
Sps. Guevarra filed a motion for reconsideration which was denied in a
Resolution, hence, this petition.
Issue:
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Whether or not the CA committed a reversible error in ruling that the
repurchase price for the subject property should be fixed by TCLC.
Ruling:
In an extra-judicial foreclosure of registered land acquired under a free
patent, the mortgagor may redeem the property within two (2) years from the date
of foreclosure if the land is mortgaged to a rural bank under Republic Act No. (RA)
720, as amended, otherwise known as the Rural Banks Act, or within one (1) year
from the registration of the certificate of sale if the land is mortgaged to parties
other than rural banks pursuant to Act No. 3135. If the mortgagor fails to exercise
such right, he or his heirs may still repurchase the property within five (5) years
from the expiration of the redemption period pursuant to Section 119 of the Public
Land Act, which states:
SEC. 119. Every conveyance of land acquired under the free patent or homestead
provisions, when proper, shall be subject to repurchase by the applicant, his widow,
or legal heirs, within a period of five years from the date of the conveyance.
In this case, the subject property was mortgaged to and foreclosed by TCLC,
which is a lending or credit institution, and not a rural bank; hence, the redemption
period is one (1) year from the registration of the certificate of sale on August 25,
2000, or until August 25, 2001. Given that Sps. Guevarra failed to redeem the
subject property within the redemption period, TCLC was entitled, as a matter of
right, to consolidate its ownership and to possess the same.
Such right should not negate Sps. Guevarras right to repurchase said
property within five (5) years from the expiration of the redemption period on
August 25, 2001, or until August 25, 2006, in view of Section 119 of the Public Land
Act.
It is apt to clarify that contrary to TCLCs claim, the tender of the repurchase
price is not necessary for the preservation of the right of repurchase, because the
filing of a judicial action for such purpose within the five-year period under Section
119 of the Public Land Act is already equivalent to a formal offer to redeem. On this
premise, consignation of the redemption price is equally unnecessary.
The RTC and CA both correctly ruled that Sps. Guevarras right to repurchase
the subject property had not yet expired when Cadastral Case No. 122 was filed on
September 8, 2005. That being said, the Court now proceeds to determine the
proper amount of the repurchase price.
Sps. Guevarra insist that the repurchase price should be the purchase price at
the auction sale plus interest of one percent (1%) per month and other assessment
fees. On the other hand, TCLC maintains that it is entitled to its total claims under
the promissory note and the mortgage contract in accordance with Section 47 of the
General Banking Law of 2000.
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TCLCs argument is partly correct.
The Court has ruled that redemptions from lending or credit institutions, like
TCLC, are governed by Section 78 of the General Banking Act (now Section 47 of the
General Banking Law of 2000), which amended Section 6 of Act No. 3135 in relation
to the proper redemption price when the mortgagee is a bank, or a banking or
credit institution.
But the Court cannot subscribe to TCLCs contention that it is entitled to its
total claims under the promissory note and the mortgage contract in view of the
settled rule that an action to foreclose must be limited to the amount mentioned in
the mortgage. Hence, amounts not stated therein must be excluded, like the
penalty charges of three percent (3%) per month included in TCLCs claim. A penalty
charge is likened to a compensation for damages in case of breach of the obligation.
Being penal in nature, it must be specific and fixed by the contracting parties.
The Court notes that the stipulated three percent (3%) monthly interest is
excessive and unconscionable. As such, the stipulated 3% monthly interest should
be equitably reduced to 1% per month or 12% per annum reckoned from the
execution of the real estate mortgage on December 12, 1996, until the filing of the
petition in Cadastral Case No. 122 on September 8, 2005.
In addition to the principal and interest, the repurchase price should also
include all the expenses of foreclosure,i.e.,Judicial Commission, Publication Fee, and
Sheriffs Fee, in accordance with Section 47 of the General Banking Law of 2000.
Considering that Sps. Guevarra failed to redeem the subject property within the
one-year reglementary period, they
are liable to reimburse TCLC for the
corresponding Documentary Stamp Tax (DST) and Capital Gains Tax (CGT) it paid
pursuant to Bureau of Internal Revenue (BIR) Revenue Regulations No. 4-99, which
requires the payment of DST on extra-judicial foreclosure sales of capital assets
initiated by banks, finance and insurance companies, as well as CGT in cases of nonredemption. CGT and DST are expenses incident to TCLCs custody of the subject
property, hence, likewise due, under the above provision of law.
From this repurchase price shall be deducted the amount consigned to the
RTC, or 240,000.00. Sps. Guevarra may repurchase the subject property within
thirty (30) days from finality of this Decision upon payment of the net amount of
449,460.11.
METROPOLITAN BANK AND TRUST COMPANY vs. S.F. NAGUIAT
ENTERPRISES, INC.
G.R. No. 178407, March 18, 2015, J. Leonen
The insolvency court has exclusive jurisdiction to deal with the property of
the insolvent. Consequently, after the mortgagor-debtor has been declared
insolvent and the insolvency court has acquired control of his estate, a mortgagee
may not, without the permission of the insolvency court, institute proceedings to
enforce its lien.
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Facts:
Spouses Rommel Naguiat and Celestina Naguiat and S.F. Naguiat Enterprises,
Inc. executed a real estate mortgage in favor of Metropolitan Bank and Trust
Company to secure certain credit accommodations obtained from the latter
amounting to P17 million. On March 3, 2005, S.F. Naguiat obtained a loan from
Metrobank in the amount of P1,575,000.00. The loan was likewise secured by the
1997 real estate mortgage by virtue of the Agreement on Existing Mortgage(s)
executed between the parties on March 15, 2004. S.F. Naguiat filed a Petition for
Voluntary Insolvency with Application for the Appointment of a Receiver. Presiding
Judge Irin Zenaida S. Buan issued an Order declaring S.F. Naguiat insolvent.
Subsequently, S.F. Naguiat defaulted in paying its loan. On November 8, 2005,
Metrobank instituted an extrajudicial foreclosure proceeding against the mortgaged
property covered by TCT No. 58676 and sold the property at a public auction held
on December 9, 2005 to Phoenix Global Energy, Inc., the highest bidder. Executive
Judge Gabitan-Erum issued the Order denying her approval of the Certificate of Sale
in view of the July 12, 2005 Order issued by the insolvency court.
Aggrieved by both Orders of Executive Judge Gabitan-Erum, Metrobank filed a
Petition for certiorari and mandamus before the Court of Appeals on June 22, 2006.
MTBC argues that nowhere in Act No. 1956 does it require that a secured creditor
must first obtain leave or permission from the insolvency court before said creditor
can foreclose on the mortgaged property. It adds that this procedural requirement
applies only to civil suits, and not when the secured creditor opts to exercise the
right to foreclose extrajudicially the mortgaged property under Act No. 3135, as
amended, because extrajudicial foreclosure is not a civil suit. The Court of Appeals
held that leave of court must be obtained from the insolvency court whether the
foreclosure suit was instituted judicially or extrajudicially so as to afford the
insolvent estate's proper representation (through the assignee) in such action and
"to avoid the dissipation of the insolvent debtor's assets in possession of the
insolvency court without the latter's knowledge.
Issue:
Whether or not the Court of Appeals erred in ruling that prior leave of the
insolvency court is necessary before a secured creditor, like petitioner Metropolitan
Bank and Trust Company, can extrajudicially foreclose the mortgaged property.
Ruling:
No, it did not.
It was held that concurrence and preference of credits can only be
ascertained in the context of a general liquidation proceeding that is in rem, such as
an insolvency proceeding, where properties of the debtor are inventoried and
liquidated and the claims of all the creditors may be bindingly adjudicated. The
application of this order of priorities established under the Civil Code in insolvency
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proceedings assures that priority of claims are respected and credits belonging to
the same class are equitably treated.
Conformably, it is the policy of Act No. 1956 to place all the assets and
liabilities of the insolvent debtor completely within the jurisdiction and control of the
insolvency court without the intervention of any other court in the insolvent debtor's
concerns or in the administration of the estate. It was considered to be of prime
importance that the insolvency proceedings follow their course as speedily as
possible in order that a discharge, if the insolvent debtor is entitled to it, should be
decreed without unreasonable delay. Act No. 1956 impliedly requires a secured
creditor to ask the permission of the insolvent court before said creditor can
foreclose the mortgaged property.
With the declaration of insolvency of the debtor, insolvency courts "obtain full
and complete jurisdiction over all property of the insolvent and of all claims by and
against it. It follows that the insolvency court has exclusive jurisdiction to deal with
the property of the insolvent. Consequently, after the mortgagor-debtor has been
declared insolvent and the insolvency court has acquired control of his estate, a
mortgagee may not, without the permission of the insolvency court, institute
proceedings to enforce its lien. In so doing, it would interfere with the insolvency
court's possession and orderly administration of the insolvent's properties.
Here, the foreclosure and sale of the mortgaged property of the debtor,
without leave of court, contravene the provisions of Act No. 1956 and violate the
Order dated July 12, 2005 of the insolvency court which declared S.F. Naguiat
insolvent and forbidden from making any transfer of any of its properties to any
person.
REDEMPTION
GE MONEY BANK, INC. (FORMERLY KEPPEL BANK PHILIPPINES) vs.
SPOUSES VICTORINO M. DIZON AND ROSALINA L. DIZON
An insufficient sum was tendered by the Spouses Dizon during the
redemption period. Whether the total redemption price is PhP 251,849.77 as stated
in the Petition for Review, or PhP 232,904.60 as stated in the Banks Motion for
Reconsideration of the CA Decision, or PhP 428,019.16 as stated in its Appellants
Brief, is immaterial. What cannot be denied is that the amount of PhP 90,000.00
paid by the Spouses Dizon during the redemption period is less than half of PhP
181,956.72 paid by the Bank at the extrajudicial foreclosure sale... If only to prove
their willingness and ability to pay, the Spouses Dizon could have tendered a
redemption price that they believe as the correct amount or consigned the same.
Seventeen long years passed since the filing of the complaint but they did not do
either. Indeed, they manifestly failed to show good faith.
The Spouses Dizons own evidence show that, after payment of PhP
90,000.00, the earliest date they exerted a semblance of effort to re-acquire the
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subject property was on October 15, 1996. Apart from being way too late, the
tender was not accompanied by the remaining balance of the redemption price. The
same is true with respect to their letter dated February 27, 1998, wherein they
were still making proposals to the Bank. The courts intervention was resorted to
only on April 3, 1998 after the redemption period expired on October 18, 1994,
making it too obvious that such recourse was merely a delayed afterthought to
recover a right already lost.
Facts:
In September 1991, Respondent Spouses Dizon obtained a loan in the
amount of PhP 100,000.00 from predecessor-in-interest of GE Money Bank, Inc.,
which was secured by a real estate mortgage over their two lots located in Manila.
Spouses Dizon defaulted in the payment of their loan obligation as they were only
able to pay at that point in time the total amount of PhP 22,000.00. Consequently,
the Bank extra-judicially foreclosed the mortgaged properties. Within the
redemption period, Spouses Dizon tendered the sum of PhP 90,000.00 which was
less than the total redemption price in the tune of PhP 181,956.72. The Bank
rejected this offer of Spouses Dizon.
Spouses Dizon then filed a case for redemption and recovery of ownership.
Both the RTC and CA upheld the contentions of Spouses Dizon. In the main, the
courts a quo agreed that the Bank accepted partial redemption of Spouses Dizon
and assured them that they can still enforce their right of redemption.
Issue:
Whether or not the redemption tried to be enforced by herein Spouses Dizon
should be sustained.
Ruling:
NO, the redemption can no longer be allowed under the circumstances of this
case.
Sec. 6 of Act No. 3135, as amended by Act No. 4118, provides:
Sec. 6. In all cases in which an extrajudicial sale is made under the
special power hereinbefore referred to, the debtor, his successors in
interest or any judicial creditor or judgment creditor of said debtor, or any
person having a lien on the property subsequent to the mortgage or deed
of trust under which the property is sold, may redeem the same at any
time within the term of one year from and after the date of 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, insofar as these are not inconsistent with the provisions of this
Act.
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The right of redemption should be exercised within the period required by
law, which should be counted not from the date of foreclosure sale but from the
time the certificate of sale is registered with the Register of Deeds. Fixing a definite
term within which a property should be redeemed is meant to avoid prolonged
economic uncertainty over the ownership of the thing sold.
In this case, considering that the creditor-mortgagee is a banking institution,
the determination of the redemption price is governed by Sec. 78 of R.A. No. 337 or
The General Banking Act, as amended by PD No. 1828.
xxxx In Ponce de Leon vs. Rehabilitation Finance Corporation, this Court
had occasion to rule that Sec. 78 of the General Banking Act had the
effect of amending Sec. 6 of Act No. 3135 insofar as the redemption price
is concerned when the mortgagee is a bank, as in this case, or a banking
or credit institution. The apparent conflict between the provisions of Act
No. 3135 and the General Banking Act was, therefore, resolved in favor of
the latter, being a special and subsequent legislation. This
pronouncement was reiterated in the case of Sy vs. [CA] where [the
Court] held that the amount at which the foreclosed property is
redeemable is the amount due under the mortgage deed, or the
outstanding obligation of the mortgagor plus interest and expenses in
accordance with Sec. 78 of the General Banking Act. It was, therefore,
manifest error on the part of the [CA] to apply in the case at bar the
provisions of Sec. 30, Rule 39 of the Rules of Court in fixing the
redemption price of the subject foreclosed property.
Redemption within the period allowed by law is not a matter of intent but a
question of payment or valid tender of the full redemption price. It is irrelevant
whether the mortgagor is diligent in asserting his or her willingness to pay. What
counts is that the full amount of the redemption price must be actually paid;
otherwise, the offer to redeem will be ineffectual and the purchaser may justly
refuse acceptance of any sum that is less than the entire amount. In Metropolitan
Bank and Trust Co. vs. Spouses Tan, et al., [the Court] held:
The general rule in redemption is that it is not sufficient that a person
offering to redeem manifests his/her desire to do so. The statement of
intention must be accom-panied by an actual and simultaneous tender of
payment. This constitutes the exercise of the right to repurchase. Bona
fide redemption necessarily implies a reasonable and valid tender of the
entire purchase price, otherwise, the rule on the redemption period fixed
by law can easily be circumvented. There is no cogent reason for
requiring the vendee to accept payment by installments from the
redemptioner, as it would ultimately result in an indefinite extension of
the redemption period
To be valid and effective, the offer to redeem must be accompanied by an
actual tender of the redemption price. Redemption price should either be fully
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offered in legal tender or validly consigned in court. Only by such means can the
auction winner be assured that the offer to redeem is being made in good faith.
None of the [compelling justifications expounded in past precedents] are
present in this case to exempt it from the application of the general rules on
redemption. Here, the offer of the Spouses Dizon was an invalid and ineffectual
exercise of their right of redemption; hence, the refusal of the offer by the Bank was
completely justified.
An insufficient sum was tendered by the Spouses Dizon during the
redemption period. Whether the total redemption price is PhP 251,849.77 as stated
in the Petition for Review, or PhP 232,904.60 as stated in the Banks Motion for
Reconsideration of the CA Decision, or PhP 428,019.16 as stated in its Appellants
Brief, is immaterial. What cannot be denied is that the amount of PhP 90,000.00
paid by the Spouses Dizon during the redemption period is less than half of PhP
181,956.72 paid by the Bank at the extrajudicial foreclosure sale... If only to prove
their willingness and ability to pay, the Spouses Dizon could have tendered a
redemption price that they believe as the correct amount or consigned the same.
Seventeen long years passed since the filing of the complaint but they did not do
either. Indeed, they manifestly failed to show good faith.
The Spouses Dizons own evidence show that, after payment of PhP
90,000.00, the earliest date they exerted a semblance of effort to re-acquire the
subject property was on October 15, 1996. Apart from being way too late, the
tender was not accompanied by the remaining balance of the redemption price. The
same is true with respect to their letter dated February 27, 1998, wherein they were
still making proposals to the Bank. The courts inter-vention was resorted to only on
April 3, 1998 after the redemption period expired on October 18, 1994, making it
too obvious that such recourse was merely a delayed afterthought to recover a right
already lost.
The official receipts issued by the Bank cannot be relied upon by the Spouses
Dizon. As pointed out by the Bank, the receipts issued categorically stated that the
partial payments were without prejudice to the foreclosure proceedings already
instituted and without prejudice to the consolidation of title. Thus, the Bank never
really intended to waive its rights to foreclose and to consolidate its ownership over
the subject property in case of the Spouses Dizons failure to fully and effectively
pay their outstanding obligation.
With the disclaimer noticeably expressed on the official receipts and as
admitted during the trial by petitioner Rosalina L. Dizon, who solely testified for the
plaintiffs, the Bank cannot be held guilty of estoppel. Estoppel in pais arises when
one, by his acts, representations or admissions, or by his own silence when he
ought to speak out, intentionally or through culpable negligence, induces another to
believe certain facts to exist and such other rightfully relies and acts on such belief,
so that he will be prejudiced if the former is permitted to deny the existence of such
facts. The principle of estoppel would step in to prevent one party from going back
on his or her own acts and representations to the prejudice of the other party who
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relied upon them. It is a principle of equity and natural justice, expressly adopted in
Art. 1431 of the New Civil Code and articulated as one of the conclusive
presumptions in Rule 131, Sec. 2 (a) of our Rules of Court.
The Spouses Dizon claimed that they negotiated with the Bank for the
extension of the period to redeem and that the latter granted the same. Aside from
the Banks vehement denial of the allegation, the Court cannot give credence to
their assertions as they failed to present any documentary evidence to prove the
conferment of the purported extension. Assuming, but with-out admitting, that an
additional period was granted to them, the extension would constitute a mere offer
on the part of the Bank to re-sell the subject property; it does not constitute a
binding contract. The right to redeem of the Spouses Dizon already expired on
October 18, 1994. Thereafter, their offer should aptly be termed as a repurchase,
not redemption. The Bank is not bound by the bid price, at the very least, and has
the discretion to even set a higher price. As [the Court] explained:
The right to redeem becomes functus officio on the date of its expiry,
and its exercise after the period is not really one of redemption but a
repurchase. Distinction must be made because redemption is by force of
law; the purchaser at public auction is bound to accept redemption.
Repurchase, however, of foreclosed property, after redemption period,
imposes no such obligation. After expiry, the purchaser may or may not
re-sell the property but no law will compel him to do so. And, he is not
bound by the bid price; it is entirely within his discretion to set a higher
price, for after all, the property already belongs to him as owner.
SURETY
GILAT SATELLITE NETWORKS, LTD.,vs.

UNITED COCONUT PLANTERS BANK GENERAL INSURANCE CO., INC
G.R. No. 189563, April 7, 2014, CJ. Sereno
In suretyship, the oft-repeated rule is that a suretys liability is joint and

solidary with that of the principal debtor. This undertaking makes a surety
agreement an ancillary contract, as it presupposes the existence of a principal
contract. Nevertheless, although the contract of a surety is in essence secondary
only to a valid principal obligation, its liability to the creditor or "promise" of the
principal is said to be direct, primary and absolute; in other words, a surety is
directly and equally bound with the principal. He becomes liable for the debt and
duty of the principal obligor, even without possessing a direct or personal interest in
the obligations constituted by the latter. Thus, a surety is not entitled to a separate
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notice of default or to the benefit of excussion. It may in fact be sued separately or
together with the principal debtor.
After a thorough examination of the pieces of evidence presented by both

parties, the RTC found that Gilathad delivered all the goods to One Virtual and
installed them. Despite these compliances, One Virtual still failed to pay its
obligation, triggering UCPBs liability to Gilat as the formers surety. In other words,
the failure of One Virtual, as the principal debtor, to fulfill its monetary obligation to
Gilat gave the latter an immediate right to pursue UCPB as the surety.
Facts:
One Virtual placed with GILAT a purchase order for various

telecommunications equipment (sic), accessories, spares, services and software, at
a total purchase price of Two Million One Hundred Twenty Eight Thousand Two
Hundred Fifty Dollars (US$2,128,250.00). Of the said purchase price for the goods
delivered, One Virtual promised to pay a portion thereof totalling US$1.2 Million in
accordance with the payment schedule. To ensure the prompt payment of this
amount, it obtained defendant UCPB General Insurance Co., Inc.s surety bond in
favor of GILAT.
One Virtual failed to pay GILAT (US$400,000.00) on the due date in

accordance with the payment schedule attached to the surety bond, prompting
GILAT to write the surety defendant UCPB for payment of the said amount. No part
of the amount set forth in this demand has been paid to date by either One Virtual
or defendant UCPB. One Virtual likewise failed to pay on the succeeding payment
instalment, prompting GILAT to send a second demand letter for the payment of the
full amount of guaranteed and which letter was received by the defendant surety.
However, defendant UCPB failed to settle the amount of US$1,200,000.00 or a part
thereof, hence, the instant complaint."
Petitoner, Gilat Satellite Networks, Ltd., filed a Complaintagainst respondent

UCPB General Insurance Co., Inc., RTC renders judgment for Gilat, and against
UCPB. Latter, appealed to the CA which dismissed the case for lack of jurisdiction.
RTCs decision is Vacated.
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Issue:
Whether or not CA erred in dismissing the case and ordering Gilatand One
Virtual to arbitrate
Ruling:
Yes, the CA erred in dismissing the case and ordering Gilat and One Virtual to
arbitrate
Existence of a suretyship agreement does not give the surety the right to
intervene in the principal contract, nor can an arbitration clause between the buyer
and the seller be invoked by a non-party such as the surety.
Moreover, Articles 1216 and 2047 of the Civil Code clearly provide that the
creditor may proceed against the surety without having first sued the principal
debtor. Even the Surety Agreement itself states that respondent becomes liable
upon "mere failure of the Principal to make such prompt payment." Thus, Gilat
should not be ordered to make a separate claim against One Virtual (via arbitration)
before proceeding against the latter.
In suretyship, the oft-repeated rule is that a suretys liability is joint and

solidary with that of the principal debtor. This undertaking makes a surety
agreement an ancillary contract, as it presupposes the existence of a principal
contract. Nevertheless, although the contract of a surety is in essence secondary
only to a valid principal obligation, its liability to the creditor or "promise" of the
principal is said to be direct, primary and absolute; in other words, a surety is
directly and equally bound with the principal. He becomes liable for the debt and
duty of the principal obligor, even without possessing a direct or personal interest in
the obligations constituted by the latter.Thus, a surety is not entitled to a separate
notice of default or to the benefit of excussion. It may in fact be sued separately or
together with the principal debtor.
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After a thorough examination of the pieces of evidence presented by both
parties, the RTC found that Gilathad delivered all the goods to One Virtual and
installed them. Despite these compliances, One Virtual still failed to pay its
obligation, triggering UCPBs liability to Gilat as the formers surety. In other words,
the failure of One Virtual, as the principal debtor, to fulfill its monetary obligation to
Gilat gave the latter an immediate right to pursue UCPB as the surety.
Consequently, Court cannot sustain UCPBs claim that the Purchase

Agreement, being the principal contract to which the Suretyship Agreement is
accessory, must take precedence over arbitration as the preferred mode of settling
disputes.
First, the acceptance [of a surety agreement], however, does not change in
any material way the creditors relationship with the principal debtor nor does it
make the surety an active party to the principal creditor-debtor relationship. In other
words, the acceptance does not give the surety the right to intervene in the
principal contract. The suretys role arises only upon the debtors default, at which
time, it can be directly held liable by the creditor for payment as a solidary obligor."
Hence, the surety remains a stranger to the Purchase Agreement. Court agrees with
Gilat that UCPB cannot invoke in its favor the arbitration clause in the Purchase
Agreement, because it is not a party to that contract.An arbitration agreement
being contractual in nature, it is binding only on the parties thereto, as well as their
assigns and heirs.
Second, Section 24 of Republic Act No. 9285 is clear in stating that a referral
to arbitration may only take place "if at least one party so requests not later than
the pre-trial conference, or upon the request of both parties thereafter." UCPB has
not presented even an iota of evidence to show that either Gilat or One Virtual
submitted its contesting claim for arbitration.
Third, sureties do not insure the solvency of the debtor, but rather the debt
itself.They are contracted precisely to mitigate risks of non-performance on the part
of the obligor. This responsibility necessarily places a surety on the same level as
that of the principal debtor. The effect is that the creditor is given the right to
directly proceed against either principal debtor or surety. This is the reason why
excussion cannot be invoked.To require the creditor to proceed to arbitration would
render the very essence of suretyship nugatory and diminish its value in commerce.
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At any rate, if the surety is dissatisfied with the degree of activity displayed
by the creditor in the pursuit of his principal, he may pay the debt himself and
become subrogated to all the rights and remedies of the creditor.
PEOPLE'S TRANS-EAST ASIA INSURANCE CORPORATION, a.k.a. PEOPLE'S
GENERAL INSURANCE CORPORATION vs. DOCTORS OF NEW MILLENNIUM
HOLDINGS, INC.
G.R. No. 172404, August 13, 2014, J. Leonen
The liabilities of an insurer under the surety bond are not extinguished when
the modifications in the principal contract do not substantially or materially alter
the principal's obligations. The surety is jointly and severally liable with its principal
when the latter defaults from its obligations under the principal contract. On the
basis of petitioners own admissions, the principal contract of the suretyship is the
signed agreement. The surety, therefore, is presumed to have acquiesced to the
terms and conditions embodied in the principal contract when it issued its surety
bond.
Facts:
Doctors of New Millennium Holdings, Inc. is a domestic corporation comprised
of about 80 doctors. On March 2, 1999, it entered into a construction and
development agreement with Million State Development Corporation, a contractor,
for the construction of a 200-bed capacity hospital in Cainta, Rizal.
Doctors of New Millennium obliged itself to pay P10,000,000.00 to Million
State Development at the time of the signing of the agreement to commence the
construction of the hospital. Million State Development was to shoulder 95% of the
project cost and committed itself to secure P385,000,000.00 within 25 banking days
from Doctors of New Millenniums initial payment, part of which was to be used for
the purchase of the lot where the hospital was to be constructed.
As part of the conditions prior to the initial payment, Million State
Development submitted a surety bond of P10,000,000.00 to Doctors of New
Millennium. The surety bond was issued by Peoples Trans-East Asia Insurance
Corporation, now known as Peoples General Insurance Corporation (PGIC). Doctors
of New Millennium, on the other hand, made the initial payment of P10,000,000.00.
Million State Development, however, failed to comply with its obligation to
secure P385,000,000.00 within 25 banking days from initial payment.
When Million State Development reneged on its obligations, Doctors of New
Millennium sent a demand letter dated June 14, 1999 to Peoples General Insurance
for the return of its initial payment of P10,000,000.00, in accordance with its surety
bond. On July 9, 1999, Doctors of New Millennium sent another letter to People s
General Insurance, this time furnishing a copy to the Insurance Commission.
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After several conferences, Peoples General Insurance sent a letter to then
Insurance Commissioner Eduardo T. Malinis, stating that Doctors of New
Millenniums surety claim was denied on the ground that the guarantee only
extended to "the full and faithful construction of a First Class 200 hospital bed
building" and not to "the funding of the construction of the hospital." As a result of
the letter, Doctors of New Millennium filed an administrative complaint for unfair
claim settlement practice against Peoples General Insurance.
While the administrative complaint was pending before the Insurance
Commission, Doctors of New Millennium sent a demand letter to Million State
Development for the return of their initial payment of P10,000,000.00. Due to
Million State Developments inaction, Doctors of New Millennium filed a complaint
for breach of contract with damages with prayer for the issuance of preliminary
attachment against Million State Development and Peoples General Insurance with
the RTC.
Million State Development did not appear or submit any responsive pleading
and was declared in default. The trial court resolved the issues of the case only as
to the remaining parties and primarily involving the surety bond.
Doctors of New Millennium, represented by its President, Dr. Cenon Alfonso,
testified that the surety bond was entered into to protect the release of the
P10,000,000.00 initial mobilization fund. Peoples General Insurance, represented by
its President, Manual Liboro, testified that its liability was only limited to the
construction of the hospital.
Mr. Liboro also argued that the terms of the surety bond were based on the
Draft Construction and Development Agreement (draft agreement). It alleged that
without its knowledge and consent, Doctors of New Millennium and Million State
Development substantially altered the conditions of the draft agreement by
inserting the clause"or the Project Owners waiver," which appeared in the signed
agreement. Mr. Liboro claimed that they became aware of the alteration during the
conciliation proceedings before the Insurance Commission.
The trial court rendered its decision finding only Million State Development
liable to Doctors of New Millennium. It discharged Peoples General Insurance from
any liability on the ground that the inclusion of the clause "or the Project Owner s
waiver" in the signed agreement was a novation of the draft agreement.
The Court of Appeals rendered a decision granting the appeal and holding
Peoples General Insurance jointly and severally liable with Million State
Development. It ruled that Peoples General Insurance guaranteed not only the
construction of the hospital but also secured the initial payment in case the
contractor defaults.
Issue:
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Whether or not the surety bond guaranteeing respondent Doctors of New
Millenniums initial payment was impliedly novated by the insertion of a clause in
the principal contract, which waived the conditions for the initial payments release.
Ruling:
The petition is without merit
The principal contract of the suretyship is the signed agreement
The obligations of the surety to the principal under the surety bond are
different from the obligations of the contractor to the client under the principal
contract. The surety guarantees the performance of the contractors obligations.
Upon the contractors default, its client may demand against the surety bond even if
there was no privity of contract between them. This is the essence of a surety
agreement.
The definition of a surety is provided for under the Civil Code, which states:
Art. 2047. By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter should fail to
do so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract
is called a suretyship.
In this case, the surety bond was executed "to guarantee the repayment of
the downpayment" and "to secure the full and faithful performance" of Million State
Development. According to the terms of the bond, Peoples General Insurance
bound itself to be liable in the amount of P10,000,000.00 in the event that Million
State Development defaults in its obligations.
Petitioner, however, contends that the inclusion of the clause "or the Project
Owners waiver" in the signed agreement made its obligations more onerous and,
the surety must be released from its bond.
A suretyship consists of two different contracts: (1) the surety contract and
(2) the principal contract which it guarantees. Since the insurers liability is strictly
based only on the terms stated in the surety contract in relation to the principal
contract, any change in the principal contract, which materially alters the principals
obligations would, in effect, constitute an implied novation of the surety contract:
A surety is released from its obligation when there is a material alteration of
the contract in connection with which the bond is given, such as a change which
imposes a new obligation on the promising party, or which takes away some
obligation already imposed, or one which changes the legal effect of the original
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contract and not merely its form. A surety, however, is not released by a change in
the contract which does not have the effect of making its obligation more onerous.
Petitioner PGIC insists that the principal contract of the suretyship was the
draft agreement since it was assured by its principal that the draft would embody
the same terms and conditions as the final signed agreement. The insertion of the
disputed clause in the signed agreement, it argues, "effectively deprived petitioner
of the opportunity to objectively assess the real risk of its undertaking and fix the
reasonable rate of premium thereon."
This argument is unmeritorious.
In his testimony before the trial court, Mr. Liboro, representing petitioner,
admitted that the signed copy of the agreement was attached to the surety bond
when it was returned to them by Million State Development and respondent.
Petitioner, as the surety, had the responsibility to read through the terms of
the principal contract; it cannot simply rely on the assurances of its principal. It was
petitioners duty to carefully scrutinize the agreement. If petitioner had any
objection to the terms of the signed agreement, it could have pointed it out before
its principal defaults and it becomes liable under the surety bond. The silence of
petitioner must be taken against it since it was responsible for exerting diligence in
the conduct of its affairs.
Petitioners failure to notice the changes in the signed agreement was due to
its own fault and not to any deception on the part of respondent. Respondent was
not privy to the terms of the surety bond entered into by petitioner and Million State
Development. If there were any changes in the contract that petitioner should have
been aware of, it was Million State Development, as its principal, which had the duty
to inform them about the changes.
On the basis of petitioners own admissions, the principal contract of the
suretyship is the signed agreement. The surety, therefore, is presumed to have
acquiesced to the terms and conditions embodied in the principal contract when it
issued its surety bond.
Petitioner cannot argue that the insertion of the clause in the signed
agreement constituted an implied novation of the obligation which extinguished its
obligations as a surety since there was nothing to novate: in order that an obligation
may be extinguished by another which substitutes the same, it is imperative that it
be so declared in unequivocal terms, or that the old and new obligation be in every
point incompatible with each other. Novation of a contract is never presumed. In the
absence of an express agreement, novation takes place only when the old and the
new obligations are incompatible on every point.
Even if we were to assume, for the sake of argument, that the principal
contract in the suretyship was the draft agreement, the addition of the clause "or
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the Project Owners waiver" in the signed agreement does not operate as a novation
of petitioners liability under the surety bond.
Petitioner cannot feign ignorance of Million State Developments obligation to
provide the funds for the balance since this provision was present in both the draft
agreement and the signed agreement. Since Million State Development failed to
fulfill its obligation, the surety becomes jointly and severally liable for the amount of
the bond.
CENTENNIAL GUARANTEE ASSURANCE CORPORATION vs. UNIVERSAL

MOTORS CORPORATION, RODRIGO T. JANEO, JR., GERARDO GELLE, NISSAN
CAGAYAN DE ORO DISTRIBUTORS, INC., JEFFERSON U. ROLIDA, and PETER
YAP
G.R. No. 189358, October 8, 2014, J. Perrlas-Bernabe
Verily, in a contract of suretyship, one lends his credit by joining in the

principal debtors obligation so as to render himself directly and primarily
responsible with him, and without reference to the solvency of the principal. Thus,
execution pending appeal against NSSC means that the same course of action is
warranted against its surety, CGAC. The same reason stands for CGACs other
principal, Orimaco, who was determined to have permanently left the country with
his family to evade execution of any judgment against him.
Facts:
The instant petition originated from a Complaint for Breach of Contract with
Damages and Prayer for Preliminary Injunction and Temporary Restraning Order
filed by Nissan Specialist Sales Corporation (NSSC) and its President and General
Manager, Reynaldo A. Orimaco (Orimaco), against herein respondents Universal
Motors
Corporation
and
private
respondents.
The temporary restraining order (TRO) prayed for was eventually issued by the RTC
upon the posting by NSSC and Orimaco of a 1,000,000.00 injunction bond issued by
their surety, CGAC.Respondents filed a petition for certiorari and prohibition before
the CA. Consequently, the April 2, 2002 Writ of Preliminary Injunction issued by the
RTC
was
ordered
dissolved.
On October 31, 2007, the RTC rendered a Decision dismissing the complaint
for breach of contract with damages for lack of merit. The RTC ordered NSSC,
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Orimaco, and CGAC to jointly and severally pay respondents damages and
attorneys fees. Upon respondents motion, the RTC granted Execution Pending
Appeal of its October 31, 2007 Decision through an Order16 dated January 16,
2008. It ruled that there exists good reasons to justify the immediate execution of
the Decision. CGAC assailed the RTCs January 16, 2008 Order before the CA
through a petition for certiorari, questioning the existence of good reasons to
warrant the grant of execution pending appeal and the propriety of enforcing it
against one which is not the losing party in the case but a mere bondsman whose
liability is limited to the surety bond it issued. The CA affirmed in part the assailed
order by allowing the execution pending appeal of the RTCs October 31, 2007
Decision but limiting the amount of CGACs liability to only 1,000,000.00.
Issue:
Whether or not CGAC as surety is directly liable to the execution of judgment

pending appeal.
Ruling:
Yes.
That CGACs financial standing differs from that of NSSC does not negate the
order of execution pending appeal. As the latters surety, CGAC is considered by law
as being the same party as the debtor in relation to whatever is adjudged touching
the obligation of the latter, and their liabilities are interwoven as to be inseparable.
Verily, in a contract of suretyship, one lends his credit by joining in the principal
debtors obligation so as to render himself directly and primarily responsible with
him, and without reference to the solvency of the principal. Thus, execution pending
appeal against NSSC means that the same course of action is warranted against its
surety, CGAC. The same reason stands for CGACs other principal, Orimaco, who
was determined to have permanently left the country with his family to evade
execution of any judgment against him.
OFFICE OF THE OMBUDSMAN, vs. AMALIO A. MALLARI

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Mallari was administratively charged due to the fact the he approved surety
bond in favor of ECOBEL without consideration of the policies by GSIS. The court
finds substantial evidence to prove Mallaris administrative liability. The Court notes
that irregularities, defects and infirmities attended the processing, approval,
issuance, and the actual drawdown of the US$10,000,000.00 ECOBEL bond in which
Mallari actively participated. In a letter, dated September 13, 2002, to the FFIB, Mr.
Reynaldo R. Nograles, OIC-Office of the President, Internal Audit Service, GSIS,
attached a copy of the excerpts from the Final Report on the GSIS Audit of
Underwriting Departments. Said Audit Report found that: there was non-adherence
to existing policies/SOPs in the processing and release of the Ecobel Land, Inc.
guaranty payment bond, as well as non-adherence to GSIS GIGs business policy
statement on survey, inspection or assessment of risks/properties to be insured
including re-inspection and survey of insured properties
Facts:
ECOBEL applied for a two-year surety bond with GSIS to guarantee payment
of a Ten Million US Dollar (US$10,000,000.00) loan with the Philippine Veterans Bank
(PVB) acting as the obligee.ECOBEL bond application was approved in principle
"subject to analysis/evaluation of the project and the offered collaterals.March 11,
1998, the GSIS Surety Bond or G (16) GIF Bond No. 029132(ECOBEL bond) in the
amount of Ten Million US Dollars (US$10,000,000.00) was correspondingly issued in
favor of ECOBEL with PVB as the obligee. The ECOBEL bond was signed by Mallari
on behalf of the GSIS GIG to guarantee the repayment of the principal and interest
on the loan granted to ECOBEL through the obligee to be used for the construction
of its tower building.
On February 9, 1999, almost a year from the issuance of the ECOBEL bond,
Valencerina(vice president of the London Representative Office (LRO) received from
Boright the premium payment for the bond in the amount of ?12,731,520.00, in
FEBTC check, post-dated February 26, 1999 as a one-year premium for the period,
March 11, 1998 to March 11, 1999.Thereafter, Transfer Certificate of Title (TCT) No.
66289 covering the land located in Lipa City, Batangas, consisting of 205,520
square meters, submitted as collateral, turned out to be not genuine or spurious.
The said land, with an appraised value of ?202,437,200.00, was the major collateral
for the issuance of the ECOBEL bond. The land was titled in the name of Vicente
Yupangco who did not appear to hold any interest in ECOBEL, either as officer or
stockholder.Thus, on February 12, 1999, the ECOBEL bond was cancelled by GSIS,
through Atty. Saludares of the Underwriting Department II. On the same day,
Valencerina informed Boright that the bond was invalid and unenforceable and that
the FEBTC check, postdated February 26, 1999, was disregarded by GSIS.On
February 19, 1999, despite the notice of the bond cancellation, ECOBEL was granted
a loan by Bear and Stearns International Ltd. (BSIL) in the face amount of
US$10,000,000.00 using the ECOBEL bond. The amount actually drawn and
received by ECOBEL was US$9,307,000.00. After the drawdown, Campaa at the
LRO received the surety bond premium check payments, dated April 1, 1999 and
April 15, 1999, in the total amount of US$200,629.00. The said checks were
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remitted to GSIS Manila on May 10, 1999.On March 7, 2000, a Notice of Default on
Payment was issued against ECOBEL which placed GSIS under threat of a suit. GSIS
was furnished with a copy of the said notice and was similarly advised on March 9,
2000.In a Certification, dated March 20, 2000,PVB stated that it did not accept the
proposal for it to be named obligee in the ECOBEL bond, as there was no contract
or agreement executed between ECOBEL and PVB.
Issue:
Whether or not Mallari should held administratively liable in granting the
surety bond
Ruling:
Yes, Mallari should be held administrative liable.
At the outset it is well to quote the principles, policies and procedural
guidelines involved in a regularly issued surety bond. A contract of suretyship is an
agreement whereby a party, called the surety, guarantees the performance by
another party, called the principal or obligor, of an obligation or undertaking in favor
of another party, called the obligee. Although the contract of a surety is secondary
only to a valid principal obligation, the surety becomes liable for the debt or duty of
another although it possesses no direct or personal interest over the obligations nor
does it receive any benefit therefrom. The contract of suretyship is further
elucidated, in this wise:
The surety's obligation is not an original and direct one for the performance
of his own act, but merely accessory or collateral to the obligation contracted
by the principal. Nevertheless, although the contract of a surety is in essence
secondary only to a valid principal obligation, his liability to the creditor or
promisee of the principal is said to be direct, primary and absolute; in other
words, he is directly and equally bound with the principal.Thus, suretyship
arises upon the solidary binding of a person deemed the surety with the
principal debtor for the purpose of fulfilling an obligation. A surety is
considered in law as being the same party as the debtor in relation to
whatever is adjudged touching the obligation of the latter, and their liabilities
are interwoven as to be inseparable.
With the aforecited GSIS policies and procedures as guidelines and the basic
rule that, in administrative cases, the quantum of evidence necessary to find an
individual administratively liable is substantial evidence, the Court assesses the
liability of Mallari in this administrative case. The Court finds substantial evidence to
prove Mallaris administrative liability. The Court notes that irregularities, defects
and infirmities attended the processing, approval, issuance, and the actual
drawdown of the US$10,000,000.00 ECOBEL bond in which Mallari actively
participated. In a letter, dated September 13, 2002, to the FFIB, Mr. Reynaldo R.
Nograles, OIC-Office of the President, Internal Audit Service, GSIS, attached a copy
of the excerpts from the Final Report on the GSIS Audit of Underwriting
Departments. Said Audit Report found that: there was non-adherence to existing
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policies/SOPs in the processing and release of the Ecobel Land, Inc. guaranty
payment bond, as well as non-adherence to GSIS GIGs business policy statement
on survey, inspection or assessment of risks/properties to be insured including reinspection and survey of insured properties.
The Sworn Statement, dated September 23, 2002, of Atty. Nora M.
Saludaresmerely confirms the findings of the GSIS Internal Audit and Legal Services
Group, viz: at the time the surety bond was issued that bore the signatures of
Josephine Edralin Boright as Principal and PVB as Obligee and likewise of Amalio A.
Mallari for the Surety or GSIS, there was yet no premium payment and no sufficient
collateral; the collateral that was subsequently submitted was found to be spurious;
Fernando U. Campana received premium payment at the GSIS London Office
subsequent to the cancellation of the surety bond; Alex M. Valencerinas assurance
that the bond is fully secured from the inception of the transaction contributed to
the eventual release and issuance of the surety bond that bore the
confirmation/approval of Amalio A. Mallari.On the basis of these findings, the Court
agrees with the Ombudsmans conclusion that Mallaris liability for the
administrative act of grave misconduct was established by substantial evidence.
Indeed, Mallari was duty bound to ensure that the procedural and
documentary requisites were duly complied with before affixing his signature on the
bond. In the same way, he should not have signed the attestation clause as the
required underwriting work had not been diligently complied with. His failure to act
accordingly was a gross and inexcusable violation of the GSIS avowed policy on
strict underwriting. His act constituted an obvious disregard of the aforementioned
GSIS policies and guidelines which evidently rendered undue benefit and advantage
to ECOBEL to the detriment of GSIS, whose right and interest he was duty bound to
protect.
YULIM INTERNATIONAL COMPANY LTD., JAMES YU, JONATHAN YU, and
ALMERICK TIENG LIM vs. INTERNATIONAL EXCHANGE BANK (now Union
Bank of the Philippines),
G.R. No. 203133, February 18, 2015, J. Reyes
A surety is considered in law as being the same party as the debtor in
relation to whatever is adjudged touching the obligation of the latter, and their
liabilities are interwoven as to be inseparable. And it is well settled that when the
obligor or obligors undertake to be jointly and severally liable, it means that the
obligation is solidary, as in this case.
Facts:
IBank, a commercial bank, granted Yulim, a domestic partnership, a credit
facility for 5,000,000.00, as evidenced by a Credit Agreement secured by a Chattel
Mortgage. As further guarantee, the partners, namely, James, Jonathan and
Almerick, executed a Continuing Surety Agreement in favor of iBank.
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Yulim also executed a promissory note for 4,246,310.00, to mature on
February 28, 2002. But Yulim defaulted on the said note. IBank sent demand
letters to Yulim, through its President, James but without success. iBank then filed a
Complaint for Sum of Money with Replevin against Yulim and its sureties.
The Court granted the application for a writ of replevin. Pursuant to the
Sheriffs Certificate of Sale the items seized from Yulims warehouse were worth only
140,000.00, not 500,000.00 as the petitioners have insisted.
The petitioners moved to dismiss the complaint insisting that their loan had
been fully paid after they assigned to iBank their Condominium Unit with parking
space. They claimed that while the pre-selling value of the condominium unit
was 3.3 Million, its market value has since risen to 5.5 Million. The RTC did not
entertain the motion to dismiss for non-compliance with Rule 15 of the Rules of
Court.
The petitioners filed their Answer reiterating that they have paid their loan by
way of assignment of a condominium unit to iBank.
The RTC rendered judgment and finds the individual defendants James Yu,
Jonathan Yu and Almerick Tieng Lim, not liable to the plaintiff, iBank, hence the
complaint against them is
dismissed. But the defendant corporation Yulim
International Company Ltd. is liable; and it orders defendant corporation to pay
plaintiff the sum of P4,246,310.00 with interest at 16.50% per annum from February
28, 2002 until fully paid plus cost of suit.
The factual issue on appeal to the CA, raised by petitioners James, Jonathan
and Almerick, was whether Yulims loans have been extinguished with the execution
of a Deed of Assignment of their condominium unit in favor of iBank, while the legal
issue, raised by iBank, was whether they should be held solidarily liable with Yulim
for its loans and other obligations to iBank.
The CA ruled that the petitioners failed to prove that they have already paid
Yulims consolidated loan obligations totaling 4,246,310.00. The CA found the
records bereft of any evidence to show that Yulim had fully settled its obligation to
iBank, further stating that the so-called assignment by Yulim of its condominium
unit to iBank was nothing but a mere temporary arrangement to provide security for
its loan pending the subsequent execution of a real estate mortgage. Specifically,
the CA found nothing in the Deed of Assignment which could signify that iBank had
accepted the said property as full payment of the petitioners loan.
Thus, the appellate court granted the appeal of iBank, and denied that of the
petitioners, and ruled that James Yu, Jonathan Yu and Almerick Tieng Lim are held
jointly and severally liable with defendant-appellant Yulim for the payment of the
monetary awards.
Issues:
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1) Whether or not petitioners James, Jonathan and Almerick should be held jointly
and severally liable with petitioner Yulim to pay
iBank the amount of
4,246,310.00 with interest at 16.5% per annum from February 28, 2002 until
fully paid.
2) Whether or not the loan obligations have been paid by executing the deed of
assignment of the said condominium unit in favor of iBank
Ruling:
1) The individual petitioners do not deny that they executed the Continuing Surety
Agreement, wherein they jointly and severally with the principal Yulim,
unconditionally guarantee full and complete payment when due, whether at stated
maturity or otherwise, of any and all credit accommodations that have been
granted to Yulim by iBank, including interest, fees, penalty and other charges.
Under Article 2047 of the Civil Code, these words are said to describe a
contract of suretyship:
Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor
to fulfill the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the
contract is called a suretyship.
In a contract of suretyship, one lends his credit by joining in the principal debtors
obligation so as to render himself directly and primarily responsible with him
without reference to the solvency of the principal. According to the above Article, if
a person binds himself solidarily with the principal debtor, the provisions of Articles
1207 to 1222, or Section 4, Chapter 3, Title I, Book IV of the Civil Code on joint and
solidary obligations, shall be observed.
Thus, where there is a concurrence of two or more creditors or of two or
more debtors in one and the same obligation, Article 1207 provides that among
them, there is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.
A surety is considered in law as being the same party as the debtor in relation to
whatever is adjudged touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable. And it is well settled that when the obligor or
obligors undertake to be jointly and severally liable, it means that the obligation is
solidary, as in this case.
In addition to binding themselves jointly and severally with Yulim to
unconditionally guarantee full and complete payment of any and all credit
accommodations that have been granted to Yulim, the petitioners warrant that their
liability as sureties shall be direct, immediate and not contingent upon the pursuit
by the bank of whatever remedies it may have against the pricipal of other
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securities. There can be no doubt that the individual petitioners have bound
themselves to be solidarily liable with Yulim for the payment of its loan with iBank.
2) As regards the petitioners contention that iBank in its letter had accepted the
assignment of its condominium unit in Tomas Morato Avenue as full and final
payment of their various loan obligations, the Court is far from persuaded.
What the letter accepted was only the collaterals provided for the loans.
Nowhere can it be construed that the Deed of Assignment would extinguish the
petitioners loan. Otherwise, there would have been no need for iBank to mention
therein the three collaterals or supports provided by the petitioners, namely,
the Deed of Assignment, the Chattel Mortgage and the Continuing Surety
Agreement executed by the individual petitioners.
In fact, the Deed of Assignment expressly states, by way of a resolutory
condition concerning the purpose or use of the Deed of Assignment, that after the
petitioners have delivered or caused the delivery of their title to iBank, the Deed of
Assignment shall then become null and void. Shorn of its legal efficacy as an interim
security, the Deed of Assignment would then become functus officio once title to
the condominium unit has been delivered to iBank. This is so because the
petitioners would then execute a Deed of Real Estate Mortgage over the property in
favor of iBank as security for their loan obligations.
To stress, the assignment being in its essence a mortgage, it was but a
security and not a satisfaction of the petitioners indebtedness.
Article 1255 of the Civil Code invoked by the petitioners contemplates the
existence of two or more creditors and involves the assignment of the entire
debtors property, not a dacion en pago.
Under Article 1245 of the Civil Code, dation in payment, whereby property
is alienated to the creditor in satisfaction of a debt in money, shall be governed by
the law on sales. Nowhere in the Deed of Assignment can it be remotely said that
a sale of the condominium unit was contemplated by the parties, the consideration
for which would consist of the amount of outstanding loan due to iBank from the
petitioners.
PLEDGE
PACTUM COMMISSORIUM
PHILNICO INDUSTRIAL CORPORATION vs. PRIVATIZATION AND
MANAGEMENT OFFICE
G.R. No. 199420, August 27, 2014, J. Leonardo-De Castro
Petitioner assails the decision of the CA ruling that Section 8.02 of the
ARD does not constitute pactum commissorium, on the ground that since the
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ARDA and the Pledge Agreement are entirely separate and distinct contract
and that neither contract contains both elements of pactum commissorium:
the ARDA solely has the second element, while the Pledge Agreement only
has the first element, such provision cannot be considered as one of pactum
commissorium. The SC however ruled that the agreement of the parties may
be embodied in only one contract or in two or more separate writings. In case
of the latter, the writings of the parties should be read and interpreted
together in sucha way as to render their intention effective. The ARDA and the
Pledge Agreement herein, although executed in separate written instruments,
are integral to one another. It was the intention of the parties to enter into and
execute both contracts for a complete effectuation of their agreement.
Facts:
This case involves the consolidated Petitions for Review on Certiorari under
Rule 45 of the Rules of Court filed by Philnico Industrial Corporation (PIC) and
Privatization and Management Office (PMO).
In 1987, the shares of stock owned by DPB and PNB in Philnico Processing
Corporation (PPC), a corporation engaged in nickel mining and refining business,
were transferred to respondent PMO. Thereafter, PMO, PIC and PPC executed a
contract, denominated as the Amended and Restated Definitive Agreement (ARDA),
which laid down the terms and conditions of the purchase and acquisition by
petitioner PIC from PMO of 22,500,000 shares of stock of PPC (representing 90% of
ownership of PPC), as well as receivables of PMO from PPC. Under the ARDA, PIC
agreed to pay PMO the peso equivalent of US$333,762,000.00 as purchase price,
payable in instalments and in accordance with the schedule also set out in the
ARDA.
Under the ARDA the parties agreed that respondent PMO shall execute and
deliver to petitioner PIC the necessary deed of sale transferring to the latter all of
the formers right, title and interest in and to the Shares and deliver to PIC the stock
certificates representing such shares, each duly endorsed, or with separate stock
transfer powers attached, in favor of PIC. Likewise stipulated in the ARDA is the
agreement of the parties that in case petitioner PIC defaults in the payment of its
obligations, the shares shall ipso facto revertto PMO without need of any further
demand. The parties further agreed that PIC shall execute and deliver a Pledge
Agreement in favor of PMO covering the PPC Shares.
In accordance with the ARDA, PMO executed and delivered to PIC the
necessary documents to transfer the formers rights, title, and interests to and in
the PPC shares of stock to the latter; and PPC issued new certificates for the same
shares of stock in the name of PIC and/or its nominees. Also, in accordance with the
ARDA, PIC and PMO executed a Pledge Agreement stating therein that respondent
PMO may conduct a public or private sale of the shares of stock, wherein PMO may
opt to buy the same.
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Three years later, on account of economic problems, petitioner PIC failed to
pay its obligations. Consequently PMO demanded that PIC settle its unpaid
amortizations or else PMO would enforce the automatic reversion of the PPC shares
provided under the ARDA. Due to the refusal of respondent PMO to give PIC an
opportunity to conclude its fund-raising efforts, PIC filed before the RTC a Complaint
against respondent PMO, PPC and the PPC Corporate Secretary praying that they be
enjoined from effecting the reversion of the PPC shares.
After hearing, the RTC rendered a decision and ordered the issuance of a Writ
of Preliminary Injunction restraining PMO, PPC, and the PPC Corporate Secretary
from effecting the reversion of the 22,500,000 shares of stock of PPC. In ruling as
such, the RTC concluded that the provision in the ARDA providing for ipso facto
reversion of the shares of stock is null and void for being a pactum commissorium.
The Court of Appeals however disagreed with the finding of the RTC that the said
provision constitutes pactum commissorium, but still affirmed the denial by the RTC
of the motion of PMO to dissolve the Writ of Preliminary Injunction issued by it.
Hence, the instant petitions.
Issue:
Whether or not Section 8.02 of the ARDA on ipso facto or automatic reversion
of the PPC shares of stock to PMO in case of default by PIC constitutes pactum
commissorium.
Ruling:
Yes, Section 8.02 of the ARDA constitutes pactum commissorium and, thus,
null and void for being contrary to Article 2088 of the Civil Code.
Article 1305 of the Civil Code allows contracting parties to establish such
stipulation, clauses, terms, and conditions as they may deem convenient, provided,
however, that they are not contrary to law, morals, good customs, public order, or
public policy.
Pactum commissorium is among the contractual stipulations that are deemed
contrary to law. It is defined as "a stipulation empowering the creditor to
appropriate the thing given as guaranty for the fulfillment of the obligation in the
event the obligor fails to live up to his undertakings, without further formality, such
as foreclosure proceedings, and a public sale." It is explicitly prohibited under Article
2088 of the Civil Code.
There are two elements for pactum commissorium to exist: (1) that there
should be a pledge or mortgage wherein a property is pledged or mortgaged by way
of security for the payment of the principal obligation; and (2) that there should be
a stipulation for an automatic appropriation by the creditor of the thing pledged or
mortgaged in the event of non-payment of the principal obligation within the
stipulated period.
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Both elements of pactum commissoriumare present in the instant case: (1)
By virtue of the Pledge Agreement dated May 2,1997, PIC pledged its PPC shares of
stock in favor of PMO as security for the fulfillment of the formers obligations under
the ARDA dated May 10, 1996 and the Pledge Agreement itself; and (2) There is
automatic appropriation as under Section 8.02 of the ARDA, in the event of default
by PIC, title to the PPC shares of stock shall ipso factorevert from PIC to PMO without
need of demand.
The Court of Appeals, in ruling that there is no pactum commissorium,
adopted the position of PMO that the ARDA and the Pledge Agreement are entirely
separate and distinct contracts. Neither contract contains both elements of pactum
commissorium: the ARDA solely has the second element, while the Pledge
Agreement only has the first element.
The Court disagrees.
In Blas v. Angeles-Hutalla, the Court recognized that the agreement of the
parties may be embodied in only one contract or in two or more separate writings.
In case of the latter, the writings of the parties should be read and interpreted
together in sucha way as to render their intention effective.
The agreement between PMO and PIC isthe sale of the PPC shares of stock by
the former to the latter, to besecured by a pledge on the very same shares of stock.
The ARDA and the Pledge Agreement herein, although executed in separate written
instruments, are integral to one another. On one hand, Section 2.04 of the ARDA
explicitly requires the execution of a pledge agreement as security for the payment
by PIC of the purchase price for the PPC shares of stock and receivables, and even
provides the form for said pledge agreement in Annex A thereof. Section 2.07 of the
ARDA also states that the closing of the sale and purchase of the PPCshares of stock
and receivables shall take place on the same date that PIC shall execute and deliver
the pledge agreement, together with the certificates of shares of stock, to PMO. On
the other hand, the "Whereas Clauses" of the Pledge Agreement expressly mentions
the ARDA and explains that the Pledge Agreement is being executed to
securepayment by PIC of the purchase price and all other amounts due to PMO
under the ARDA, aswell as the performance by PIC of its other obligations under the
ARDA and the Pledge Agreement itself. Clearly, itwas the intention of the parties to
enter into and execute both contracts for a complete effectuation of their
agreement.
LEASE
OWEN PROSPER A. MACKAY vs. SPOUSES DANA CASWELL AND CERELINA
CASWELL
G.R. No. 183872, November 17, 2014, J. Del Castillo
Under Article 1715 of the Civil Code, if the work of a contractor has defects
which destroy or lessen its value or fitness for its ordinary or stipulated use, he may
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be required to remove the defect or execute another work. If he fails to do so, he
shall be liable for the expenses by the employer for the correction of the work. In
the case at bar, Mackay was given the opportunity to rectify his work. Subsequent
to Zameco IIs disapproval to supply the spouses Caswell electricity for several
reasons, credence must be given to the latters claim that they looked for said
Mackay to demand a rectification of the work, but said Mackay and his group were
nowhere to be found.
Facts:
In their search for someone who could provide electrical installation service in
their newly built home, Spouses Dana and Cerelina Caswell asked the sole
distributor of electricity in the area, Zambales II Electric Cooperative (Zameco II),
thru its sub-office manager how much its service for the installation would be in
which the latter estimated at P456, 000.00.
However, the Spouses Caswell hired Petitioner Owen Prosper Mackay who
offered to do the job for only P250,000.00. With the help of two companions,
Mackay claimed that the installation was completed and ready for power service
connection then. By then, the said spouses had paid him P227,000.00.
At the spouses Caswells request, Zameco II inspected the installation work
and tested the distribution transformers. The inspection showed defects and result
of such they were not granted energization to their homes. The spouses Caswell
thus looked for Mackay but he could not be found. Hence, they were constrained to
ask Zameco II to correct all the problems it found.
They then charged Mackay for swindling having misrepresented themselves
as working for NAPOCOR and as a result of the installation they suffered damages,
such lead to filing of a case for estafa. Mackay on the other hand also filed for a
collection of the remaining P23, 000.00 for the full payment under their agreement
along with damages. The MTC ruled in the said spouses favor and ordered Mackay
to pay the former for rectification and deducting his claim from said amount.
Upon appeal to the RTC it then reversed the decision opined that the Spouses
Caswell should have first filed a judicial action for specific performance where there
could have been an exhaustive determination of the quality and acceptability of
Macakys installation work.
On appeal to the Court of Appeals, it reinstated the decision of the MTC based
on Res Ipsa Loquitur. Furthermore, it was noted that the efforts of the spouses
Caswell for communicate with Mackay shows their intention to seek rectification of
the work from the latter.
Issues:
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Whether or not there was a demand to remove the defects or execute
another work in accordance with Article 1715 of the Civil Code by the spouses
Caswell?
Ruling:
Yes, there was such a demand.
Under Article 1715 of the Civil Code, if the work of a contractor has defects
which destroy or lessen its value or fitness for its ordinary or stipulated use, he may
be required to remove the defect or execute another work. If he fails to do so, he
shall be liable for the expenses by the employer for the correction of the work. The
demand required of the employer under the subject provision need not be in a
particular form.
In the case at bar, Owen Prosper Mackay was given the opportunity to rectify
his work. Subsequent to Zameco IIs disapproval to supply the spouses Caswell
electricity for several reasons, credence must be given to the latters claim that
they looked for said Mackay to demand a rectification of the work, but said Mackay
and his group were nowhere to be found. Had the latter really been readily available
to the spouses Caswell to correct any deficiency in the work, the latter would not
have entertained the thought that they were deceived and would not have been
constrained to undergo the rigors of filing a criminal complaint and testifying
therein.
In fact, the act by the spouses Caswell of demanding that Mackay, to secure
the permit and to subject the transformer to testing can already be construed as a
substantial compliance with Article 1715.
MANUEL JUSAYAN,ALFREDO JUSAYAN, AND MICHAEL JUSAYAN vs. JORGE
SOMBILLA
G.R. No. 163928, January 21, 2015, J. Bersamin
By virtue of Republic Act No. 3844, the sharing of the harvest in proportion to
the respective contributions of the landholder and tenant (share tenancy) was
abolished. Hence, to date, the only permissible system of agricultural tenancy is
leasehold tenancy, a relationship wherein a fixed consideration is paid instead of
proportionately sharing the harvest as in share tenancy. Its elements are: (1) the
object of the contract or the relationship is an agricultural land that is leased or
rented for the purpose of agricultural production; (2) the size of the landholding is
such that it is susceptible of personal cultivation by a single person with the
assistance of the members of his immediate farm household; (3) the tenant-lessee
must actually and personally till, cultivate or operate the land, solely or with the aid
of labor from his immediate farm household; and (4) the landlord-lessor, who is
either the lawful owner or the legal possessor of the land, leases the same to the
tenant-lessee for a price certain or ascertainable either in an amount of money or
produce. In the case at bar, there is no doubt that a land with a total area of 7.9
hectares were susceptible of cultivation by a single person with the help of the
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members of his immediate farm household. Also, ones knowledge of and familiarity
with the landholding, its production and the instances when the landholding was
struck by drought definitely established that the lessee personally cultivated the
land. Moreover, the fact that an agricultural lessee has a regular employment does
not render his ability to farm physically impossible.
Facts:
Wilson Jesena (Wilson) owned four parcels of land situated in New Lucena,
Iloilo. On June 20, 1970, he entered into an agreement with respondent Jorge
Sombilla (Jorge), wherein Wilson designated Jorge as his agent to supervise the
tilling and farming of his riceland in crop year 1970-1971. Before the expiration of
the agreement, Wilson sold the four parcels of land to Timoteo Jusayan (Timoteo).
Jorge and Timoteo verbally agreed that Jorge would retain possession of the parcels
of land and would deliver 110 cavans of palay annually to Timoteo without need for
accounting of the cultivation expenses provided that Jorge would pay the irrigation
fees. From 1971 to 1983, Timoteo and Jorge followed the arrangement. In 1975, the
parcels of land were transferred in the names of Timoteos sons, namely; Manuel,
Alfredo and Michael (petitioners). In 1984, Timoteo sent several letters to Jorge
terminating his administration and demanding the return of the possession of the
parcels of land. Thereafter, due to the failure of Jorge to render accounting and to
return the possession of the parcels of land despite demands, Timoteo filed on June
30, 1986 a complaint for recovery of possession and accounting against Jorge in the
RTC. Following Timoteos death on October 4, 1991, the petitioners substituted him
as the plaintiffs.
In his answer, Jorge asserted that he enjoyed security of tenure as the
agricultural lessee of Timoteo; and that he could not be dispossessed of his
landholding without valid cause.
Eventually, the RTC upheld the contractual relationship of agency between
Timoteo and Jorge; and ordered Jorge to deliver the possession of the parcels of land
to the petitioners. The CA reversed the RTC and dismissed the case, declaring that
the contractual relationship between the parties was one of agricultural tenancy;
and that the demand of Timoteo for the delivery of his share in the harvest and the
payment of irrigation fees constituted an agrarian dispute that was outside the
jurisdiction of the RTC, and well within the exclusive jurisdiction of the Department
of Agriculture (DAR) pursuant to Section 3(d) of Republic Act No. 6657
(Comprehensive Agrarian Reform Law of 1988).
Issues:
1) Whether a lease of agricultural land between the Jorge and Timoteo was a
civil law lease or an agricultural lease.
2) Whether or not the Regional Trial Court (RTC) had original exclusive
jurisdiction over the action commenced by the predecessor of the petitioners
against the respondent.
Ruling:
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1) Jorge was able to establish the existence of agricultural tenancy by
substantial evidence.
The claim of Timoteo that Jorge was his agent contradicted the verbal
agreement he had fashioned with Jorge. By assenting to Jorges possession of the
land sans accounting of the cultivation expenses and actual produce of the land
provided that Jorge annually delivered to him 110 cavans of palay and paid the
irrigation fees belied the very nature of agency, which was representation. The
verbal agreement between Timoteo and Jorge left all matters of agricultural
production to the sole discretion of Jorge and practically divested Timoteo of the
right to exercise his authority over the acts to be performed by Jorge. While in
possession of the land, therefore, Jorge was acting for himself instead of for
Timoteo. Unlike Jorge, Timoteo did not benefit whenever the production increased,
and did not suffer whenever the production decreased. Timoteos interest was
limited to the delivery of the 110 cavans of palay annually without any concern
about how the cultivation could be improved in order to yield more produce.
On the other hand, to prove the tenancy relationship, Jorge presented
handwritten receipts indicating that the sacks of palay delivered to and received by
one Corazon Jusayan represented payment of rental. Thus, the receipts substantially
proved that the contractual relationship between Jorge and Timoteo was a lease.
Yet, the lease of an agricultural land can be either a civil law or an agricultural
lease. In Gabriel vs. Pangilinan, this Court differentiated between a leasehold
tenancy and a civil law lease in the following manner, namely: (1) the subject
matter of a leasehold tenancy is limited to agricultural land, but that of a civil law
lease may be rural or urban property; (2) as to attention and cultivation, the law
requires the leasehold tenant to personally attend to and cultivate the agricultural
land; the civil law lessee need not personally cultivate or work the thing leased; (3)
as to purpose, the landholding in leasehold tenancy is devoted to agriculture; in civil
law lease, the purpose may be for any other lawful pursuits; and (4) as to the law
that governs, the civil law lease is governed by the Civil Code, but the leasehold
tenancy is governed by special laws. However, by virtue of Republic Act No. 3844,
the sharing of the harvest in proportion to the respective contributions of the
landholder and tenant (share tenancy) was abolished. Hence, to date, the only
permissible system of agricultural tenancy is leasehold tenancy, a relationship
wherein a fixed consideration is paid instead of proportionately sharing the harvest
as in share tenancy.
In Teodoro vs. Macaraeg, this Court has synthesized the elements of
agricultural tenancy to wit: (1) the object of the contract or the relationship is an
agricultural land that is leased or rented for the purpose of agricultural production;
(2) the size of the landholding is such that it is susceptible of personal cultivation by
a single person with the assistance of the members of his immediate farm
household; (3) the tenant-lessee must actually and personally till, cultivate or
operate the land, solely or with the aid of labor from his immediate farm household;
and (4) the landlord-lessor, who is either the lawful owner or the legal possessor of
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the land, leases the same to the tenant-lessee for a price certain or ascertainable
either in an amount of money or produce.
It can be gleaned that in both civil law lease of an agricultural land and
agricultural lease, the lessor gives to the lessee the use and possession of the land
for a price certain. Although the purpose of the civil law lease and the agricultural
lease may be agricultural cultivation and production, the distinctive attribute that
sets a civil law lease apart from an agricultural lease is the personal cultivation by
the lessee. An agricultural lessee cultivates by himself and with the aid of those of
his immediate farm household. Conversely, even when the lessee is in possession of
the leased agricultural land and paying a consideration for it but is not personally
cultivating the land, he or she is a civil law lessee.
In the case at bar, nor was there any question that the parcels of agricultural
land with a total area of 7.9 hectares involved herein were susceptible of cultivation
by a single person with the help of the members of his immediate farm household.
Also, Jorges knowledge of and familiarity with the landholding, its production and
the instances when the landholding was struck by drought definitely established
that he personally cultivated the land. His ability to farm the seven hectares of land
despite his regular employment as an Agricultural Technician at the Municipal
Agriculture Office was not physically impossible for him to accomplish considering
that his daughter, a member of his immediate farm household, was cultivating one
of the parcels of the land. Indeed, the law did not prohibit him as the agricultural
lessee who generally worked the land himself or with the aid of member of his
immediate household from availing himself occasionally or temporarily of the help
of others in specific jobs.
Section 7 of Republic Act No. 3844 provides that once there is an agricultural
tenancy, the agricultural tenants right to security of tenure is recognized and
protected. The landowner cannot eject the agricultural tenant from the land unless
authorized by the proper court for causes provided by law. However, none of such
grounds for valid dispossession of landholding was attendant in Jorges case.
2) The rule is settled that the jurisdiction of a court is determined by the
statute in force at the time of the commencement of an action. In 1980, upon the
passage of Batas Pambansa Blg. 129 (Judiciary Reorganization Act), the Courts of
Agrarian Relations were integrated into the Regional Trial Courts and the jurisdiction
of the Courts of Agrarian Relations was vested in the Regional Trial Courts. It was
only on August 29, 1987, when Executive Order No. 229 took effect, that the
general jurisdiction of the Regional Trial Courts to try agrarian reform matters was
transferred to the DAR. Therefore, the RTC still had jurisdiction over the dispute at
the time the complaint was filed in the RTC on June 30, 1986.
NEW WORLD DEVELOPERS AND MANAGEMENT INC. vs.
AMA COMPUTER LEARNING CENTER INC.
G.R. Nos. 187930 & 188250, February 23, 2015, C.J. Sereno
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New World and AMA entered into a lease agreement whereby New World
agreed to lease to AMA its commercial building located in Manila. AMA failed to pay
its rentals citing financial losses. AMA then preterminated the 8 year lease
agreement and demanded the refund of its security deposit and advance rentals. It
also prayed that its liabilities be reduced on account of its financial difficulties. The
Supreme Court ruled that in the sphere of personal and contractual relations
governed by laws, rules and regulations created to promote justice and fairness,
equity is deserved, not demanded. The application of equity necessitates a
balancing of the equities involved in a case, for [h]e who seeks equity must do
equity, and he who comes into equity must come with clean hands. Persons in dire
straits are never justified in trampling on other persons rights. Litigants shall be
denied relief if their conduct has been inequitable, unfair and dishonest as to the
controversy in issue. The actions of AMA smack of bad faith.
Facts:
New World is the owner of a commercial building located at No. 1104-1118
Espaa corner Paredes Streets, Sampaloc, Manila. In 1998, AMA agreed to lease the
entire second floor of the building for its computer learning center, and the parties
entered into a Contract of Lease covering the eight-year period from 15 June 1998
to 14 March 2006. In the said contract, AMA may preterminate the contract by
sending notice in writing to New World at least six months before the intended date.
In case of pretermination, AMA shall be liable for liquidated damages in an amount
equivalent to six months of the prevailing rent.
For the first three years, AMA paid the monthly rent as stipulated in the
contract. In the succeeding years, AMA requested the deferment of the annual
increase in the monthly rent which was stipulated in the Lease Agreement citing
financial constraints. New World agreed to reduce the escalation rate. In 2004, AMA
decided to preterminate the contract effective immediately on the ground of
business losses. AMA also demanded the refund of its advance rental and security
deposit. New World then computed the remaining liability of AMA. The deduction of
the advance rental and security deposit paid by AMA still left an unpaid balance in
the amount of 1,049,486.59. However, despite the meetings between the parties,
they failed to arrive at a settlement regarding the payment of the foregoing
amounts. Hence, New World filed a complaint for a sum of money and damages
against AMA.
The RTC ordered AMA to pay New World 466,620 as unpaid rentals plus 3%
monthly penalty interest until payment; 1,399,860 as liquidated damages
equivalent to six months rent. On appeal with the CA, the CA ordered AMA to pay
New World 466,620 for unpaid rentals and 933,240 for liquidated damages
equivalent to four months rent, with the advance rental and security deposit paid
by AMA to be deducted therefrom. Hence, this petition.
Issues:
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1. Whether or not AMA is liable to pay six months worth of rent as liquidated
damages.
2. Whether or not AMA remained liable for the rental arrears.
Ruling:
1. AMA is liable to pay six months worth of rent as liquidated damages.
Quite notable is the fact that AMA never denied its liability for the payment of
liquidated damages in view of its pretermination of the lease contract with New
World. What it claims, however, is that it is entitled to the reduction of the amount
due to the serious business losses it suffered as a result of a drastic decrease in its
enrollment.
The law does not relieve a party from the consequences of a contract it
entered into with all the required formalities. Courts have no power to ease the
burden of obligations voluntarily assumed by parties, just because things did not
turn out as expected at the inception of the contract. It must also be emphasized
that AMA is an entity that has had significant business experience, and is not a
mere babe in the woods.
It is quite easy to understand the reason why a lessor would impose
liquidated damages in the event of the pretermination of a lease contract.
Pretermination is effectively the breach of a contract, that was originally intended to
cover an agreed upon period of time. A definite period assures the lessor a steady
income for the duration. A pretermination would suddenly cut short what would
otherwise have been a longer profitable relationship. Along the way, the lessor is
bound to incur losses until it is able to find a new lessee, and it is this loss of income
that is sought to be compensated by the payment of liquidated damages.
In the sphere of personal and contractual relations governed by laws, rules
and regulations created to promote justice and fairness, equity is deserved, not
demanded. The application of equity necessitates a balancing of the equities
involved in a case, for [h]e who seeks equity must do equity, and he who comes
into equity must come with clean hands. Persons in dire straits are never justified
in trampling on other persons rights. Litigants shall be denied relief if their conduct
has been inequitable, unfair and dishonest as to the controversy in issue. The
actions of AMA smack of bad faith.
2. AMAs liability for the rental arrears has already been extinguished.
Based on Item No. 4 of the Lease contract, the security deposit was paid
precisely to answer for unpaid rentals that may be incurred by AMA while the
contract was in force. The security deposit was held in trust by New World, and
whatever may have been left of it after the termination of the lease shall be
refunded to AMA.
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Unlike the security deposit, no part of the advance rental was ever meant to
be refunded to AMA. Instead, the parties intended to apply the advance rental, on a
staggered basis, to a portion of the monthly rental in the last year of the lease term.
Considering the pretermination of the lease contract in the present case, this intent
of the parties as regards the advance rental failed to take effect. The advance
rental, however, retains its purpose of answering for the outstanding amounts that
AMA may owe New World.
The Court then applies the advance rental of 450,000 to this amount to arrive
at a total extinguishment of the liability for the unpaid rentals and a partial
extinguishment of the liability for liquidated damages. This shall leave AMA still
liable to New World in the amount of 966,480
(1,416,480 total liability less 450,000 advance rental).
LAND, TITLES AND DEEDS
TORRENS TITLE
AZNAR BROTHERS REALTY COMPANY vs. SPOUSES JOSE AND MAGDALENA
YBAEZ
G.R. No. 161380, April 21, 2014, J. Bersamin
The settled rule is that a free patent issued over a private land is null and
void, and produces no legal effects whatsoever. Private ownership of land as when
there is a prima facie proof of ownership like a duly registered possessory
information or a clear showing of open, continuous, exclusive, and notorious
possession, by present or previous occupants is not affected by the issuance of a
free patent over the same land, because the Public Land Law applies only to lands
of the public domain. Lot No. 18563, not being land of the public domain as it was
already owned by Aznar Brothers, was no longer subject to the free patent issued to
the Spouses Ybaez.
Facts:
On 1964, Casimiro Ybaez (Casimiro), with the marital consent of Maria
Daclan, executed a Deed of Absolute Sale in favor of Aznar Brothers.
Meanwhile on 1968, Casimiro died intestate leaving as heirs his wife Maria,
and their children, namely, Fabian and Adriano, both surnamed Ybaez, and Carmen
Ybaez-Tagimacruz, Fe Ybaez-Alison, and Dulcisima Ybaez-Tagimacruz. On 1977,
the heirs of Casimiro executed a document entitled Extrajudicial Declaration of Heirs
with an Extrajudicial Settlement of Estate of Deceased Person and Deed of Absolute
Sale, whereby they divided and adjudicated among themselves Lot No. 18563. By
the same document, they sold the entire lot to their co-heir, Adriano. On 1978,
Adriano sold Lot No. 18563 to Spouses Ybaez. On 1979, Jose R. Ybaez filed Free
Patent Application in respect of the land he had bought from Adriano. In due course,
Original Certificate of Title (OCT) was issued to Jose R. Ybaez.
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On 1989, Aznar Brothers filed in the RTC a complaint against Spouses Ybaez
claiming absolute ownership of Lot No. 18563 by virtue of the Deed of Absolute
Sale dated 1964 executed in its favor by Casimiro. Alleging that the free patent
issued in favor of Jose R. Ybaez covered the same property already adjudicated as
private property, Aznar Brothers sought judgment to compel Jose R. Ybaez to
surrender all the documents pertaining to the free patent for cancellation. Aznar
Brothers averred that Spouses Ybaez held no legal right nor just title to apply for
free patent over the lot in question, for the land was no longer a public disposable
agricultural land but a private residential land that it already owned; that the
issuance of OCT No. 2150 was erroneous and without factual and legal bases; that it
learned about the registration of the land in the name of Jose R. Ybaez only when
his agent offered to sell the land to it; that it refused the offer because it was
already the owner of the land; and that consequently OCT No. 2150 should be
cancelled, and Jose R. Ybaez should be ousted from the land.
Issues:
1. Whether or not Spouses Ybaez have a right of ownership over the subject
lot.
2. Whether or not Aznar Brothers are barred by laches.
3. Whether or not the Issuance of patent to Spouses Ybaez is valid.
Ruling:
1. None. Aznar Brothers owned Lot No. 18563 and that Spouses Ybaez were not
buyers in good faith.
Spouses Ybaez were guilty of bad faith, and that they acquired Lot No. 18563
from sellers who were not the owners. The Spouses Ybaez held no right to Lot No.
18563 because Adriano, their seller, and his siblings were not the owners of Lot No.
18563. Indeed, Casimiro had absolutely conveyed his interest in Lot No. 18563 to
Aznar Brothers under the Deed of Absolute Sale of March 21, 1964 with the marital
consent of Maria Daclan, Casimiros surviving spouse and the mother of Adriano and
his siblings. Considering that such conveyance was effective and binding on Adriano
and his siblings, there was no valid transmission of Lot No. 18563 upon Casimiros
death to any of said heirs, and they could not legally adjudicate Lot No. 18563 unto
themselves, and validly transfer it to Adriano. The conveyance by Adriano to Jose R.
Ybaez on June 21, 1978 was absolutely void and ineffectual.
There is also no question that the Spouses Ybaez were aware of the
conveyance of Lot No. 18563 by Casimiro to Aznar Brothers considering that
the Deed of Absolute Sale of March 21, 1964 between Casimiro and Aznar Brothers
was registered in the book of registry of unregistered land on the same day
pursuant to their agreement. Such registration constituted a constructive notice of
the conveyance on the part of the Spouses Ybaez pursuant to Section 194 of
the Revised Administrative Code of 1917, as amended by Act No. 3344.
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Finally, Section 3 of P.D. No. 1529, albeit expressly discontinuing the system of
registration under the Spanish Mortgage Law, has considered lands recorded under
that system as unregistered land that could still be recorded under Section 113 of
P.D. No. 1529 until the land shall have been brought under the operation of the
Torrens system; and has provided that the books of registration for unregistered
lands provided under Section 194 of the Revised Administrative Code, as amended
by Act No. 3344, shall continue to remain in force; provided, that all instruments
dealing with unregistered lands shall henceforth be registered under Section 113 of
this Decree. It is clear, therefore, that even with the effectivity of P.D. No. 1529, all
unregistered lands may still be registered pursuant to Section 113 of P.D. No. 1529,
which essentially replicates Section 194, as amended by Act No. 3344, to the effect
that a deed or instrument conveying real estate not registered under the Torrens
system should affect only the parties thereto unless the deed or instrument was
registered in accordance with the same section.
2. No.
Aznar Brothers immediately registered the purchase in accordance with Act No.
3344, the law then governing the registration of unregistered land. Its action in that
regard ensured the protection of the law as to its ownership of the land, and evinced
that it did not abandon its ownership. Secondly, the supposed acts of possession of
Lot No. 18563 exercised by the Spouses Ybaez from the time of their purchase
from Adriano, including causing it to be surveyed for purposes of the application for
free patent, did not prejudice Aznar Brothers interest because the registration
under Act No. 3344 had given constructive notice to the Spouses Ybaez of its prior
acquisition of the land. Thereby, the Spouses Ybaez became bound by the sale
from Casimiro to Aznar Brothers, and rendered them incapable of acquiring the land
in good faith from Adriano. Consequently, Jose R. Ybaezs intervening application
for the free patent, the grant of the free patent and the issuance of OCT No. 2150
thereafter did not supplant the superior rights and interest of Aznar Brothers in Lot
No. 18563.
3. No. Lot No. 18563, not being land of the public domain as it was already owned
by Aznar Brothers, was no longer subject to the free patent issued to the
Spouses Ybaez.
The settled rule is that a free patent issued over a private land is null and void,
and produces no legal effects whatsoever. Private ownership of land as when there
is a prima facie proof of ownership like a duly registered possessory information or a
clear showing of open, continuous, exclusive, and notorious possession, by present
or previous occupants is not affected by the issuance of a free patent over the
same land, because the Public Land Law applies only to lands of the public domain.
The Director of Lands has no authority to grant free patent to lands that have
ceased to be public in character and have passed to private ownership.
Consequently, a certificate of title issued pursuant to a homestead patent partakes
of the nature of a certificate issued in a judicial proceeding only if the land covered
by it is really a part of the disposable land of the public domain.
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DOLORES CAMPOS vs. DOMINADOR ORTEGA, SR. AND JAMES SILOS
G.R. No. 171286, June 02, 2014, J. Peralta
It cannot be argued that Dolores had already acquired a vested right over the
subject property when the NHA recognized her as the censused owner by assigning
to her a tag number TAG No. 77-0063. While it is true that NHA recognizes Dolores
as the censused owner of the structure built on the lot, the issuance of the tag
number is not a guarantee for lot allocation. The census, tagging, and Dolores
petition, did not vest upon her a legal title to the lot she was occupying, but a mere
expectancy that the lot will be awarded to her. The expectancy did not ripen into a
legal title when the NHA, informed her that her petition for the award of the lot was
denied.
Facts:
On August 17, 1999, Dolores Campos, through her attorney-in-fact, Salvador
Pagunsan, filed a case for specific performance with damages against respondents
Dominador Ortega, Sr. and James Silos. The Petition stated that, Dolores and her
husband Ernesto, along with their family, occupied the entire second level as well as
the front portion of the ground level of a residential structure located at No. 2085 F.
Blumentritt Street, Mandaluyong City. The lot on which the said structure is standing
is owned by the government, while the structure itself is owned by Dominga Boloy
from whom Dolores leased the same beginning in 1966. Dolores had paid the real
estate taxes in behalf of Dominga Boloy in 1987, in view of the apparent
abandonment by Dominga Boloy on these obligations. In 1977, pursuant to the
Zonal Improvement Program, a census, where Dolores dwelling is located, was
conducted wherein Dolores was among those censused and qualified as a bona fide
occupant. As a consequence of having qualified, Dolores was assigned an
identifying house tag number 77-00070-08 on August 20, 1977.
After the death of the owner Dominga Boloy, Dolores had a verbal
understanding with Clarita Boloy, daughter-in-law of the former, to allow Dolores to
introduce improvements and renovations on the structure. It was further agreed
that said amount shall be accordingly applied to their monthly rentals. The
foregoing agreement, was never followed and Dolores was made to continue paying
the monthly obligations but even this latter agreement never materialized.
In 1987, Walter Boloy stepped into the situation and demanded from the
Dolores and family the immediate vacation of the subject premises. An ejectment
suit was filed against Dolores but it was later dismissed by the MTC. Dolores
authorized her nephew Salvador Pagunsan to follow up with the NHA the matter
concerning the award of lot to them in line with the ZIP, after learning that all bona
fide occupants may be allowed to buy the structure if the owner has already died.
Salvador Pagunsan was informed by one Antonio Fernando that if Ernesto Campos,
who was duly censused as a bona fide occupant, may be able to buy the property
from Mr. Walter Boloy, Ernesto Campos may be awarded the lot on which the
structure is located.
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Salvador Pagunsan attended the meeting scheduled by the Arbitration and
Awards Committee, Atty. Fernandez gave Dolores one month to buy the property.
Dolores did not accede to the offer since the lot occupied by them and where they
were duly censused as occupants is Lot 18, Block 7, whereas the one offered to be
sold is Lot 17, which pertains to a different owner. But it was learned by Dolores,
that the property was already awarded to James Silos and Dominador Ortega, Sr.,
and that a Deed of Absolute Sale was executed by and between Clarita Boloy and
Dominador Ortega Sr. over Lot 17, Block 7. This despite the fact that during the said
initial meeting, Dolores was given one month to exercise the option of buying the
property.
Dolores inquired with the NHA and questioned the award of the lot to Ortega
Sr. and Silos. Dolores only came to know later that a TCT was already issued to
Dominador Ortega, Sr. and James Silos over the lot despite the appeal. Ortega Sr.
and Silos countered that the complaint stated no cause of action, and such cause of
action is already barred by prior judgment. Lastly, they argued that they are
registered owners of the land in question as well as the house built thereon by
virtue of TCT No. 13342 and tax declarations, and that the Torrens title cannot be
altered, modified or cancelled except through a direct proceeding. Trial ensued. RTC
ruled in favor of Dolores Campos. The RTC rejected the allegation that respondents
are guilty of committing fraud and, consequently, denied Dolores claim for
damages. Upon appeal, the CA reversed the trial courts decision. Campos moved
for reconsideration, but it was denied. Hence, this petition.
Issues:
1. Whether or not the Court of Appeals erred in failing to recognize that Dolores
has already acquired a vested and cognizable right respecting the property.
2. Whether or not the Court of Appeals erred in upholding the presumption of
regularity of official acts respecting the process of award of the property
made to the Ortega Sr.
Ruling:
1. No, the Court of Appeals did not err.
Neither can it be successfully argued that Dolores had already acquired a
vested right over the subject property when the NHA recognized her as the
censused owner by assigning to her a tag number TAG No. 77-0063. While it is true
that NHA recognizes Dolores as the censused owner of the structure built on the lot,
the issuance of the tag number is not a guarantee for lot allocation. Dolores had
petitioned the NHA for the award to her of the lot she is occupying. However, the
census, tagging, and Dolores petition, did not vest upon her a legal title to the lot
she was occupying, but a mere expectancy that the lot will be awarded to her. The
expectancy did not ripen into a legal title when the NHA, sent a letter informing her
that her petition for the award of the lot was denied. Moreover, the NHA, after the
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conduct of studies and consultation with residents, had designated Area 1, where
the lot petitioned by Dolores is located, as an Area Center.
A vested right is one that is absolute, complete and unconditional and no
obstacle exists to its exercise. It is immediate and perfect in itself and not
dependent upon any contingency. To be vested, a right must have become a title
legal or equitable to the present or future enjoyment of property. Contrary to
Dolores position, the issuance of a tag number in her favor did not grant her
irrefutable rights to the subject property. The "tagging of structures" in the Bagong
Barrio area was conducted merely to determine the qualified beneficiaries and bona
fide residents within the area. Her possession and occupancy of the said property
could not be characterized as fixed and absolute. As such, Dolores cannot claim that
she was deprived of her vested right when the NHA ordered her relocation to
another area. Neither does Campos have a cognizable right respecting the lot in
question. Notably, she readily admitted not exercising their option to buy Boloys
property despite the knowledge that one of the requirements before an entitlement
to an award of the government-owned lot is that they must own the subject house.
There should be no doubt that the object of the sale is a determinate thing, a semiapartment house owned by Boloy and not the specific lot on which it was built.
Thus, it is totally immaterial if the land on which the structure stood was indicated
as Lot 17 or Lot 18.
2. No, the Court of Appeals did not err.
In this case, Dolores, as the party alleging fraud in the transaction and the
one who bears the burden of proof, miserably failed to demonstrate that Ortega Sr.
and Silos committed fraud or that they connived with government officials and
employees to cause undue damage or prejudice to Dolores. Dolores did not present
even a single evidence to support the view that the repetitive absences of the
persons necessary for the meetings before the Arbitration and Awards Committee
were intentional or done with malicious intent.
The Court agrees with the CA that the case for specific performance with
damages instituted by Dolores effectively attacks the validity of Ortegas Torrens
title over the subject lot. It is evident that, the objective of such claim is to nullify
the title of Ortega Sr. and Silos to the property in question, which, challenges the
judgment pursuant to which the title was decreed. This is a collateral attack that is
not permitted under the principle of indefeasibility of Torrens title. The appropriate
legal remedy that Dolores should have availed is an action for reconveyance. Proof
of actual fraud is not required as it may be filed even when no fraud intervened
such as when there is mistake in including the land for registration.
Under the Principle of constructive trust, registration of property by one
person in his name, whether by mistake or fraud, the real owner being another
person, impresses upon the title so acquired the character of a constructive trust for
the real owner, which would justify an action for reconveyance. The Court agrees
with the CAs disquisition that an action for reconveyance can indeed be barred by
prescription. In a long line of cases decided by this Court, Supreme Court ruled that
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an action for reconveyance based on implied or constructive trust must perforce
prescribe in ten (10) years from the issuance of the Torrens title over the property.
VERGEL PAULINO AND CIREMIA PAULINO
vs.
COURT OF APPEALS AND REPUBLIC OF THE PHILIPPINES, represented by
the ADMINISTRATOR of the LAND REGISTRATION AUTHORITY
G.R. No. 205065, June 4, 2014
x-----------------------x
SPOUSES DR. VERGEL L. PAULINO & DR. CIREMIA G. PAULINO
vs.
REPUBLIC OF THE PHILIPPINES, represented by the ADMINISTRATOR of the
LAND REGISTRATION AUTHORITY
G.R. No. 207533, J. Mendoza
In reconstitution proceedings, the Court has repeatedly ruled that before
jurisdiction over the case can be validly acquired, it is a condition sine quo non that
the certificate of title has not been issued to another person. If a certificate of title
has not been lost but is in fact in the possession of another person, the
reconstituted title is void and the court rendering the decision has not acquired
jurisdiction over the petition for issuance of new title. In the case at bench, the CA
found that the RTC lacked jurisdiction to order the reconstitution of the original
copy of TCT No. 301617, there being no lost or destroyed title over the real
property, the respondent having duly proved that TCT No. 301617 was in the name
of a different owner, Florendo, and the technical description appearing on that TCT
No. 301617 was similar to the technical description appearing in Lot 939, Piedad
Estate covered by TCT No. RT-55869 (42532) in the name of Antonino.
Facts:
The late Celso Fernandez purchased, in a public auction conducted by the
Quezon City government, a real property owned and registered in the name of Lolita
G. Javier (Javier) as evidenced by a certificate of sale of delinquent property. The
subject property appeared to be covered by an owners duplicate of TCT No. 301617
of the QCRD.
After his death, the surviving heirs executed an Extra-Judicial Settlement of
Estate with Absolute Sale covering the property, selling it in favor of the petitioners,
spouses Vergel L. Paulino and Ciremia Paulino (Spouses Paulino).
On June 11, 1988, a fire broke out in the Quezon City Hall which burned a
portion thereof which included the office of the QCRD.
On March 9, 2010, Spouses Paulino filed a petition for reconstitution of the
original copy of TCT No. 301617 with the RTC, alleging that its original copy was
among those titles that were razed during the fire.
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The RTC directed the LRA to submit a report within five (5) days from notice.
Without awaiting the LRA Report, the RTC rendered the assailed July Decision,
granting the petition for reconstitution and ordering the Registrar of Deeds of the
QCRD to reconstitute the original copy of TCT No. 301617. The RTC issued the
Certificate of Finality, there being no motion for reconsideration or appeal filed by
any of the interested parties.
The RTC received the LRA Report, stating that TCT No. 301617 was registered
in the name of a certain Emma B. Florendo (Florendo) and that it was previously the
subject of an application for administrative reconstitution; that the original copy of
the title on file in the Registry of Deeds was among those saved titles from the fire
that gutted the office of QCRD. When the technical description of the property was
plotted, it was identical with Lot 939,Piedad Estate covered by TCT No. RT-55869
(42532), in the name of Magnolia W. Antonino (Antonino).
Spouses Paulino filed with the QCRD an application for registration of the
judicial reconstitution of TCT No. 301617 based on the RTC decision. The Registrar of
Deeds refused to reconstitute the original copy of the TCT.
Respondent Republic of the Philippines, represented by the Administrator of
the LRA, filed its Petition for Annulment of Judgment with Urgent Prayer for Issuance
of Temporary Restraining Order and/or Writ of Preliminary Injunction assailing the
RTC decision granting the petition for reconstitution of the original title.
The CA issued the assailed resolution, granting the prayer for the issuance of
a writ of preliminary injunction.
The CA ruled that the RTC lacked jurisdiction to order the reconstitution of the
original copy of TCT No. 301617, there being no lost or destroyed title.
Issue:
Can the court overturn the decision of the RTC granting the petition for
reconstitution even if it lacked jurisdiction?
Ruling:
Yes, the court can overturn the decision of the RTC since the petition for
reconstitution is considered null and void.
The governing law for judicial reconstitution of title is R.A. No. 26. Sec. 15
thereof provides when an order for reconstitution should issue, as follows:
Section 15. If the court, after hearing, finds that the documents presented, as
supported by parole evidence or otherwise, are sufficient and proper to warrant the
reconstitution of the lost or destroyed certificate of title, and that petitioner is the
registered owner of the property or has an interest therein, that the said certificate
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of title was in force at the time it was lost or destroyed, and that the description,
area and boundaries of the property are substantially the same as those contained
in the lost or destroyed certificate of title, an order of reconstitution shall be issued.
The clerk of court shall forward to the register of deeds a certified copy of said order
and all the documents which, pursuant to said order, are to be sued as the basis of
the reconstitution. If the court finds that there is no sufficient evidence or basis to
justify the reconstitution, the petition shall be dismissed, but such dismissal shall
not preclude the right of the party or parties entitled thereto to file an application
for confirmation of his or their title under the provisions of the Land Registration Act.
The following must be present for an order for reconstitution to issue: (a) that
the certificate of title had been lost or destroyed; (b) that the documents presented
by petitioner are sufficient and proper to warrant the reconstitution of the lost or
destroyed certificate of title; (c) that the petitioner is the registered owner of the
property or had an interest therein; (d) that the certificate of title was in force at the
time it was lost and destroyed; and (e) that the description, area and boundaries of
the property are substantially the same as those contained in the lost or destroyed
certificate of title.
In reconstitution proceedings, the Court has repeatedly ruled that before
jurisdiction over the case can be validly acquired, it is a condition sine quo non that
the certificate of title has not been issued to another person. If a certificate of title
has not been lost but is in fact in the possession of another person, the
reconstituted title is void and the court rendering the decision has not acquired
jurisdiction over the petition for issuance of new title. The courts simply have no
jurisdiction over petitions by such third parties for reconstitution of allegedly lost or
destroyed titles over lands that are already covered by duly issued subsisting titles
in the names of their duly registered owners. The existence of a prior title ipso facto
nullifies the reconstitution proceedings. The proper recourse is to assail directly in a
proceeding before the regional trial court the validity of the Torrens title already
issued to the other person.
In the case at bench, the CA found that the RTC lacked jurisdiction to order
the reconstitution of the original copy of TCT No. 301617, there being no lost or
destroyed title over the subject real property, the respondent having duly proved
that TCT No. 301617 was in the name of a different owner, Florendo, and the
technical description appearing on that TCT No. 301617 was similar to the technical
description appearing in Lot 939, Piedad Estate covered by TCT No. RT-55869
(42532) in the name of Antonino.
The Court finds no reversible error in the findings of the CA. It is clear from
the records that the subject TCT No. 301617 is in the name of a different owner,
Florendo, and the technical description appearing therein pertains to a parcel of
land covered by TCT No. RT-55869 (42532) in the name of one Antonino.
It must be remembered that the reconstitution of a certificate of title denotes
restoration in the original form and condition of a lost or destroyed instrument
attesting the title of a person to a piece of land. The purpose of the reconstitution of
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title is to have, after observing the procedures prescribed by law, the title
reproduced in exactly the same way it has been when the loss or destruction
occurred. Reconstitution apparently presupposes the existence of an original
certificate of title which was lost or destroyed. If there was no loss or destruction
like in the case at bench, there is actually nothing to reconstitute. The same rule
applies if in fact there is an earlier valid certificate of title in the name and in the
possession of another person and said title is existing. The RTC never acquired
jurisdiction over the same, and its judgment rendered is null and void, which may
be attacked anytime.
In addition, Spouses Paulino also raised the irregularity in the issuance of TCT
No. RT-558969 (42532), arguing that a reconstitution would not constitute a
collateral attack on a title that was irregularly and illegally issued in the first place.
They argued that it was an error on the part of the CA to deny their right to have
their title reconstituted based on the fake title of Antonino. They assert that the
rule, that a title issued under the Torrens System is presumed valid and, hence, is
the best proof of ownership of a piece of land, does not apply where the certificate
itself is faulty as to its purported origin.
The Court, however, finds the argument of Spouses Paulino misplaced. It is a
well settled rule that a certificate of title, once registered, cannot be impugned,
altered, changed, modified, enlarged or diminished except in a direct proceeding
permitted by law. The validity of the certificate of title can be threshed out only in a
direct proceeding filed for the purpose. A Torrens title cannot be attacked
collaterally.
It is also a well-known doctrine that the issue as to whether the title was
procured by falsification or fraud as advanced by Spouses Paulino can only be raised
in an action expressly instituted for the purpose. A Torrens title can be attacked only
for fraud, within one year after the date of the issuance of the decree of
registration. Such attack must be direct, and not by a collateral proceeding. The title
represented by the certificate cannot be changed, altered, modified, enlarged, or
diminished in a collateral proceeding.
The reconstitution proceeding constituted a collateral attack on the Torrens
title of Antonino. The proper recourse of the Spouses Paulino to contest the validity
of the certificate of title is not through the subject petition for reconstitution, but in
a proper proceeding instituted for such purpose. Even if their arguments of fraud
surrounding the issuance of the title of Antonino is correct, such allegation must be
raised m a proper proceeding which is expressly instituted for that purpose.
REPUBLIC OF THE PHILIPPINES vs. FRANKLIN M. MILLADO
Where the authority to proceed is conferred by a statute and the manner of
obtaining jurisdiction is mandatory, the same must be strictly complied with, or the
proceedings will be void. For non-compliance with the actual notice requirement to
all other persons who may have interest in the property, in this case the registered
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owners and/or their heirs, in accordance with Section 13 in relation to Section 12 of
RA 26, the trial court did not acquire jurisdiction over L.R.A. The proceedings
therein were therefore a nullity and the Decision was void.
Facts:
Franklin M. Millado (Millado) filed a petition for reconstitution of Original
Certificate of Title (OCT) No. 2108 issued in favor of the following, in undivided
equal shares: Isabel, Sixto and Apolonia (all surnamed Bautista). Millado alleged
that he and his wife are the vendees of the property covered by the said title, by
virtue of a Deed of Extra-Judicial Settlement of Estate with Sale executed by the
heirs of spouses Sixto and Elena Bautista. That the owner's duplicate of OCT No.
2108 was in his possession while he was securing clearances for the transfer of title
in their names but he either left or misplaced the same.
Millado claimed that despite efforts he exerted to locate the owners
duplicate of OCT he was unable to find it.
The trial court ordered Millado to submit the names and addresses of the
occupants or persons in possession of the property, the owners of the adjoining
properties and all persons who may have any interest in the property. In
compliance, Millado submitted only the names and addresses of the owners/actual
occupants of the adjoining lots.
The hearing date for the petition was set on December 13, 2007, and
directing that (a) the notice/order be published twice in the successive issues of the
Official Gazette, posted in the premises of the property, the main entrance of the
Provincial Capitol and at the entrance of the municipal building of San Narciso,
Zambales; (b) copies of the notice/order together with the petition be sent to the
Office of the Solicitor General, the Provincial Prosecutor, the Register of Deeds, the
Land Registration Authority (National Land Titles and Deeds, LRA), Atty. Jose T. Pacis,
Engr. Franklin M. Millado and the adjoining lot owners, namely; Remedios Fernandez
and Pascual Fernandez, Letecia Mariano and Harris Fogata; (c) the LRA thru its
Records Section submit its report within 30 days from receipt of the order/notice,
pursuant to Sections 10 and 12 of LRC Circular No. 35; and (d) the Register of Deeds
to submit her verification in accordance with the aforesaid rule, within 30 days from
receipt of notice/order.
At the hearing, Millado took the witness stand and confirmed the loss of the
owners duplicate copy of OCT No. 2108 while he was securing clearances from the
Bureau of Internal Revenue for the payment of capital gains tax. At that time he had
a bunch of documents in an envelope but he forgot about it. He went back to the
said office looking for the envelope but there were many people going in and out of
said office. He secured a certification from the Register of Deeds on the lost or
missing original OCT No. 2108 in their files, and also a certification from the LRA
regarding the issuance of the decree of registration.
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The trial court granted the petition for reconstitution. The CA affirmed the
trial courts ruling. It held that Millado had complied with the statutory notice
requirements so that the adjoining owners and any other persons who may have an
interest in the property may be duly notified of the proceedings and given the
opportunity to oppose the petition.
Issue:
Can the court grant the petition for reconstitution even if Millado failed to
comply with all the jurisdictional requisites?
Ruling:
No, the court cannot grant the petition for reconstitution without complying
with the jurisdictional requisites.
The nature of judicial reconstitution proceedings is the restoration of an
instrument which is supposed to have been lost or destroyed in its original form and
condition. The purpose of the reconstitution of title or any document is to have the
same reproduced, after proper proceedings in the same form they were when the
loss or destruction occurred.
In order for the court to acquire jurisdiction over the petition for
reconstitution, the following provisions must be observed, to wit:
SEC. 12. Petitions for reconstitution from sources enumerated in
Sections 2(c), 2(d), 2(e), 2(f), 3(c), 3(d), 3(e), and/or 3(f) of this Act,
shall be filed with the proper Court of First Instance, by the registered
owner, his assigns, or any person having an interest in the property.
The petition shall state or contain, among other things, the following:
(a) that the owners duplicate of the certificate of title had been lost or
destroyed; (b) that no co-owners, mortgagees or lessees duplicate
had been issued, or, if any had been issued, the same had been lost or
destroyed; (c) the location, area and boundaries of the property; (d)
the nature and description of the buildings or improvements, if any,
which do not belong to the owner of the land, and the names and
addresses of the owners of such buildings or improvements; (e) the
names and addresses of the occupants or persons in possession of the
property, of the owners of the adjoining properties and of all persons
who may have any interest in the property; (f) a detailed description of
the encumbrances, if any, affecting the property; and (g) a statement
that no deeds or other instruments affecting the property have been
presented for registration, or, if there be any, the registration thereof
has not been accomplished, as yet. All the documents, or
authenticated copies thereof, to be introduced in evidence in support
of the petition for reconstitution shall be attached thereto and filed
with the same: Provided, That in case the reconstitution is to be made
exclusively from sources enumerated in Section 2(f) or 3(f) of this Act,
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the petition shall be further accompanied with a plan and technical
description of the property duly approved by the Chief of the General
Land Registration Office, [now Commission of Land Registration] or
with a certified copy of the description taken from a prior certificate of
title covering the same property.
SEC. 13. The court shall cause a notice of the petition, filed under the
preceding section, to be published, at the expense of the petitioner,
twice in successive issues of the Official Gazette, and to be posted on
the main entrance of the provincial building and of the municipal
building of the municipality or city in which the land is situated, at least
thirty days prior to the date of hearing. The court shall likewise cause a
copy of the notice to be sent, by registered mail or otherwise, at the
expense of the petitioner, to every person named therein whose
address is known, at least thirty days prior to the date of hearing. Said
notice shall state, among other things, the number of the lost or
destroyed Certificate of Title, if known, the name of the registered
owner, the names of the occupants or persons in possession of the
property, the owners of the adjoining properties and all other
interested parties, the location, area and boundaries of the property,
and the date on which all persons having any interest therein must
appear and file their claim or objections to the petition. The petitioner
shall, at the hearing, submit proof of the publication, posting and
service of the notice as directed by the court.
In this case, the source of reconstitution is an authenticated copy of Decree
No. 295110 under Section 2(d), which as certified by the LRA, was issued in favor of
Isabel, Sixto and Apolonia, all surnamed Bautista, covering the lot in San Narciso
Cadastre. The said co-owners pro indiviso are supposedly the registered owners
named in OCT No. 2108. The Deed of Extra-Judicial Settlement of Estate with Sale
stated that Apolonia and Isabel died single and without any children and only the
alleged heirs of spouses Sixto and Elena Bautista executed the said document
conveying the 7,594-square meter lot to Millado. These supposed vendors claiming
to be heirs of one of the registered owners were not notified of the judicial
reconstitution proceedings.
The registered owners appearing in the title sought to be reconstituted, or in
this case, their surviving heirs, are certainly interested parties who should be
notified of reconstitution proceeding under Section 12 in relation to Section 13 of
R.A. 26. Indeed, for petitions based on sources enumerated in Sections 2(c), 2(d),
2(e), 2(f), 3(c), 3(d), 3(e) and 3(f), Section 13 adds another requirement aside from
publication and posting of notice of hearing: that the notice be mailed to occupants,
owners of adjoining lots, and all other persons who may have an interest in the
property. Notwithstanding the sale supposedly effected by vendors claiming to be
heirs of the registered owners, they remain as interested parties entitled to notice of
judicial reconstitution proceedings.
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It is settled that the actual notice requirement in Section 13 in relation to
Section 12 of R.A. 26 is mandatory and jurisdictional.
Where the authority to proceed is conferred by a statute and the manner of
obtaining jurisdiction is mandatory, the same must be strictly complied with, or the
proceedings will be void. As such, the court upon which the petition for
reconstitution of title is filed is duty-bound to examine thoroughly the petition for
reconstitution of title and review the record and the legal provisions laying down the
germane jurisdictional requirements. Thus, we have held that notwithstanding
compliance with the notice publication, the requirement of actual notice to the
occupants and the owners of the adjoining property under Sections 12 and 13 of
R.A. 26 is itself mandatory to vest jurisdiction upon the court in a petition for
reconstitution of title and essential in order to allow said court to take the case on
its merits. The non-observance of the requirement invalidates the whole
reconstitution proceedings in the trial court.
For non-compliance with the actual notice requirement to all other persons
who may have interest in the property, in this case the registered owners and/or
their heirs, in accordance with Section 13 in relation to Section 12 of RA 26, the trial
court did not acquire jurisdiction over L.R.A. The proceedings therein were therefore
a nullity and the Decision was void.
NORA B. CALALANG-PARULAN and ELVIRA B. CALALANG vs.
ROSARIO CALALANG-GARCIA, LEONORA CALALANG-SABILE, and CARLITO S.
CALALANG
Further strong proofs that the properties in question are the paraphernal
properties of a spouse are the very Torrens Titles covering said properties.
The phrase Pedro Calalang, married to Elvira Berba Calalang merely
describes the civil status and identifies the spouse of the registered owner Pedro
Calalang. Evidently, this does not mean that the property is conjugal. As the sole
and exclusive owner, Pedro Calalang had the right to convey his property in favor of
Nora B. Calalang-Parulan by executing a Deed of Sale on February 17, 1984. A
close perusal of the records of this case would show that the records are bereft of
any concrete proof to show that the subject property indeed belonged to
respondents maternal grandparents. The evidence respondents adduced merely
consisted of testimonial evidence such as the declaration of Rosario Calalang-Garcia
that they have been staying on the property as far as she can remember and that
the property was acquired by her parents through purchase from her maternal
grandparents. However, she was unable to produce any document to evidence the
said sale, nor was she able to present any documentary evidence such as the tax
declaration issued in the name of either of her parents.
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Facts:
Rosario Calalang-Garcia, Leonora Calalang-Sabile, and Carlito S. Calalang
(Respondents) asserted their ownership over a certain parcel of land against Nora B.
Calalang-Parulan and Elvira B. Calalang (Petitioners). The said lot was allegedly
acquired by the respondents from their mother Encarnacion Silverio, through
succession as the latters compulsory heirs.
Respondents alleged that their father, Pedro Calalang (Pedro) contracted two
marriages during his lifetime. The first marriage was with their mother Encarnacion
Silverio. During the subsistence of this marriage, their parents acquired the abovementioned parcel of land from their maternal grandmother Francisca Silverio.
Despite enjoying continuous possession of the land, however, their parents failed to
register the same. The first marriage was dissolved with the death of Encarnacion
Silverio.
Pedro Calalang entered into a second marriage with Elvira B. Calalang who
then gave birth to Nora B. Calalang-Parulan and Rolando Calalang. According to the
respondents, it was only during this time that Pedro Calalang filed an application for
free patent over the parcel of land with the Bureau of Lands. Pedro Calalang
committed fraud in such application by claiming sole and exclusive ownership over
the land since 1935 and concealing the fact that he had three children with his first
spouse. As a result, the Register of Deeds of Bulacan issued the Original Certificate
of Title (OCT) No. P-2871 in favor of Pedro only.
Pedro sold the said parcel of land to Nora B. Calalang-Parulan (Nora).

Accordingly, the Register of Deeds of Bulacan cancelled OCT No. P-2871 and issued
Transfer Certificate of Title (TCT) No. 283321 in the name of Nora. On December 27,
1989, Pedro Calalang died.
Respondents assailed the validity of TCT No. 283321 on two grounds. First,
the respondents argued that the sale of the land was void because Pedro failed to
obtain the consent of the respondents who were co-owners of the same. Second,
the sale was absolutely simulated as Nora did not have the capacity to pay for the
consideration stated in the Deed of Sale.
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Petitioners argued that the parcel of land was acquired during the second
marriage of Pedro Calalang with Elvira B. Calalang. They stressed that OCT No. P2871 itself stated that it was issued in the name of "Pedro Calalang, married to
Elvira Berba Calalang." Thus, the property belonged to the conjugal partnership of
the spouses Pedro and Elvira Calalang. The petitioners likewise denied the
allegation that the sale of the land was absolutely simulated as Nora was gainfully
employed in Spain at the time of the sale.
RTC rendered a decision in favor of the plaintiffs and against the defendants.
The trial court declared that the parcel of land was jointly acquired by the spouses
Pedro Calalang and Encarnacion Silverio from the parents of the latter. Thus, it was
part of the conjugal property of the first marriage of Pedro Calalang. The trial court
then ordered all of Pedros share to be given to Nora B. Calalang-Parulan on account
of the sale.
The CA reversed the factual findings of the trial court and held that Pedro
Calalang was the sole and exclusive owner of the subject parcel of land. Firstly, it
held that there was insufficient evidence to prove that the disputed property was
indeed jointly acquired from the parents of Encarnacion Silverio during the first
marriage. Secondly, the CA upheld the indefeasibility of OCT No. P-2871. It held that
although the free patent was issued in the name of "Pedro Calalang, married to
Elvira Berba Calalang" this phrase was merely descriptive of the civil status of Pedro
Calalang at the time of the registration of the disputed property.
Issue:
Whether or not Pedro Calalang was the exclusive owner of the disputed
property prior to its transfer to his daughter Nora B. Calalang-Parulan.
Ruling:
The petition is meritorious.
Page 298 of 483

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As correctly pointed out by the CA, a close perusal of the records of this case
would show that the records are bereft of any concrete proof to show that the
subject property indeed belonged to respondents maternal grandparents. The
evidence respondents adduced merely consisted of testimonial evidence such as
the declaration of Rosario Calalang-Garcia that they have been staying on the
property as far as she can remember and that the property was acquired by her
parents through purchase from her maternal grandparents. However, she was
unable to produce any document to evidence the said sale, nor was she able to
present any documentary evidence such as the tax declaration issued in the name
of either of her parents.
Moreover, the free patent was issued solely in the name of Pedro Calalang
and that it was issued more than 30 years after the death of Encarnacion and the
dissolution of the conjugal partnership of gains of the first marriage. Thus, the Court
cannot subscribe to respondents submission that the subject property originally
belonged to the parents of Encarnacion and was acquired by Pedro Calalang and
Encarnacion.
The Court likewise cannot sustain the argument of the petitioners that the
disputed property belongs to the conjugal partnership of the second marriage of
Pedro Calalang with Elvira B. Calalang on the ground that the title was issued in the
name of "Pedro Calalang, married to Elvira Berba Calalang."
The contents of a certificate of title are enumerated by Section 45 of

Presidential Decree No. 1529, otherwise known as the Property Registration Decree:
SEC. 45. Statement of personal circumstances in the certificate. Every

certificate of title shall set forth the full names of all persons whose interests
make up the full ownership in the whole land, including their civil status, and
the names of their respective spouses, if married, as well as their citizenship,
residence and postal address. If the property covered belongs to the conjugal
partnership, it shall be issued in the names of both spouses.
A plain reading of the above provision would clearly reveal that the phrase
"Pedro Calalang, married to Elvira Berba Calalang" merely describes the civil status
and identifies the spouse of the registered owner Pedro Calalang. Evidently, this
does not mean that the property is conjugal. As the sole and exclusive owner, Pedro
Page 299 of 483

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Calalang had the right to convey his property in favor of Nora B. Calalang-Parulan by
executing a Deed of Sale on February 17, 1984.
SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA vs. HEIRS OF

BERNARDINA ABALON / HEIRS OF BERNARDINA ABALON vs. MARISSA
ANDAL, LEONIL AND AL, ARNEL AND AL, SPOUSES DOMINDOR PERALTA
AND OFELIA PERALTA, and HEIRS of RESTITUTO RELLAMA, represented by
his children ALEX, IMMANUEL, JULIUS and SYLVIA, all surnamed RELLAMA
G.R. No. 183448 / G.R. No. 183464, June 30, 2014, CJ. Sereno
The established rule is that a forged deed is generally null and cannot convey
title, the exception thereto, pursuant to Section 55 of the Land Registration Act,
denotes the registration of titles from the forger to the innocent purchaser for
value. Thus, the qualifying point here is that there must be a complete chain of
registered titles. This means that all the transfers starting from the original rightful
owner to the innocent holder for value and that includes the transfer to the forger
must be duly registered, and the title must be properly issued to the transferee.
Facts:
The subject parcel of land was registered in the name of Bernardina Abalon
(Abalon). It appears that a Deed of Absolute Sale was executed over the subject
property in favor of Restituto M. Rellama (Rellama). By virtue of such conveyance
the OCT was cancelled and in lieu thereof TCT No. 42108 was issued in the name of
Rellama. The subject property was then subdivided into three (3) portions: Lot 1679A, Lot 1679-B, Lot 1679-C. Lot 1679-A was sold to Spouses Dominador P. Peralta, Jr.
and Ofelia M. Peralta for which reason TCT No. 42254 was issued in their names. Lot
1679-B, on the other hand, was first sold to Lotivio who thereafter transferred his
ownership thereto to Marissa Andal, Arnel Andal, and Leonil Andal (the Andals)
through a Deed of Absolute Sale. TCT No. 42482 was issued in the name of the
Andals. The Andals likewise acquired Lot 1679-C as evidenced by the issuance of
TCT No. 42821 in their favor on December 27, 1995.
Claiming that the Deed of Absolute Sale executed by Abalon in favor of

Rellama was a forged document, and claiming further that they acquired the subject
property by succession, they being the nephew and niece of Abalon who died
without issue, they filed a complaint. It was alleged that Rellama was able to cause
the cancellation of OCT and in lieu thereof the issuance of TCT No. 42108 in his own
name from which the defendants-appellants derived their own titles, upon
presentation of a xerox copy of the alleged forged deed of absolute sale. They
averred that the owners duplicate copy of OCT had always been with Abalon and
that upon her death, it was delivered to them. Likewise, they alleged that Abalon
had always been in possession of the subject property through her tenant
Page 300 of 483

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Godofredo Bellen. They further alleged that after the ownership over the subject
property was transferred to them upon the death of Abalon, they took possession
thereof and retained Godofredo as their own tenant. However, they averred that in
1995 the defendants-appellants were able to wrest possession of the subject
property from Godofredo Bellen. They alleged that the defendants-appellants are
not buyers in good faith as they were aware that the subject land was in the
possession of the plaintiffs-appellees at the time they made the purchase. They thus
claim that the titles issued to the defendants-appellants are null and void. In his
answer, Rellama alleged that the deed of absolute sale executed by Abalon is
genuine and that they had been delivered to him upon the execution of the said
deed of transfer. As for Spouses Peralta and the Andals, who filed their separate
answers to the complaint, they mainly alleged that they are buyers in good faith
and for value.
The trial court rendered judgment in favor of the plaintiffs-appellees and

ordered the restoration of OCT in the name of Abalon and the cancellation of the
titles issued to the defendants-appellants. On appeal, the CA set aside the RTC
Decision. The CA ruled that the circumstances surrounding the sale of the subject
property showed badges of fraud or forgery against Rellama. It found that Abalon
had not parted with her ownership over the subject property despite the claim of
Rellama that they both executed a Deed of Absolute Sale. CA also found no
evidence to show that Rellama exercised dominion over the subject property,
because he had not introduced improvements on the property, despite claiming to
have acquired it. The appellate court considered the Spouses Peralta as buyers in
bad faith for relying on a mere photocopy of TCT No. 42108 when they bought the
property from Rellama. On the other hand, it accorded the Andals the presumption
of good faith, finding no evidence that would rebut this presumption.
Issue:
Whether a forged instrument may become the root of a valid title in the
hands of an innocent purchaser for value, even if the true owner thereof has been in
possession of the genuine title, which is valid and has not been cancelled.
Ruling:
The established rule is that a forged deed is generally null and cannot convey
title, the exception thereto, pursuant to Section 55 of the Land Registration Act,
denotes the registration of titles from the forger to the innocent purchaser for value.
Thus, the qualifying point here is that there must be a complete chain of registered
titles. This means that all the transfers starting from the original rightful owner to
the innocent holder for value and that includes the transfer to the forger must be
duly registered, and the title must be properly issued to the transferee.
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In the instant case, there is no evidence that the chain of registered titles was
broken in the case of the Andals. Neither were they proven to have knowledge of
anything that would make them suspicious of the nature of Rellamas ownership
over the subject parcel of land. Hence, the Court sustains the CAs ruling that the
Andals were buyers in good faith. Consequently, the validity of their title to the
parcel of the land bought from Rellama must be upheld.
As for Spouses Peralta, the Court sustain the ruling of the CA that they are
indeed buyers in bad faith. The appellate court made a factual finding that in
purchasing the subject property, they merely relied on the photocopy of the title
provided by Rellama. The CA concluded that a mere photocopy of the title should
have made Spouses Peralta suspicious that there was some flaw in the title of
Rellama, because he was not in possession of the original copy. This factual finding
was supported by evidence. Whether or not Spouses Peralta are buyers in good
faith, is without a doubt, a factual issue. Although this rule admits of
exceptions, none of these applies to their case.
HECTOR L. UY vs. VIRGINIA G. FULE; HEIRS OF THE LATE AMADO A.
GARCIA, HEIRS OF THE LATE GLORIA GARCIA ENCARNACION; HEIRS OF THE
LATE PABLO GARCIA;
and HEIRS OF THE LATE ELISA G. HEMEDES,
G.R. No. 164961, June 30, 2014, J. Bersamin
The standard is that for one to be a purchaser in good faith in the eyes of the
law, he should buy the property of another without notice that some other person
has a right to, or interest in, such property, and should pay a full and fair price for
the same at the time of such purchase, or before he has notice of the claim or
interest of some other persons in the property. He buys the property with the belief
that the person from whom he receives the property was the owner and could
convey title to the property. Indeed, a purchaser cannot close his eyes to facts that
should put a reasonable man on his guard and still claim he acted in good faith.
Facts:
The dispute herein involves the parcel of land registered under TCT No. 30111
located in San Agustin, Pili, Camarines Sur that was part of the vast tract of land
covered by TCT No. 1128 registered in the name of the late Conrado Garcia. Upon
the death of Conrado Garcia, his heirs entered into an extrajudicial settlement of his
estate. Thereafter, his heirs caused the registration on March 7, 1973 of the vast
track of land under TCT No. RT-8922.
Page 302 of 483

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In September 1985, the Department of Agrarian conducted a survey of the
disputed land, referring to it as Lot 562. It issued a joint certification to the effect
that the disputed land was an "untitled" property owned by Conrado Garcia. The
joint certification was buttressed by the certification by the Register of Deeds of
Camarines Sur to the effect that no title covering Lot 562 appeared on record. As a
result, the disputed land was included in the Operation Land Transfer (OLT) program
of the DAR.
In 1988, the DAR and the Register of Deeds of Camarines Sur respectively
issued emancipation patents and original certificates of title covering the disputed
land to the farmers beneficiaries, namely: Catalino Alcaide, Mariano Ronda,
Ponciano Ermita, Felipe Marcelo, Salvador Pedimonte, Fabiana Pedimonte and
Leonila Pedimonte. In the interim, farmer-beneficiary Mariano Ronda sold his portion
to Chisan Uy who then registered his title thereto under TCT No. 29948 and TCT No.
29949 of the Registry of Deeds of Camarines Sur. On the other hand, the heirs of
farmer-beneficiary Mariano Ronda (Isabel Ronda, et al.) sold their land to
petitioner Hector Uy for P10 million. Hector Uy registered his title thereto under
TCT No. 31436 and TCT No. 31437, both of the Registry of Deeds of Camarines
Sur.
In 1997, TCT No. RT-8922 was cancelled following the partition of the property
covered therein. Subsequently, TCT No. 30136 and TCT No. 30111 were issued in
the names of respondents heirs of the late Conrado Garcia. In 1998, the President,
acting through the DAR Secretary, issued EPs to the farmers-beneficiaries pursuant
to P.D. No. 27 and P.D. No. 266. On December 21, 1998, the respondents filed a
complaint for cancellation of titles, quieting of title, recovery of possession, and
damages against the DAR Secretary and the farmer-beneficiaries in the RTC alleging
that they had been denied due process; and that the titles of the defendants (who
included the Hector Uy)in the disputed land constituted clouds on their own title.
They prayed that the farmer-beneficiaries certificates of title, including those of
their purchasers Chisan Uy and Hector Uy, be cancelled; that the private defendants
be ordered to surrender the possession of the disputed land to them.
The RTC resolved in favor of the respondents by finding that no notice of the
inclusion of the disputed land under the operation of P.D. No. 27 had been given to
them. It ruled declaring null and void all the proceedings taken by public defendants
in the generation of the certificates of land transfer and emancipation patents and
ordered the Register of Deeds of Camarines Sur to cancel all the OCTs and TCTs
mentioned.
On appeal to CA, Hector Uy insisted that the RTC gravely erred in holding that
he had not been an innocent purchaser in good faith and for value; and in declaring
void and ordering the cancellation of TCT No. 31436 and TCT No. 31437, among
Page 303 of 483

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others. On their part, Catalino Alcaide, Julia Casaysayan, and Chisan Uy claimed that
the RTC erred in assuming jurisdiction over the case when in fact it had no such
jurisdiction; in holding that the titles issued to the tenants Spouses Alcaides and
Chisan Uy were void; and in holding that the proceedings taken by the public
defendants in generating the CLTs and EPs were void. The CA however, denied the
appeal. The CA ruled that Hector Uy and Chisan Uy are not purchasers in good faith
and that no valid title could have passed to them because the transfers are void
under PD 27. PD 72 explicitly provides that Title to land acquired pursuant to this
Decree or the Land Reform Program of the Government shall not be transferable
except by hereditary succession or to the Government x x x
Issue:
Whether or not Hector Uy was a purchaser in good faith of the property in
litis.
Ruling:
No. The Court affirmed the decision of the CA.
An examination of the deed of sale executed between Isabel Ronda, et al. and
Hector Uy respecting the portions covered by TCT No. 31120 and TCT No. 31121
indicates that the TCTs were issued only on August 17, 1998 but the deed of sale
was executed on July 31, 1998. While it is true, as Hector Uy argues, that
succession occurs from the moment of death of the decedent pursuant to Article
777 of the Civil Code, his argument did not extend to whether or not he was a buyer
in good faith, but only to whether or not, if at all, Isabel Ronda, et al., as the heirs of
Mariano Ronda, held the right to transfer ownership over their predecessors
property. The argument did not also address whether or not the transfer to Hector
Uy was valid.
Evidently, Hector Uy entered into the deed of sale without having been
able to inspect TCT No. 31120 and TCT No. 31121 by virtue of such TCTs being
not yet in existence at that time. If at all, it was OCT No. 9852 and OCT No. 9853
that were available at the time of the execution of the deed of sale, and such OCTs
were presumably inspected by Hector Uy before he signed the deed of sale. It is
notable that said OCTs categorically stated that they were entered pursuant to an
emancipation patent of the Ministry of Agrarian Reform pursuant to the Operation
Land Transfer (OLT) Program of the government. Furthermore, said OCTs plainly
recited the following prohibition: "it shall not be transferred except by hereditary
succession or to the Government in accordance with the provisions of Presidential
Decree No. 27, Code of Agrarian Reforms of the Philippines and other existing laws
and regulations."
Page 304 of 483

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The foregoing circumstances negated the third element of good faith cited in
Bautista v. Silva, i.e., that "at the time of sale, the buyer was not aware of any claim
or interest of some other person in the property, or of any defect or restriction in the
title of the seller or in his capacity to convey title to the property." In Bautista v.
Silva, the absence of the third condition put Hector Uy on notice and obliged him to
exercise a higher degree of diligence by scrutinizing the certificates of title and
examining all factual circumstances in order to determine the sellers title and
capacity to transfer any interest in the lots. Consequently, it is not sufficient for him
to insist that he relied on the face of the certificates of title, for he must further
show that he exercised reasonable precaution by inquiring beyond the certificates
of title. Failure to exercise such degree of precaution rendered him a buyer in bad
faith. "It is a well-settled rule that a purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good
faith under the belief that there was no defect in the title of the vendor."
Hector Uy was not an innocent purchaser for value; hence, he cannot be

awarded the disputed land.
HEIRS OF SPOUSES JOAQUIN MANGUARDIA AND SUSANA MANALO, ET AL
vs. HEIRS OF SIMPLICIO VALLES AND MARTA VALLES, ET AL
G.R. No. 177616, August 27, 2014, J. Del Castillo
The petitioners assail the decision of the CA affirming in toto the decision of
the RTC declaring that their predecessors-in-interest are not buyers in good faith
and for value. In denying the petition the SC ruled that the transfers of the
properties in question did not go far, but were limited to close family relatives by
affinity and consanguinity. Good faith among the parties to the series of
conveyances is therefore hard if not impossible to presume. Unfortunately for the
petitioners, they did not provide any sufficient evidence that would convince the
courts that the proximity of relationships between/among the vendors and vendees
in the questioned sales was not used to perpetrate fraud. Thus there is nothing to
dispel the notion that apparent anomalies attended the transactions among close
relations.
It must be emphasized that "the burden of proving the status of a purchaser
in good faith and for value lies upon him who asserts that standing. In discharging
the burden, it is not enough to invoke the ordinary presumption of good faith that
everyone is presumed to act in good faith. The good faith that is here essential is
integral with the very status that must be proved. x x x Petitioners have failed to
discharge that burden."
Facts:
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Simplicio and Marta were the registered owners of a 42,215-square meter
property in Barrio Cudian, Ivisan, Capiz known as Lot 835. Marta died in 1943 and
was survived by her illegitimate daughter, Encarnacion. On the other hand,
Simplicio died on April 20, 1957 and was survived by his wife Villarica and his
children.
It appears, however, that on October 28, 1968, a notarized Deed of Absolute
Sale over Lot 835 was executed by Simplicio and Marta in favor of their brothers,
Melquiades and Rustico; Simplicios daughter, Adelaida; and Martas daughter,
Encarnacion. The Deed of Absolute Sale ostensibly bore the signature of Marta and
the thumb marks of Simplicio and his wife. On even date, said deed was registered
in the Registry of Deeds of Capiz, resulting in the cancellation of OCT No. RO-4017
and the issuance of TCT No.T-9409. The following day, the alleged buyers and new
registered owners executed a Subdivision Agreement, subdividing Lot 835 into four
lots. Said Subdivision Agreement was also registered on the same day in the
Registry of Deeds of Capiz. Hence, TCT No. T-9409 was cancelled and in lieu
thereof, individual titles to the subdivided lots were issued to the putative buyers
Thereafter the subdivided lots were conveyed to different persons and after
several transfers the Spouses Manguardia became the registered owner of Lots
835-B and 835-C; Leonardo and Rebecca of Lot 835-D while Adelaida of Lot 835-A.
Subsequently, respondents commenced an action for the Declaration of
Nullity of Certificates of Title and Deeds of Sale, Cancellation of Certificates of Title,
Recovery of Possession and Damages with the RTC against herein petitioners.
Respondents alleged that the purported Deed of Absolute Sale is a forgery because
Marta and Simplicio were long dead when the said document was executed.
Consequently, all titles emanating therefrom including the titles covering the
subdivided lots of Lot 835 are all null and void.
The trial resulted in the RTC rendering a Decision in favor of herein
respondents. It declared the Deed of Absolute Sale void ab initio because there was
no proof that the vendors, were still alive in 1968 and had signed/thumb marked
the sale document. On appeal, the CA affirmed in toto the decision of the trial
court. Hence, this petition.
The Petitioners argue that their predecessors-in-interest were innocent
purchasers in good faith and for value, having acquired Lots 835-B and 835-C in
1980 from their registered owners and occupants. They further averred that their
parents had been in possession of the lots since they purchased them in 1980, and
had since then constructed four buildings thereon for their poultry business,
without opposition from anyone. They maintained that the titles in the names of
the spouses Manguardia are valid and legal. In addition, since the documents of
sale and Torrens titles were duly registered in the Registry of Deeds, and that
actual possession by the different transferees spanning a period of over 30 years
were known to the respondents and their predecessors without any complaint or
opposition, the claim of respondents is barred by prescription, estoppel and laches.
Page 306 of 483

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Issue:
Whether or not petitioners predecessors-in-interest are buyers in good faith
and for value.
Ruling:
No, petitioners cannot be considered as buyers in good faith and for value.
Petitioners failed to discharge the burden of proving that their predecessorsin-interest were buyers in good faith.
Petitioners do not dispute that the original Deed of Absolute Sale is a forgery
because the alleged vendors were already long dead when the questioned deed
was executed. While their ownership rights are ultimately based upon this forged
deed, petitioners assert that the good faith of their predecessors-in-interest
validates their title over the lots.
The Court, however, disagrees. It must be noted that the relationships by
consanguinity or affinity, between and among the vendors and vendees in the
series of sales of the subject properties, were established by testimonial evidence.
Again, these were not contradicted by petitioners. And as aptly concluded by the
trial court, it can reasonably be assumed from these relations that the spouses
Manguardia and Leonardo were not buyers in good faith, viz:
Are the Manguardias and Leonardo Araza third persons x x x who are innocent
purchasers for value?
The general rule x x x that a person dealing with registered land has a right to
rely on the Torrens Certificate of Title without need of inquiring further cannot
apply when the party has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such inquiry or when the
purchaser has knowledge of a defect or lack of title in his vendor or of sufficient
facts to induce a reasonably prudent man to [inquire] into the status of the title
of the property in litigation (Voluntad vs. Dizon, 313 SCRA 209). If circumstances
exist that [require] a prudent man to investigate and he does not, he is deemed
to have acted in mala fide, and his mere refusal to believe that a defect exists
or his willful closing of his eyes to the possibility of the existence of a defect in
his vendors title will not make him an innocent purchaser for value (Voluntad
vs. Dizon, supra).
The transfers of the properties in question did not go far, but were limited to
close family relatives by affinity and consanguinity. Circuitous and convoluted as
they may be, and involving more than two families but belonging to a clan which,
although living in different barangays, such barangays belong to the same city and
[are] adjacent to each other. Good faith among the parties to the series of
conveyances is therefore hard if not impossible to presume.
Page 307 of 483

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Unfortunately for the petitioners, they did not provide any sufficient evidence
that would convince the courts that the proximity of relationships between/among
the vendors and vendees in the questioned sales was not used to perpetrate fraud.
Thus there is nothing to dispel the notion that apparent anomalies attended the
transactions among close relations. Glaringly emphasized were the established
facts that the parties to the alleged original sale in 1968, and the witnesses thereto
were close relatives (siblings, children and nephew of Marta and Simplicio).
Similarly, the vendors and vendees in subsequent sale transactions were either the
co-vendees themselves in the original sale, first cousins, and close relatives by
consanguinity and affinity. In addition, these transactions between close relatives
happened at a time when everybody knew everyone, in a place where vendees
lived in close proximity to the vendors, and to the disputed properties. This is not to
say however, that a sale between close relatives is automatically anomalous. It is
just that in this particular case, the circumstances strongly show that fraud was
committed by relatives against relatives and the evidence adduced by petitioners
was insufficient to remove the cloud of doubt pertaining to the good faith of their
predecessors-in-interest in acquiring the properties in question.
It must be emphasized that "the burden of proving the status of a purchaser
in good faith and for value lies upon him who asserts that standing. In discharging
the burden, it is not enough to invoke the ordinary presumption of good faith that
everyone is presumed to act in good faith. The good faith that is here essential is
integral with the very status that must be proved. x x x Petitioners have failed to
discharge that burden."
Anent Petitioners contention of acquisitive prescription the same cannot
prevail over the rights of respondents. To begin with, the disputed property is a duly
registered land under the Torrens system. "It is well-settled that no title to
registered land in derogation of that of the registered owner shall be acquired by
prescription or adverse possession. Neither can prescription be allowed against the
hereditary successors of the registered owner, because they merely step into the
shoes of the decedent and are merely the continuation of the personality of their
predecessor[-]in[-]interest. Consequently, since a certificate of registration covers it,
the disputed land cannot be acquired by prescription regardless of petitioner's good
faith."
On the claim of laches, this Court reiterates that "laches is based upon equity
and the public policy of discouraging stale claims. Since laches is an equitable
doctrine, its application is controlled by equitable considerations. It cannot be used
to defeat justice or to [perpetrate] fraud and injustice. Thus, the assertion of laches
to thwart the claim of respondents is foreclosed because the deed upon which
petitioners base their claim is first and foremost a forgery."
ENRIQUETA M. LOCSIN vs. BERNARDO HIZON, CARLOS HIZON, SPS. JOSE
MANUEL AND LOURDES GUEVARA
G.R. No. 204369, September 17, 2014, J. Velasco Jr.
Page 308 of 483

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A purchaser of property under the Torrens system cannot simply invoke that
he is an innocent purchaser for value when there are attending circumstances that
raise suspicions. In that case, he cannot merely rely on the title and must look
beyond to ascertain the truth as to the right of the seller to convey the property.
Facts:
Enriqueta is the owner of a parcel of land located in Quezon City and leased
the same to a certain Billy Aceron. In 1992, she instituted an ejectment case against
Aceron and obtained a favorable judgment. Enriqueta then went to the US and had
her lawyer check if Aceron complied with the order of the court.
To her surprise, Enriqueta was informed that the land was already sold to
Bernardo Hizon by a certain Marylou Bolos who derived her title from a Deed of
Absolute Sale allegedly executed by Enriqueta in 1979. Bernardo secured a new
transfer certificate of title in favor of his son Carlos and filed a motion for execution
of judgment to regain possession of the land from Aceron. When Enriqueta
communicated with the Hizons, Carlos contended that he was an innocent buyer in
good faith and for value. Bernardo, on the other hand, suggested a compromise
agreement with Enriquetas lawyer to which the latter acceded. Bernardos
suggestion never materialized as Carlos sold the property to Spouses Guevara and
obtained a new TCT in their favor. Spouses Guevara then mortgaged the property to
Damar Credit Corporation.
Enriqueta filed an action for annulment of Spouses Guevaras title claiming
that her signature in Bolos Deed of Absolute Sale was forged. She also alleged that
there was no legitimate transfer of property from Carlos to Spouses Guevara and
the sale was only employed to keep the property out of her reach. Spouses Guevara
instituted Bernardo as attorney-in-fact to represent them until the termination of the
proceedings. In their defense, they contended that they were innocent purchasers
in good faith and for value.
The RTC ruled in favor of Spouse Guevara holding that Enriqueta could not
hinge her claims only on the differences of signatures. On appeal, the CA
acknowledged the existence of forgery but affirmed the ruling of the RTC elucidating
that a buyer of a property covered by Torrens system need not look beyond the title.
Issue:
Whether or not Enriqueta is entitled to recover the land
Ruling:
Yes, she may recover the land.
An innocent purchaser for value is one who buys the property of another
without notice that some other person has a right to or interest in it, and who pays a
full and fair price at the time of the purchase or before receiving any notice of
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another persons claim. As such, a defective titleor one the procurement of which
is tainted with fraud and misrepresentationmay be the source of a completely legal
and valid title, provided that the buyer is an innocent third person who, in good
faith, relied on the correctness of the certificate of title, or an innocent purchaser for
value.
Complementing this is the mirror doctrine which echoes the doctrinal rule
that every person dealing with registered land may safely rely on the correctness of
the certificate of title issued therefor and is in no way obliged to go beyond the
certificate to determine the condition of the property. The recognized exceptions to
this rule are stated as follows:
The presence of anything which excites or arouses suspicion
should then prompt the vendee to look beyond the certificate
and investigate the title of the vendor appearing on the face
of said certificate. One who falls within the exception can
neither be denominated an innocent purchaser for value nor
a purchaser in good faith and, hence, does not merit the
protection of the law.
In the case at bar, Bolos certificate of title was concededly free from liens
and encumbrances on its face. However, the failure of Carlos and the spouses
Guevara to exercise the necessary level of caution in light of the factual milieu
surrounding the sequence of transfers from Bolos to respondents bars the
application of the mirror doctrine and inspires the Courts concurrence with Locsins
proposition.
The Court viewed that Bernardo negotiated with Bolos for the property as
Carlos agent. This is bolstered by the fact that he was the one who arranged for the
sale and eventual registration of the property in Carlos favor. Consistent with the
rule that the principal is chargeable and bound by the knowledge of, or notice to, his
agent received in that capacity, any information available and known to Bernardo is
deemed similarly available and known to Carlos, including the following:
1. Bernardo knew that Bolos, from whom he purchased the
subject property, never acquired possession over the lot.
2. Bolos purported Deed of Sale was executed on November
3, 1979 but the ejectment case commenced by Locsin
against Aceron was in 1992, or thirteen (13) years after the
property was supposedly transferred to Bolos.
3. The August 6, 1993 Judgment, issued by the MTC on the
compromise agreement between Locsin and Aceron, clearly
stated therein that [o]n August 2, 1993, the parties [Aceron
and Locsin] submitted to [the MTC] for approval a
Compromise Agreement dated July 28, 1993. It further
indicated that [Aceron] acknowledges [Locsins] right of
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possession to [the subject property], being the registered
owner thereof.
Having knowledge of the foregoing facts, Bernardo and Carlos should have
been impelled to investigate the reason behind the arrangement. They should have
been pressed to inquire into the status of the title of the property in litigation in
order to protect Carlos interest. It should have struck them as odd that it was
Locsin, not Bolos, who sought the recovery of possession by commencing an
ejectment case against Aceron, and even entered into a compromise agreement
with the latter years after the purported sale in Bolos favor.
At this point it is well to emphasize that entering into a compromise
agreement is an act of strict dominion. If Bolos already acquired ownership of the
property as early as 1979, it should have been her who entered into a compromise
agreement with Aceron in 1993, not her predecessor-in-interest, Locsin, who,
theoretically, had already divested herself of ownership thereof.
As regards the transfer of the property from Carlos to the spouses Guevara,
The Court finds the existence of the sale highly suspicious. For one, there is a dearth
of evidence to support the respondent spouses position that the sale was a bona
fide transaction. Even if the Court repeatedly sift through the evidence on record,
still the Court cannot find any document, contract, or deed evidencing the sale in
favor of the spouses Guevara. The same goes for the purported payment of the
purchase price of the property in the amount of PhP 1.5 million in favor of Carlos.
Indeed, the fact that the spouses Guevara never intended to be the owner in
good faith and for value of the lot is further made manifest by their lack of interest
in protecting themselves in the case. It does not even appear in their testimonies
that they, at the very least, intended to vigilantly protect their claim over the
property and prevent Locsin take it away from them. What they did was to simply
appoint Bernardo as their attorney-in-fact to handle the situation and never
bothered acquainting themselves with the developments in the case.
AMBROSIO ROTAIRO (SUBSTITUTED BY HIS SPOUSE MARIA RONSAYRO
ROTAIRO, AND HIS CHILDREN FELINA ROTAIRO, ERLINDA ROTAIRO CRUZ,
EUDOSIA ROTAIRO CRIZALDO, NIEVES ROTAIRO TUBIG, REMEDIOS ROTAIRO
MACAHILIG, FELISA ROTAIRO TORREVILLAS, AND CRISENCIO R. ROTAIRO,
MARCIANA TIBAY, EUGENIO PUNZALAN, AND VICENTE DEL ROSARIO vs.
ROVIRA ALCANTARA AND VICTOR ALCANTARA
More than the charge of constructive knowledge, the surrounding
circumstances of this case show Roviras actual knowledge of the disposition of the
subject property and Rotairos possession thereof. It is undisputed that after the
contract to sell was executed , Rotairo imme-diately secured a mayors permit
for the construction of his residential house on the property. Rotairo, and
subsequently, his heirs, has been residing on the property since then. Rovira, who
lives only fifty (50) meters away from the subject property, in fact, knew that there
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were structures built on the property. Rovira, however, claims that she did not
bother to inquire as to the legitimacy of the rights of the occupants, because she
was assured by the bank of its title to the property. But Rovira cannot rely solely
on the title and assurances of Pilipinas Bank; it was incumbent upon her to look
beyond the title and make necessary inquiries because the bank was not in
possession of the property. Where the vendor is not in possession of the property,
the prospective vendees are obligated to investigate the rights of one in
possession. A purchaser cannot simply close his eyes to facts which should put a
reasonable man on guard, and thereafter claim that he acted in good faith under
the belief that there was no defect in the title of the vendor. Hence, Rovira cannot
claim a right better than that of Rotairo's as she is not a buyer in good faith.
Facts:
In 1988, Respondent Rovira Alcantara instituted an action for the recovery of
possession of a parcel of land situated in Cainta, Rizal. She disclosed that the
property was formerly owned by his father, Victor Alcantara (Alcantara), and Alfredo
Ignacio, who mortgaged the property to Pilipinas Bank and Trust Company in 1968.
Through their firm, Ignacio & Company, the two were able to parcel out the property
and separately sold the subdivided lots to different buyers. One of the buyers was
Ambrosio Rotairo (Rotairo) who took the property identified as Lot C-1 and
completed the payments therefor on September 25, 1979. However, Alcantara and
Ignacio earlier defaulted in their loan obligation with Pilipinas Bank which led to the
foreclosure of the mortgage. Without redemption being made, title was consolidated
in the name of Pilipinas Bank and it later sold the property in a Deed of Absolute
Sale dated June 6, 1975 to Rovira, who happens to be the daughter of Alcantara.
The RTC ruled that the transaction between Ignacio & Company and Rotairo
was covered by P.D. No. 957. Thus, Rovira, as successor-in-interest of Wilfredo S.
Ignacio [and Victor Alcantara] was well aware of the condition of the property which
she bought from the Pilipinas Bank, because she lives near the land, and at the time
she purchased it she was aware of the existing houses or structures on the land.
She was, therefore, not entitled to the relief prayed for in her complaint.
On appeal, the CA set aside the RTC decision and ordered the turnover of
possession of the property to Rovira. The CA held that P.D. No. 957 is not applicable
since the mortgage was constituted prior to the sale to Rotairo and so the law does
not confer more rights to an unregistered buyer like him, as against a registered
prior mortgagee like Pilipinas Bank and its buyer, Rovira.
Issue:
Whether or not Rovira is a buyer in good faith of the subject property.
Ruling:
NO, Rovira is not buyer in good faith.
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The rule is that as [b]etween two transactions concerning the same parcel
of land, the registered transaction prevails over the earlier unregistered right. This
is in accord with Sec. 50 of the Land Registration Act, which provides [that] xxx
[t]he act of registration shall be the operative act to convey and affect the land.
Sec. 51 of the Land Registration Act further states that [e]very conveyance,
mortgage, lease, lien, attachment, order, decree, instrument, or entry affecting
registered land xxx, if registered xxx be notice to all persons from the time of such
registering xxx.
The rule, however, is not without recognized exceptions. The conveyance
shall not be valid against any person unless registered, except (1) the grantor, (2)
his heirs and devisees, and (3) third persons having actual notice or knowledge
thereof. Moreover, when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or
when the purchaser has knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire into the status of the
title of the property in litigation, he cannot find solace in the protection afforded by
a prior registration. Neither can such person be considered an innocent purchaser
for value nor a purchaser in good faith.
In this case, two factors work against Rovira as a buyer in good faith. One,
she cannot be considered a third person for purposes of applying the rule. Rovira
does not deny that she is the daughter and an heir of Victor C. Alcantara, one of the
parties to the contract to sell (and the contract of sale) executed in favor of Rotairo.
The vendors heirs are his privies. Based on such privity, Rovira is charged with
constructive knowledge of prior dispositions or encumbrances affecting the subject
property made by her father. The fact that the contract to sell was unregis-tered
became immaterial and she is, therefore, bound by the provisions of the contract to
sell and eventually, the contract of sale, executed by her father in favor of Rotairo.
Further, more than the charge of constructive knowledge, the surrounding
circum-stances of this case show Roviras actual knowledge of the disposition of the
subject property and Rotairos possession thereof. It is undisputed that after the
contract to sell was executed , Rotairo immediately secured a mayors permit
for the construction of his residential house on the property. Rotairo, and
subsequently, his heirs, has been residing on the property since then. Rovira, who
lives only fifty (50) meters away from the subject property, in fact, knew that there
were structures built on the property. Rovira, however, claims that she did not
bother to inquire as to the legitimacy of the rights of the occupants, because she
was assured by the bank of its title to the property. But Rovira cannot rely solely on
the title and assurances of Pilipinas Bank; it was incumbent upon her to look beyond
the title and make necessary inquiries because the bank was not in possession of
the property. Where the vendor is not in possession of the property, the
prospective vendees are obligated to investigate the rights of one in possession. A
purchaser cannot simply close his eyes to facts which should put a reasonable man
on guard, and thereafter claim that he acted in good faith under the belief that
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there was no defect in the title of the vendor. Hence, Rovira cannot claim a right
better than that of Rotairo's as she is not a buyer in good faith.
SPOUSES MARIO OCAMPO and CARMELITA F. OCAMPO vs. HEIRS OF
BERNARDINO U. DIONISIO, represented by ARTEMIO SJ. DIONISIO
Jurisprudence consistently holds that "prescription and laches cannot apply
to registered land covered by the Torrens system" because "under the Property
Registration Decree, no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession.
Mario claimed that they have been in possession of the said parcel of land
since 1969 and that cause of action of the Dionisios is already barred by laches.
Jurisprudence consistently holds that "prescription and laches cannot apply to
registered land covered by the Torrens system" because "under the Property
Facts:
Dionisio filed a complaint for forcible entry with MTC against Mario and Felix
Ocampo. Dionisio sought to recover the possession of a portion of his property,
covered by an original certificate of title, situated in Dalig, Cardona, Rizal. Mario
denied Dionisios allegation, claiming that the disputed parcel of land is owned by
his wife, Carmelita, who inherited the same from her father. Mario further claimed
that they have been in possession of the said parcel of land since 1969.
On September 12, 1997, the MTC rendered a decision, which dismissed the
complaint for forcible entry filed by Dionisio. Dionisio died on September 27, 1997.
Consequently, on July 3, 1998, the heirs of Dionisio filed a complaint for recovery of
possession with the MTC. On February 18, 2008, the MTC rendered a decision
dismissing the complaint for recovery of possession filed by the respondents on the
ground of res judicata.
The RTC ruled that the MTC erred in dismissing the Dionisios' complaint for
recovery of possession of the subject property solely on the ground of res judicata.
CA affirmed the decision of RTC and held that the doctrine of res judicata cannot be
applied in this case since there is no identity of cause of action as between the
forcible entry case and the recovery of possession case.
Issue:
Whether the Dionisios cause of action is already barred by laches.
Ruling:
No.
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As owners of the subject property, the Dionisios have the right to recover the
possession thereof from any person illegally occupying their property. This right is
imprescriptible. Assuming arguendo that the Ocampos indeed have been occupying
the subject property for a considerable length of time, the Dionisios, as lawful
owners, have the right to demand the return of their property at any time as long as
the possession was unauthorized or merely tolerated, if at all.
Jurisprudence consistently holds that "prescription and laches cannot apply to
registered land covered by the Torrens system" because "under the Property
ELIZA ZUNIGA-SANTOS, represented by her Attorney-in Fact, NYMPHA Z.
SALES vs.
MARIA DIVINA GRACIA SANTOS-GRAN and REGISTER OF DEEDS OF
MARIKINA CITY
G.R. No. 197380, October 8, 2014, J. Perlas-Bernabe
To determine when the prescriptive period commenced in an action for

reconveyance, the plaintiffs possession of the disputed property is material. If
there is an actual need to reconvey the property as when the plaintiff is not in
possession, the action for reconveyance based on implied trust prescribes in ten
(10) years, the reference point being the date of registration of the deed or the
issuance of the title. On the other hand, if the real owner of the property remains in
possession of the property, the prescriptive period to recover title and possession of
the property does not run against him and in such case, the action for
reconveyance would be in the nature of a suit for quieting of title which is
imprescriptible.
In the case at bar, a reading of the allegations of the Amended Complaint

failed to show that Eliza remained in possession of the subject properties in dispute.
Facts:
Eliza Zuiga-Santos (Eliza), through her authorized representative, Nympha

Z. Sales, filed a Complaint for annulment of sale and revocation of title against
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respondents Maria Divina Gracia Santos-Gran (Gran) and the Register of Deeds of
Marikina City before the RTC. Eliza alleged that (a) she was the registered owner of
three (3) parcels of land located in the Municipality of Montalban, Province of Rizal
prior to their transfer in the name of private respondent Gran; (b) she has a second
husband by the name of Lamberto C. Santos (Lamberto), with whom she did not
have any children; (c) she was forced to take care of Lambertos alleged daughter,
Gran, whose birth certificate was forged to make it appear that the latter was Elizas
daughter; (d) pursuant to void and voidable documents, i.e., a Deed of Sale,
Lamberto succeeded in transferring the subject properties in favor of and in the
name of Gran; (e) despite diligent efforts, said Deed of Sale could not be located;
and (f) she discovered that the subject properties were transferred to Gran
sometime in November 2005. Accordingly, Eliza prayed, inter alia, that Gran
surrender to her the subject properties and pay damages, including costs of suit.
Gran filed a Motion to Dismiss, contending that (a) the action filed by Eliza
had prescribed since an action upon a written contract must be brought within ten
(10) years from the time the cause of action accrues, or in this case, from the time
of registration of the questioned documents before the Registry of Deeds; and (b)
the Amended Complaint failed to state a cause of action as the void and voidable
documents sought to be nullified were not properly identified nor the substance
thereof set forth, thus, precluding the RTC from rendering a valid judgment in
accordance withthe prayer to surrender the subject properties.
RTC granted Grans motion and dismissed the Amended Complaint for its
failure to state a cause of action, considering that the deed of sale sought to be
nullified an "essential and indispensable part of [Elizas] cause of action" was not
attached. It likewise held that the certificates of title covering the subject properties
cannot be collaterally attacked and that since the action was based on a written
contract, the same had already prescribed under Article 1144 of the Civil Code. On
appeal, CA sustained the dismissal of Elizas Amended Complaint buton the ground
of insufficiency of factual basis. Aggrieved, Eliza moved for reconsideration 23 and
attached, for the first time, a copy of the questioned Deed of Sale which she
claimed to have recently recovered, praying that the order of dismissal be set aside
and the case be remanded to the RTC for further proceedings. In a Resolution, the
CA denied Elizas motion and held that the admission of the contested Deed of Sale
at this late stage would be contrary to Grans right to due process. Hence, the
instant petition.
Issue:
Whether the action of Eliza had already prescribe.
Ruling:
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It is evident that Eliza ultimately seeks for the reconveyance to her of the
subject properties through the nullification of their supposed sale to Gran. An action
for reconveyance is one that seeks to transfer property, wrongfully registered by
another, to its rightful and legal owner. Having alleged the commission of fraud by
Gran in the transfer and registration of the subject properties in her name, there
was, in effect, an implied trust created by operation of law pursuant to Article
1456 of the Civil Code which provides:
Art. 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.
To determine when the prescriptive period commenced in an action for

reconveyance, the plaintiffs possession of the disputed property is material. If there
is an actual need to reconvey the property as when the plaintiff is not in possession,
the action for reconveyance based on implied trust prescribes in ten (10) years, the
reference point being the date of registration of the deed or the issuance of the
title. On the other hand, if the real owner of the property remains in possession of
the property, the prescriptive period to recover title and possession of the property
does not run against him and in such case, the action for reconveyance would be in
the nature of a suit for quieting of title which is imprescriptible.
In the case at bar, a reading of the allegations of the Amended Complaint

failed to show that Eliza remained in possession of the subject properties in dispute.
On the contrary, it can be reasonably deduced that it was Gran who was in
possession of the subject properties, there being an admission by the Eliza that the
property covered by TCT No. 224174 was being used by Grans mother-in-law. In
fact, Elizas relief in the Amended Complaint for the "surrender" of three (3)
properties to her bolsters such stance. And since the new titles to the subject
properties in the name of Gran were issued by the Registry of Deeds of Marikina on
the following dates: TCT No. 224174 on July 27, 1992, TCT No. N-5500 on January
29, 1976, and TCT No. N-4234 on November 26, 1975, the filing of the Elizas
complaint before the RTC on January 9, 2006 was obviously beyond the ten-year
prescriptive period, warranting the Amended Complaints dismissal all the same.
ONOFRE ANDRES, SUBSTITUTED BY HIS HEIRS, NAMELY: FERDINAND,
ROSALINA, ERIBERTO, FROILAN, MA. CLEO FE, NELSON, GERMAN, GLORIA,
ALEXANDER, MAY, ABRAHAM, AND AFRICA, ALL SURNAMED ANDRES vs.
PHILIPPINE NATIONAL BANK
Page 317 of 483

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A bank that accepts a mortgage based upon a title which appears valid on its
face and after exercising the requisite care, prudence, and diligence appropriate to
the public interest character of its business can be deemed a mortgagee in good
faith. The subsequent consolidation of title in its name after a valid foreclosure
shall be respected notwithstanding later proof showing that the title was based
upon a void transaction. In this case, PNB is considered as a mortgagee in good
faith because it complied with the standard operating practice expected from
banks.
Facts:
This case involves a 4,634-square-meter parcel of land in Nueva Ecija
mortgaged to respondent Philippine National Bank (PNB). PNB later foreclosed the
property and consolidated title in its name. Petitioner Onofre Andres, the uncle of
mortgagors Reynaldo Andres and his wife, Janette de Leon, filed a complaint for
cancellation of title and reconveyance of the property alleging that title in
mortgagor's name was based on a falsified document denominated as SelfAdjudication of Sole Heir.
The trial court ruled in favor of Onofre Andres by voiding all derivative titles.
The Court of Appeals modified this decision by declaring as valid and existing TCT
No. N-24660 in PNBs name. Onofre Andres filed the instant petition assailing the
Court of Appeals decision and resolution.
The Spouses Victor and Filomena Andres acquired during their marriage a
4,634-square-meter parcel of land in Sto. Domingo, Nueva Ecija, covered by a TCT.
They had nine children. Among them were Onofre Andres and Roman Andres
who is the father of Reynaldo Andres. Victor passed away on June 15, 1955, while
his wife, Filomena, died on April 23, 1973.
After Victors death, or on July 1, 1965, his widow, Filomena, and six of their
children Onofre, Roman, Juana, Guillermo, Felisa, and Maxima agreed in an
extrajudicial partition with sale to adjudicate one half of the land covered by a TCT
to each of them pro indiviso. This document also provides that for P1,000.00, they
all sold, transferred, and conveyed to Roman Andres their respective rights and
participation to the one-half portion of the property. This was annotated on the title.
Consequently, the said TCT was cancelled, and a new title was issued on
August 20, 1965 in the name of Roman Andres and his wife, Lydia Echaus-Andres,
under a new TCT.
PNB alleged that on October 22, 1968, the Spouses Roman and Lydia Andres
mortgaged the property to PNB for P3,000.00. According to PNB, no objection was
made, even after the mortgage had been cancelled on July 20, 1972.
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PNB also alleged that on October 14, 1992, the Nueva Ecija Regional Trial
Court cancelled the guardianship issued in favor of the Security Bank and Trust
Company and transferred ownership of the properties of the deceased, Spouses
Roman and Lydia Andres, to their only living heir, Reynaldo Andres.
The TCT of the said property was consequently cancelled, and title was
transferred to the Spouses Reynaldo Andres and Janette de Leon, under a new TCT.
On September 4, 1995, the Spouses Reynaldo Andres and Janette de Leon
used this title and mortgaged the property to PNB for a P1.2 million loan. This was
without the consent of Onofre Andres.
Onofre Andres, claiming ownership over the property, filed on November 13,
1996 a complaint for cancellation of title, reconveyance of property and damages,
with prayer for the issuance of a preliminary injunction against his nephew Reynaldo
Andres and Reynaldos wife, Janette de Leon, PNB, Lydia Echaus-Andres, and the
Register of Deeds of Nueva Ecija.
The complaint alleged that on November 8, 1994, Onofre Andres nephew
Reynaldo Andres was in collusion with his mother, Lydia Echaus-Andres, in executing
a falsified document denominated as Self- Adjudication of Sole Heir. This stated
that Reynaldo Andres was the sole heir of his father, Roman Andres, who died on
October 12, 1968, and his mother who died on December 15, 1969. However, his
mother was then still alive and his father, Roman Andres, died only on May 29,
1990.
PNB denied the material allegations in the complaint. It argued that it
conducted an investigation on the property. The title presented to PNB by Reynaldo
Andres and his wife was clear and free from adverse claims.
For their part, the Spouses Reynaldo Andres and Janette de Leon claimed that
from the time title was issued in the name of Reynaldo Andres parents, until title
transferred to them on December 27, 1994, his father, Roman Andres, had
exercised acts of ownership over the property until they succeeded in its
possession. Onofre Andres possession was merely tolerated becauseof their close
relationship. The Spouses Reynaldo Andres and Janette de Leon also raised
prescription and estoppel.
In his reply, Onofre Andres countered that the extrajudicial partition with sale
executed on July 1, 1965 was fictitious, thus, void.
Even assuming that the document was valid, only a one-half undivided
portion of the land was sold since the other half was the conjugal share of Filomena
Andres who was then still living. The residential building did not exist yet at the
time of the questioned partition so this could not have been sold to Roman Andres.
Onofre Andres also denied that his continuous possession of the property was by
mere tolerance.
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Onofre Andres died on March 20, 2001 when the case was in the presentation
of evidence stage. He was substituted by his surviving heirs.
The Regional Trial Court rendered its decision in favor of Onofre Andres.
The Court of Appeals rendered its decision on December 13, 2005, modifying
the trial courts decision in that TCT No. N-24660 in the name of PNB was declared
valid and existing. The rest of the decision stands. It also denied reconsideration
on July 5, 2006, prompting Onofre Andres to file the instant petition.
Issue:
Whether PNB is an innocent mortgagee for value and in good faith, thus, its
right on the property is protected even if the mortgagor obtained title through
fraud.
Ruling:
Yes. PNB is an innocent mortgagee for value and in good faith.
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.
The general rule allows every person dealing with registered land to rely on
the face of the title when determining its absolute owner. Thus, cases like Cabuhat
vs. Court of Appeals have held that a mortgagee has a right to rely in good faith on
the certificate of title of the mortgagor of the property given as security and in the
absence of any sign that might arouse suspicion, has no obligation to undertake
further investigation. The protection of innocent mortgagees for value finds
support in the Land Registration Act.
However, the banking industry belongs to a different category than private
individuals.
Banks are considered businesses impressed with public interest,
requiring high standards of integrity and performance. Consequently, banks must
exercise greater care, prudence, and due diligence in their property dealings. The
standard operating practice for banks when acting on a loan application is to
conduct an ocular inspection of the property offered for mortgage and to verify the
genuineness of the title to determine the real owners thereof.
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Unlike in Cruz v. Bancom Finance Corporation cited by petitioners, PNB
complied with this standard operating practice.
The petition even attached certified true copies of the transcript of bank
appraiser Gerardo Pestaos testimony, offered to prove that defendant spouses
Reynaldo and Jannette Andres mortgaged the property subject matter of the
litigation to secure their loan to PNB approved in 1995 and at that time the
defendant Andres spouses were the owners of the mortgaged property; that there
was no claim filed by the plaintiff Onofre Andres.
AMADA COTONER-ZACARIA vs. SPOUSES ALFREDO REVILLA AND THE HEIRS
OF PAZ REVILLA
Amada argues that the subsequent buyer of the disputed parcel of land is in
good faith. The court has held that the rule in land registration law that the issue
of whether the buyer of realty is in good or bad faith is relevant only where the
subject of the sale is registered land and the purchase was made from the
registered owner whose title to the land is clean.
Facts:
The respondents spouses Revilla are the owners of the disputed unregistered
parcel of land in the case at bar. Having difficulty in raising money for the travelling
expenses of Alfredo Revilla to Saudi Arabia, the spouses borrowed money from the
petitioner Amada Cotoner-Zacaria. As a security, the spouses verbally agreed that
the parcel of land they own would be physically possessed and cultivated by
Amada, the earnings of which is to be applied to the payment of the loan and realty
taxes.
Unknown to the spouses, Amada forged the signature of the spouses in a
document designated as Kasulatan ng Bilihan ng Lupa. By virtue of this
document, Amada was able to transfer the ownership of the parcel of land to
Casorla. Casorla then sold the land to spouses Sun.
Upon learning of this, the respondent spouses Revilla filed a complaint for
reconveyance and annulment of the Kasulatan with the Regional Trial Court alleging
that there signature in the said document were forged. The RTC ruled in favor of the
spouses Revilla. On appeal, the Court of Appeals affirmed the decision of the RTC.
Hence, the current petition.
Issue:
Whether or not the reconveyance and reinstatement of the tax declaration in
favor of the spouses Revilla over the disputed parcel of land is proper.
Ruling:
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The reconveyance of the ownership of the parcel of land to spouses Revilla is
proper. The Supreme Court affirmed the decision of the Court of Appeals.
The reinstatement of the property in favor of respondents Revilla spouses
was anchored on the lower courts finding that their signatures as sellers in the
Kasulatan ng Bilihan ng Lupa were forged. This court has held that the question
of forgery is one of fact. Well-settled is the rule that [f]actual findings of the lower
courts are entitled great weight and respect on appeal, and in fact accorded finality
when supported by substantial evidence on the record.
Amada contends that the Sun spouses were buyers in good faith for value,
thus, the court erred in ordering reinstatement of the property in favor of
respondents Revilla spouses.
The court has held that the rule in land registration law that the issue of
whether the buyer of realty is in good or bad faith is relevant only where the subject
of the sale is registered land and the purchase was made from the registered owner
whose title to the land is clean[.]
Necessarily, those who rely in good faith on a clean title issued under the
Torrens system for registered lands must be protected. On the other hand, those
who purchase unregistered lands do so at their own peril.
This good faith argument cannot be considered as this case involves
unregistered land. In any case, as explained by respondents Revilla spouses in their
memorandum, this is a defense personal to the Sun spouses and cannot be
borrowed by Amada. The Sun spouses no longer raised this argument on appeal,
but only made a partial appeal regarding legal interest on the award.
HEIRS OF GREGORIO LOPEZ, REPRESENTED BY ROGELIA LOPEZ, ET AL., vs.
DEVELOPMENT BANK OF THE PHILIPPINES [NOW SUBSTITUTED BY
PHILIPPINE INVESTMENT TWO (SPV-AMC), INC.]
Marietta could acquire valid title over the whole property if she were an
innocent purchaser for value. An innocent purchaser for value purchases a property
without any notice of defect or irregularity as to the right or interest of the seller. He
or she is without notice that another person holds claim to the property being
purchased. Marietta cannot claim the protection to innocent purchasers for value
because the circumstances do not make this available to her. In this case, there was
no certificate of title to rely on when she purchased the property from Enrique. At
the time of the sale, the property was still unregistered. What was available was
only a tax declaration issued under the name of Heirs of Lopez.
Facts:
Gregoria Lopez owned a property in Bustos, Bulacan. She died on March 19,
1922 and was survived by her three sons: Teodoro, Francisco, and Carlos Lopez. Tax
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Declaration No. 613 was issued under the names of Teodoro, Francisco, and Carlos.
Teodoro, Francisco, and Carlos died. Only Teodoro was survived by children:
Gregorio, Enrique, Simplicio, and Severino. Petitioners in this case are Simplicio
substituted by his daughter Eliza Lopez, and the heirs of Gregorio and Severino.
Enrique is deceased.
Petitioners discovered that on November 29, 1990, Enrique executed an
affidavit of self-adjudication declaring himself to be Gregoria Lopezs only surviving
heir, adjudicating upon himself the land in Bulacan and sold it to Marietta Yabut.
Petitioners demanded from Marietta the nullification of Enriques affidavit of
self-adjudication and the deed of absolute sale. They also sought to redeem
Enriques one-fourth share. However, Marietta refused.
In 1993, Marietta obtained a loan from Development Bank of the Philippines
(DBP) and mortgaged the property to DBP as security. The property was covered by
Tax Declaration No. 18727. Subsequently, an original certificate of title(OCT) was
issued in Mariettas name. Marietta and DBP executed a supplemental document
placing the subject property within the coverage of the mortgage. The mortgage
was annotated to the title.
Petitioners filed a complaint with the RTC for the annulment of document,
recovery of possession, and reconveyance of the property. Petitioners caused the
annotation of a notice of lis pendens at the back of the OCT.
Marietta failed to pay her loan to DBP. DBP instituted foreclosure proceedings
and was awarded the sale of the property as the highest bidder. The Certificate of
Sale was registered with the Register of Deeds. Later on, the title to the property
was consolidated in favor of DBP.
The RTC ruled in favor of petitioners; that the affidavit of self-adjudication and
the deed of absolute sale did not validly transfer to Marietta the title to the property.
The RTC also found that DBP was not a mortgagee in good faith because at the time
of the execution of the mortgage contract, a certificate of title was yet to be issued
in favor of Marietta.
The RTC ordered the nullification of Enriques affidavit of self-adjudication, the
sale of the three-fourth portion of the subject property in favor of Marietta, the
reconveyance of the three-fourth share of the property in favor of petitioners, the
nullification of the real estate mortgage executed in favor of DBP, and the surrender
of possession of the property to petitioners.
DBP, substituted by Philippine Investment Two (PI Two), appealed to the Court
of Appeals.
The CA reversed the decision of the RTC. It held that DBP was a mortgagee in good
faith.
Issues:
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3) Whether or not Enrique's affidavit of self-adjudication is valid, thus allowing the
sale to Marietta.
4) Whether or not the mortgage executed by Marietta in favor of DBP is valid.
Ruling:
The Court finds merit in the petition.
1. Validity of Enriques affidavit and the sale to Marietta
The Court has upheld the principle that no one can give what one does not
have. A seller can only sell what he or she owns, or that which he or she does not
own but has authority to transfer, and a buyer can only acquire what the seller can
legally transfer.
This principle is incorporated in our Civil Code. It provides that in a contract of
sale, the seller binds himself to transfer the ownership of the thing sold, thus:
Art. 1458. By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
The seller cannot perform this obligation if he or she does not have a right to
convey ownership of the thing. Hence, Article 1459 of the Civil Code provides:
Art. 1459. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered.
Title or rights to a deceased persons property are immediately passed to his
or her heirs upon death. The heirs rights become vested without need for them to
be declared heirs. Before the property is partitioned, the heirs are co-owners of
the property.
In this case, the rights to Gregoria Lopezs property were automatically
passed to her sons Teodoro, Francisco, and Carlos when she died. Since only
Teodoro was survived by children, the rights to the property passed to them when
Gregoria Lopezs sons died. The children entitled to the property were Gregorio,
Simplicio, Severino, and Enrique.
Gregorio, Simplicio, Severino, and Enrique became co-owners of the property,
with each of them entitled to an undivided portion of only a quarter of the property.
Upon their deaths, their children became the co-owners of the property, who were
entitled to their respective shares, such that the heirs of Gregorio became entitled
to Gregorios one-fourth share, and Simplicios and Severinos respective heirs
became entitled to their corresponding one-fourth shares in the property.
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The heirs cannot alienate the shares that do not belong to them. Article 493
of the Civil Code provides:
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits
and benefits pertaining thereto, and he may therefore alienate, assign or mortgage
it, and even substitute another person in its enjoyment, except when personal rights
are involved. But the effect of the alienation or the mortgage, with respect to the
co-owners, shall be limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership.
Since Enriques right to the property was limited to his one-fourth share, he
had no right to sell the undivided portions that belonged to his siblings. Any sale by
one heir of the rest of the property will not affect the rights of the other heirs who
did not consent to the sale. Such sale is void with respect to the shares of the other
heirs.
Regardless of their agreement, Enrique could only convey to Marietta his
undivided one-fourth share of the property, and Marietta could only acquire that
share. This is because Marietta obtained her rights from Enrique who, in the first
place, had no title or interest over the rest of the property that he could convey.
This is despite Enriques execution of the affidavit of self-adjudication wherein
he declared himself to be the only surviving heir of Gregoria Lopez. The affidavit of
self-adjudication is invalid for the simple reason that it was false. At the time of its
execution, Enriques siblings were still alive and entitled to the three-fourth
undivided share of the property. The affidavit of self-adjudication did not have the
effect of vesting upon Enrique ownership or rights to the property.
The issuance of the original certificate of title in favor of Marietta does not
cure Enriques lack of title or authority to convey his co-owners portions of the
property. Issuance of a certificate of title is not a grant of title over petitioners
undivided portions of the property. The physical certificate of title does not vest in a
person ownership or right over a property. It is merely an evidence of such
ownership or right.
Marietta could acquire valid title over the whole property if she were an
innocent purchaser for value. An innocent purchaser for value purchases a property
without any notice of defect or irregularity as to the right or interest of the seller.
He or she is without notice that another person holds claim to the property being
purchased.
As a rule, an ordinary buyer may rely on the certificate of title issued in the
name of the seller. He or she need not look beyond what appears on the face of the
certificate of title. However, the ordinary buyer will not be considered an innocent
purchaser for value if there is anything on the certificate of title that arouses
suspicion, and the buyer failed to inquire or take steps to ensure that there is no
cloud on the title, right, or ownership of the property being sold.
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Marietta cannot claim the protection accorded by law to innocent purchasers
for value because the circumstances do not make this available to her. In this case,
there was no certificate of title to rely on when she purchased the property from
Enrique. At the time of the sale, the property was still unregistered. What was
available was only a tax declaration issued under the name of Heirs of Lopez.
The defense of having purchased the property in good faith may be availed of
only where registered land is involved and the buyer had relied in good faith on the
clear title of the registered owner. It does not apply when the land is not yet
registered with the Registry of Deeds.
The unregistered status of the property should have prompted Marietta to
inquire further as to Enriques right over the property. She did not. Hence, she was
not an innocent purchaser for value. She acquired no title over petitioners portions
of the property.
2. Validity of the mortgage
One of the requisites of a valid mortgage contract is ownership of the
property being mortgaged. Article 2085 of the Civil Code enumerates the requisites
of a mortgage contract:
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.
Applying this provision and having established that Marietta acquired no valid
title or ownership from Enrique over the undivided portions of the property, this
court finds that no valid mortgage was executed over the same property in favor of
DBP. Without a valid mortgage, there was also no valid foreclosure sale and no
transfer of ownership of petitioners undivided portions to DBP.
DBP acquired no right over the undivided portions since its predecessor-ininterest was not the owner and held no authority to convey the property.
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As in sales, an exception to this rule is if the mortgagee is a mortgagee in
good faith. This exception was explained in Torbela v. Rosario:
Under this doctrine, even if the mortgagor is not the owner of the mortgaged
property, the mortgage contract and any foreclosure sale arising therefrom are
given effect by reason of public policy. This principle is based on the rule that all
persons dealing with property covered by a Torrens Certificate of Title, as buyers or
mortgagees, are not required to go beyond what appears on the face of the title.
This is the same rule that underlies the principle of "innocent purchasers for value."
The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on
the certificate of title of the mortgagor to the property given as security and in the
absence of any sign that might arouse suspicion, has no obligation to undertake
further investigation. Hence, even if the mortgagor is not the rightful owner of, or
does not have a valid title to, the mortgaged property, the mortgagee in good faith
is, nonetheless, entitled to protection.
DBP claims that it is covered by this exception. DBP is mistaken. The
exception applies when, at the time of the mortgage, the mortgagor has already
obtained a certificate of title under his or her name. It does not apply when the
mortgagor had yet to register the property under her name.
The facts show that DBP disregarded circumstances that should have aroused
suspicion. At the time of the mortgage with DBP, Marietta only had a tax declaration
under her name to show that she was the owner of the property. A tax declaration
neither proves ownership of property nor grants title. Yet, DBP agreed to accept the
property as security even though Mariettas claim was supported only by the tax
declaration, and a certificate of title was yet to be issued under her name.
DBP should have inquired further as to Mariettas rights over the property
since no certificate of title was issued to her. DBP took the risks attendant to the
absence of a certificate of title. It should bear the burden of checking the ownership
as well as the validity of the deed of sale. This is despite the eventual issuance of a
certificate of title in favor of Marietta.
The rule on innocent purchasers or mortgagees for value is applied more
strictly when the purchaser or the mortgagee is a bank. Banks are expected to
exercise higher degree of diligence in their dealings. Banks may not rely simply on
the face of the certificate of title.
DBP failed to exercise the degree of diligence required of banks when it
accepted the unregistered property as security for Mariettas loan despite
circumstances that should have aroused its suspicion.
To reiterate, the protection accorded to mortgagees in good faith cannot be
extended to mortgagees of properties that are not yet registered or registered but
not under the mortgagors name.
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The RTC did not err in ordering the nullification of the documents of sale and
mortgage. Contracts involving the sale or mortgage of unregistered property by a
person who was not the owner or by an unauthorized person are void.
FLORENTINO W. LEONG AND ELENA LEONG, ET AL. vs. EDNA C. SEE
G.R. No. 194077, December 03, 2014, J. Leonen
Spouses owned the subject property wherein petitioner Elena was allowed to
stay. Upon the spouses divorce, the property went to the wife. She sold it to the
respondent See. The Court held that See was a buyer in good faith. She went to the
Register of Deeds to verify the title and relied on the marriage settlement
agreement. The Court found that she exerted due diligence. An innocent purchaser
for value refers to someone who buys the property of another without notice that
some other person has a right to or interest in it, and who pays a full and fair price
at the time of the purchase or before receiving any notice of another persons
claim.
Facts:
The spouses Florentino Leong and Carmelita Leong used to own the property
located at De Guzman Street, Quiapo, Manila. Elena Leong is Florentino's sister-inlaw. She had stayed with her in-laws on the property rental-free for over two
decades until the building they lived in was razed by fire. They then constructed
makeshift houses, and the rental-free arrangement continued.
Florentino and Carmelita immigrated to the United States and eventually had
their marriage dissolved in Illinois. A provision in their marital settlement agreement
states that Florentino shall convey and quitclaim all of his right, title and interest in
and to 540 De Guzman Street, Manila, Philippines . . . to Carmelita.
Intercalated in the lower margin of page 12 of the instrument was a longhand scribbling of a proviso, purporting to be a footnote remark: Neither party shall
evict or charge rent to relatives of the parties, or convey title, until it has been
established that Florentino has clear title to the Malabon property. Clear title to be
established by the attorneys for the parties or the ruling of a court of competent
jurisdiction. In the event Florentino does not obtain clear title, this court reserves
jurisdiction to reapportion the properties or their values to effect a 50-50 division of
the value of the 2 remaining Philippine properties.
Carmelita sold the land to Edna. In lieu of Florentino's signature of conformity
in the deed of absolute sale, Carmelita presented to Edna and her father a waiver of
interest notarized in Illinois. In this waiver, Florentino reiterated his quitclaim over
his right, title, and interest to the land. Consequently, the lands title was
transferred to Edna's name. Edna was aware of the Leong relatives staying in the
makeshift houses on the land. Carmelita assured her that her nieces and nephews
would move out, but demands to vacate were unheeded.
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Edna filed a complaint for recovery of possession against Elena and the other
relatives of the Leong ex-spouses. Florentino filed a complaint for declaration of
nullity of contract, title, and damages against Carmelita, Edna, and the Manila
Register of Deeds, alleging that the sale was without his consent. The two cases
were consolidated.
The trial court granted Edna possession and ownership over the subject
property. The appellate court affirmed the ruling.
Issue:
Whether or not Edna is a buyer in good faith and for value
Ruling:
Yes, the Court held that Edna was a buyer in good faith and for value.
The Torrens system was adopted to obviate possible conflicts of title by giving
the public the right to rely upon the face of the Torrens certificate and to dispense,
as a rule, with the necessity of inquiring further. One need not inquire beyond the
four corners of the certificate of title when dealing with registered property.
An innocent purchaser for value refers to someone who buys the property of
another without notice that some other person has a right to or interest in it, and
who pays a full and fair price at the time of the purchase or before receiving any
notice of another persons claim. One claiming to be an innocent purchaser for
value has the burden of proving such status.
The Court cited the ruling of the trial court: By her overt acts, Edna See with
her father verified the authenticity of Carmelitas land title at the Registry of Deeds
of Manila. There was no annotation on the same, and thus, it is deemed a clean
title. Also, she relied on the duly executed and notarized Certificate of Authority
issued by the State of Illinois and Certificate of Authentication issued by the Consul
of the Republic of the Philippines for Illinois in support to the Waiver of Interest
incorporated in the Deed of Absolute Sale presented to her by Carmelita.
Examination of the assailed Certificate of Authority shows that it is valid and
regular on its face. The assailed Certificate of Authority is a notarized document and
therefore, presumed to be valid and duly executed. Thus, Edna Sees reliance on the
notarial acknowledgment found in the duly notarized Certificate of Authority
presented by Carmelita is sufficient evidence of good faith.
The Court found that Edna exerted due diligence when she ascertained the
authenticity of the documents attached to the deed of sale. These further inquiries
were considered by the lower courts in finding See to be an innocent purchaser in
good faith and for value.
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Edna, an innocent purchaser in good faith and for value with title in her
name, has a better right to the property than Elena. Elenas possession was neither
adverse to nor in the concept of owner.
REPUBLIC OF THE PHILIPPINES vs. HEIRS OF SPOUSES DONATO
SANCHEZ and JUANA MENESES represented by RODOLFO S. AGUINALDO
G.R. No. 212388, December 10, 2014, J. Velasco, Jr.
Before a certificate of title which has been lost or destroyed may be
reconstituted, it must first be proved by the claimants that said certificate of title
was still in force at the time it was lost or destroyed, among others.
Facts:
The spouses Sanchez filed an amended petition for reconstitution of Original
Certificate of Title No. 45361 that covered Lot No. 854 of the Cadastral Survey of
Dagupan, pursuant to Republic Act No. 26. In said petition, respondents alleged that
OCT No. 45361 was issued in the name of their predecessor-in-interest, the spouses
Sanchez; that said lot was declared for taxation purposes in the name of the
spouses Sanchez and that when the latter died intestate, they executed a Deed of
Extrajudicial Partition. Said Deed, however, could not be registered because the
owners copy of OCT No. 45361 was missing; and that Pangasinan issued a
certification that the copies of Decree No. 41812 and OCT No. 45361 could not be
found among its records. Upon order of the LRA, the spouses submitted documents
with corresponding evidence as to their due execution.
On January 11, 2008, the LRA submitted its Report pertaining to the legality
of the reconstitution sought in favor of Sanchezs. On June 30, 2008, however, the
Regional Trial Court rendered its Decision dismissing the petition for lack of sufficient
evidence, ruling that RA No. 26 only applies in cases where the issuance of the OCT
sought to be reconstituted has been established, only that it was lost or destroyed.
Issue:
Whether the documents presented by spouses Sanchez is sufficient to
warrant the reconstitution of the alleged lost title.
Ruling:
No, they were not.
The Court agrees with the trial court that no clear and convincing proof has
been adduced that OCT No. 45361 was issued by virtue of Decree No. 418121. A
petition for reconstitution of lost or destroyed OCT requires, as a condition
precedent, that an OCT has indeed been issued, for obvious reasons. As explicitly
stated in the law, before a certificate of title which has been lost or destroyed may
be reconstituted, it must first be proved by the claimants that said certificate of title
was still in force at the time it was lost or destroyed, among others. Here, the mere
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existence of TCT No. 10202, later cancelled by TCT No. 44365, which, in turn, was
superseded by TCT No. 80792, clearly shows that the OCT which respondents seek
to be reconstituted is no longer in force, rendering the procedure, if granted, a mere
superfluity. Additionally, if indeed OCT No. 45361 was lost or destroyed, it is
necessary that the RD issue a certification that such was in force at the time of its
alleged loss or destruction. Definitely, the RD cannot issue such certification
because of the dearth of records in support of the alleged OCT No. 45361 in its file.
The presentation of alleged derivative titlesTCT No. 10202, TCT No. 44365 and
TCT No. 80792will not suffice to replace this certification because the titles do not
authenticate the issuance of OCT No. 45361 having been issued by the RD without
any basis from its official records.
SPOUSES CARLOS J. SUNTAY and ROSARIO R. SUNTAY vs. KEYSER
MERCANTILE INC.
Every person dealing with a registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way
oblige him to go beyond the certificate to determine the condition of the property.
Facts:
On October 20, 1989, Eugenia Gocolay, chairperson and president of
respondent Keyser Mercantile, Inc., entered into a contract to sell with Bayfront
Development Corporation for the purchase on installment basis of a condominium
unit in Bayfront Tower Condominium. This Contract to Sell was not registered with
the Register of Deeds of Manila. Thus, the subject unit remained in the name of
Bayfront with a clean title.
On July 7, 1990, petitioner spouses Carlos and Rosario Suntay also purchased
several condominium units on the 4 th floor of Bayfront Tower Condominium through
another contract to sell. Despite payment of the full purchase price, however,
Bayfront failed to deliver the condominium units. When Bayfront failed to reimburse
the full purchase price, Spouses Suntay filed an action against it.
In its decision, dated April 23 1994, the HLURB rescinded the Contract to Sell
between Bayfront and Spouses Suntay and ordered Bayfront to pay Spouses Suntay
the total amount of P2,752,068.60 as purchase price with interest. Upon the
application of Spouses Suntay, the Sheriffs of the Regional Trial Court of Manila
levied Bayfronts titled properties, including the subject condominium of Keyser.
Considering that CCT No. 15802 was still registered under Bayfront with a clean
title, the sheriffs deemed it proper to be levied. The levy on execution in favor of
Spouses Suntay was duly recorded in the Register of Deeds of Manila on January 18,
1995. The auction sale was conducted on February 23, 1995, and Spouses Suntay
were the highest bidder. Consequently, on March 1, 1995, the Certificate of Sale in
favor of Spouses Suntay was issued. Meanwhile, the Deed of Absolute Sale between
Bayfront and Keyser involving the subject property was finally executed on
November 9, 1995. The latter allegedly paid the full purchase price sometime in
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1991. When Keyser was about to register the said deed of absolute sale in February
1996, it discovered the Notice of Levy and the Certificate of Sale annotated at the
back of CCT No. 15802 in favor of Spouses Suntay.
In its decision, dated November 18, 1996, the HLURB ruled in favor of Keyser.
In its September 7, 2012 Decision, the CA denied the appeal as it found that
Spouses Suntay did not acquire the subject property because at the time it was
levied, Bayfront had already sold the condominium unit to Keyser.
Issue:
Whether the spouses Suntay properly relied on Bayfronts Certificate of Title.
Ruling:
Yes it did.
The main purpose of the Torrens system is to avoid possible conflicts of title
to real estate and to facilitate transactions relative thereto by giving the public the
right to rely upon the face of a Torrens certificate of title and to dispense with the
need of inquiring further, except when the party concerned has actual knowledge of
facts and circumstances that should impel a reasonably cautious man to make such
further inquiry. Every person dealing with a registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige
him to go beyond the certificate to determine the condition of the property.
In the case at bench, the subject property was registered land under the
Torrens System covered by CCT No. 15802 with Bayfront as the registered owner. At
the time that the Notice of Levy was annotated on January 18, 1995, the title had no
previous encumbrances and liens. Evidently, it was a clean title. The Certificate of
Sale, pursuant to an auction sale, was also annotated on April 7, 1995, with
Bayfront still as the registered owner. It was only on March 12, 1996, almost a year
later, that Keyser was able to register its Deed of Absolute Sale with Bayfront. Prior
to such date, Spouses Suntay appropriately relied on the Torrens title of Bayfront to
enforce the latters judgment debt.
The settled rule is that levy on attachment, if duly registered, takes
preference over a prior unregistered sale. The preference created by the levy on
attachment is not diminished even by the subsequent registration of the prior sale.
IMELDA SYJUCO, et.al vs. FELISA D. BONIFACIO and VSD REALTY &
CORPORATION
G.R. No. 148748, January 14, 2015, J. Leonardo-De Castro
The filing of an action to quiet title is imprescriptible if the disputed real
property is in the possession of the plaintiff. The rule on the incontrovertibility or
indefeasibility of title has no application in this case given the fact that the
contending parties claim ownership over the subject land based on their respective
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certificates of title thereon which originated from different sources. The Syjucos'
title, shows that it originated from OCT No. 994 registered on May 3, 1917 while
Bonficacio's title shows that that it likewise originated from OCT No. 994, but
registered on April 19, 1917. This case affirmed the earlier finding that there is
only one OCT No. 994, the registration date of which had already been decisively
settled as 3 May 1917 and not 19 April 1917 and categorically concluded that
OCT No. 994 which reflects the date of 19 April 1917 as its registration date is null
and void.
Facts:
Imelda, Leonardo, Fidelino, Azucena, Anita, and Sisa, all surnamed Syjuco are
the registered co-owners of the subject land, located in Caloocan City. They
inherited the property from their father Martin Syjuco. They then leased the
property to Manufacturers Bank. They also subleased the property to Kalayaan
Development Corporation (KDC).
Sometime in 1994, they learned that their property was being offered for
sale. They found out that respondent Bonifacio, sub-lessee of KDC, was able to
register the said property in her name in another title. Bonifacios title was issued
pursuant to her petition for segregation which was granted by RTC of Caloocan City,
Branch 125.
Thereafter, they filed a declaration of nullity and cancellation of Bonifacios
title. It was also only in 1995 when the Syjucos learned that Bonifacio was able to
sell and transfer her title over the subject land in favor of VSD Realty. According to
the Syjucos, the other certificates of title over the subject land could have only been
obtained fraudulently. On January 9, 1998, RTC rendered a decision the Syjucos
declaring VSD as the owner.
The Syjucos' title, shows that it originated from OCT No. 994 registered on
May 3, 1917. The title of Bonifacio shows that it likewise originated from OCT No.
994, but registered on April 19, 1917. Curiously, the title of respondent VSD Realty
is supposed to be a direct transfer from the title of respondent Bonifacio, yet, the
certification as to the original registration of its mother title OCT No. 994
provides the registration date of May 3, 1917.
The Syjucos filed an appeal before the Court of Appeals arguing that
Bonifacios title, which originated from OCT No. 994 registered in 1912, is null and
void as the only authentic OCT No. 994 is the one issued pursuant to Decree No.
36455 originally registered on May 3, 1917.
Issues:
1. Whether or not the action to quiet title over the subject land by the Syjucos is
proper.
2. Whether or not the title of Bonifacio is null and void.
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Ruling:
1.
Yes.
The instituted action in this case is clearly a direct attack on a certificate of

title to real property. The relief sought by petitioners is certainly feasible since the
objective of an action to quiet title, as provided under Article 476 of the Civil Code
of the Philippines, is precisely to quiet, remove, invalidate, annul, and/or nullify a
cloud on title to real property or any interest therein by reason of any instrument,
record, claim, encumbrance or proceeding which is apparently valid or effective but
is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be
prejudicial to said title.
It is an established doctrine in land ownership disputes that the filing of an
action to quiet title is imprescriptible if the disputed real property is in the
possession of the plaintiff. One who is in actual possession of a piece of land
claiming to be owner thereof may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, the reason for the rule being that
his undisturbed possession gives him a continuing right to seek the aid of a court of
equity to ascertain and determine the nature of the adverse claim of a third party
and its effect on his own title, which right can be claimed only by one who is in
possession. In this case, petitioners have duly established during the trial that they
and/or their predecessors-in-interest have been in uninterrupted possession of the
subject land since 1926.
Moreover, the rule on the incontrovertibility or indefeasibility of title has no
application in this case given the fact that the contending parties claim ownership
over the subject land based on their respective certificates of title thereon which
originated from different sources. Certainly, there cannot be two or even several
certificates of title on the same parcel of real property because a land registration
court has no jurisdiction to order the registration of land already decreed in the
name of another in an earlier land registration case and a second decree for the
same land would be null and void, since the principle behind original registration is
to register a parcel of land only once.
2.
Yes.
The Court reiterates that the validity of OCT No. 994 registered on May 3,
1917, and the non-existence of a purported OCT No. 994 registered on April 19,
1917, have already been exhaustively passed upon and settled with finality in in the
Resolution[s] dated December 14, 2007 and March 31, 2009 in Manotok Realty, Inc.
v. CLT Realty Development Corporation.
The fact that respondents claim that their respective titles, TCT Nos. 265778
and 285313, are derivatives of OCT No. 994 registered on April 19, 1917, which the
Court had already repeatedly declared to be a non-existent and invalid title, the
Court rules in favor of the Syjucos. As held in Manotok, "any title that traces its
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source to OC'f No. 994 dated [19) April 1917 is void, for such mother title is
inexistent."
UNGAY MALOBAGO MINES, INC. vs. REPUBLIC OF THE PHILIPPINES
G.R. No. 187892, January 14, 2015, J. Peralta
The persons who can file the petition for reconstitution of a lost certificate
are the registered owner, his assigns or persons in interest in the property. In this
case, Ungay Malobago Mines, Inc. admitted that it was not the owner of the land on
which the mining patent was issued as the same was owned and registered in the
name of Rapu Rapu Minerals Inc., thus it has no legal capacity to institute a petition
for reconstitution of a lost certificate.
Facts:
On April 16, 2004, Ungay Malobago Mines, Inc. (Ungay) filed with the
Regional Trial Court (RTC) of Legaspi City, a verified petition seeking the
reconstitution of Original Certificate of Title (OCT) No. 4784 of the Cadastral Survey
of Albay, pursuant to the provisions of Republic Act (RA)
264 and Presidential Decree (PD) No. 1529.
In its petition, Ungay alleged: that it is the registered owner of a mining
patent which was issued by then President Diosdado Macapagal on July 20, 1962
and entered in the Registry of Deeds of the Province of Albay on September 4,
1962; that sometime in April 2004, it requested for a certified true copy of OCT No.
VH-4784 from the Register of Deeds of Albay, but despite a diligent search, the said
copy could not be located by the said office leading one to believe that the same
was permanently lost or destroyed; that the property was free from all liens and
encumbrances of any kind whatsoever and there existed no deeds or instruments
affecting the same which had been presented for or pending registration with the
Register of Deeds of Albay.
During the initial hearing, Ungay, through counsel, showed compliance with
the jurisdictional requirements. Trial thereafter ensued. The Republic opposed the
petition. On July 17, 2006, the RTC rendered its decision dismissing the petition.
Ungay filed its appeal with the CA. After the parties had filed their respective
pleadings, the case was then submitted for decision. On January 21, 2009, the CA
issued its assailed decision affirming in toto the decision of the RTC.
In so ruling, the CA found that since Ungay is not the registered owner of the
land covered by the OCT and citing the earlier ruling of the Supreme Court in Ungay
Malobago Mines, Inc v. Intermediate Appellate Court (IAC) where the Court declared
that as a grantee of a mining patent, Ungay did not become the owner of the land
where the minerals are located, hence, it has no personality to file for the
reconstitution of lost or destroyed certificate of title. The CA ruled that Ungay's
mining patent did not qualify as an interest in property as contemplated by RA No.
26 so as to give Ungay the authority under the law to initiate a petition for the
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reconstitution of said OCT. The CA affirmed the RTC's findings that the owner's
duplicate of OCT presented by Ungay was insufficient to serve as a basis for the
reconstitution of the original of said OCT because of the absence of the signature of
the Register of Deeds.
Ungay filed a motion for reconsideration, which the CA denied.
Issue:
Whether or not Ungay has the legal capacity to institute a petition seeking
the reconstitution of Original Certificate of Title (OCT) No. 4784 of the Cadastral
Survey of Albay, pursuant to the provisions of RA 264 and PD No. 1529.
Ruling:
No. It has no legal capacity.
The persons who can file the petition for reconstitution of a lost certificate are
the registered owner, his assigns or persons in interest in the property. In this case,
petitioner admitted that it was not the owner of the land on which the mining patent
was issued as the same was owned and registered in the name of Rapu Rapu
Minerals Inc.
A petition for judicial reconstitution of a registered interest, lien or
encumbrance, may be filed only when the certificate of title affected has not been
totally destroyed, that is, when said certificate of title is composed of more than one
sheet and only the portion of the additional sheet, on which such interest, lien or
encumbrance was noted is missing. The reconstitution in this case does not only
refer to a registered interest which was noted on an additional sheet of a certificate
of title but the reconstitution of a lost certificate. Therefore, Ungay's reliance on
Section 11 to support its claim that it can file for the reconstitution of OCT is
misplaced.
Petitioner argues that what it actually sought is the reconstitution of evidence
of the grant by the State in favor of petitioner of the right to explore and extract
mineral deposits within the area described in the original certificate of title.
Petitioner's filing of the reconstitution for that purpose is not within the purview of
RA No. 26 which deals with lost or destroyed certificates attesting title to a piece of
land.
MARIFLOR T. HORTIZUELA, represented by JOVIER TAGAUFA vs. GREGORIA
TAGUFA, ROBERTO TAGUFA and ROGELIO LUMABAN
Petitioner assails the decision of the CA that the action for reconveyance filed
by her was not the proper remedy on the ground that it constitutes a collateral
attack on the validity of the subject certificate of title. The SC however ruled that it
is not unmindful of the principle of indefeasibility of a Torrens title and that a
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certificate of title shall not be subject to collateral attack. Contrary to the
pronouncements of the MCTC and the CA, however, the complaint of petitioner was
not a collateral attack on the title warranting dismissal. As a matter of fact, an
action for reconveyance is a recognized remedy, an action in personam, available to
a person whose property has been wrongfully registered under the Torrens system
in anothers name. In an action for reconveyance, the decree is not sought to be set
aside. It does not seek to set aside the decree but, respecting it as incontrovertible
and no longer open to review, seeks to transfer or reconvey the land from the
registered owner to the rightful owner.
Facts:
The property involved in this case is a parcel of land titled under the name of
defendant Gregoria. Before it was titled in the name of Gregoria, said property was
originally owned by plaintiff Hortizuelas parents. Although untitled, Hortizuelas
parents mortgaged the property with DBP. For failure to redeem the property, DBP
foreclosed the same and sold it to Atty. Romulo Marquez who in turn sold it back to
Runsted Tagufa, husband of Gregoria and brother of Hortizuela, using the fund sent
by Hortizuela who was in America, with the agreement that Runsted will reconvey
the said property to Hortizuela when demanded.
Thereafter, Hortizuela discovered that the said unregistered property was
later on titled in the name of Gregoria by virtue of a free patent application before
the DENR. Consequently, Hortizuela filed a complaint for Reconveyance and
Recovery of Possession against herein defendants with the MCTC.
The MCTC dismissed the complaint on the ground that an action for
reconveyance was not the proper remedy. On appeal, the RTC reversed the decision
of the MCTC. The reversal being unacceptable to them, respondents filed a petition
for review before the CA. Ruling in favor of respondents the CA held that although
Hortizuela filed with the MCTC a complaint for reconveyance and recovery of
possession of the subject lot, she was also questioning the validity of the Torrens
title. It cited the well-settled rule that a Torrens title could not be collaterally
attacked; that the issue of whether or not the title was fraudulently issued, could
only be raised in an action expressly instituted for that purpose; and that an action
for reconveyance and recovery of possession was not the direct action
contemplated by law. Hence, this petition.
Hortizuela claims that Gregoria was aware that the subject land was actually
sold by Atty. Marquez to her. Runsted, only acted as attorney-in-fact in the sale
transaction. Thus, the action for reconveyance was not a collateral attack on the
said title because Hortizuela was not seeking the nullification of the title, but rather
the reconveyance of the property, covered by the said title, which Gregoria was
holding in trust for her benefit as the real owner.
Issue:
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Whether or not an action for reconveyance and recovery of possession
constitutes an indirect or collateral attack on the validity of the subject certificate of
title.
Ruling:
No it does not.
The Court finds the petition meritorious.
The Court is not unmindful of the principle of indefeasibility of a Torrens title
and Section 48 of P.D. No. 1528 where it is provided that a certificate of title shall
not be subject to collateral attack. A Torrens title cannot be altered, modified or
cancelled except in a direct proceeding in accordance with law. When the Court says
direct attack, it means that the object of an action is to annul or set aside such
judgment, or enjoin its enforcement. On the other hand, the attack is indirect or
collateral when, in an action to obtain a different relief, an attack on the judgment
or proceeding is nevertheless made as an incident thereof.
Contrary to the pronouncements of the MCTC and the CA, however, the
complaint of Hortizuela was not a collateral attack on the title warranting dismissal.
As a matter of fact, an action for reconveyance is a recognized remedy, an action in
personam, available to a person whose property has been wrongfully registered
under the Torrens system in anothers name. In an action for reconveyance, the
decree is not sought to be set aside. It does not seek to set aside the decree but,
respecting it as incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner. Reconveyance is
always available as long as the property has not passed to an innocent third person
for value.
There is no quibble that a certificate of title, like in the case at bench, can
only be questioned through a direct proceeding. The MCTC and the CA, however,
failed to take into account that in a complaint for reconveyance, the decree of
registration is respected as incontrovertible and is not being questioned. What is
being sought is the transfer of the property wrongfully or erroneously registered in
another's name to its rightful owner or to the one with a better right. If the
registration of the land is fraudulent, the person in whose name the land is
registered holds it as a mere trustee, and the real owner is entitled to file an action
for reconveyance of the property.
The fact that Gregoria was able to secure a title in her name does not operate
to vest ownership upon her of the subject land. Registration of a piece of land
under the Torrens System does not create or vest title, because it is not a mode of
acquiring ownership. A certificate of title is merely an evidence of ownership or title
over the particular property described therein. It cannot be used to protect a
usurper from the true owner; nor can it be used as a shield for the commission of
fraud; neither does it permit one to enrich himself at the expense of others. Its
issuance in favor of a particular person does not foreclose the possibility that the
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real property may be co-owned with persons not named in the certificate, or that it
may be held in trust for another person by the registered owner.
Also, the Court is not unaware of the rule that a fraudulently acquired free
patent may only be assailed by the government in an action for reversion pursuant
to Section 101 of the Public Land Act.
The foregoing rule is, however, not without exception. A recognized exception
is that situation where plaintiff-claimant seeks direct reconveyance from defendant
of public land unlawfully and in breach of trust titled by him, on the principle of
enforcement of a constructive trust.
In Roco, et al. v. Gimeda, the Court stated that if a patent had already been
issued through fraud or mistake and has been registered, the remedy of a party who
has been injured by the fraudulent registration is an action for reconveyance, thus:
It is to be noted that the petition does not seek for a reconsideration of the
granting of the patent or of the decree issued in the registration proceeding. The
purpose is not to annul the title but to have it conveyed to plaintiffs. Fraudulent
statements were made in the application for the patent and no notice thereof was
given to plaintiffs, nor knowledge of the petition known to the actual possessors and
occupants of the property. The action is one based on fraud and under the law, it
can be instituted within four years from the discovery of the fraud. (Art. 1146, Civil
Code, as based on Section 3, paragraph 43 of Act No. 190.) It is to be noted that as
the patent here has already been issued, the land has the character of registered
property in accordance with the provisions of Section 122 of Act No. 496, as
amended by Act No. 2332, and the remedy of the party who has been injured by the
fraudulent registration is an action for reconveyance.
In this case, in filing the complaint for reconveyance and recovery of
possession, Hortizuela was not seeking a reconsideration of the granting of the
patent or the decree issued in the registration proceedings. What she was seeking
was the reconveyance of the subject property on account of the fraud committed by
respondent Gregoria. An action for reconveyance is a legal and equitable remedy
granted to the rightful landowner, whose land was wrongfully or erroneously
registered in the name of another, to compel the registered owner to transfer or
reconvey the land to him. Thus, the RTC did not err in upholding the right of
Hortizuela to ask for the reconveyance of the subject property. To hold otherwise
would be to make the Torrens system a shield for the commission of fraud.
REGALIAN DOCTRINE
REPUBLIC OF THE PHILIPPINES vs. CORAZON C. SESE and FE C. SESE
The burden of proof in overcoming the presumption of State ownership of the
lands of the public domain is on the person applying for registration or claiming
ownership, who must prove that the land is alienable or disposable. To overcome
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this presumption, incontrovertible evidence must be established that the land is
alienable or disposable. There must be an existence of a positive act of the
government such as a presidential proclamation or an executive order; an
administrative action; investigation reports of Bureau of Lands investigators; or a
legislative act or a statute. The applicant may also secure a certification from the
government that the land claimed to have been possessed for the required number
of years is alienable and disposable. In this case, petitioners cite a surveyor
geodetic engineers notation indicating that the survey was inside alienable and
disposable land. Such notation does not constitute a positive government act
validly changing the classification of the land. A mere surveyor has no authority to
reclassify lands of the public domain. By relying solely on the said surveyors
assertion, petitioners have not sufficiently proven that the land in question has
been declared alienable."
Facts:
Corazon C. Sese and Fe C. Sese (respondents Sese) filed with the MTC an
application for original registration of land over a parcel of land situated in the
Municipality of Pulilan, Province of Bulacan. Respondents Sese alleged that on July
22, 1972, they acquired, through a donation inter vivos from their mother,
Resurreccion L. Castro (Resurreccion), the subject agricultural land; that they,
through their predecessors-in-interest, had been in possession of the subject
property; and that the property was not within a reservation.
They submitted the following documents, namely: (1) Tax Declaration (2)
Certificate of Technical Description which was approved by DENR; (3) Official
Receipt of payment of real property tax over the property; (5) Certification from the
Office of the Municipal Treasurer of Pulilan, stating that the registered owners of a
property were Corazon Sese and others; and (6) Survey plan approved by the
Regional Technical Director of the Land Management Service, Region III, of the
DENR, stating that the land was alienable and disposable land, and certified by the
Bureau of Forestry, was outside of any civil or military reservation. A note stating
that a deed of absolute sale over the subject property was executed by a certain
Luis Santos and Fermina Santos (the Santoses) in favor of Resurreccion on October
4, 1950.
The MTC rendered its Decision, ordering the registration of the property in the
name of respondents Sese. The MTC reasoned out that there was evidence to show
that the subject lots had been in open, continuous, adverse, and public possession,
either by the applicants themselves or their predecessor-in-interest. Such
possession since time immemorial conferred an effective title on the applicants,
whereby the land ceased to be public and became private property. It had been the
accepted norm that open, adverse and continuous possession for at least 30 years
was sufficient.
The OSG appeal with the CA, OSG argued that there was no proof that the
subject property was already segregated from inalienable lands of the public
domain. It was only from the date of declaration of such lands as alienable and
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disposable that the period for counting the statutory requirement of possession
would start. Also, there was no evidence that respondents were actually occupying
the subject tract of land or that they had introduced improvement thereon.
The CA rendered a Decision affirming the judgment of the MTC ordering the
registration of the subject property in the name of respondents Sese.
Issue:
1. Can the respondents Sese validly registered the said land under Section 14(1) of
Presidential Decree (P.D.)No. 1529 or;
2. Under Section 14(2) of P.D. No. 1529, for acquisitive prescription
Ruling:
1.
No, the respondents Sese cannot registered the said land under Section 14
(1), respondents failed to prove (a) that the property is alienable and disposable;
and (b) that their possession of the property dated back to June 12, 1945 or
earlier.
SECTION 14. Who may apply. The following persons may file in the
proper Court of First Instance an application for registration of title to
land, whether personally or through their duly authorized
representatives:
(1) Those who by themselves or through their predecessors in-interest
have been in open, continuous, exclusive and notorious possession and
occupation of alienable and disposable lands of the public domain
under a bona fide claim of ownership since June 12, 1945, or earlier.
xxxx
Section 48. The following described citizens of the Philippines,
occupying lands of the public domain or claiming to own any such
lands or an interest therein, but whose titles have not been perfected
or completed, may apply to the Court of First Instance now Regional
Trial Court of the province where the land is located for confirmation of
their claims and the issuance of a certificate of title therefor, under the
Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors in-interest
occupation of agricultural lands of the public domain, under a bona fide
claim of acquisition of ownership, since June 12, 1945, or earlier,
immediately preceding the filing of the application for confirmation of
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title except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential
to a Government grant and shall be entitled to a certificate of title
under the provisions of this chapter.
Based on the above-quoted provisions, applicants for registration of land title
must establish and prove: (1) that the subject land forms part of the disposable and
alienable lands of the public domain; (2) that the applicant and his predecessors-ininterest have been in open, continuous, exclusive and notorious possession and
occupation of the same; and (3) that it is under a bona fide claim of ownership since
June 12, 1945, or earlier. Compliance with the foregoing requirements is
indispensable for an application for registration of land title, under Section 14(1) of
P.D. No. 1529, to validly prosper. The absence of any one requisite renders the
application for registration substantially defective.
Respondents Sese presented evidence to establish the disposable and
alienable character of the land through a survey plan, where a note stated, as
follows: "This survey is inside the alienable and disposable area certified by the
Bureau of Forestry. It is outside any civil or military reservation." It was approved by
the DENR, Land Management Services, Regional Office III, San Fernando, Pampanga
on December 3, 1998. The annotation in the survey plan, fell short of the
requirement of the law in proving its disposable and alienable character.
This proof is not sufficient. For the original registration of title, the applicant
must overcome the presumption that the land sought to be registered forms part of
the public domain. Unless public land is shown to have been reclassified or
alienated to a private person by the State, it remains part of the inalienable public
domain. Indeed, "occupation thereof in the concept of owner, no matter how long,
cannot ripen into ownership and be registered as a title." To overcome such
presumption, incontrovertible evidence must be shown by the applicant. Absent
such evidence, the land sought to be registered remains inalienable.
In the present case, petitioners cite a surveyor geodetic engineers notation
in Exhibit "E" indicating that the survey was inside alienable and disposable land.
Such notation does not constitute a positive government act validly changing the
classification of the land in question. Verily, a mere surveyor has no authority to
reclassify lands of the public domain. By relying solely on the said surveyors
assertion, petitioners have not sufficiently proven that the land in question has been
declared alienable."
lands of the public domain is on the person applying for registration (or claiming
ownership), who must prove that the land subject of the application is alienable or
disposable. To overcome this presumption, incontrovertible evidence must be
established that the land subject of the application (or claim) is alienable or
disposable. The applicant must establish the existence of a positive act of the
government such as a presidential proclamation or an executive order; an
administrative action; investigation reports of Bureau of Lands investigators; or a
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legislative act or a statute. The applicant may also secure a certification from the
government that the land claimed to have been possessed for the required number
of years is alienable and disposable.
Thus, the present rule is that an application for original registration must be
accompanied by (1) a CENRO or PENRO Certification; and (2) a copy of the original
classification approved by the DENR Secretary and certified as a true copy by the
legal custodian of the official records.
Here, the only evidence presented by respondents to prove the disposable
and alienable character of the subject land was an annotation by a geodetic
engineer in a survey plan. Although this was certified by the DENR, it clearly falls
short of the requirements for original registration.
It must be shown that the possession and occupation of a parcel of land by
the applicant, by himself or through his predecessors-in-interest, started on June 12,
1945 or earlier. A mere showing of possession and occupation for 30 years or more,
by itself, is not sufficient.
Respondents likewise failed. The earliest that respondents and their
predecessor-in-interest can trace back possession and occupation of the subject
land was only in the year 1950,when their mother, Resurreccion, acquired the
subject land from the Santoses on October 4, 1950 by virtue of an absolute sale.
Evidently, their possession of the subject property commenced roughly five (5)
years beyond June 12, 1945, the reckoning date expressly provided under Section
14(1) of P.D. No. 1529. Thus, their application for registration of land title was legally
infirm.
2.
No, the respondents Sese cannot registered the said land under Section 14(2)
of P.D. No. 1529.
For failing to prove the alienable and disposable nature of the subject land,
respondents all the more cannot apply for registration by way of prescription
pursuant to Section 14 (2) which requires possession for 30 years to acquire or take.
Not only did respondents need to prove the classification of the subject land as
alienable and disposable, but also to show that it has been converted into
patrimonial.
Thus, under Section 14(2) of P.D. No. 1529, for acquisitive prescription to
commence and operate against the State, the classification of land as alienable and
disposable alone is not sufficient. There must be an express declaration by the State
that the public dominion property is no longer intended for public service or the
development of the national wealth or that the property has been converted into
patrimonial. Without such express declaration, the property, even if classified as
alienable or disposable, remains property of the public dominion, pursuant to Article
420(2), and, thus, incapable of acquisition by prescription. It is only when such
alienable and disposable lands are expressly declared by the State to be no longer
intended for public service or for the development of the national wealth that the
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period of acquisitive prescription can begin to run. Such declaration shall be in the
form of a law duly enacted by Congress or a Presidential Proclamation in cases
where the President is duly authorized by law.
REPUBLIC OF THE PHILIPPINES vs. FRANCISCA, GERONIMO AND CRISPIN,
ALL SURNAMED SANTOS
Petitioner Republic assails the decision of the CA affirming in toto the
decision of the trial court holding that the respondents was able to prove that the
subject lots had been classified as alienable and disposable. Ruling in favor of
Republic, the SC ruled that the evidence required to establish that land subject of
an application for registration is alienable and disposable are: (1) CENRO or PENRO
Certification; and (2) a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records.
In the present case, the foregoing documents had not been submitted in evidence.
There is no copy of the original classification approved by the DENR Secretary. As
ruled by this Court, a mere certification issued by the Forest Utilization & Law
Enforcement Division of the DENR is not enough. Republic is then correct that
evidence on record is not sufficient to prove that subject lots had been declared
alienable and disposable lands.
Facts:
The respondents, all surnamed Santos, filed an application for Registration of
title for four parcels of land described as Lot Nos. 536, 1101, 12141, 1215 all
Mcadm 590-D of the Taguig Cadastre, covering areas of 12,221, 4,218, 9,237 and
1,000 square meters, respectively.
After the submission of the jurisdictional requirements, trial on the merits
followed.
Thereafter, the applicants presented their evidence ex parte.
The trial court, based on the oral and documentary evidence presented, ruled
that the respondents were able to discharge their burden of proving their registrable
right over the said properties. Accordingly, the trial court ordered the registration of
the said properties in the names of the respondents.
The Solicitor General, disagreeing with the decision of the trial court, filed its
Appellants Brief before the CA. The CA however affirmed in toto the decision of the
RTC. Hence, this petition.
Republic maintains that there is no proof that the subject lots had been
classified as alienable and disposable, because a mere notation in the Conversion
Plan, even if it had been formally offered in evidence, is not the required proof of a
positive government act validly changing the classification of the land in question.
Respondents counter that they presented Exhibit "X," a Certification from the
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Department of Environment and Natural Resources (DENR) stating that the subject
lots were "verified to be within Alienable and Disposable Land.
Issue:
Whether the respondents were able to prove that the subject parcels of land
had been classified as part of the alienable and disposable land of the public
domain.
Ruling:
No, the respondents failed to prove that the subject parcels of land had been
classified as part of the alienable and disposable land of the public domain.
The Court agrees with Republics stance. In Republic v. Medida, the Court
emphasized that "anyone who applies for registration of ownership over a parcel of
land has the burden of overcoming the presumption that the land sought to be
registered forms part of the public domain." Expounding on the kind of evidence
required to overcome said presumption, the Court stated, thus:
As the rule now stands, an applicant must prove that the land subject of an
application for registration is alienable and disposable by establishing the existence
of a positive act of the government such as a presidential proclamation or an
executive order; an administrative action; investigation reports of Bureau of Lands
investigators; and a legislative act or a statute. The applicant may also secure a
certification from the government that the land claimed to have been possessed for
the required number of years is alienable and disposable. In a line of cases, we have
ruled that mere notations appearing in survey plans are inadequate proof of the
covered properties alienable and disposable character.
In Republic v. T.A.N. Properties, Inc., this Court explained that a Provincial
Environment and Natural Resources Office (PENRO) or CENRO certification, by itself,
fails to prove the alienable and disposable character of a parcel of land. We ruled:
[I]t is not enough for the PENRO or CENRO to certify that a land is
alienable and disposable. The applicant for land registration must prove that
the DENR Secretary had approved the land classification and released the
land of the public domain as alienable and disposable, and that the land
subject of the application for registration falls within the approved area per
verification through survey by the PENRO or CENRO. In addition, the applicant
for land registration must present a copy of the original classification
approved by the DENR Secretary and certified as a true copy by the legal
custodian of the official records. These facts must be established to prove
that the land is alienable and disposable. Respondents failed to do so
because the certifications presented by respondent do not, by themselves,
prove that the land is alienable and disposable.
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To reiterate, the evidence required to establish that land subject of an
application for registration is alienable and disposable are: (1) CENRO or PENRO
Certification; and (2) a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records.
In the present case, the foregoing documents had not been submitted in evidence.
There is no copy of the original classification approved by the DENR Secretary. As
ruled by this Court, a mere certification issued by the Forest Utilization & Law
Enforcement Division of the DENR is not enough. Republic is then correct that
evidence on record is not sufficient to prove that subject lots had been declared
alienable and disposable lands.
KASAMAKA-CANLUBANG, INC., represented by PABLITO M. EGILDO vs.
LAGUNA ESTATE DEVELOPMENT CORPORATION
The approval by city and municipal boards and councils of an application for
subdivision through an ordinance should already be understood to include approval
of the reclassification of the land, covered by said application, from agricultural to
the intended non-agricultural use. Otherwise, the approval of the subdivision
application would serve no practical effect; for as long as the property covered by
the application remains classified as agricultural, it could not be subdivided and
developed for non-agricultural use.
Facts:
LEDC Laguna Estate Development Corporation (LEDC) filed a request with the
Ministry of Agrarian Reform (now Department of Agrarian Reform) for the conversion
of ten (10) parcels of land consisting of an aggregate area of 216. 7394 hectares
located in the Province of Laguna from agricultural to residential land, pursuant to
RA No. 3844, as amended by P.D. No. 815. On June 4, 1979, then Minister Conrado F.
Estrella issued an Order granting LEDCs request provided that certain conditions
are complied with, one of which was that the development of the site shall
commence within two (2) years from receipt of the order of conversion.
KASAMAKA-Canlubang, Inc. (KASAMAKA) filed a petition with the Department

of Agrarian Reform (DAR) for the revocation of the conversion order, alleging that
LEDC failed to develop the subject parcels of land. Then DAR Secretary Nasser C.
Pangandaman issued an Order partially revoking the conversion order as to eight
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(8) out of the ten (10) parcels of land consisting of an aggregate area of 66.7394
hectares, all registered in the name of Canlubang Sugar Estate. The remaining two
(2) parcels of land, each registered in the names of LEDC and Jose Yulo, Jr., were
excluded from the revocation by virtue of a DAR Exemption Order issued on June 26,
1992 which removed said lands from the ambit of the Comprehensive Agrarian
Reform Law (CARL) of 1998.
LEDC then filed a motion for reconsideration, alleging that the eight (8)
parcels of land in question are likewise outside the ambit of the CARL on the basis of
zoning ordinances issued by the municipalities concerned reclassifying said lands as
non-agricultural. The DAR, through its Center for Land Use Policy, Planning and
Implementation (CLUPPI) Committee-A, field officials and personnel, and
representatives of both LEDC and KASAMAKA conducted an ocular inspection of the
subject lands and found that out of the eight (8) parcels of land, two (2) parcels of
land, particularly Lot No. 2-C under TCT No. 82523 and Lot No. 1997-X-A under TCT
No. T-82517, remained undeveloped. Despite this, however, the CLUPPI CommitteeA declared that, with the exception of one (1) parcel of land, specifically Lot No. 1-A4 under TCT No. T-82586, LEDC failed to substantially comply with the condition of
the conversion order to develop the eight (8) subject parcels of land. DAR Secretary
Pangandaman issued an Order affirming his previous Order with the exception of
the land under TCT No. T-82586, as concluded by the CLUPPI Committee-A.
Aggrieved, LEDC filed an appeal with the Office of the President (OP), which
granted the same and declared the remaining seven (7) parcels of land in question
exempt from the coverage of the CARL and reinstated the Conversion Order. The
Motion for Reconsideration filed by KASAMAKA was further denied by said Office.
KASAMAKA filed a Petition for Review with the CA alleging that the OP erred in
approving LEDCs appeal in light of the findings of the DAR. The CA dismissed the
petition for lack of merit. KASAMAKAs Motion for Reconsideration was,
subsequently, denied in the CA Resolution. Hence, this petition.
Issues:
1. Whether or not the undeveloped areas of the landholdings subject of the

Estrella conversion order should no longer be considered agricultural lands.
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2. Whether or not the Estrella conversion order and the municipal zoning
ordinances as claimed by LEDC reclassifying the subject landholding to nonagricultural uses prior to the passage of RA No. 6657 did not ipso facto
change the nature of existing agricultural lands or the legal relationship then
existing over such lands.
Ruling:
1.
The power of the cities and municipalities, such as the Municipality of
Calamba, to adopt zoning ordinances or regulations converting lands into nonagricultural cannot be denied.
It may, therefore, be reasonably presumed that when city and municipal

boards and councils approved an ordinance delineating an area or district in their
cities or municipalities as residential, commercial, or industrial zone, pursuant to the
power granted to them under Section 3 of the Local Autonomy Act of 1959, they
were, at the same time, reclassifying any agricultural lands within the zone for nonagricultural use; hence, ensuring the implementation of and compliance with their
zoning ordinances. The logic and practicality behind such a presumption is more
evident when considering the approval by local legislative bodies of subdivision
ordinances and regulations. The approval by city and municipal boards and councils
of an application for subdivision through an ordinance should already be understood
to include approval of the reclassification of the land, covered by said application,
from agricultural to the intended non-agricultural use. Otherwise, the approval of
the subdivision application would serve no practical effect; for as long as the
property covered by the application remains classified as agricultural, it could not
be subdivided and developed for non-agricultural use.
It cannot be denied that the disputed lands are likewise outside the ambit of
the CARL. As mentioned previously, by virtue of zoning ordinances issued by the
Municipality of Calamba, Laguna, as accepted by the Sangguniang Bayan of
Cabuyao and approved by the Human Settlements Regulatory Commission, the
subject lands were effectively converted into residential areas. These ordinances
were issued and accepted in 1979 and 1980, or before the effectivity of the CARL
which took effect on June 15, 1988. It necessarily follows, therefore, that the
properties herein can no longer be subject to compulsory coverage of the CARL.
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2. Going now to KASAMAKAs argument that the municipal zoning ordinances

classifying the disputed lands to non-agricultural did not ipso facto change the
nature of said lands, much less affect the legal relationship of the farmers and
workers of the Canlubang Sugar Estate then existing prior to the granting of the
order of conversion and the passage of the municipal zoning ordinances. In support
of said argument, KASAMAKA cites Co v. Intermediate Appellate Court.
According to KASAMAKA, the nature of the subject lands herein remained

agricultural despite the passage of the municipal ordinances, which may not disturb
the legal relationship of the farmers and workers of the Canlubang Sugar Estate. As
correctly pointed out by LEDC, there are essential distinctions between the facts in
the Co case and the facts herein.
First, there exists an agricultural tenancy arrangement between the parties

involved in the Co case. The land in question, even prior to the municipal ordinance
declaring that the same shall be used only for residential or light industrial
purposes, had already been subject to an agricultural lease wherein an agricultural
tenant continued to cultivate the subject land which was impliedly allowed by the
landowner by accepting a share in the produce.
In the case at bar, however, no such arrangement exists. Apart from a mere
statement that the lands in dispute was once part of the vast portion of the
Canlubang Sugar Estate, wherein a large number of farmworkers tilled the land,
KASAMAKA did not present any supporting evidence that will show an indication of a
leasehold arrangement.
Second, the Co case did not involve an order of conversion categorically

declaring the land as converted for residential use. As stated by KASAMAKA, the
zoning ordinance in the Co case does not unequivocally disclose any provision
converting the subject lands into residential or light industrial. Yet it is manifest,
even from a plain reading of the order of conversion in this case, that the LEDCs
application for converting the disputed lands from agricultural to residential is
granted. As a consequence of such approval, the fact that the subject property is
deemed zoned and reclassified as residential upon compliance with the conditions
imposed cannot be questioned. KASAMAKA cannot, therefore, rely on the Co case
given the fundamental differences of the same from the case at hand.
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REPUBLIC OF THE PHILIPPINES vs. CRISANTO S. RANESES

The Regalian doctrine, embodied in Section 2, Article XII of the 1987
Constitution, provides that all lands of the public domain belong to the State, which
is the source of any asserted right to ownership of land. All lands not appearing to
be clearly within private ownership are presumed to belong to the State. Unless
public land is shown to have been reclassified or alienated to a private person by
the State, it remains part of the inalienable public domain for land classification or
reclassification cannot be assumed. It must be proved.
In this case, the records do not support the findings made by the RTC and the
CA that the subject properties are part of the alienable and disposable portion of
the public domain. It bears noting that in support of his claim that the subject
properties are alienable and disposable, Raneses merely presented the Conversion
Subdivision Plan which was prepared by Engr. Montallana with the annotation that
the subject properties were "inside alienable and disposable land area Proj. No. 27B as per LC Map No. 2623 certified by the Bureau of Forestry on January 3, 1968"
and the Inter-Office Memorandum from the LLDA. Raneses failed to hurdle this
burden and his reliance on the said annotation and Inter-Office Memorandum is
clearly insufficient. Clearly, the pieces of evidence submitted by Raneses before the
RTC in this case hardly satisfy the aforementioned documentary requirements.
Facts:
Crisanto S. Raneses (Raneses) filed an Application for Original Registration of

Land Title over two parcels of land identified as both located at Barangay Napindan,
Taguig City, Metro Manila with a total area of 22,600 square meters(subject
properties).
During the initial hearing, Raneses marked several documents to establish

compliance with the jurisdictional requirements. There being no opposition filed, the
RTC issued an Order of General Default against all persons except herein Republic of
the Philippines (Republic) and granted Raneses Motion to Present his Evidence ExParte. Raneses testified that despite the fact that the earliest tax declaration on
record over the subject properties was issued only in 1980, his parents had been in
continuous possession and occupation of the same as early as June 1945.
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He narrated that his father, the late Pedro Raneses (Pedro), was a farmer who
cultivated the subject properties by planting palay and other crops thereon and that
since the subject properties were near the lake, Pedro used a portable irrigation
system to suck water from Laguna de Bay and a mechanized harvester to harvest
the palay.
However, he claimed that when Pedro died, the cultivation of the subject
properties was likewise stopped. Raneses averred that Pedro declared the subject
properties for real estate tax purposes, as evidenced by several tax
declarations issued in Pedros name. He claimed that he acquired ownership over
the subject properties when his mother, Nina Raneses, and his sisters, Annabelle R.
San Juan and Belinda R. Bayas, executed an Extrajudicial Settlement of Estate with
Deed of Waiver (Extrajudicial Settlement of Estate) whereby they agreed to partition
and adjudicate among themselves the subject properties, and thereafter, waive all
their rights, interest and participation over the same in favor of Raneses.
Subsequently, Raneses had the subject properties declared for real estate tax
purposes under his own name.
Raneses also testified that there were no other persons or entities who
occupied the subject properties. Catalina Raneses (Catalina), the mother of
Raneses, also testified that she and her husband Pedro had been in possession of
the subject properties since the Japanese occupation. She narrated that Pedro
cultivated the subject properties for palay production. However, after Pedros death
in 1982, the subject properties were no longer used for palay production, and were,
instead, at times leased out for the production of watermelons.
RTC issued its first assailed Order granting Raneses application for land
registration.
However, the Laguna Lake Development Authority (LLDA) filed its

Opposition to the application alleging that the subject properties are below the
12.50-meter elevation, hence, forming part of the bed of Laguna Lake and are,
therefore, inalienable, indisposable and incapable of registration. RTC issued its
second assailed Order, finding merit in Raneses arguments and dismissing LLDAs
Opposition.
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For the LLDAs failure to take any action against its second assailed Order,
the RTC, in its Order, approved the Notice of Appeal filed by the OSG and directed
the transmittal of the records of this case to the CA.
The CA upheld the RTC which gave more credence to the findings contained
in the Inter-Office Memorandum than that of the ECD Memorandum and in granting
Raneses application. The CA found that Raneses had adequately proven that the
subject properties form part of the disposable and alienable lands of the public
domain.
Issue:
Whether or not the subject properties in this case are alienable or disposable
land of the public domain.
Ruling:
The petition is impressed with merit.
In this case, the records do not support the findings made by the RTC and the
CA that the subject properties are part of the alienable and disposable portion of the
public domain.
Raneses bases his right to registration of title on Section 14 (1) of Presidential

Decree (P.D.) No. 1529, otherwise known as the Property Registration Decree, which
provides:
SEC. 14. Who may apply. The following persons may file in the proper
Court of First Instance an application for registration of title to land,
whether personally or through their duly authorized representatives:
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(1) Those who by themselves or through their predecessors-in-interest
occupation of alienable and disposable lands of the public domain
The afore-quoted provision authorizes the registration of title acquired
in accordance with Section 48 (b) of Commonwealth Act No. 141,
otherwise known as the Public Land Act, as amended by P.D. No. 1073,
which reads:
SEC. 48. The following described citizens of the Philippines, occupying

lands of the public domain or claiming to own any such lands or an
interest therein, but whose titles have not been perfected or
completed, may apply to the Court of First Instance of the province
where the land is located for confirmation of their claims and the
issuance of a certificate of title therefor, under the Land Registration
Act, to wit:
(a) x x x
(b) Those who by themselves or through their predecessors in interest
have been in the open, continuous, exclusive, and notorious
possession and occupation of alienable and disposable lands of the
public domain, under a bona fide claim of acquisition or ownership,
since June 12, 1945, except when prevented by war or force majeure.
These shall be conclusively presumed to have performed all the
conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.
Thus, under Section 14 (1) of P.D. No. 1529, a petition may be granted upon
compliance with the following requisites: (a) that the property in question is
alienable and disposable land of the public domain; (b) that the applicants by
themselves or through their predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation; and (c) that such possession is
under a bona fide claim of ownership since June 12, 1945 or earlier.
The Regalian doctrine, embodied in Section 2, Article XII of the 1987

Constitution, provides that all lands of the public domain belong to the State, which
is the source of any asserted right to ownership of land. All lands not appearing to
be clearly within private ownership are presumed to belong to the State. Unless
public land is shown to have been reclassified or alienated to a private person by
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the State, it remains part of the inalienable public domain for land classification or
reclassification cannot be assumed. It must be proved. And the applicant bears the
burden to overturn, by incontrovertible evidence, the presumption that the land
subject of an application for registration is alienable and disposable.
It bears noting that in support of his claim that the subject properties are
alienable and disposable, Raneses merely presented the Conversion Subdivision
Plan which was prepared by Engr. Montallana with the annotation that the subject
properties were "inside alienable and disposable land area Proj. No. 27-B as per LC
Map No. 2623 certified by the Bureau of Forestry on January 3, 1968" and the InterOffice Memorandum from the LLDA.
Raneses failed to hurdle this burden and his reliance on the said annotation
and Inter-Office Memorandum is clearly insufficient. Clearly, the pieces of evidence
submitted by Raneses before the RTC in this case hardly satisfy the aforementioned
documentary requirements. Given the lack of evidence that the subject properties
are alienable and disposable, it becomes unnecessary for this Court to resolve
whether the Inter-Office Memorandum should be given more credence over the ECD
Memorandum.
CARMEN T. GAHOL, substituted by her heirs, RICARDO T. GAHOL, MARIA
ESTER GAHOL PEREZ, JOSE MARI T. GAHOL, LUISITO T. GAHOL and ALCREJ
CORPORATION vs. ESPERANZA COBARRUBIAS
Petitioner Gahol applied for Townsite Sales Application with the DENR for the
land adjacent to her property. Respondent Cobarrubias filed a protest, stating that
she and her family are occupying said lot. The Court ruled that Gahols application
must be rejected because one of the requirements was that the applicant must not
own any other lot but Gahol is a registered owner of a residential lot. She also
stated that there are no signs of improvement or occupation in the said lot but it
was in fact occupied by Cobarrubias. She is disqualified due to the untruthful
statements in her application.
Facts:
Carmen Gahol was the registered owner of a residential lot in Baguio City.
Carmen filed a Townsite Sales Application (TSA) with the Department of
Environment and Natural Resources for a 101 sq. meter land adjacent to her titled
property with the purpose of using the land solely for additional and protection
purposes.
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Esperanza Cobarrubias filed a Protest against Carmen's TSA claiming that her
late mother, and her heirs are the actual occupants of the subject lot since 1970
and continuously having built thereon a residential building and that they had also
planted on the lot several fruit-bearing trees, a narra tree and plants. Esperanza
Cobarrubias also filed her own TSA over a 215 sq. meter-lot which included the
subject lot.
The Regional Executive Director of DENR-Cordillera Administrative Region
denied the protest and gave due course to the application of Carmen Gahol. DENRCAR disagreed with Esperanzas contention that she is entitled to a direct award of
the subject lot because long years of possession and occupation of the same.
It ruled that all lands within the limits of Baguio City are declared as Townsite
Reservation disposable under Section 58, in relation to Section 79 of
Commonwealth Act No. 141 (CA 141), as amended, which provides that such lands
are sold by way of public auction to the highest bidder, and not as an agricultural
public land disposable under Section 44 of the Public Land Act or Free Patent
Application and/or confirmation of an imperfect complete title.
Further, DENR-CAR stated it could not adjudicate the lot to Esperanza based
on Administrative Order No. 504 Clearing Committee Resolution No. 93-1,
particularly SITUATION B which states that minimum area must not be less than 200
sq. m.; and its minimum depth, measured perpendicularly from edge of right of way
to titled property lot-line should not be less than 15 meters, otherwise, the subject
area is reserved for greenbelt purposes.
DENR dismissed the appeal. DENR reiterated that the subject lot is part of the
Baguio Townsite Reservation, disposable in accordance with CA 141 which does not
give preferential right to actual occupants of lots within townsite reservations.
Further, the DENR said that Cobarrubias actual occupation of the subject lot will not
bar Carmen's TSA for the purpose of conducting a public bidding on the said lot. It
was also found that Esperanzas application did not meet the required minimum
area of 200 sq. m. Upon appeal to the Office of the President, it was also dismissed.
Esperanza filed with the CA a petition for review under Rule 43 seeking to set
aside the OP decision. It was granted. CA found that Carmens application must be
rejected.
Issue:
Whether or not Carmen is not qualified for the TSA
Ruling:
Yes, the Court affirmed CAs finding that Carmen is not qualified.
One of the requirements for the issuance of a TSA form is a certificate of no
homelot, but Carmen had not submitted any and was issued a TSA. Also, the TSA to
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which Carmen affixed her signature, stated among others that she is not the owner
of any lot in Baguio City and that such lot applied for does not contain any
improvement or indication of occupation and settlement and that she understood
that submission of false statements shall be punishable and as consequence,
application shall be rejected.
When Carmen filed her TSA, she is the registered owner of a lot in Baguio. In
fact, she is the titled owner of the lot adjacent to the subject lot. Therefore, there is
no truth to the statement in the TSA that she does not own any lot in Baguio.
Moreover, Carmen failed to state in her TSA the fact that there were signs of
improvement or indication of occupation on the subject lot. The records of the
ocular inspection indicated that there were structures that served as residence of
Esperanza and plants with economic value such as coffee, avocado tree and a
guava tree and alnus tree and a parking space used by Esperanza.
Carmen had also filed complaints for violations of PD 1096, National Building
Code of the Philippines, and PD 772, anti-squatting and other similar acts, against
Camilo Coscolan and Rolando Clemente with the end in view of evicting them from
the subject lot which are indications of occupation of the subject lot.
As correctly observed by the CA, neither the DENR-CAR, the DENR, nor the OP
touched and discussed the matter of Gahol's disqualification and/or lack of certain
qualifications. They simply denied the protest of Esperanza and gave due course to
Carmens TSA without any explanation as to how she was able to hurdle these
disqualifications.
The DENR-CAR and DENR denied Esperanza's TSA based on said Resolution
No. 93-1, that her application did not meet the area requirements. On the other
hand, the area applied for by Carmen was only 101 sq. meters which was less than
the minimum area required. She had also stated untruthful statements in her TSA.
Thus, her TSA should have been rejected in the first place instead of giving due
course to it.
HOLY TRINITY REALTY & DEVELOPMENT CORPORATION, vs. VICTORIO DELA
CRUZ, LORENZO MANALAYSAY, RICARDO MARCELO, JR. and LEONCIO DE
GUZMAN
G.R. No. 200454, October 22, 2014, J. Lucas P. Bersamin
Consequently, before land may be placed under the coverage of Republic Act
No. 6657, two requisites must be met, namely: (1) that the land must be devoted to
agricultural activity; and (2) that the land must not be classified as mineral, forest,
residential, commercial or industrial land. For land to be covered under Presidential
Decree No. 27, it must be devoted to rice or corn crops, and there must be a
system of share-crop or lease-tenancy obtaining therein. Unfortunately, the Dakila
property did not meet these requirements.
Facts:
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Subject of the controversy is a parcel of land located in, Bulacan (Dakila
property) registered in the name of Freddie Santiago. The Dakila property used to
be tenanted but later on the tenants freely and voluntarily relinquished their
tenancy rights in favor of Santiago through their respective sinumpaang pahayag in
exchange for some financial assistance and individual homelots titled and
distributed in their names.
Subsequently, Holy Trinity Realty purchased the remaining areas of the Dakila
property from Santiago, and later caused the transfer of the title to its name as well
as subdivided the Dakila property into six lots,
The Holy Trinity Realty then developed the property by dumping filling
materials on the topsoil, and by erecting a perimeter fence and steel gate. It
established its field office on the property. Sanggunian Bayan ng Malolos passed
Municipal Resolution reclassifying four of the six subdivided lots belonging to Holy
Trinity Realty.
Thereafter, Holy Trinity Realty purchased from Santiago another parcel of land
in Bulacan (Sumapang Matanda property) Few years later, a certain Silvino Manalad
and the alleged heirs of Felix Surio wrote to the Provincial Agrarian Reform Officer
(PARO) of Bulacan to request an investigation of the sale of the Dakila property.
This was followed by the letter request of Sumapang Matanda Barangay
Agrarian Reform Council (BARC) Chairman to place the Dakila property within the
coverage of Operation Land Transfer (OLT) pursuant to Presidential Decree No. 27.
Several days later, the DAR Provincial Office of Bulacan filed a petition to
annul the sale of the Dakila property with the Provincial Agrarian Reform Adjudicator
(PARAD). DAR Regional Office
issued an order granting the letter request of BARC Chairman since the sale of the
Dakila property was a prohibited transaction under Presidential Decree No. 27,
Section 6 of Republic Act No. 6657 and DAR Administrative Order No. 1, Series of
1989; and that Holy Trinity Realty was disqualified from acquiring land under
Republic Act No. 6657 because it was a corporation.
Register of Deeds issued emancipation patents (EPs) pursuant to the order of
the OIC-Regional Director. The Holy Trinity Realtys titles were canceled and EPs
were issued to the respondents. Holy Trinity Realty appealed to the DAR Secretary
which issued an order denying the appeal. Office of the President (OP) reversed the
ruling of DAR Secretary upon its finding that the Dakila property had ceased to be
suitable for agriculture, and had been reclassified as residential land pursuant to
Municipal Resolution No. 16-98. CA reversed and set aside the decision of the OP
and declared that prior to the effectivity of Republic Act No. 6657 and even after the
passage of Municipal Resolution No. 16-98, the Dakila property was an agricultural
land; that there was no valid reclassification because Section 20 of Republic Act No.
7160 (The Local Government Code) and Memorandum Circular No. 54 required an
ordinance, not a resolution.
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Issue:
Whether or not the Dakila property is an agricultural land within the coverage
of Republic Act No. 6657 or Presidential Decree No. 27.
Ruling:
No, the Dakila property was not an agricultural land within the coverage of
R.A.No. 6657 nor P.D. No. 27
Under Republic Act No. 7160, local government units, such as the
Municipality of Malolos, Bulacan, are vested with the power to reclassify lands.
However, an ordinance is required in order to reclassify agricultural lands, and such
may only be passed after the conduct of public hearings.
Holy Trinity Realty claims the reclassification on the basis of Municipal Resolution.
Given the foregoing clarifications, however, the resolution was ineffectual for that
purpose. A resolution was a mere declaration of the sentiment or opinion of the
lawmaking body on a specific matter that was temporary in nature, and differed
from an ordinance in that the latter was a law by itself and possessed a general and
permanent character. Note that, Holy Trinity Realty did not show if the requisite
public hearings were conducted at all. In the absence of any valid and complete
reclassification, therefore, the Dakila property remained under the category of an
agricultural land. Nonetheless, the Dakila property was not an agricultural land
subject to the coverage of Republic Act No. 6657 or Presidential Decree No. 27.
Verily, the basic condition for land to be placed under the coverage of
Republic Act No. 6657 is that it must either be primarily devoted to or be suitable
for agriculture. Perforce, land that is not devoted to agricultural activity is outside
the coverage of Republic Act No. 6657. An agricultural land, according to Republic
Act No. 6657, is one that is devoted to agricultural activity and not classified as
mineral, forest, residential, commercial or industrial land. Agricultural activity
includes the "cultivation of the soil, planting of crops, growing of fruit trees, raising
livestock, poultry or fish, including the harvesting of such farm products; and other
farm activities and practices performed by a farmer in conjunction with such
farming operations done by persons whether natural or juridical."
Consequently, before land may be placed under the coverage of Republic Act
No. 6657, two requisites must be met, namely: (1) that the land must be devoted to
agricultural activity; and (2) that the land must not be classified as mineral, forest,
residential, commercial or industrial land.
Considering that the Dakila property has not been classified as mineral,
forest, residential, commercial or industrial, the second requisite is satisfied. For the
first requisite to be met, however, there must be a showing that agricultural activity
is undertaken on the property. It must be remembered that previous tenants said
that such land was not fit for being an agricultural land due to lack of irrigation
system.
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Even if the Court supplemented the provisions of Presidential Decree No. 27,
the outcome is still the same, because the Dakila property was still not within the
scope of the law. For land to be covered under Presidential Decree No. 27, it must
be devoted to rice or corn crops, and there must be a system of share-crop or leasetenancy obtaining therein. If either requisite is absent, the land must be excluded.
Hence, exemption from coverage followed when the land was not devoted to rice or
corn even if it was tenanted; or the land was untenanted even though it was
devoted to rice or corn. Based on these conditions, the DAR Regional Office erred in
subjecting the Dakila property under the OLT.
Unfortunately, no such evidence was presented, nor was there any field
investigation conducted to verify whether or not the landholding was primarily
devoted to the cultivation of rice or corn. Accordingly, the Dakila property should be
excluded from the OLT.
The evidence to establish in the proceedings below that they or their
predecessors had been tenants of the Holy Trinitys predecessor in-interest to make
them the rightful beneficiaries of the Dakila property was severely wanting. For
tenancy to exist, there must be proof that: (1) the parties are the landholder and
the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose
isagricultural production; (5) there is consideration; and (6) there is a sharing of the
harvests. All these requisites are necessary to create a tenancy relationship, and
the absence of one or more of them will not make the alleged tenant a de facto
tenant. Unless a person has established his status as a de juretenant, he is not
entitled to security of tenure; nor is he covered by the land reform program of the
Government under the existing tenancy laws.
Here, the consent to establish a tenant-landlord relationship was manifestly
absent. In view of Holy Trinity Realtys repeated denial of the tenancy, the
respondents ought then to establish the tenancy relationship, but did not do so.
Tenancy could not be presumed, but must be established by evidence; its mere
allegation is neither evidence nor equivalent to proof of its existence.
DANILO ALMERO, TERESITA ALAGON, CELIA BULASO, LUDY RAMADA,
REGINA GEGREMOSA, ISIDRO LAZARTE, THELMA EMBARQUE, FELIPE
LAZARTE, GUILERMA LAZARTE, DULCESIMA BENIMELE vs. HEIRS OF
MIGUEL PACQUING, as represented by LINDA PACQUING FADRILAN
G.R. No. 199008, November 19, 2014, J. Brion
Thus, in order for the homestead grantees or their direct compulsory heirs to
retain their homestead, the following conditions must be satisfied: (a) they must
still be the owners of the original homestead at the time of the CARL's effectivity,
and (b) they must continue to cultivate the homestead land. In this case, Linda, as
the direct compulsory heir of the original homestead grantee, is no longer
cultivating the homestead land. That parcels of land are covered by homestead
patents will not automatically exempt them from the operation of land reform. It is
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the continued cultivation by the original grantees or their direct compulsory heirs
that shall exempt their lands from land reform coverage."
Facts:
Miguel Pacquing acquired agricultural lands (23.6272 hectares) in
Cuambogan, Tagum City through Homestead Patent. These lands were registered on
January 6, 1955 with the Register of Deeds.
On August 5, 1991, the Municipal Agrarian Reform Officer (MARO) sent Miguel
a Notice of Coverage placing the Pacquing Estate under the Comprehensive
Agrarian Reform Program (CARP). Miguel failed to reply, instead he filed a Voluntary
Offer to Sell (VOS) with the Department of Agrarian Reform (DAR). Miguel, however,
died during the pendency of the VOS proceedings. Miguels wife had died five years
earlier.
In January 1992, respondent Linda Pacquing-Fadrilan, sole heir of the spouses
Pacquing, executed an affidavit adjudicating to herself ownership of the property.
She filed an application for retention with the DAR, who denied Lindas application.
The order denying Lindas application for retention later became final and
executory.
On June 25, 1994, certain individuals, including the present petitioners who
were identified as farmer-beneficiaries of the land, were issued CLOAs over their
respective cultivated portions of the property.
Linda, through her attorney-in-fact, Samuel Osias, filed with the Office of the
Provincial Adjudicator a petition to cancel the petitioners CLOAs. The Provincial
Adjudicator later dismissed the petition due to Lindas failure to file her position
paper. She appealed the dismissal with the Department of Agrarian Reform
Adjudication Board (DARAB). It appears that, Transfer Certificates of Title (TCTs) of
the property were issued to Napoleon Villa Sr., et al. who had been contracted by
Linda, under an agricultural leasehold agreement, to cultivate the lands.
The DARAB nullified the TCTs issued to Napoleon Villa Sr. et. al. and reinstated
Lindas title. Also, the DARAB ordered the issuance of titles of the land to the
petitioners.
Linda again sought to recall and cancel the petitioners CLOAs by filing a
petition with the DAR. Linda argued that the DARAB erred in distributing portions of
the land to the petitioners because the property was supposed to be exempt from
CARP coverage. The petitioners opposed Lindas petition.
The DAR Regional Director ruled that the Pacquing Estate was subject to
CARP and that the CLOAs issued to the petitioners were valid. Linda filed an appeal
to the DAR Secretary, who also denied Lindas appeal. Linda appealed the DAR
Secretarys order to the Office of the President (OP).
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The OP, through Executive Secretary Paquito N. Ochoa Jr., reversed the DAR
Secretarys Order and recalled and cancelled the petitioners CLOAs. The OP held
that:
"xxx, the fact that respondent Linda, since the beginning, have always protested the
issuance of the CLOAs to the petitioners is a clear demonstration of their willingness
to continue with the cultivation of the subject landholdings, or to start anew with
the cultivation or even to direct the management of the farm.
Respondent Linda should be given the chance to exercise their rights as heirs of the
homestead grantee to continue to cultivate the homestead lots either personally or
directly managing the farm pursuant to the pronouncement in the Paris case. They
still own the original homestead issued to their predecessor-in-interest and have
manifested their intention to continue with the cultivation of the homestead lots."
With no appeal or petition for review filed with the Court of Appeals within the
15 day appeal period, the resolution of the OP became final and executory. The
petitioners, contest the finality of the OPs decision, since the copy of the OP's
resolution was received late by their counsel denying their motion for
reconsideration.
Hence, the petitioners directly filed with this Court a petition for review on
certiorari under Rule 45 assailing the subject OPs decision and resolution.
Issue:
Whether or not the lands under the homestead grant, exempt from agrarian
reform coverage under sec. 6 of R.A 6657, even if the heir of the patentee is not
cultivating the land, but and had even offered the same under the voluntary offer to
sell scheme.
Ruling:
The Court sees MERIT in the present petition.
The subject land, being agricultural in nature, is clearly not exempt from
CARP coverage.
But Linda argues that the subject land is exempt from CARP because it was
acquired by her father via a homestead patent. She claims that the rights of
homestead grantees have been held superior to those of agrarian reform tenants
and, thus, her right to the land must be upheld. The OP, agreeing with Linda, stated
that:
"There can be no question that, weighed against each other, the rights of a
homesteader prevail over the rights of the tenants guaranteed by agrarian reform
laws.
Page 361 of 483

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As early as the case of Patricio v. Bayug, it has been held that the more
paramount and superior policy consideration is to uphold the right of the
homesteader and his heirs to own and cultivate personally the land acquired from
the State without being encumbered by tenancy relations.
Just right after the promulgation of Republic Act No. 6657, otherwise known
as the Comprehensive Agrarian Reform Law (CARL), the doctrine enunciated in
Patricio was applied in Alita v. Court of Appeals where it was held that Presidential
DecreeNo. 27 cannot be invoked to defeat the very purpose of the enactment of the
Public Land Act or Commonwealth Act No. 141. It was pointed out that even the
Philippine Constitution respects the superiority of the homesteaders rights over the
rights of the tenants guaranteed by the Agrarian Reform statute."
The right of homestead grantees to retain or keep their homestead is,
however, not absolutely guaranteed by law. Section 6 of R.A 6657 provides that:
"Section 6. Retention Limits. Except as otherwise provided in this
Act, no person may own or retain, directly or indirectly, any public or
private agricultural land, the size of which shall vary according to
factors governing a viable family-size farm, such as commodity
produced, terrain, infrastructure, and soil fertility as determined by
the Presidential Agrarian Reform Council (PARC) created hereunder,
but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1) that he is at
least fifteen (15) years of age; and (2) that he is actually tilling the
land or directly managing the farm: provided, that landowners
whose lands have been covered by Presidential Decree No. 27 shall
be allowed to keep the areas originally retained by them thereunder:
provided, further, that original homestead grantees or their direct
compulsory heirs who still own the original homestead at the time of
the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead.
Thus, in order for the homestead grantees or their direct compulsory heirs to
retain or keep their homestead, the following conditions must first be satisfied: (a)
they must still be the owners of the original homestead at the time of the CARL's
effectivity, and (b) they must continue to cultivate the homestead land.
In this case, Linda, as the direct compulsory heir of the original homestead
grantee, is no longer cultivating the homestead land. The OP misinterpreted our
ruling in Paris v. Alfeche when it held that Linda's mere expression of her desire to
continue or to start anew with the cultivation of the land would suffice to exempt
the subject homestead land from the CARL. On the contrary, the Court held in Paris
v. Alfeche that:
"Indisputably, homestead grantees or their direct compulsory heirs can own
and retain the original homestead, only for "as long as they continue to
Page 362 of 483

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cultivate" them. That parcels of land are covered by homestead patents will
not automatically exempt them from the operation of land reform. It is the
fact of continued cultivation by the original grantees or their direct
compulsory heirs that shall exempt their lands from land reform coverage."
REMMAN ENTERPRISES, INC. vs. REPUBLIC OF THE PHILIPPINES
It is not enough for the PENRO or CENRO to certify that a land is alienable
and disposable. The applicant for land registration must prove that the DENR
Secretary had approved the land classification and released the land of the public
domain as alienable and disposable, and that the land subject of the application for
registration falls within the approved area per verification through survey by the
PENRO or CENRO. In addition, the applicant for land registration must present a
copy of the original classification approved by the DENR Secretary and certified as a
true copy by the legal custodian of the official records. Thus, the property
registration of a corporation merely relying on the CENRO Certification must be
dismissed for failure to prove that the land had been declared alienable and
disposable.
Facts:
Petitioner Remman Enterprises, Inc. filed with the RTC an application for
registration of a parcel of land. Among its evidence were survey plans, tax
declarations, and the testimonies of its employees indicating that the property was
acquired by Remman through a sale, and that it had been occupying the same. It
also presented a certification by the Community Environment and Natural
Resources Office of the DENR that the property is alienable and disposable land. The
RTC granted Remmans application. The State, through the OSG, appealed to the
CA, which reversed the RTC, which held among others, that Remman should have
also submitted a certification from the proper government office stating that the
properties were already declared alienable and disposable.
Issue:
Was the alienable and disposable character of the properties duly established
by the CENRO Certification?
Ruling:
The petition is dismissed.
The CAs dismissal of the Remmans application for original registration was
proper considering the latters failure to sufficiently establish that the subject
properties were already declared alienable and disposable by the government. Its
reliance on a Report, issued by the CENRO was misplaced. It is not enough for the
PENRO or CENRO to certify that a land is alienable and disposable. The applicant for
land registration must prove that the DENR Secretary had approved the land
Page 363 of 483

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classification and released the land of the public domain as alienable and
disposable, and that the land subject of the application for registration falls within
the approved area per verification through survey by the PENRO or CENRO. In
addition, the applicant for land registration must present a copy of the original
legal custodian of the official records.
lands of the public domain is on the person applying for registration, who must
prove that the properties subject of the application are alienable and disposable.
Even the notations on the survey plans submitted by the Remman cannot be
admitted as evidence of the subject properties alienability and disposability. Such
notations do not constitute incontrovertible evidence to overcome the presumption
that the subject properties remain part of the inalienable public domain.
Given the foregoing, the dismissal of the Remmanr's application for
registration was proper. Under pertinent laws and jurisprudence, it had to
sufficiently establish that: first, the subject properties form part of the disposable
and alienable lands of the public domain; second, the applicant and his
predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and third, the possession is under a bona
fide claim of ownership since June 12, 1945 or earlier.
REPUBLIC OF THE PHILIPPINES vs. SPS. JOSE CASTUERA AND PERLA
CASTUERA
G.R. No. 203384, January 14, 2015, J. Carpio
The applicant for land registration must prove that the DENR Secretary had
approved the land classification and released the land of the public domain as
alienable and disposable, and that the land subject of the application for
registration falls within the approved area per verification through survey by the
PENRO or CENRO.
Facts:
Andres Valiente owned a 3,135-square meter land which he sold the property
to Jose and Perla Castuera during 1978. On May 2003, the Spouses Castuera filed
with the RTC an application for original registration of title over the property.
The Spouses Castuera presented three witnesses to support their application.
The three witnesses were: 1) former barangay captain and councilman Alfredo
Dadural; 2) Senior Police Officer 2 Teodorico Cudal; and 3) Perla Castuera. All
witnesses testified that the Spouses Castuera owned the property. The Spouses
Castuera also presented documentary evidence to support their application. The
documents included tax receipts and an advance plan.
Petitioner Republic of the Philippines, through the Office of the Solicitor
General, filed an opposition to the application for original registration.
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The court ruled that they are entitled therefore to a judicial confirmation of
their imperfect title to the said land pursuant to the provisions of P.D. 1529.
Republic appealed the RTC Decision to the Court of Appeals, in which the Spouses
Castuera attached to their appellees brief a certification from the Community
Environment and Natural Resources Office (CENRO).
In its decision the appellate court affirmed the formers decision in toto. It
based its decision on the records that there is substantial compliance with the
requirement that the subject land is alienable and disposable land. It bears to
emphasize that the Advance Plan has the following notations. Thus, the present
petition.
Issue:
Whether or not the advance plan and the CENRO certification are insufficient
proofs of the alienable and disposable character of the property?
Ruling:
No, such document are insufficient proofs of alienable and disposable
character of lands.
The Spouses Castuera, as applicants for registration of title, must present a
certified true copy of the Department of Environment and Natural Resources
Secretarys declaration or classification of the land as alienable and disposable.
In Republic of the Philippines v. Heirs of Juan Fabio, citing Republic v. T.A.N.
Properties, Inc., the Court held that, we ruled that it is not enough for the Provincial
Environment and Natural Resources Office (PENRO) or CENRO to certify that a land
is alienable and disposable. The applicant for land registration must prove that the
DENR Secretary had approved the land classification and released the land of the
public domain as alienable and disposable, and that the land subject of the
application for registration falls within the approved area per verification through
survey by the PENRO or CENRO.
In addition, the applicant must present a copy of the original classification of
the land into alienable and disposable, as declared by the DENR Secretary, or as
proclaimed by the President. Such copy of the DENR Secretarys declaration or the
Presidents proclamation must be certified as a true copy by the legal custodian of
such official record. These facts must be established to prove that the land is
alienable and disposable.
REGISTRATION
RODOLFO V. FRANCISCO vs. EMILIANA M. ROJAS, and the legitimate heirs
of JOSE A. ROJAS, namely: JOSE FERDINAND M. ROJAS II, ROLANDO M.
ROJAS, JOSE M. ROJAS, JR., CARMELITA ROJAS-JOSE, VICTOR M.ROJAS, and
Page 365 of 483

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LOURDES M. ROJAS, all represented by JOSEFERDINAND M. ROJAS II
G.R. No. 167120, April 23, 2014, J. Peralta
A land registration court has no jurisdiction to order the registration of land
already decreed in the name of another in an earlier land registration case. After
the promulgation of the Guido, it can no longer be said that an original registration
proceeding is proper, since Guido held that certificate of title are genuine and
authentic. What the land registration court should have done was to dismiss the
application for registration upon learning that the same property was already
covered by a valid title.
Facts:
The Republic of the Philippines filed a complaint for declaration of nullity against
the Transfer Certificate Title both in the name of Francisco and Hermogenes Guido,
the spouses Jose Rojas and Emiliana Rojas as succesor-in-interest, on the basis that
such title were false, spurious and fabricated. The trial dismissed the complaint
stating that such title was genuine and authentic which was affirmed by the Court of
Appeals.
The Guido case was brought to the Supreme Court which upheld the decision of
the lower court. However, the Courts decision was subject to bona fide occupants
with length of possession which had ripened to ownership, the latter to be
determined in an appropriate proceeding.
It appears that an Application for Registration of Title was instituted by the
Franciscos over four parcels of land which was overlapping with the land of the
Rojases. However, the Rojases were never impleaded in such application.
Eventually, the Franciscos were declared to be the true and absolute owners of said
parcels of land which has become final and executory.
Hence, the Rojases filed a petition for certiorari and prohibition against the
Franciscos, claiming that they came to know of such registration only when a real
estate agent discovered the same and brought to their knowledge.
The Court of Appeals granted the petition for certiorari and declared that such
registration of the Franciscos is null and void on the basis that a title may be
challenged only in a proceeding for that purpose, not in an application for
registration of a land already registered in the name of another person.
Issue:
Whether a land registration proceeding is the appropriate proceeding
contemplated in the Supreme Courts pronouncement in the Guido case?
Ruling:
No.
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As the very nature of the action limits the subject matter to alienable and
disposable lands of the public domain, an ordinary registration proceeding cannot
be availed of by the Franciscos in order to establish claims over lands which had
already been brought within the coverage of the Torrens system.
already decreed in the name of another in an earlier land registration case. Issuance
of another decree covering the same land is, therefore, null and void.
After the promulgation of the Guido, it can no longer be said that an original
registration proceeding is proper, since Guido held that certificate of title are
genuine and authentic. What the land registration court should have done was to
dismiss the application for registration upon learning that the same property was
already covered by a valid title.
The appropriate proceeding referred to in Guido is a case where the Franciscos
must present specific acts of ownership to substantiate their claim that they are
bona fide occupants while, at the same time, the Rojases are accorded due process
of law by availing of the opportunity to oppose and refute the representations made
by the Franciscos. Whatever the appropriate proceeding may be, the decisive
factor is that the same should be a proceeding in personam wherein personal
service of summons and copy of the complaint/petition is necessary.
JOSEPHINE WEE vs. FELICIDAD MARDO
already decreed in the name of another in an earlier land registration case. A
second decree for the same land would be null and void, since the principle behind
the original registration is to register a parcel of land only once.
The issue of fraudulent alienation raised in the second application for
registration of the subject property is collateral attack which should be directly
raised in a separate proceeding filed for such purpose. It cannot be entertained in
this proceeding. In several cases, the Court has ruled that an attack is indirect or
collateral when, in an action to obtain a different relief, an attack on the judgment
or proceeding is nevertheless made as an incident thereof.
Facts:
Felicidad Gonzales, married to Leopoldo Mardo, was granted a registered Free
Patent No. (IV-2) 15284, dated April 26, 1979, covering Lot No. 8348, situated in
Puting Kahoy, Silang, Cavite. Felicidad allegedly conveyed to Josephine Wee,
through a Deed of Absolute Sale, a portion of Lot No. 8348 known as Lot No. 8348-B,
for a consideration of P250,000.00 which was fully paid. However, Felicidad refused
to vacate and turn over the subject property claiming that the alleged sale was
falsified.
Page 367 of 483

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On December 22, 1994, Josephine Wee filed an Application for Original
Registration of Lot No. 8349. Said application was amended, this time covering a
parcel of land known as Lot 8348-B situated in Barangay Puting Kahoy, Silang,
Cavite. Josephine Wee claimed that she is the owner of the said unregistered land
by virtue of a deed of absolute sale. Felicidad filed her Opposition to the Amended
Application alleging that she is the true and lawful owner of the parcel of land. She
also filed a Motion to Dismiss the Application alleging that the land described in the
application was different from the land being claimed for titling. The motion was
denied by the RTC.
On June 10, 2003, during the pendency of the case, Felicidad managed to
register the land in her name under Original Certificate of Title (OCT) No. OP-1840.
Josephine filed a Notice of Lis Pendens with the Registry of Deeds of Cavite on May
10, 2005 which was annotated on the title.
A "Motion for Leave to File Supplemental Pleading and to Admit Attached
Supplemental Complaint for Reconveyance" was filed by Josephine which was
denied by the RTC on the ground that a motion for reconveyance was different from
an application for registration of title.
The RTC rendered a Decision granting the application of Josephine. Thereby,
declaring her as the person qualified to register the subject land in her name and
directed the LRA to issue the corresponding decree in her name. A motion for
reconsideration was filed by Felicidad which was denied by the RTC.
On appeal, the Court of Appeals reversed and set aside the decision of the
RTC. Hence, this petition.
Issue:
Whether or not the subject property may be registered under the name of
Josephine Wee
Ruling:
No. The subject property cannot be registered under the name of Josephine
Wee.
Based on these legal parameters of the Property Registration Decree,
applicants for registration of title under Section 14(1) must sufficiently establish: (1)
that the subject land forms part of the disposable and alienable lands of the public
domain; (2) that the applicant and his predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of the same; and (3)
that it is under a bona fide claim of ownership since June 12, 1945 or earlier.
The Court of Appeals was of the view that she could not have complied with
the requirement of possession and occupation under Sec. 14 (1) of P.D. No. 1529
Page 368 of 483

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considering that she had admitted that it was not physically turned over to her. As
she was not in actual and physical possession, she could not have exercised any
acts of dominion over the subject property which was essential to the requirement
of possession and occupation contemplated under Sec. 14 (1) of P.D. No. 1529.
A more important consideration, however, is that the subject land is already
registered under OCT No. OP-1840 (Patent No. 042118-03-6111) of the Registry of
Deeds of Cavite, under the name of respondent Felicidad Gonzales. It is a veritable
Torrens title and becomes as indefeasible as a Torrens title upon the expiration of
one (1) year from the date of its issuance.
For said reason, the order of the RTC directing the Administrator of LRA to
issue a corresponding decree in Josephine Wees name is null and void. A land
registration court has no jurisdiction to order the registration of land already
decreed in the name of another in an earlier land registration case. A second decree
for the same land would be null and void, since the principle behind the original
registration is to register a parcel of land only once.
Verily, once a title is registered, the owner may rest secure, without the
necessity of waiting in the portals of the court sitting in the mirador de su casa to
avoid the possibility of losing his land. The certificate of title cannot be defeated by
adverse, open and notorious possession. Neither can it be defeated by prescription.
As provided under Sec. 47 of PD 1529, no title to registered land in derogation of
the title of the registered owner shall be acquired by prescription or adverse
possession.
Remedy of the Josephine Wee is to file a separate proceeding such as an
action for specific performance or for reconveyance. The issue of fraudulent
alienation raised in the second application for registration of the subject property is
collateral attack which should be directly raised in a separate proceeding filed for
such purpose. It cannot be entertained in this proceeding. In several cases, the
Court has ruled that an attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the judgment or proceeding is nevertheless made as an
incident thereof.
The remedy of the Josephine Wee is to file a separate proceeding or action to
protect her alleged interest. As she claimed that she bought the subject property for
value from the respondent Felicidad as evidenced by a deed of sale, she can file an
action for specific performance to compel the respondent Felicidad to comply with
her obligation in the alleged deed of sale and/or an action for reconveyance of the
property. She can also file an action for rescission. Needless to state, Josephine Wee
must prove her entitlement because the respondent Felicidad claims that the sale
was falsified.
AFP RETIREMENT AND SEPARATION BENEFITS SYSTEM [AFP-RSBS] vs.
REPUBLIC OF THE PHILIPPINES
G.R. No.180086, July 2, 2014, J. Leonen
Page 369 of 483

2015)
On one hand, AFP-RSBS argued that its and its predecessors-in-interests
possession before the declaration that the property was alienable and disposable
agricultural land in1982 should be included in the computation of the period of
possession for purposes of registration. On the other hand, Republic of the
Philippines holds the position that possession before the establishment of
alienability of the land should be excluded in the computation. The Court ruled that
what is important in computing the period of possession is that the land has already
been declared alienable and disposable at the time of the application for
registration. Upon satisfaction of this requirement, the computation of the period
may include the period of adverse possession prior to the declaration that land is
Facts:
On July 10, 1997, the Armed Forcesof the Philippines Retirement and
Separation Benefits System (AFP-RSBS) filed an application for original registration
of parcels of land in Silang, Cavite. These were allegedly acquired from Narciso
Ambrad, Alberto Tibayan, and Restituto Tibayan on March 13, 1997. It was also
alleged that their predecessors-ininterest had been in possession ofthe properties
since June 12, 1945.
The Municipal Circuit Trial Court approved AFP-RSBSs application for original
registration. The Register of Deeds was directed to cause the registration of the
properties in the name of AFP-RSBS. However, the Republic of the Philippines moved
for the reconsideration of the decision but it was denied,
The Court of Appeals reversed the decision of the trial court and dismissed
AFP-RSBSs application. According to the Court of Appeals, since Lot 2969 was
declared alienable and disposable only on March 15, 1982, the period of possession
of the predecessors-in-interest before that date should be excluded from the
computation of the period of possession. Hence, AFPRSBSs and its predecessors-ininterests possessions could not ripen into ownership.
On one hand, AFP-RSBS argued that its and its predecessors-in interests
possession before the declaration that the property was alienable and disposable
agricultural land in1982 should be included in the computation of the period of
possession for purposes of registration. On the other hand, Republic of the
Philippines holds the position that possession before the establishment of
alienability of the land should be excluded in the computation.
Issue:
1.
Whether the period of possession before the declaration that land is

alienable and disposable agricultural land should be excluded from the
computation of the period of possession for purposes of original
registration.
Page 370 of 483

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2.
Whether AFP-RSBS, as a private corporation or association, may own

alienable lands of the public domain pursuant to Section 3, Article XII of
the Constitution.
Ruling:
1. No. The requirements for the application for original registration of land
based on a claim of open and continuous possession of alienable and disposable
lands of public domain are provided in Section 14(1) of Presidential Decree No. 1529
or the Property Registration Decree. It provides:
Section 14. Who may apply. The following persons may file in the proper Court of
First Instance an application for registration of title to land, whether personally or
through their duly authorized representatives:
(1)
Those who by themselves or through their predecessors-in-interest

have been in open, continuous, exclusive and notorious possession
and occupation of alienable and disposable lands of the public
domain under a bona fide claim of ownership since June 12, 1945,
or earlier.
A similar provision can be found in Commonwealth Act No. 141 or Public Land
Act:
Sec. 48. The following-described citizens of the Philippines, occupying lands
of the public domain or claiming to own any such lands or an interest therein, but
whose titles have not been perfected or completed, may apply to the Court of First
Instance of the province where the land is located for confirmation of their claims
and the issuance of a certificate of title therefor under the Land Registration Act, to
wit:
....
(b) Those who by themselves or through their predecessors-in-interest have
been in open, continuous, exclusive, and notorious possession and occupation of
agricultural lands of the public domain, under a bona fide claim of acquisition or
ownership, since June 12, 1945, immediately preceding the filing of the application
for confirmation of title, except when prevented by war or force majeure. Those
shall be conclusively presumed to have performed all the conditions essential to a
government grant and shall be entitled to a certificate of title under the provisions
of this chapter. (As amended by Presidential Decree No. 1073)
Based on these provisions, an applicant for original registration based on a
claim of exclusive and continuous possession or occupation must show the
existence of the following:
1) Open, continuous, exclusive, and notorious possession, by themselves or
through their predecessors-in-interest, of land;
2) The land possessed or occupied must have been declared alienable and
disposable agricultural land of public domain;
3) The possession or occupation was under a bona fide claim of ownership;
4) Possession dates back to June 12, 1945 or earlier.
Page 371 of 483

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The more reasonable interpretation of Section 14(1) is that it merely requires
the property sought to be registered as already alienable and disposable at the time
the application for registration of title is filed. If the State, at the time the
application is made, has not yet deemed it proper to release the property for
alienation or disposition, the presumption is that the government is still reserving
the right
to utilize the property; hence, the need to preserve its ownership in the
State irrespective of the length of adverse possession even if in good faith.
However, if the property has already been classified as alienable and disposable, as
it is in this case, then there is already an intention on the part of the State to
abdicate its exclusive prerogative over the property.
Moreover, in the resolution of the motions for reconsideration of this Courts
2009 decision in Heirs of Malabanan, the Court explained that there was no other
legislative intent that could be associated with the date, June 12, 1945, as written in
our registration laws except that it qualifies the requisite period of possession and
occupation. The law imposes no requirement that land should have been declared
alienable and disposable agricultural land as early as June 12, 1945.
Therefore, what is important in computing the period of possession is that the
land has already been declared alienable and disposable at the time of the
application for registration. Upon satisfaction of this requirement, the computation
of the period may include the period of adverse possession prior to the declaration
that land is alienable and disposable.
Although adverse, open, continuous, and notorious possession in the concept
of an owner is a conclusion of law to be determined by courts, it has more to do with
a persons belief in good faith that he or she has just title to the property that he or
she is occupying. It is unrelated to the declaration that land is alienable or
disposable. A possessor or occupant of property may, therefore, be a possessor in
the concept of an owner prior to the determination that the property is alienable
and disposable agricultural land. His or her rights, however, are still to be
determined under the law.
AFP-RSBS' right to the original registration of title over the property is,
therefore, dependent on the existence of: a) a declaration that the land is alienable
and disposable at the time of
the application for registration and b) open and
continuous possession in the concept of an owner through itself or through its
predecessors-in-interest since June 12, 1945 or earlier.
In this case, there is no dispute that the properties were already declared alienable
and disposable land on March 15, 1982. Hence, the property was already alienable
and disposable at the time of petitioners application for registration on July 10,
1997. As to the required period of possession, AFP-RSBS was able to show that it,
through itself or its predecessors-in-interest, has been in open, continuous,
exclusive, and notorious possession before 1945 through testimonies and
documents.
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2. Yes. Republic of the Philippines argues that although petitioner is a
government-owned and -controlled corporation, it cannot acquire title through
acquisitive prescription. This argument is unmeritorious. The type of corporation
that petitioner is has nothing to do with the grant of its application for original
registration. Petitioner also acquired title to the property under Section 14(1) of the
Property Registration Decree or Section 48(b) of the Public Land Act, and not
through acquisitive prescription.
If Republic of the Philippines argument stems from the Court of Appeals
ruling that petitioner cannot acquire title to the property because of Section 3,
Article XII of the Constitution, which prohibits private corporations from acquiring
public land, it is, again, mistaken. The prohibition in Section 3, Article XII of the
Constitution applies only to private corporations. AFP-RSBS is a government
corporation organized under Presidential Decree No. 361, as amended by
Presidential Decree No. 1656.
REPUBLIC OF THE PHILIPPINES vs. APOSTELITA SAN MATEO, ET AL
G.R. No. 203560, November 10, 2014, J. Velasco, Jr.
It must be emphasized that the present ruling on substantial compliance
applies pro hac vice. It does not in any way detract from our rulings in Republic v.
T.A.N. Properties, Inc., and similar cases which impose a strict requirement to prove
that the public land is alienable and disposable, especially in this case when the
decisions of the lower court and the Court of Appeals were rendered prior to these
rulings. To establish that the land subject of the application is alienable and
disposable public land, the general rule remains: all applications for original
registration under the Property Registration Decree must include both(1) a CENRO
or PENRO certification and(2) a certified true copy of the original classification made
by the DENR Secretary. As an exception, however, the courts - in their sound
discretion and based solely on the evidence presented on record - may approve the
application, pro hac vice, on the ground of substantial compliance showing that
there has been a positive act of government to show the nature and character of
the land and an absence of effective opposition from the government. This
exception shall only apply to applications for registration currently pending before
the trial court prior to this Decision and shall be inapplicable to all future
applications.
Facts:
A Petition for Registration of Title filed by respondents, filed before the RTC.
Respondents averred that the land used to be owned by their grandfather and
predecessor-in-interest, Leocadio Landrito (Leocadio). Leocadios occupation of a
5,500 square-meter portion of the property can be traced from Tax Declaration
issued in 1948 under his name. When Leocadio died, the property was inherited by
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his three children, Crisanta, Amador, and Juanito. Both Juanito and Amador
subsequently mortgaged their share to Crisanta and her husband, and failed to
settle their obligations. Thus, in 2000 and 2001, the respective widows of Juanito
and Amador executed waivers of rights in favor of the respondents, the heirs of
Crisanta. Respondents then executed an extra-judicial settlement among
themselves.
In support of the petition, attached were the following: the original tracing
cloth plan AS-00-000233, together with the blueprints, technical description of the
land, in duplicate; surveyors certificate; deed of extrajudicial settlement of the
estate of Leocadio; and various TDs and tax receipts.
The case was set for initial hearing.

Globe Steel Corporation (GSC),
represented by Kenneth Yu (Yu), New Donavel Compound Neighborhood Association,
Inc.(NDCNAI), and the Laguna Lake Development Authority (LLDA), all registered
their opposition to the petition. GSC contended that the application might have
encroached on its properties, because it owned the adjoining parcels of land.
NDCNAI argued that it had a better right of possession to apply for registration of
ownership, because the lot would have been unfit for human habitation, were it not
for the fillings introduced by the association to the lot. Moreover, its members, who
are informal settlers, are the actual occupants of the lot. LLDA, on the other hand,
claimed that the petition should be denied because the lot is located below the
reglementary lake elevation of 12.50 meters, and, thus, the lot forms part of the
Laguna Lake bed, and is considered inalienable and indisposable public land, and
within the jurisdiction of the LLDA.
RTC rendered a decision ordered the registration of the title over the subject
lot in the name of the respondents. CA affirmed.
Issue:
Whether or not RTC, affirmed by the CA, is correct in granting the petition for
registration of the respondents.
Ruling:
No. In view, however, of the erroneous finding of the CA that the land is
alienable, and the failure of the respondents to provide the necessary evidence to
support their allegation that the land is indeed alienable, the assailed CA Decision
must be reversed.
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However, on the issue of whether the respondents were able to prove that
the subject property is alienable and disposable, the Court finds that the
respondents failed to prove that the property sought to be registered is indeed
alienable and thus subject to registration. Respondents merely relied on the
certification of DENR-South CENRO to the effect that the subject property is
alienable. But as discussed below, this is insufficient, as respondents failed to
present any proof that the DENR Secretary approved such certification. The Court
rules that the CAs reliance solely on the DENR-South CENRO certification
constitutes reversible error on its part.
Material to the resolution of thisissue is this Courts ruling in Republic v. T.A.N.
Properties, Inc., which, similar to the one at bar, is one for registration of property.
Hence, the certification issued by the Regional Technical Director, FMS-DENR, in the
form of memorandum to the trial court, has no probative value.
Further, it is not enough for the PENRO or CENRO to certify that a land is
alienable and disposable. The applicant for land registration must prove that the
DENR Secretary had approved the land classification and released the land of the
public domain as alienable and disposable, and that the land subject of the
application for registration falls within the approved area per verification through
survey by the PENRO or CENRO. In addition, the applicant for land registration must
present a copy of the original classification approved by the DENR Secretary and
certified as a true copy by the legal custodian of the official records. These facts
must be established to prove that the land is alienable and disposable. Respondent
failed to do so because the certifications presented by respondent do not, by
themselves, prove that the land is alienable and disposable.
Clearly, therefore, a CENRO certification that a certain property is alienable,

without the corresponding proof that the DENR Secretary had approved such
certification, is insufficient to support a petition for registration of land. Both
certification and approval are required to be presented as proofs that the land is
alienable. Otherwise, the petition must be denied.
Indeed, the best proofs in registration proceedings that a land is alienable
and disposable are a certification from the CENRO or Provincial Environment and
Natural Resources Office (PENRO) and a certified true copy of the DENRs original
classification of the land. The Court, however, has nonetheless recognized and
affirmed applications for land registration on other substantial and convincing
evidence duly presented without any opposition from the LRA or the DENR on the
ground of substantial compliance.
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The Court immediately made clear, however, that the ruling in Vega is pro
hac vice, and is not to be considered an exception nor a departure from its ruling in
T.A.N. Properties, which applied the rule on strict compliance with the rules. The
Court clarified:
It must be emphasized that the present ruling on substantial compliance

applies pro hac vice. It does not in any way detract from our rulings in Republic v.
T.A.N. Properties, Inc., and similar cases which impose a strict requirement to prove
that the public land is alienable and disposable, especially in this case when the
decisions of the lower court and the Court of Appeals were rendered prior to these
rulings. To establish that the land subject of the application is alienable and
registration under the Property Registration Decree must include both(1) a CENRO
or PENRO certification and(2) a certified true copy of the original classification made
by the DENR Secretary. As an exception, however, the courts - in their sound
discretion and based solely on the evidence presented on record - may approve the
application, pro hac vice, on the ground of substantial compliance showing that
there has been a positive act of government to show the nature and character of
the land and an absence of effective opposition from the government. This
exception shall only apply to applications for registration currently pending before
the trial court prior to this Decision and shall be inapplicable to all future
applications.
LUZVIMINDA APRAN CANLAS vs. REPUBLIC OF THE PHILIPPINES
G.R. No. 200894, November 10, 2014, J. LEONEN
An applicant for land registration or judicial confirmation of incomplete or
imperfect title under Section 14(1) of Presidential Decree No. 1529 must prove the
following requisites:(1) that the subject land forms part of the disposable and
alienable lands of the public domain, and (2) that the applicant has been in open,
continuous, exclusive and notorious possession and occupation of the same under a
bona fide claim of ownership since June 12, 1945, or earlier. Concomitantly, the
burden to prove these requisites rests on the applicant. With regard to the first
requisite, it is undisputed that the land subject of registration is part of the
alienable and disposable lands of the public domain. The trial court found the
Department of Environment and Natural Resources report sufficient to prove the
existence of the first requisite. The Court of Appeals decision was silent on this
matter. Respondent Republic failed to make objections on the issue as well. Thus,
we do not see any reason to deviate from the findings of the lower courts.
Facts:
Petitioner Luzviminda A. Canlas (Canlas) applied for the original registration
of title, under Presidential Decree No. 1529 in Municipality of Binangonan, Province
of Rizal.
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There was no opposition to Canlas application. Respondent Republic of the
Philippines (Republic) did not submit its comment or opposition despite the
opportunity given by the trial court. The case was then submitted for decision. Thus
the Regional Trial Court granted Canlas application.
According to the trial court, Canlas complied with the procedural
requirements and substantiated her application. She sufficiently proved that,
through her predecessors-in-interest, she has been in "open, continuous, exclusive
and notorious possession of an alienable and disposable parcel of land of the public
domain under a bona fide claim of ownership for more than 30 years.
Acting on the Republics appeal, the Court of Appeals reversed and set aside
the decision of the trial court.
Thus Canlas comes before the Supreme Court, arguing that she has duly
overcome the burden of proof by showing open, continuous, exclusive, adverse, and
notorious possession and occupation of the property. This is allegedly shown in the
following acts of Canlas and her predecessors-in-interest since the 1900s: declaring
the property in their names, paying taxes due on the property, having the property
surveyed, and allowing the excavation in the property for the retrieval and hauling
of "pulang lupa" for the making of clay pots.
Canlas argued further that "residence" is not synonymous with "possession
and occupation" as implied by the Court of Appeals. 21 Presidential Decree No. 1529
does not require the applicant to reside on the land being registered. The law also
does not require that a relative of the applicant be present to oversee the property.
Issue:
Whether or not the CA is correct in reversing the trial courts decision
granting the original registration of title.
Ruling:
No. The CA is not correct in reversing the trial courts decision that grants the
original registration of title.
After considering the parties arguments and the records of this case, this
court resolves to grant the petition.
In land registration cases, the applicants legal basis is important in
determining the required number of years or the reference point for possession or
prescription. This court has delineated the differences in the modes of acquiring
imperfect titles under Section 14 of Presidential Decree No. 1529. Heirs of Mario
Malabanan v. Republic extensively discussed the distinction between Section 14(1)
and Section 14(2) of Presidential Decree No. 1529.
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In Republic v. Gielczyk, this court summarized and affirmed the differences
between Section 14(1) and Section 14(2) of Presidential Decree No. 1529 as
discussed in Heirs of Malabanan: In Heirs of Mario Malabanan v. Republic, the Court
further clarified the difference between Section 14(1) and Section 14(2) of P.D. No.
1529. The former refers to registration of title on the basis of possession, while the
latter entitles the applicant to the registration of his property on the basis of
prescription. Registration under the first mode is extended under the aegis of the
P.D. No. 1529 and the Public Land Act (PLA) while under the second mode is made
available both by P.D. No. 1529 and the Civil Code. Moreover, under Section 48(b) of
the PLA, as amended by Republic Act No. 1472, the 30-year period is in relation to
possession without regard to the Civil Code, while under Section 14(2) of P.D. No.
1529, the 30-year period involves extraordinary prescription under the Civil Code,
particularly Article 1113 in relation to Article 1137.
An applicant for land registration or judicial confirmation of incomplete or
imperfect title under Section 14(1) of Presidential Decree No. 1529 must prove the
following requisites:(1) that the subject land forms part of the disposable and
alienable lands of the public domain, and (2) that the applicant has been in open,
continuous, exclusive and notorious possession and occupation of the same under a
bona fide claim of ownership since June 12, 1945, or earlier. Concomitantly, the
burden to prove these requisites rests on the applicant. With regard to the first
requisite, it is undisputed that the land subject of registration is part of the alienable
and disposable lands of the public domain. The trial court found the Department of
Environment and Natural Resources report sufficient to prove the existence of the
first requisite. The Court of Appeals decision was silent on this matter. Respondent
Republic failed to make objections on the issue as well. Thus, the Court does not see
any reason to deviate from the findings of the lower courts.
Canlas has sufficiently overcome the burden of proof required in a judicial
confirmation of incomplete or imperfect title to land. Contrary to Republics
arguments, the trial court specifically found that Canlas possession and occupation,
through her predecessors-in interest, started earlier than June12, 1945
It is settled that tax declarations are not conclusive evidence of ownership.
Other evidence may be appreciated to determine actual possession and occupation.
Documentary evidence, such as tax declarations, when coupled with positive and
clear testimonies of the applicant and his or her witnesses, may be weighed in favor
of the applicant. The fact that a parcel of land is not declared for tax purposes
regularly, or that realty taxes are not paid on a regular basis, does not automatically
contradict the claim of possession. Tax declarations serve as additional indicia of
ownership. It is not conclusive as to the fact of possession, occupation, or
ownership. Likewise, to solely rely on tax declarations and payment of realty taxes
would mean that Canlas possession of the land should be reckoned from 1949 or
the year the earliest tax declaration was made. Such interpretation is untenable and
goes beyond the text of Section 14(1) of Presidential Decree No. 1529. Moreover, as
shown in the records, Canlas, through her predecessors-in-interest, has been in
possession of the land since the early 1900s.
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REPUBLIC OF THE PHILIPPINES vs. CECILIA GRACE L. ROASA, married to
GREG AMBROSE ROASA, as herein represented by her Attorneys-in-Fact,
BERNARDO M. NICOLAS, JR. and ALVIN B. ACAYEN,
G.R. No. 176022, February 2, 2015, J. Diosdado M. Peralta
An applicant for original registration of title based on a claim of exclusive and

continuous possession or occupation must show the existence of the following: (1)
Open, continuous, exclusive and notorious possession, by themselves or through
their predecessors-in-interest, of land; (2) The land possessed or occupied must
have been declared alienable and disposable agricultural land of public domain; (3)
The possession or occupation was under a bona fide claim of ownership; (4)
Possession dates back to June 12, 1945 or earlier.
Therefore, what is important in computing the period of possession is that

the land has already been declared alienable and disposable at the time of the
In the present case, there is no dispute that the subject lot has been declared
alienable and disposable on March 15, 1982. This is more than eighteen (18) years
before Roasa's application for registration, which was filed on December 15, 2000.
Moreover, the unchallenged testimonies of two of Roasa's witnesses established
that the latter and her predecessors-in-interest had been in adverse, open,
continuous, and notorious possession in the concept of an owner even before June
12, 1945.
Facts:
Cecilia Roasa alleged, among others, that she is the owner in fee simple of
the subject lot, having acquired the same by purchase as evidenced by a Deed of
Absolute Sale; that the said property is an agricultural land planted with corn, palay,
bananas, coconut and coffee by Cecilia Roasa 's predecessors-in-interest; that
Cecilia Roasa and her predecessors-in-interest had been in open, continuous,
exclusive and uninterrupted possession and occupation of the land under bona
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fideclaim of ownership since the 1930's and that they have declared the land for
taxation purposes.
Subsequently, the Republic of the Philippines, through the Office of the

Solicitor General (OSG), opposed the application contending that the muniments of
title, such as tax declarations and tax payment receipts, did not constitute
competent and sufficient evidence of a bona fide acquisition of the land applied for
nor of the alleged open, continuous, exclusive and notorious possession by
respondent and her predecessors-in-interest as owners for the period required by
law. The OSG also argued that the subject lot is a portion of the public domain
belonging to the Republic of the Philippines which is not subject to private
appropriation.
RTC rendered its decision denying respondent's application. CA rendered its

decision, granting the application for confirmation of imperfect title. Hence, the
instant petition.
Issue:
Whether or not the possession of the subject lot by Cecilia Roasa and her
predecessors-in-interest before the establishment of alienability of the said land,
should be excluded in the computation of the 30-year period of possession.
Ruling:
Section 14(1), Presidential Decree No. 1529 as well as Section 48 of

Commonwealth Act No. 141, otherwise known as The Public Land Act, as amended
by Presidential Decree No. 1073, provides that an applicant for original registration
of title based on a claim of exclusive and continuous possession or occupation must
show the existence of the following:
1. Open, continuous, exclusive and notorious possession, by themselves or
through their predecessors-in-interest, of land;
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2. The land possessed or occupied must have been declared alienable and
disposable agricultural land of public domain;
3. The possession or occupation was under a bona fide claim of ownership;
4. Possession dates back to June 12, 1945 or earlier.
Section 14(1) of the Property Registration Decree should be interpreted to

include possession before the declaration of the lands alienability as long as at the
time of the application for registration, the land has already been declared part of
the alienable and disposable agricultural public lands. This court also emphasized
that the absurdity that would result in interpreting Section 14(1) as requiring that
the alienability of public land should have already been established by June 12,
1945
Instead, the more reasonable interpretation of Section 14(1) is that it merely

requires the property sought to be registered as already alienable and disposable at
the time the application for registration of title is filed. If the State, at the time the
application is made, has not yet deemed it proper to release the property for
alienation or disposition, the presumption is that the government is still reserving
the right to utilize the property; hence, the need to preserve its ownership in the
State irrespective of the length of adverse possession even if in good faith.
However, if the property has already been classified as alienable and disposable, as
it is in this case, then there is already an intention on the part of the State to
abdicate its exclusive prerogative over the property.
In the present Petition, the Subject Lots became alienable and disposable
only on 25 June 1963. Any period of possession prior to the date when the Subject
Lots were classified as alienable and disposable is inconsequential and should be
excluded from the computation of the period of possession; such possession can
never ripen into ownership and unless the land had been classified as alienable and
disposable, the rules on confirmation of imperfect title shall not apply thereto. It is
very apparent then that respondents could not have complied with the period of
possession required by Section 48(b) of the Public LandAct, as amended, to acquire
imperfect or incomplete title to the Subject Lots that may be judicially confirmed or
legalized.
The Court explained that there was no other legislative intent that could be
associated with the date, June 12, 1945, as written in our registration laws except
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that it qualifies the requisite period of possession and occupation. The law imposes
no requirement that land should have been declared alienable and disposable
agricultural land as early as June 12, 1945.
Therefore, what is important in computing the period of possession is that the

land has already been declared alienable and disposable at the time of the
Although adverse, open,continuous, and notorious possession in the concept

of an owner is a conclusion of law to be determined by courts, it has more to do with
a persons belief in good faith that he or she has just title to the property that he or
she is occupying. It is unrelated to the declaration that land is alienable or
disposable. A possessor or occupant of property may, therefore, be a possessor in
the concept of an owner prior to the determination that the property is alienable
and disposable agricultural land.
Roasas right to the original registration of title over the subject property is,
therefore, dependent on the existence of (a) a declaration that the land is alienable
and disposable at the time of the application for registration and (b) open and
continuous possession in the concept of an owner through itself or through its
predecessors-in-interest since June 12, 1945 or earlier.
In the present case, there is no dispute that the subject lot has been declared
alienable and disposable on March 15, 1982. This is more than eighteen (18) years
before Roasa's application for registration, which was filed on December 15, 2000.
Moreover, the unchallenged testimonies of two of respondent's witnesses
established that the latter and her predecessors-in-interest had been inadverse,
open, continuous, and notorious possession in the concept ofan owner even before
June 12, 1945.
THE HON. SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM
vs. NEMESIO DUMAGPI, REPRESENTED BY VICENTE DUMAGPI
G.R. No. 195412, February 04, 2015, J. Reyes
The respondent claims that he is the owner of the disputed parcel of land by
virtue of his open, exclusive, notorious and continuous possession of the land for
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more than 30 years. The Supreme Court ruled that adverse possession can only
ripen into ownership when the land adversely owned is classified as an agricultural
land. If the disputed land is non-agricultural, adverse possession cannot ripen into
ownership.
Facts:
The respondent Nemesio Dumagpi filed a complaint for accion reindivicatoria
against Aguilar, Valencia and Custodia including the Department of Agrarian
Reform. He alleges that he is the owner of the disputed land in Zamboanga City
through his open and exclusive possession of the said lot since July 4, 1945. He
asserted that unknown to him, DAR issued titles over the land he owns to Aguilar,
Valencia and Custodia and by virtue of this titles, the latter threatens to dispossess
of his land.
The Regional Trial Court ruled in favor of Nemesio and held that the open,
continuous, notorious and exclusive possession of Nemesio of the disputed land for
more than 30 years has already ripened into title and therefore he is the rightful
owner of the property. On appeal, the Court of Appeals affirmed the decision of the
RTC. Hence, the current petition.
Issue:
Whether or not the open, exclusive, notorious and continuous possession of
Nemesio for more than 30 years of the disputed land can ripen into ownership.
Ruling:
The open, notorious, exclusive and continuous possession of Nemesio on the
disputed land cannot ripen into ownership. The Supreme Court reversed and set
aside the decision of the Court of Appeals.
Article XII, Section 2 of the 1987 Constitution provides that [a]ll lands of the
public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of agricultural lands,
all other natural resources shall not be alienated. Under Section 3 of Article XII,
lands of the public domain are classified into agricultural, forest or timber, mineral
lands and national parks, and alienable lands of the public domain, which shall be
limited to agricultural lands. Pursuant to Section 48(b) of Commonwealth Act No.
141, or the Public Land Act, only citizens of the Philippines may be granted title to
alienable public agricultural land, to wit:
Section 48 (b) Those who by themselves or through their predecessors in
interest have been in open, continuous, exclusive, and notorious possession
and occupation of agricultural lands of the public domain, under a bona fide
claim of acquisition or ownership, for at least thirty years immediately
preceding the filing of the application for confirmation of title except when
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prevented by war or force majeure. These shall be conclusively presumed to
have performed all the conditions essential to a government grant and shall
be entitled to a certificate of title under the provisions of this chapter.
As asserted by the DAR and testified to by Labrador, from 1938 to 1984 the
subject lot was part of a coal mine reservation, established under Proclamation No.
234, Series of 1938, as amended by Proclamation No. 402, Series of 1953. On March
14, 1984, a portion of the reservation containing 2,598 has was reclassified under
Presidential Proclamation No. 2342 as agricultural land reserved for resettlement.
On June 10, 1988, R.A. No. 6657, or the Comprehensive Agrarian Reform Law
(CARL), placed the said reclassified area under the administration and disposition of
the DAR, pursuant to Section 2 thereof.
Concerning Nemesios claim of entitlement to a free patent, Section 44 of
Commonwealth Act No. 141 provides:
Sec. 44. Any natural-born citizen of the Philippines who is not the owner of
more than twenty-four hectares and who since July fourth, nineteen hundred
and twenty-six or prior thereto, has continuously occupied and cultivated,
either by himself or through his predecessors-in-interest, a tract or tracts of
agricultural public lands subject to disposition, or who shall have paid the real
estate tax thereon while the same has not been occupied by any person shall
be entitled, under the provisions of this chapter, to have a free patent issued
to him for such tract or tracts of such land not to exceed twenty-four
hectares.
There is no dispute that the land Nemesio is claiming was not alienable public
agricultural land but in truth was classified and reserved as a coal mine from 1938
to 1984, a period which overlapped with his claimed acquisitive possession. Clearly,
he cannot invoke Section 48(b) of Commonwealth Act No. 141 and assert an
acquisitive title thereto by reason of open, continuous, exclusive, and notorious
possession for 30 years.
Then, even granting arguendo that his application for free patent was
approved by DENR, it is not denied that the same was never released. In fact, DAR
claimed that it was never approved precisely because the land was not alienable.
Even Nemesio admitted that his free patent application was not approved due to
opposition by several other claimants. And even if the same was approved and
released, it would still have been void under the Constitution, for as held in Heirs of
Santiago v. Heirs of Santiago, free patent applications under the Public Land Act, as
amended, apply only to disposable lands of the public domain.
REPUBLIC OF THE PHILIPPINES vs. SPOUSES DANTE and LOLITA BENIGNO
G.R. No. 205492, March 11, 2015, J. Del Castillo
The State is not estopped from the acts of the Clerk of Court in land
registration cases. Illegal acts of government agents do not bind the State.
Assuming that it is, the respondents did not prove that the land sought to be
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registered is an alienable and disposable land. All applications for original
registration under the Property Registration Decree must include both (1) a CENRO
or PENRO certification and (2) a certified true copy of the original classification
made by the DENR Secretary.
Facts:
Spouses Dante and Lolita Benigno filed with the RTC an Application for
Registration of title to a lot in Los Baos, Laguna.
The RTC granted the application for registration. The Republic filed its notice
of appeal. The trial court approved the notice of appeal and directed that the entire
records of the case be forwarded to the CA.
Spouses Benigno filed a Motion to Dismiss the Appeal and Issue a Final
Decree of Registration, claiming among others that the Republic has abandoned its
appeal. RTC denied it, stating that it was the spouses failure to submit certain
required documentsthe Affidavit of Publication and Certificate of Postingas
earlier directed by the court which caused the non-transmittal of the records of the
case to the CA, thus delaying the appeal proceedings. The Republic did not file its
brief within the reglementary period. Thus, the CA dismissed its appeal.
The Republic filed the instant case, reiterating that it should not be faulted for
the delay in the proceedings on appeal, as it resulted from the Calamba City Office
of the Clerk of Courts failure to transmit the records of the case to the CA.
Issue:
Should an appeal for land registration cases be dismissed for the failure of
the Clerk of Court to transmit the records of the case to the CA?
Ruling:
No, the Court ruled that illegal acts of government agents do not bind the
State, and the Government is never estopped from questioning the acts of its
officials.
Though Republic is admittedly ornery in the prosecution of its case, it is
nonetheless true that as a matter of doctrine, illegal acts of government agents do
not bind the State, and the Government is never estopped from questioning the
acts of its officials, more so if they are erroneous, let alone irregular. This principle
applies in land registration cases. Certainly, the State will not be allowed to abdicate
its authority over lands of the public domain just because its agents and officers
have been negligent in the performance of their duties. Under the Regalian
doctrine, all lands of the public domain belong to the State, and the State is the
source of any asserted right to ownership in land and charged with the conservation
of such patrimony.
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Even if the Office of the Solicitor General was remiss in the handling of the
States appeal, respondents application for registration must be dismissed since
they failed to prove that the land applied for is alienable and disposable public land.
Applicants for registration of title under PD 152950 must prove: (1) that the
subject land forms part of the disposable and alienable lands of the public domain;
and (2) that they have been in open, continuous, exclusive and notorious
possession and occupation of the land under a bona fide claim of ownership since
12 June 1945 or earlier. Section 14(1) of the law requires that the property sought to
be registered is already alienable and disposable at the time the application for
registration is filed.
And, in order to prove that the land subject of the application is alienable and
registration under the Property Registration Decree must include both (1) a CENRO
or PENRO certification and (2) a certified true copy of the original classification
made by the DENR Secretary.
In this case, the Spouses did not present any documentary evidence to prove
that the land applied for is alienable and disposable public land. Their Exhibits A to
N are bereft of the required documentary proof particularly, a copy of the
original classification approved by the DENR Secretary and certified as a true copy
by the legal custodian of the official records, and a CENRO or PENRO certification
to show that the land applied for registration is alienable and disposable public land.
Respondents cannot invoke substantial compliance with the requirement of
proof of alienability. There is complete absence of documentary evidence showing
that the land applied for forms part of the alienable and disposable portion of the
public domain. Complete absence of proof is certainly not equivalent to substantial
compliance with the required amount of proof.
Applicants for registration of public land should come to court prepared and
complete with the necessary evidence to prove their registrable title. Otherwise,
their efforts will be for naught, and they would only have wasted precious time,
resources and energy in advancing a lost cause.
REPUBLIC OF THE PHILIPPINES vs. EMETERIA G. LUALHATI
Emeteria G. Lualhati filed with the RTC of Antipolo City an application for
original registration covering Lots 1 and 2 situated in C-5 C-6 Pasong Palanas, Sitio
Sapinit, San Juan, Antipolo, Rizal. To support her contention that the lands subject of
her application is alienable and disposable, Lualhati submitted certifications from
the DENR-CENRO, Region IV, Antipolo City, stating that no public land application or
land patent covering the subject lots is pending nor are the lots embraced by any
administrative title. It has been repeatedly ruled that certifications issued by the
CENRO, or specialists of the DENR, as well as Survey Plans prepared by the DENR
containing annotations that the subject lots are alienable, do not constitute
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incontrovertible evidence to overcome the presumption that the property sought to
be registered belongs to the inalienable public domain. Rather, this Court stressed
the importance of proving alienability by presenting a copy of the original
classification of the land approved by the DENR Secretary and certified as true copy
by the legal custodian of the official records.
Moreover, as petitioner Republic aptly points out, Lualhati failed to provide
any other proof of acts of dominion over the subject land other than the fact that
she, together with her husband and children, planted fruit-bearing trees and
constructed their home thereon considering the vastness of the same. A mere
casual cultivation of portions of the land by the claimant, and the raising thereon of
cattle, do not constitute possession under claim of ownership. In that sense,
possession is not exclusive and notorious as to give rise to a presumptive grant
from the State.
Facts:
On August 12, 2004, respondent Emeteria G. Lualhati filed with the RTC of
Antipolo City an application for original registration covering Lots 1 and 2 situated in
C-5 C-6 Pasong Palanas, Sitio Sapinit, San Juan, Antipolo, Rizal. Lualhati maintains
that she, together with her deceased husband, Andres Lualhati, and their four
children, have been in possession of the subject lands in the concept of an owner
since 1944. In support of her application, Lualhati submitted the blueprint of the
survey plan and the tracing cloth plan surveyed at the instance of Andres Lualhati
and approved by the Director of Lands in October 1957, the certified true copy of
the surveyors certificate, the technical descriptions of Lots 1 and 2, Tax Declaration
No. 26437 issued in the name of Andres Lualhati, which states that the tax on the
properties commenced in 1944, the real property tax register evidencing payment
of realty taxes on the subject properties from 1949 to 1958, certifications from the
Department of Environment and Natural Resources (DENR), Region IV, City
Environment and Natural Resources Office (CENRO), Antipolo City, that no public
land application/land patent covering the subject lots is pending nor are the lots
embraced by any administrative title, and a letter from the Provincial Engineer that
the province has no projects which will be affected by the registration. Moreover,
Lualhati presented several witnesses to prove her claim that she and her husband,
together with their four children, have tilled the soil, planted fruit-bearing trees, and
constructed their conjugal house on the subject properties, where all four of her
children grew up until they got married.
The RTC granted Lualhatis application finding that she had been in open,
public, continuous, exclusive, adverse, and notorious possession and occupation of
the lands for more than 50 years under a bona fide claim of ownership even prior to
June 12, 1945, as required under Section 14 (1) of Presidential Decree (PD) No.
1529, otherwise known as the Property Registration Decree.
The CA affirmed the ruling of the RTC, rejecting Republics contention that
Lualhati failed to overcome the burden of proving her possession of the subject lots
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in its entirety, and that even if they did, such can hardly suffice as possession, being
a mere casual cultivation.
Issues:
1. Whether or not Lualhati was able to prove the alienable and disposable character
of the land applied for registration;
2. Whether or not Lualhati was able to prove possession over the property applied
for registration in the concept and within the period required by law
Ruling:
1.
No. Section 14 (1) of PD 1529, otherwise known as the Property Registration
Decree provides:
SEC. 14. Who may apply. - The following persons may file in the proper
Court of First Instance an application for registration of title to land,
whether personally or through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest
have been in open, continuous, exclusive and notorious possession
and occupation of alienable and disposable lands of the public domain
Thus, pursuant to the aforequoted provision, applicants for registration of title
must prove that: (1) the subject land forms part of the disposable and alienable
lands of the public domain; and (2) they, by themselves or through their
predecessors-in-interest, have been in open, continuous, exclusive, and notorious
possession and occupation of the same under a bona fide claim of ownership since
June 12, 1945, or earlier.
To support her contention that the lands subject of her application is alienable
and disposable, Lualhati submitted certifications from the DENR-CENRO, Region IV,
Antipolo City, stating that no public land application or land patent covering the
subject lots is pending nor are the lots embraced by any administrative title.
It has been repeatedly ruled that certifications issued by the CENRO, or
specialists of the DENR, as well as Survey Plans prepared by the DENR containing
annotations that the subject lots are alienable, do not constitute incontrovertible
evidence to overcome the presumption that the property sought to be registered
belongs to the inalienable public domain. Rather, this Court stressed the
importance of proving alienability by presenting a copy of the original classification
of the land approved by the DENR Secretary and certified as true copy by the legal
custodian of the official records.
Thus, as it now stands, an application for original registration must be
accompanied by: (1) CENRO or PENRO certification; and (2) a copy of the original
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legal custodian of the official records, in order to establish that the land is indeed
Here, Lualhati failed to establish, by the required evidence, that the land
sought to be registered has been classified as alienable or disposable land of the
public domain. The records of this case merely bear certifications from the DENRCENRO, Region IV, Antipolo City, stating that no public land application or land
patent covering the subject lots is pending nor are the lots embraced by any
administrative title. Said CENRO certifications, however, do not even make any
pronouncement as to the alienable character of the lands in question for they
merely recognize the absence of any pending land patent application,
administrative title, or government project being conducted thereon.
2.
No. Other than the bare allegations of Lualhati and her witness, as well as the
1947 tax declaration, Lualhati did not present any other proof to substantiate her
claim of possession beginning in 1944. Neither did she provide any explanation as
to why, if she has truly been occupying the properties as early as 1994, it was only
in 1947 that she sought to declare the same for purposes of taxation.
In addition to this, the real property tax register presented by Lualhati
evidenced payment of realty taxes only from 1949 up to 1958. Consequently, this
Court cannot concede to Lualhatis assertion that she had been adversely
possessing the properties beginning in 1944 up until the filing of her complaint in
2004, or for a duration of sixty full years, when the evidence presented depicts
payment of taxes for only nine years. Payment of realty taxes for a brief and
fleeting period simply cannot be considered sufficient proof of ownership.
Furthermore, it bears stressing that tax declarations and receipts are not
conclusive evidence of ownership or of the right to possess land when not
supported by any other evidence. The disputed property may have been declared
for taxation purposes in the names of the applicants for registration, or of their
predecessors-in-interest, but it does not necessarily prove ownership. They are
merely indicia of a claim of ownership.
Moreover, as petitioner Republic aptly points out, Lualhati failed to provide
any other proof of acts of dominion over the subject land other than the fact that
she, together with her husband and children, planted fruit-bearing trees and
constructed their home thereon considering the vastness of the same. As
enunciated in Republic v. Bacas, et al.:
A mere casual cultivation of portions of the land by the claimant, and the
raising thereon of cattle, do not constitute possession under claim of ownership. In
that sense, possession is not exclusive and notorious as to give rise to a
presumptive grant from the State. While grazing livestock over land is of course to
be considered with other acts of dominion to show possession, the mere occupancy
of land by grazing livestock upon it, without substantial enclosures, or other
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permanent improvements, is not sufficient to support a claim of title thru acquisitive
prescription.
CANCELLATION OF TITLE
ROSARIO BANGUIS-TAMBUYAT vs. WENIFREDA BALCOM-TAMBUYAT
Under Sec. 108 of PD 1529, the proceeding for the erasure, alteration, or
amendment of a certificate of title may be resorted to in seven instances: (1) when
registered interests of any description, whether vested, contingent, expectant, or
inchoate, have terminated and ceased; (2) when new interests have arisen or been
created which do not appear upon the certificate; (3) when any error, omission or
mistake was made in entering a certificate or any memorandum thereon or on any
duplicate certificate; (4) when the name of any person on the certificate has been
changed; (5) when the registered owner has been married, or, registered as
married, the marriage has been terminated and no right or interest of heirs or
creditors will thereby be affected; (6) when a corporation, which owned registered
land and has been dissolved, has not conveyed the same within three years after its
dissolution; and (7) when there is reasonable ground for the amendment or
alteration of title. The present case falls under (3) and (7), where the Registrar of
Deeds of Bulacan committed an error in issuing TCT T-145321 in the name of
Adriano M. Tambuyat married to Rosario E. Banguis when, in truth and in fact,
respondent Wenifreda and not Banguis is Adrianos lawful spouse.
Facts:
During their marriage, Adriano Tambuyat and Respondent Wenifreda
Tambuyat acquired several real properties including a parcel of land in Bulacan,
which was bought by Adriano. On the deed of sale over this property, one of the
witnesses was herein Petitioner Rosario Banguis-Tambuyat who signed thereon as
Rosario Banguis.
All this time, Petitioner Banguis remained married to Eduardo Nolasco and at
all stages of the instant case, Nolasco was alive and his marriage to Banguis
subsisted and was never annulled.
On June 7, 1998, Adriano died intestate. On October 19, 1999, Wenifreda filed
a petition seeking the cancellation of TCT-145321 for its defect showing his spouse
as married to Petitioner Banguis. Banguis opposed this petition, saying that she
alone bought the subject property and that she and adriano were married on
September 2, 1988.
After due trial, the RTC issued a judgment finding Respondent Wenifreda as
having the lawful title over the property and the same be cancelled the defect
stated therein. The trial court held that it has the sufficient authority under the
Property Registration Decree to rectify errors appearing on certificates of title.
Further, the evidence of Wenifreda is preponderant on the point that she and
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deceased Adriano were legally married and the latter acquired the subject property.
The CA sustained the ruling the RTC.
Issue:
Whether or not the trial court was invested with proper authority to cause the
cancellation of the certificate of title on the ground that it shows a defect or error.
Ruling:
YES, the Court is not convinced with the contentions of Petitioner Banguis.
The OMB contends that the CA should have dismissed Rigors Petition for
Certiorari
The trial court in [the subject land registration case] was not precluded from
resolving the objections raised by Banguis in her opposition to the petition for
cancellation; a separate action need not be filed in a different court exercising
general jurisdiction. Banguis should be considered to have acquiesced and freely
submitted the case to the trial court for complete determination on her opposition,
when she went to trial and adduced and submitted all her relevant evidence to the
court. The active participation of the party against whom the action was brought,
coupled with his failure to object to the jurisdiction of the court or quasi-judicial
body where the action is pending, is tantamount to an invocation of that jurisdiction
and a willingness to abide by the resolution of the case and will bar said party from
later on impugning the court or bodys jurisdiction.
Under Sec. 108 of PD 1529, the proceeding for the erasure, alteration, or
amendment of a certificate of title may be resorted to in seven instances: (1) when
registered interests of any description, whether vested, contingent, expectant, or
inchoate, have terminated and ceased; (2) when new interests have arisen or been
created which do not appear upon the certificate; (3) when any error, omission or
mistake was made in entering a certificate or any memorandum thereon or on any
duplicate certificate; (4) when the name of any person on the certificate has been
changed; (5) when the registered owner has been married, or, registered as
married, the marriage has been terminated and no right or interest of heirs or
creditors will thereby be affected; (6) when a corporation, which owned registered
land and has been dissolved, has not conveyed the same within three years after its
dissolution; and (7) when there is reasonable ground for the amendment or
alteration of title. The present case falls under (3) and (7), where the Registrar of
Deeds of Bulacan committed an error in issuing TCT T-145321 in the name of
Adriano M. Tambuyat married to Rosario E. Banguis when, in truth and in fact,
respondent Wenifreda and not Banguis is Adrianos lawful spouse.
Proceedings under Sec. 108 are summary in nature, contemplating
corrections or insertions of mistakes which are only clerical but certainly not
controversial issues. Banguiss opposition to the petition for cancellation ostensibly
raised controversial issues involving her claimed ownership and the hereditary
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rights of Adrian, which she claims to be her son by Adriano. However, apart from the
fact that evidence of Banguiss ownership is irrelevant in Wenifredas petition, the
evidence apparently indicates that Banguis could not be the owner of the subject
property, while a resolution of the issue of succession is irrelevant and unnecessary
to the complete determination of Wenifredas petition. The Court is thus led to the
conclusion that the Registrar of Deeds of Bulacan simply erred in including Banguis
in TCT T-145321 as Adrianos spouse.
As correctly ruled by the appellate court, the preponderance of evidence
points to the fact that Wenifreda is the legitimate spouse of Adriano. Documentary
evidence among others, the parties respective marriage contracts, which,
together with marriage certificates, are considered the primary evidence of a
marital union indicates that Adriano was married to Wenifreda, while Banguis was
married to Nolasco and both marriages were subsisting at the time of the
acquisition of the subject property and issuance of the certificate of title thereto.
Thus, it cannot be said that Adriano and Banguis were husband and wife to each
other; it cannot even be said that they have a common-law relationship at all.
Consequently, Banguis cannot be included or named in TCT T-145321 as Adrianos
spouse; the right and privilege belonged to Wenifreda alone.
ACTION FOR RECONVEYANCE
HEIRS OF FRANCISCO I. NARVASA, SR., ANDHEIRS OF PETRA IMBORNAL
AND PEDRO FERRER,REPRESENTED BY THEIR ATTORNEY-IN-FACT, MRS.
REMEDIOS B. NARVASA-REGACHO vs. EMILIANA, VICTORIANO, FELIPE,
MATEO, RAYMUNDO, MARIA,AND EDUARDO, ALL SURNAMED IMBORNAL
G.R. No. 182908, August 06, 2014, J. Perlas Bernabe
An action for reconveyance based on an implied trust prescribes in ten (10)
years, reckoned from the date of registration of the deed or the date of issuance of
the certificate of title over the property, if the plaintiff is not in possession. Hence,
when a complaint for reconveyance is filed beyond the 10-year reglementary
period, such cause of action is barred by prescription.
Facts:
Basilia Imbornal+ (Basilia) had four (4) children, namely, Alejandra, Balbina,
Catalina, and Pablo.
Francisco I. Narvasa, Sr.(Francisco) and Pedro Ferrer (Pedro) were the children of
Alejandra, while petitioner Petra Imbornal (Petra) was the daughter of Balbina.
Petitioners are the heirs and successors-in-interest of Francisco, Pedro, and Petra
(Francisco, et al.). On the other hand, respondents Emiliana, Victoriano, Felipe,
Mateo, Raymundo, Maria, and Eduardo, all surnamed Imbornal, are the descendants
of Pablo.
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During her lifetime, Basilia owned a parcel of land (Sabangan property) which
she conveyed to her three daughters, Balbina, Alejandra and Catalina (Imbornal
sisters) sometime in 1920.
Meanwhile, Catalinas husband, Ciriaco Abrio (Ciriaco), applied for and was
granted a homestead patent riparian land. He was eventually awarded Homestead
Patent therefor, and, an original certificate of title was issued in his name.
Claiming rights over the entire Motherland, Francisco, et al., as the children of
Alejandra and Balbina, filed on February 27, 1984 an Amended Complaint for
reconveyance, partition, and/or damages against respondents. They anchored their
claim on the allegation that Ciriaco, with the help of his wife Catalina,urged Balbina
and Alejandra to sell the Sabangan property, and that Ciriaco used the proceeds
therefrom to fund his then-pending homestead patent application over the disputed
land. In return, Ciriaco agreed that once his homestead patent is approved, he will
be deemed to be holding the land in trust for the Imbornal sisters.
In their Answer respondents contended that the action was barred by
prescription; and that the properties sought to be reconveyed and partitioned are
not the properties of their predecessors-in-interest but, instead, are covered by
Torrens certificates of titles, free from any encumbrance, and declared for taxation
purposes in their names.
The RTC rendered a Decision in favor of Francisco, et al. It found that the factual
circumstances surrounding the present case showed that an implied trust existed
between Ciriaco and the Imbornal sisters with respect to the Motherland. It gave
probative weight to Francisco, et al.s allegation that the Sabangan property,
inherited by the Imbornal sisters from their mother, Basilia, was sold in order to help
Ciriaco raise funds for his then-pending homestead patent application. In exchange
therefor, Ciriaco agreed that he shall hold the land in trust for them once his
homestead patent application had been approved.
However, the CA rendered a Decision reversing and setting aside the RTC
Decision. The CA found that Ciriaco alone was awarded a homestead patent, which
later became the basis for the issuance of a Torrens certificate of title in his name;
as such, said certificate of title cannot be attacked collaterally through an action for
reconveyance filed by his wifes (Catalinas) relatives.
Issue:
1. Whether the complaint for reconveyance is already barred by prescription
2. Whether there is the existence of implied trust between the Imbornal sisters
and Ciriaco
Ruling:
1. Yes, the cause of action of the petitioners is barred by prescription.
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An action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. Thus, reconveyance is a
remedy granted only to the owner of the property alleged to be erroneously titled in
anothers name.
When property is registered in anothers name, an implied or constructive trust
is created by law in favor of the true owner. Article 1456 of the Civil Code provides
that a person acquiring property through fraud becomes, by operation of law, a
trustee of an implied trust for the benefit of the real owner of the property. An action
for reconveyance based on an implied trust prescribes in ten (10) years, reckoned
from the date of registration of the deed or the date of issuance of the certificate of
title over the property, if the plaintiff is not in possession.However, if the plaintiff is
in possession of the property, the action is imprescriptible.
Based on the foregoing, Francisco, et al. had then a period of ten (10) years
from the registration of the respective titles covering the disputed properties within
which to file their action for reconveyance, taking into account the fact that they
were never in possession of the said properties. Hence, the disputed land which was
covered by OCT No. 1462 issued on December 5, 1933 in the name of Ciriaco, an
action for reconveyance therefor should have been filed until December 5,1943.
A judicious perusal of the records, however, will show that the Amended
Complaint covering the disputed properties was filed only on February 27, 1984. As
such, it was filed way beyond the 10-year reglementary period.
2. No, there is no existence of implied trust between the Imbornal sisters and
Ciriaco.
An implied trust arises, not from any presumed intention of the parties, but by
operation of law in order to satisfy the demands of justice and equity and to protect
against unfair dealing or downright fraud. To reiterate, Article 1456 of the Civil Code
states that[i]f property is acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
The burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the
trust and its elements.While implied trusts may be proven by oral evidence, the
evidence must be trustworthy and received by the courts with extreme caution, and
should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated.
In this case, it cannot be said, merely on the basis of the oral evidence offered
by Francisco, et al.,that the Motherland had been either mistakenly or fraudulently
registered in favor of Ciriaco. Accordingly, it cannot be said either that he was
merely a trustee of an implied trust holding the Motherland for the benefit of the
Imbornal sisters or their heirs.
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As the CA had aptly pointed out,a homestead patent award requires proof that
the applicant meets the stringent conditions set forth under Commonwealth Act No.
141, as amended, which includes actual possession, cultivation, and improvement
of the homestead. It must be presumed, therefore, that Ciriaco underwent the rigid
process and duly satisfied the strict conditions necessary for the grant of his
homestead patent application. As such, it is highly implausible that the property had
been acquired and registered by mistake or through fraud as would create an
implied trust between the Imbornal sisters and Ciriaco,.
Hence, when the original certificate of title was issued in his name pursuant to
homestead patent, Ciriacos title to the Motherland had become indefeasible. It
bears to stress that the proceedings for land registration that led to the issuance of
Homestead Patent No. 24991 and eventually, OCT No. 1462 in Ciriacos name are
presumptively regular and proper, which presumption has not been overcome by
the evidence presented by Francisco, et al.
TORTS AND DAMAGES
DAMAGES
JOSE ESPINELI a.k.a. DANILO ESPINELI vs. PEOPLE OF THE PHILIPPINES
G.R. No. 179535, June 9, 2014, J. Del Castillo
Moral damages are mandatory without need of allegation and proof other
than the death of the victim, owing to the fact of the commission of murder or
homicide, such as when the victim was gunned down in front of his house. If
medical and funeral expenses were substantiated, actual damages may be
awarded. However, damages for loss of earning capacity may not be awarded
absent documentary evidence except where the victim was either self-employed or
a daily wage worker earning less than the minimum wage under current labor laws.
The testimony of the wife of the victim, a Senior Desk Coordinator of a radio station,
as to the latters monthly salary without any documentary evidence will not suffice
to substantiate the claim.
Facts:
Petitioner Jose Espineli was charged before the RTC with murder for the death
of Alberto Berbon, a 49-year old Senior Desk Coordinator of the radio station DZMM.
In the early evening of December 15, 1996, Berbon was shot in the head and
different parts of the body in front of his house. Meanwhile, Romeo Reyes was
arrested, and confided to NBI officers that he was willing to give vital information
regarding the Berbon case. NBI Agent Segunial interviewed Reyes and reduced his
statement into writing whereby Reyes claimed that on December 15, 1996 he saw
Espineli and Sotero Paredes board a red car while armed with a .45 caliber firearm
and armalite, respectively, and that Espineli told Paredes that ayaw ko nang abutin
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pa ng bukas yang siBerbon. Afterwards, Reyes posted bail and was never again
heard of. NBI Agent Segunial testified on these facts during trial.
Another prosecution witness, Rodolfo Dayao (Rodolfo), testified that he sold
his red Ford Escort car to three persons who came to his residence in the afternoon
of September 1, 1996. He later identified the said car from the photographs
presented to him by the police officers.Dr. Ludivino J. Lagat (Dr. Lagat), the NBI
Medico-Legal Officer who conducted a post-mortem examination on Alberto,
declared in his Autopsy Report that the victim suffered multiple gunshot wounds in
the head and body. He also stated that based on the size of the gunshot wounds or
entrance, high-powered guns were used in the killing.
Espineli filed a Demurrer to Evidence without leave of court. The RTC
convicted Espineli and ordered him to likewise ordered to pay the heirs of Berbon,
the civil indemnity of P50,000.00, and actual and compensatory damages in the
total amount of P135,000.00 as funeral expenses, interment fee of P8,360.00,
medical expenses in the total amount of P1,519.45 and for the contract fees of
Memorial Park Care the amount of P15,700.00. The CA affirmed the RTC.
Issue:
Was the award of damages proper?
Ruling:
While the CA correctly imposed the amount of P50,000.00 as civil indemnity,
it failed, however, to award moral damages. These awards are mandatory without
need of allegation and proof other than the death of the victim, owing to the fact of
the commission of murder or homicide. Thus, for moral damages, the award of
PS0,000.00 to the heirs of the victim is only proper.
Anent the award of actual damages, this Court sees no reason to disturb the
amount awarded by the trial court as upheld by the CA since the itemized medical
and burial expenses were duly supported by receipts and other documentary
evidence.
The CA did not grant any award of damages for loss of earning capacity and
rightly so. Though Sabina testified as to the monthly salary of the deceased, the
same remains unsubstantiated. "Such indemnity cannot be awarded in the absence
of documentary evidence except where the victim was either self employed or a
daily wage worker earning less than the minimum wage undercurrent labor laws.''
The exceptions find no application in this case.
In addition and in conformity with current policy, an interest at the legal rate
of 6% per annum is imposed on all the monetary awards for damages from date of
finality of this judgment until fully paid.
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PEDRITO DELA TORRE vs.DR. ARTURO IMBUIDO, DRA. NORMA IMBUIDO in
their capacity as owners and operators of DIVINE SPIRIT GENERAL
HOSPITAL and/or DR. NESTOR PASAMBA
Medical malpractice or, more appropriately, medical negligence, is that type

of claim which a victim has available to him or her to redress a wrong committed by
a medical professional which has caused bodily harm. In order to successfully
pursue such a claim, a patient, or his or her family as in this case, "must prove that
a health care provider, in most cases a physician, either failed to do something
which a reasonably prudent health care provider would have done, or that he or she
did something that a reasonably prudent provider would not have done; and that
failure or action caused injury to the patient.
As the Court held in Spouses Flores v. Spouses Pineda, et al.,the critical and
clinching factor in a medical negligence case is proof of the causal connection
between the negligence and the injuries. The claimant must prove not only the
injury but also the defendant's fault, and that such fault caused the injury. A verdict
in a malpractice action cannot be based on speculation or conjecture. Causation
must be proven within a reasonable medical probability based upon competent
expert testimony,which the Court finds absent in the case at bar. As regards the
respondents' counterclaim, the CA's award of P48,515.58 is sustained.
Facts:
The case stemmed from a complaint for damages filed by PedritoDela Torre
(Pedrito), against herein respondents Dr. ArturoImbuido and Dr. Norma Imbuido (Dr.
Norma), in their capacity as the ownersand operators of the Divine Spirit General
Hospital in Olongapo City, and Dr. Nestor Pasamba (Dr. Nestor) (Respondents).
At around 3:00 p.m. on February 3, 1992, Carmen Castillo Dela

Torre(Carmen), wife of Pedrito, was brought to the hospitals operating room for her
caesarian section operation, which was to be performed by Dr. Nestor. By 5:30 p.m.
of the same day, Pedrito was informed of his wifes delivery of a baby boy. In the
early morning of February 4, 1992, Carmen experienced abdominal pain and
difficulty in urinating. She was diagnosed to be suffering from urinary tract infection
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(UTI), and was prescribed medications by Dr. Norma. On February 10, 1992, Pedrito
noticed that Carmens stomach was getting bigger, but Dr. Normadismissed the
patients condition as mere flatulence (kabag).
When Carmens stomach still grewbigger despite medications, Dr. Norma

advised Pedrito of the possibility of a second operation on Carmen. Dr. Norma,
however, provided no detailson its purpose and the doctor who would perform it. At
around 3:00 p.m. on February 12, 1992, Carmen had her second operation. Later in
the evening, Dr. Norma informed Pedrito that "everything was going on fine with his
wife.
The condition of Carmen did not improve. It worsened and on February 13,
1992, she vomited dark red blood. At 9:30 p.m. on the same day, Carmen died. Per
her certificate of death, the immediate cause of Carmens death was "cardiorespiratory arrest secondary to cerebro vascular accident, hypertension and chronic
nephritis induced by pregnancy." An autopsy Reportprepared by Dr. Richard
Patilano(Dr. Patilano), Medico-Legal Officer-Designate of Olongapo City, however,
provided that the cause of Carmens death was "shock due to peritonitis, severe,
with multiple intestinal adhesions; Status post Caesarian Section and Exploratory
Laparotomy."
Pedrito claimed in his complaint that the respondents "failed to exercise the
degree of diligence required of them" as members of the medical profession, and
were "negligent for practicing surgery on Carmen in the most unskilled, ignorant
and cruel manner.
Herein respondents argued that they "observed the required standard of

medical care in attending to the needs of Carmen." They explained that Carmen
was admitted in Divine Spirit General Hospital for "pregnancy in labor and preeclampsia." Her condition was closely monitored during her confinement. A
caesarian section operation became necessary, as she manifested no significant
progress for the spontaneous delivery of her baby and no unusual events were
observed during the course of Carmens caesarian section operation. The second
surgery, however, became necessary due to suspected intestinal obstruction and
adhesions.
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The respondents included in their answer a counterclaim for P48,515.58 as
unpaid hospital charges, professional fees and medicines, P3,000,000.00 for moral
damages, P1,500,000.00 for exemplary damages, and attorneys fees.
At the trial, Pedrito presented the testimony of Dr. Patilano, the medicolegal
officer who conducted an autopsy on the body of Carmen upon a telephone request
made by the City Health Officer of Olongapo City, Dr. Generoso Espinosa. Dr.
Patilano claimed that peritonitis could have been prevented through proper medical
procedures and medicines. He also stated that if the cause of Carmens death was
actually cerebro-vascular accident, there would have been ruptured blood vessels
and blood clot in her head; but there were none in Carmens case.
Among those who testified to refute Pedritos claim was Dr. Nestor. He
claimed that when Carmen was referred to him on February 3, 1992, she was in full
term uterine pregnancy, with pre-eclampsia, fetal distress and active labor pains. A
caesarian section operation became necessary to terminate the pregnancy for her
safety. Carmen was ready to go home four days after giving birth, but was advised
by the doctors to stay more because of her persistent hypertension.The second
surgery performed on Carmen was necessary after she showed symptoms of
intestinal obstruction, which happens as the intestines get twisted due to adhesions
and the normal flow of intestinal contents are obstructed. Both Carmen and Pedrito
gave their written consent to this second procedure.
Regional Trial Court (RTC) of Olongapo City, Branch 75, rendered its
Decisionin favor of Pedrito. Dissatisfied with the RTC ruling, the respondents
appealed to the CA. The CA rendered its Decision reversing and setting aside the
decision of the RTC. For the appellate court, it was not established that the
respondents failed to exercisethe degree of diligence required of them by their
profession as doctors. The CA also granted the respondents counterclaim for the
amount of P48,515.58,
Hence, this petition for review on certiorariin which Pedrito insists that the
respondents should be held liable for the death of Carmen.
Issue:
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Whether or not herein respondents should be held liable for the death of
Carmen.
Ruling:
No. The petition is hereby denied.
"Medical malpractice or, more appropriately, medical negligence, is that type

of claim which a victim has available to him or her to redress a wrong committed by
a medical professionalwhich has caused bodily harm." In order to successfully
pursue such a claim, a patient, or his or her family as in this case, "must prove that
a health care provider, in most cases a physician, either failed to do something
which a reasonably prudent health care provider would have done, or that he or she
did something that a reasonably prudent provider would not have done; and that
failure or action caused injury to the patient."
The Court emphasized in Lucas, et al. v. Tuao that in medical negligence

cases, there is a physician-patient relationship between the doctor and the victim,
but just like in any other proceeding for damages, four essential elements must be
established by the plaintiff, namely: (1) duty; (2) breach; (3) injury; and (4)
proximate causation. All four elements must be present in order to find the
physician negligent and, thus, liable for damages.
It is settled that a physicians duty to his patient relates to his exercise of the
degree of care, skill and diligence which physicians in the same general
neighborhood, and in the same general line of practice, ordinarily possess and
exercise in like cases. There is breach of this duty when the patient is injured in
body or in health. Proof of this breach rests upon the testimony of an expert witness
that the treatment accorded to the patient failed to meet the standard level of care,
skill and diligence. To justify an award of damages, the negligence of the doctor
must be established to be the proximate cause of the injury
As the Court held in Spouses Flores v. Spouses Pineda, et al., the critical and
clinching factor in a medical negligence case is proof of the causal connection
between the negligence and the injuries. The claimant must prove not only the
injury but also the defendant's fault, and that such fault caused the injury. A verdict
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in a malpractice action cannot be based on speculation or conjecture. Causation
must be proven within a reasonable medical probability based upon competent
expert testimony, which the Court finds absent in the case at bar.
As regards the respondents' counterclaim, the CA's award of P48,515.58 is

sustained, considering that among the parties' stipulations during the pre-trial
indicated:
That at the time of the death of the patient Carmen, there was
an unpaid balance for hospital bills, professional fees and other
expenses in the amount of P48,515.58, incurred by plaintiff
when the patient was confined at said hospital from February 3
to 13, 1992.
BPI EXPRESS CARD CORPORATION vs. MA. ANTONIA R. ARMOVIT
The relationship between the credit card issuer and the credit card holder is a
contractual one that is governed by the terms and conditions found in the card
membership agreement. Such terms and conditions constitute the law between the
parties. In case of their breach, moral damages may be recovered where the
defendant is shown to have acted fraudulently or in bad faith. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest
purpose or moral obliquity. However, a conscious or intentional design need not
always be present because negligence may occasionally be so gross as to amount
to malice or bad faith. Hence, bad faith in the context of Article 2220 of the Civil
Code includes gross negligence. Nowhere in the terms and conditions requires the
defendant to submit new application form in order to reactivate her credit card.
Indeed, BPI Express Credit did not observe the prudence expected of banks whose
business was imbued with public interest, hence, defendant is entitled to damages.
Facts:
Ma. Antonina R. Armovit (Armovit), then a depositor of the Bank of the

Philippine Islands at its Cubao Branch, was issued by BPI Express Credit a preapproved BPI Express Credit Card (credit card) in 1989 with a credit limit
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of P20,000.00 that was to expire at the end of March 1993. On November 21, 1992,
she treated her British friends from Hong Kong to lunch. As the host, she handed to
the waiter her credit card to settle the bill, but the waiter soon returned to inform
her that her credit card had been cancelled upon verification with BPI Express Credit
and would not be honored. Inasmuch as she was relying on her credit card because
she did not then carry enough cash that day, her guests were made to share the bill
to her extreme embarrassment. Outraged, Armovit called BPI Express Credit to
verify the status of her credit card. She learned that her credit card had been
summarily cancelled for failure to pay her outstanding obligations. She vehemently
denied having defaulted on her payments. Thus, by letter, Armovit demanded
compensation for the shame, embarrassment and humiliation she had suffered in
the amount of P2,000,000.00.
On the other hand, BPI Express Credit claimed that it had sent Armovit a
telegraphic message on March 19, 1992 requesting her to pay her arrears for three
consecutive months, and that she did not comply with the request, causing it to
temporarily suspend her credit card effective March 31, 1992. It further claimed that
she had been notified of the suspension and cautioned to refrain from using the
credit card to avoid inconvenience or embarrassment; and that while the obligation
was settled by April, 1992, she failed to submit the required application form in
order to reactivate her credit card privileges. Thus, BPI Express Credit countered
that her demand for monetary compensation had no basis in fact and in law.
As a result, Armovit sued BPI Express Credit for damages in the RTC, insisting
that she had been a credit card holder in good standing, and that she did not have
any unpaid bills at the time of the incident. After hearing, RTC ruled in favor of
Armovit, finding BPI Express Credit guilty of negligence and bad faith, ordering it to
pay Armovit moral damages ofP100,000.00; exemplary damages and attorneys
fees each in the amount of P10,000.00; and the costs of suit. Both parties appealed
to the CA. CA affirmed RTCs decision, hence, this appeal by petition for review on
certiorari.
Issue:
Whether Armovit is entitled to the award of moral and exemplary damages
Ruling:
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The petition for review lacks merit.
The relationship between the credit card issuer and the credit card holder is a
contractual one that is governed by the terms and conditions found in the card
membership agreement. Such terms and conditions constitute the law between the
parties. In case of their breach, moral damages may be recovered where the
defendant is shown to have acted fraudulently or in bad faith. Malice or bad faith
implies a conscious and intentional design to do a wrongful actfor a dishonest
purpose or moral obliquity. However, a conscious or intentional design need not
always be present because negligence may occasionally be so gross as to amount
to malice or bad faith. Hence, bad faith in the context of Article 2220 of the Civil
Code includes gross negligence.
BPI Express Credit contends that it was not grossly negligent in refusing to lift
the suspension of Armovits credit card privileges inasmuch as she had not complied
with the requisite submission of a new application form; and that under the
circumstances its negligence, if any, was not so gross as to amount to malice or bad
faith.
The Court disagrees with the contentions of BPI Express Credit.
The terms and conditions nowhere stated that the card holder must submit
the new application form in order to reactivate her credit card, to allow BPI Express
Credit to impose the duty to submit the new application form in order to enable
Armovit to reactivate the credit card would contravene the Parol Evidence
Rule. Indeed, there was no agreement between the parties to add the submission of
the new application form as the means to reactivate the credit card. When she did
not promptly settle her outstanding balance, BPI Express Credit sent a message on
March 19, 1992 demanding payment with the warning that her failure to pay would
force it to temporarily suspend her credit card effective March 31, 1992. It then sent
another demand letter dated March 31, 1992 requesting her to settle her obligation
in order to lift the suspension of her credit card and prevent its cancellation. In April
1992, she paid her obligation. In the context of the contemporaneous and
subsequent acts of the parties, the only condition for the reinstatement of her credit
card was the payment of her outstanding obligation. Had it intended otherwise, BPI
Express Credit would have surely informed her of the additional requirement in its
letters of March 19, 1992 and March 31, 1992. That it did not do so confirmed that
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they did not agree on having her submit the new application form as the condition
to reactivate her credit card.
Bereft of the clear basis to continue with the suspension of the credit card
privileges of Armovit, BPI Express Credit acted in wanton disregard of its contractual
obligations with her. We concur with the apt observation by the CA that BPI Express
Credits negligence was even confirmed by the telegraphic message it had
addressed and sent to Armovit apologizing for the inconvenience caused in
inadvertently including her credit card in the caution list. It was of no consequence
that the telegraphic message could have been intended for another client, as BPI
Express Credit apparently sought to convey subsequently, because the tenor of the
apology included its admission of negligence in dealing with its clients, Armovit
included. Indeed, BPI Express Credit did not observe the prudence expected of
banks whose business was imbued with public interest.
The Court holds that the CA rightly sustained the award of P100,000.00 as
moral damages. To us, too, that amount was fair and reasonable under the
circumstances. Similarly, the grant of exemplary damages was warranted under
Article 2232 of the New Civil Code because BPI Express Credit acted in a reckless
and oppressive manner. Finally, with Armovit having been forced to litigate in order
to protect her rights and interests, she was entitled to recover attorney's fees and
expenses of litigation.
S.V. MORE PHARMA CORPORATION and ALBERTO A. SANTILLANA vs.

DRUGMAKERS LABO RA TORIES, INC. and ELIEZER DEL MUNDO; S.V. MORE
PHARMA CORPORATION and ALBERTO A. SANTILLANA vs. DRUGMAKERS
LABO RA TORIES, INC. and ELIEZER DEL MUNDO
G.R. No. 200408; G.R. No. 200416, November 12, 2014, J. Perlas- Bernabe
The existence of contractual breach in this case revolves around the

exclusive status of Drugmakers as the manufacturer of the subject pharmaceutical
products. In particular, the Contract Manufacturing Agreement states that
Drugmakers, being the exclusive manufacturer of the subject pharmaceutical
products, had to first give its written consent before S.V. More could contract the
services of another manufacturer. The agreements notwithstanding, S.V More,
through the CMPP and absent the prior written consent of Drugmakers, contracted
the services of Hizon Laboratories to manufacture some of the pharmaceutical
products covered by the said contracts. Considering that Drugmakers palpably
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suffered some form of pecuniary loss resulting from S.V. Mores breach of contract,
the Court deems it proper to, instead, award in their favor the sum of P100,000.00
in the form of temperate damages. This course of action is hinged on Article 2224
of the Civil Code.
Facts:
Eliezer, Evangeline C. Del Mundo, and Atty. Quirico T. Carag (Atty. Carag) (Del
Mundo Group) are the registered owners of fifty percent (50%) of E.A. Northam
Pharma Corporation (E.A. Northam), a domestic corporation which exclusively
distributes and markets 28 various pharmaceutical products that are exclusively
manufactured by Drugmakers, a domestic corporation under the control of
Eliezer. The remaining fifty percent (50%) in E.A. Northam are owned by Alberto and
Nilo S. Valente (Santillana Group). In an Agreement dated May 31, 1993, the Del
Mundo Group agreed to cede all their rights and interests in E.A. Northam in favor of
the Santillana Group. However, it was agreed therein that: (a) the said
pharmaceutical products shall remain jointly owned by Eliezer/Drugmakers and
Alberto; (b) the products shall be exclusively manufactured by Drugmakers as long
as Eliezer maintains majority ownership and control of the said company; and (c)
the products will be sold, conveyed, and transferred to S.V. More, provided that
Alberto remains its chief executive officer with majority ownership and control
thereof.
On even date, E.A. Northam entered into a Deed of Sale/Assignment with S.V.
More, whereby E.A. Northam agreed to convey, transfer, and assign all its rights
over 28 pharmaceutical products in favor of S.V. More which shall then have the
right to have them sold, distributed, and marketed in the latters name, subject to
the condition that such pharmaceutical products will be exclusively manufactured
by Drugmakers based on their existing Contract Manufacturing Agreement (CMA)
set to expire in October 1993.
In September 1993, or a month prior to the expiration of the CMA,
Drugmakers proposed a new manufacturing agreement which S.V. More found
unacceptable. In a letter dated October 20, 1993, S.V. More, for the purpose of
renewing its License to Operate with the Bureau of Food and Drug (BFAD),
requested a copy of the existing CMA from Drugmakers, but to no avail. Hence, on
October 23, 1993, S.V. More entered into a Contract to Manufacture Pharmaceutical
Products (CMPP) with Hizon Laboratories, Inc. (Hizon Laboratories), and, thereafter,
caused the latter to manufacture some of the pharmaceutical products covered by
the Deed of Sale/Assignment. Meanwhile, the BFAD issued the corresponding
Certificates of Product Registration (CPR) therefor, with S.V. More as distributor, and
Hizon Laboratories as manufacturer.
Consequently and after their protest on the new registration went
unheeded, Drugmakers and Eliezer (respondents) filed a Complaint for Breach of
Contract, Damages, and Injunction with Prayer for the Issuance of a Writ of
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Preliminary Injunction and/or Temporary Restraining Order against S.V. More and
Alberto (petitioners), and Hizon Laboratories, and its President, Rafael H. Hizon, Jr.
(Rafael).
Issue:
Whether or not Petitioners S.V. More and Alberto Santillana are liable for
breach of contract.
Ruling:
Yes.
The existence of contractual breach in this case revolves around the

exclusive status of Drugmakers as the manufacturer of the subject pharmaceutical
products which was stipulated and, hence, recognized under the following
contracts: (a) the CMA dated October 30, 1992 between Drugmakers, as
manufacturer, and S.V.More, as the holder of the CPR covering the pharmaceutical
products; (b) the Agreement dated May 31, 1993 covering the change in ownership
in E.A. Northam, or the distributor of the pharmaceutical products manufactured by
Drugmakers and covered by S.V. Mores CPR; and (c) the Deed of Sale/Assignment
of even date between E.A. Northam and S.V. More, whereby the formers
distributorship rights were transferred to the latter.
In particular, the CMA states that Drugmakers, being the exclusive

manufacturer of the subject pharmaceutical products, had to first give its written
consent before S.V. More could contract the services of another manufacturer. In
the May 31, 1993 Agreement, the new ownership of E.A. Northam, or the initial
distributor of the same pharmaceutical products, equally recognized Drugmakerss
status as exclusive manufacturer.
These provisions notwithstanding, records disclose that S.V More, through the
CMPP and absent the prior written consent of respondent Drugmakers, as
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represented by its President, respondent Eliezer, contracted the services of Hizon
Laboratories to manufacture some of the pharmaceutical products covered by the
said contracts. Thus, since the CMPP with Hizon Laboratories was executed on
October 23, 1993, or seven (7) days prior to the expiration of the CMA on October
30, 1993, it is clear that S.V. More, as well as its President, petitioner Alberto, who
authorized the foregoing, breached the obligation to recognize Drugmakers as
exclusive manufacturer, thereby causing prejudice to the latter.
While the CA correctly affirmed the existence of the aforementioned breach,

the Court, however, observes that the appellate courts award of actual damages
(due to loss of profits) in the amount of P6,000,000.00 was erroneous due to
improper factual basis.
Records reveal that in their attempt to prove their claim for loss of profits
corresponding to the aforesaid amount, respondents based their computation
thereof on a Sales Projection Form55 for the period November 1993 to February
1995.56 However, it is readily observable that the breach occurred only for a period
of seven (7) days, or from October 23, 1993 until October 30, 1993 that is, the date
when the CMA expired. Notably, the CMA from which stems S.V. Mores obligation
to recognize Drugmakerss status as the exclusive manufacturer of the subject
pharmaceutical products and which was only carried over in the other two (2)
above-discussed contracts was never renewed by the parties, nor contained an
automatic renewal clause, rendering the breach and its concomitant effect, i.e., loss
of profits on the part of Drugmakers, only extant for the limited period of, as
mentioned, seven (7) days.
Aside from the lack of substantiation as regards the length of time for which
supposed profits were lost, it is also evident that only six (6) of the 28
pharmaceutical products were caused by petitioners to be manufactured by Hizon
Laboratories.
Nevertheless, considering that respondents palpably suffered some form of

pecuniary loss resulting from petitioners breach of contract, the Court deems it
proper to, instead, award in their favor the sum of P100,000.00 in the form of
temperate damages. This course of action is hinged on Article 2224 of the Civil
Code which states that "temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when the court
finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty," as in this case.
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SNOW MOUNTAIN DAIRY CORPORATION vs. GMA VETERANS FORCE, INC.,
G.R. No. 192446, November 19, 2014, J. Peralta
Actual or compensatory damages are those awarded in satisfaction of, or in
recompense for, loss or injury sustained. The burden is to establish one's case by a
preponderance of evidence which means that the evidence, as a whole, adduced by
one side, is superior to that of the other. Actual damages are not presumed. In this
case, GMA Veterans had not shown that the security guards were not assigned to
another employer, and that it was compelled to pay the guards despite the pretermination of the security agreement to be entitled to the amount of PI6,014.00
per month. Indeed, no evidence was presented by GMA Veterans establishing the
actual amount of loss suffered by reason of the pre-termination. It is elementary
that to recover damages, there must be pleading and proof of actual damages
suffered. Temperate damages may be allowed in cases where from the nature of
the case, definite proof of pecuniary loss cannot be adduced, although the court is
convinced that the aggrieved party suffered some pecuniary loss. The SC also take
into consideration that GMA Veterans certainly spent for the security guard's
training, firearms with ammunitions, uniforms and other necessary things before
their deployment to Snow Mountain. Hence, the SC find it just and proper to award
temperate damages in the amount of P200,000.00 in lieu of actual damages.
Facts:
Snow Mountain Dairy Corporation (Snow Mountain) and GMA Veterans Force,
Inc. (GMA Veterans) entered into a security service agreement. Later, Snow
Mountain, through its President Teodoro T. Po, wrote a letter to GMA Veteranss
General Manager, Domingo de Guzman, informing the latter of the former's decision
to replace the security personnel effective April 15, 2005.
On even date, to GMA Veteran, through its counsel, wrote Snow Mountain a
letter reiterating that their service agreement was good for one year, which could
only be terminated for a just cause and a 30-day prior notice; that the termination
of the security contract even in the absence of just cause and the lack of due notice
may only be accepted provided that Snow Mountain would pay the remaining
contract period of 8-1/2 months equivalent to P952,833.00; and that they were open
to amicable settlement at
just and reasonable terms. On June 30, 2005, GMA
Veterans, represented by De Guzman, filed with the (RTC) of Pasig City a complaint
for damages against Snow Mountain, represented by AmancioRonquillo, and
President Po.
GMA Veterans alleged that in compliance with the service agreement and in
the process, incurred expenses for training, physical and medical examinations,
documentations, procurement of equipments like service firearms, uniform and
related expenses; that on April 15, 2005, GMA Veterans 's security guards were
barred by Snow Mountain from entering the service area and prevented from
performing their contractual obligation; that it did not commit any violation of the
service contract; and that it incurred income opportunity loss worth P952,833.00
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which it could have earned if the agreement was faithfully honored up to the end of
the contract period. GMA Veterans prayed for actual, moral and exemplary
damages, and attorney's fees.
Snow Mountain denied the material allegations in the complaint and
contended that that there was no basis for the claim of actual damages in the form
of unrealized income as said claim was premised on a contingent circumstance,
which was the fulfillment and completion of the security agreement.
The RTC awarded P952,833.50 actual or compensatory damages representing
the unserved portion of the contract. The CA affirmed such award saying that it
represented that which respondent failed to receive as benefit which would have
pertained to it had the service contract not been pre-terminated illegally by Snow
Mountain.
Issue:
Whether or not the award of actual damages is proper in this case
Ruling:
No, there was no basis for the lower court's award of actual damages in the
absence of evidence proving the same.
Actual or compensatory damages are those awarded in satisfaction of, or in
recompense for, loss or injury sustained. They proceed from a sense of natural
justice and are designed to repair the wrong that has been done, to compensate for
the injury inflicted and not to impose a penalty. The burden is to establish one's
case by a preponderance of evidence which means that the evidence, as a whole,
adduced by one side, is superior to that of the other. Actual damages are not
presumed. The claimant must prove the actual amount of loss with a reasonable
degree of certainty premised upon competent proof and on the best evidence
obtainable. Specific facts that could afford a basis for measuring whatever
compensatory or actual damages are borne must be pointed out. The award of
actual damages cannot be simply based on the mere allegation of a witness without
any tangible claim, such as receipts or other documentary proofs to support such
claim.
In this case, GMA Veterans had not shown that the security guards were not
assigned to another employer, and that it was compelled to pay the guards despite
the pre-termination of the security agreement to be entitled to the amount of
PI6,014.00 per month. Indeed, no evidence was presented by GMA Veterans
establishing the actual amount of loss suffered by reason of the pre-termination. It
is elementary that to recover damages, there must be pleading and proof of actual
damages suffered.
There was no basis for the lower court's award of actual damages in the
absence of evidence proving the same. Undeniably, however, GMA Veterans
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suffered pecuniary loss because of the pre-termination of its services without any
valid cause. But since there was no proof capable of ascertaining the actual loss, we
refer to Article 2224 of the Civil Code.Temperate damages may be allowed in cases
where from the nature of the case, definite proof of pecuniary loss cannot be
adduced, although the court is convinced that the aggrieved party suffered some
pecuniary loss. We also take into consideration that GMA Veterans certainly spent
for the security guard's training, firearms with ammunitions, uniforms and other
necessary things before their deployment to Snow Mountain.In this case, the SC find
it just and proper to award temperate damages in the amount of P200,000.00 in lieu
of actual damages.
LOADSTAR SHIPPINGCOMPANY, INCORPORATED and
LOADSTARINTERNATIONAL SHIPPINGCOMPANY, INCORPORATED vs.
MALAYAN INSURANCE COMPANY, INCORPORATED
Actual damages are not presumed. The claimant must prove the actual
amount of loss with a reasonable degree of certainty premised upon competent
proof and on the best evidence obtainable. Thus, an insurer of copper concentrates
which were contaminated by seawater while at sea, who, along with the consignee,
arbitrarily fixed the salvage value of the cargo, and who failed to refute expert
testimony from the common carrier as regards the lack of any adverse effect of
seawater on copper concentrates, then actual damages are not proven.
Facts:
Loadstar International Shipping (Loadstar Shipping) and PASAR entered into a
contract of affreightment of the latters copper concentrates. A shipment of cooper
concentrates were loaded in MV Bobcat, the vessel of petitioner Loadstar
International Shipping Co., Inc. (Loadstar International), with Philex as shipper and
PASAR as consignee. The cargo was insured by respondent Malayan Insurance
Company, Inc. (Malayan). While out in the sea, the crew of the vessel found a crack
on the vessel which caused seawater to enter and wet the copper concentrates.
Immediately after the vessel arrived at port, PASAR and Philexs tested the
copper concentrates and found them to be contaminated. PASAR sent a formal
notice of claim to Loadstar Shipping, and surveyors recommended the value of the
claim at P 32,351,102.32. Malayan paid PASAR said amount.
Meanwhile, Malayan wrote LoadstarShipping informing the latter of a
prospective buyer for the damaged copper concentrates and the opportunity to
nominate/refer other salvage buyers to PASAR. Malayan later wrote
LoadstarShipping informing the latter of the acceptance of PASARs proposal to take
the damaged copper concentrates at a residual value ofUS$90,000.00. Loadstar
Shipping wrote Malayan requesting for the reversal of its decision to accept PASARs
proposal and the conduct of a public bidding to allow Loadstar Shipping to match or
topPASARs bid by 10%.
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PASAR then signed a subrogation receipt in favor of Malaya. To recover the
amount Malaya paid to PASAR, it demanded reimbursement from Loadstar Shipping,
which refused to comply, prompting Malaya to file a case of damages with the RTC,
against Loadstar Shipping, and later including Loadstar International. Malayan
alleged that due to the unseaworthiness of the vessel, PASAR suffered loss of the
cargo. Petitioners maintain, among others, that Malayans claim is excessive,
grossly overstated, unreasonable and unsubstantiated; that their liability, if any,
should not exceed the CIF value of the lost/damaged cargo as setforth in the bill of
lading, charter party or customary rules of trade; and that the arbitration clause in
the contract of affreightment should be followed.
The RTC dismissed the complaint, finding that although contaminated by
seawater, the copper concentrates can still be used. It gave credence to the
testimony of Francisco Esguerra, petitioners expert witness, that despite high
chlorine content, the copper concentrates remain intact and will not lose their
value. The gold and silver remain with the grains/concentrates even if soaked with
seawater and does not melt. The RTC observed that the purchase agreement
between PASAR and Philex contains a penalty clause and has no rejection clause.
Despite this agreement, the parties failed to sit down and assess the penalty.
The CA reversed and set aside the RTC, holding that petitioners must pay
Malayan the amount of P33,934,948.74 as actual damages, less $90,000.00-the
residual value of the copper concentrates it sold to PASAR in 2000.
Issue:
Did Malayan fail to establish actual damages?
Ruling:
The petition is granted.
As regards the determination of actual damages, it is axiomatic that actual
damages must be proved with reasonable degree of certainty and a party is entitled
only to such compensation for the pecuniary loss that was duly proven.
Whereas the CA modified its Decision dated April 14, 2008 by deducting the
amount of US$90,000.00 from the award, the same is still iniquitous for the
petitioners because PASAR and Malayan never proved the actual damages
sustained by PASAR. It is a flawed notion to merely accept that the salvage value of
the goods is US$90,000.00, since the price was arbitrarily fixed between PASAR and
Malayan. Actual damages to PASAR, for example, could include the diminution in
value as appraised by expertsor the expenses which PASAR incurred for the
restoration of the copper concentrates to its former condition, if there is damage
and rectification isstill possible.
It is also noteworthy that when the expert witness for the petitioners,
Engineer Francisco Esguerra (Esguerra), testified as regards the lack of any adverse
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effect of seawater on copper concentrates, Malayan never presented evidence of its
own in refutation to Esguerras testimony. And, even if theCourt will disregard the
entirety of his testimony, the effect on Malayans cause of action is nil. As Malayan
is claiming for actual damages, it bears the burden of proof to substantiate its claim.
Actual damages are not presumed. The claimant must prove the actual
amount of loss with a reasonable degree of certainty premised upon competent
proof and on the best evidence obtainable. Specific facts that could afford a basis
for measuring whatever compensatory or actual damages are borne must be
pointed out. Actual damages cannot be anchored on mere surmises, speculations or
conjectures.
SEVEN BROTHERS SHIPPING CORPORATION vs. DMC-CONSTRUCTION
RESOURCES, INC.
G.R. No. 193914. November 26, 2014, C.J. Sereno
Petitioner questions the decision of the CA awarding respondent nominal
damages after having ruled that the actual damages awarded by the RTC was
unfounded. Petitioner argues that nominal damages are only awarded to vindicate a
right that has been violated and not to indemnify a party for any loss suffered by
the latter. The SC ruled that what should have been awarded was temperate and
not nominal damages. Temperate or moderate damages may be recovered when
the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be provided with certainty. Considering that it has been
established that respondent suffered a loss, even if the amount thereof cannot be
proven with certainty, the Court ruled that what should have been awarded was
temperate damages.
Facts:
On February 23, 1996, the cargo ship M/V Diamond Rabbit (the Vessel)
owned and operated by Petitioner Seven Brothers Shipping Corporation was
anchored at the causeway of the port of Bislig. The Master of the vessel, however,
decided to go to PICOP Pier in Surigao del Sur to dock there. Due to the bad weather
that day, the vessel, while sailing to PICOP Pier, experienced some difficulties in
maneuvering and controlling its engine. Thus, in order to stop the vessel from
drifting and swinging, its Master decided to drop the starboard anchor. However, the
uncontrollable and unmaneuverable vessel drifted and dragged its anchor until it hit
several structures at the pier. One of the structures it hit was the coal conveyor
facility owned by respondent DMC.
Thereafter, DMC sent a formal demand letter to petitioner Seven Brothers
claiming damages for the destruction of its vessel. Petitioner Seven Brothers,
however, failed to pay DMC prompting the latter to file a complaint for damages
against it before the RTC.
Finding negligence on the part of the vessels captain, the RTC ruled in favor
of DMC and awarded it actual damages in the amount of P3,523,179.92. On appeal,
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the CA affirmed the decision of the RTC but modified the nature of the damages
awarded, from actual to nominal, on the premise that actual damages had not been
proved. Hence, the instant petition wherein Petitioner Seven Brothers argues that
under Articles 2221 and 2223 of the Civil Code, nominal damages are only awarded
to vindicate or recognize a right that has been violated, and not to indemnify a
party for any loss suffered by the latter. They are not awarded as a simple
replacement for actual damages that were not duly proven during trial. Petitioner
Seven Brother further contends that assuming that nominal damages were properly
awarded by the CA, Petitioner Seven Brothers is of the belief that the amount
thereof must be equal or at least commensurate to the injury sustained by the
claimant. Considering that respondent DMC failed to substantiate its actual loss, it
was therefore improper for the CA to award nominal damages of 3,523,175.92,
which was based on DMCs highly speculative claims.
Issue:
Whether or not the CA erred in awarding nominal damages to DMC.
Ruling:
Yes, it did.
The Court ruled that temperate, and not nominal, damages should be
awarded to DMC in the amount of P3,523,175.92.
In this case, two facts have been established by the appellate and trial
courts: that DMC suffered a loss caused by petitioner Seven Brothers; and that DMC
failed to sufficiently establish the amount due to him, as no actual receipt was
presented.
Temperate or moderate damages may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the nature of
the case, be provided with certainty.
Under the Civil Code, when an injury has been sustained, actual damages
may be awarded under the following condition:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages.
Jurisprudence has consistently held that [t]o justify an award of actual
damages x x x credence can be given only to claims which are duly supported by
receipts. The Court takes this to mean by credible evidence. Otherwise, the law
mandates that other forms of damages must be awarded, to wit:
Art. 2216. No proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages, may be adjudicated. The
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assessment of such damages, except liquidated ones, is left to the discretion of the
court, according to the circumstances of each case.
Under Article 2221 of the Civil Code, nominal damages may be awarded in
order that the plaintiffs right, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered. The Court has laid down the concept of nominal
damages in the following wise:
Nominal damages are recoverable where a legal right is technically violated
and must be vindicated against an invasion that has produced no actual present
loss of any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be shown.
In contrast, under Article 2224, temperate or moderate damages may be
recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be provided with certainty. This
principle was thoroughly explained in Araneta v. Bank of America, which cited the
Code Commission, to wit:
The Code Commission, in explaining the concept of temperate damages
under Article 2224, makes the following comment:
In some States of the American Union, temperate damages are allowed.
There are cases where from the nature of the case, definite proof of
pecuniary loss cannot be offered, although the court is convinced that
there has been such loss. For instance, injury to one's commercial credit or to
the goodwill of a business firm is often hard to show with certainty in terms of
money. Should damages be denied for that reason? The judge should be
empowered to calculate moderate damages in such cases, rather than that the
plaintiff should suffer, without redress from the defendant's wrongful act.
Given these findings, the Court is of the belief that temperate and not
nominal damages should have been awarded, considering that it has been
established that DMC suffered a loss, even if the amount thereof cannot be proven
with certainty.
ALEJANDRO C. ALMENDRAS, JR. vs. ALEXIS C. ALMENDRAS
G.R. No. 179491, January 14, 2015, C.J. Sereno
In awarding damages in libel cases, the court is given ample discretion to
determine the amount, depending upon the facts of the particular case. Article
2219 of the Civil Code expressly authorizes the recovery of moral damages in cases
of libel, slander or any other form of defamation. However, while no proof of
pecuniary loss is necessary in order that moral damages may be awarded, x x x it is
nevertheless essential that the claimant should satisfactorily show the existence of
the factual basis of damages and its causal connection to defendants acts.
Considering that respondent sufficiently justified his claim for damages (i.e. he
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testified that he was embarrassed by the said letters [and] ashamed to show his
face in [sic] government offices), the Court finds him entitled to moral and
exemplary damages. However, the Court equitably reduce the amounts awarded
because even though the letters were libellous, respondent has not suffered such
grave or substantial damage to his reputation to warrant receiving P5,000,000 as
moral damages and P100,000.00 as exemplary damages.
As to the award of attorneys fees, it is an accepted doctrine that the award
thereof as an item of damages is the exception rather than the rule, and counsels
fees are not to be awarded every time a party wins a suit. The power of the court to
award attorneys 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. In all events,
the court must explicitly state in the text of the decision, and not only in the
decretal portion thereof, the legal reason for the award of attorneys fees.
Facts:
Alejandro C. Almendras, Jr. (Alejandro) sent letters with similar contents on 7
February 1996 to House Speaker Jose de Venecia, Jr., and on 26 February 1996 to Dr.
Nemesio Prudente, President of Oil Carriers, Inc. The controversial portion of the
first and second letters reads as follows:
This is to notify your good self and your staff that one ALEXIS DODONG C.
ALMENDRAS, a brother, is not vested with any authority to liaison or transact
any business with any department, office, or bureau, public or otherwise, that
has bearing or relation with my office, mandates or functions. x x x.
Noteworthy to mention, perhaps, is the fact that Mr. Alexis Dodong C.
Almendras, a reknown blackmailer, is a bitter rival in the just concluded
election of 1995 who ran against the wishes of my father, the late
Congressman Alejandro D. Almendras, Sr. He has caused pain to the family
when he filed cases against us: his brothers and sisters, and worst against his
own mother.
I deemed that his act of transacting business that affects my person and
official functions is malicious in purpose, done with ill motive and part of a
larger plan of harassment activities to perforce realise his egoistic and evil
objectives.
May I therefore request the assistance of your office in circulating the above
information to concerned officials and secretariat employees of the House of
Representatives.
xxxx
These letters were allegedly printed, distributed, circulated and published by
Alejandro, assisted by Atty. Roberto Layug, in Digos, Davao del Sur and Quezon City,
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with evident bad faith and manifest malice to destroy Alexis C. Almendras (Alexis)
good name. Hence, Alexis filed an action for damages arising from libel and
defamation against Alejandro in the Regional Trial Court (RTC).
The RTC ruled in favor of Alexis, ruling that the he was libelled and defamed
and granted the award of damages of
P5,000,000.00 as moral damages;
P100,000.00 as exemplary damages; P10,000.00 for litigation expenses; and
attorneys fees in the amount of 25% of whatever amounts actually received by
Alexis for this judgment. Alejandro moved for reconsideration and/or new trial, but
the same was denied by the trial court. On appeal, CA affirmed the decision of the
RTC stating that the letters were not privileged communications, since Alejandro
was not acting as a member of the Congress when he sent them. In fact, his letter
stated that he extends his apology for bringing this personal matter in the open,
Further, the CA upheld the damages awarded by the trial court, the amounts being
consistent with the social and financial standing of the parties involved. Hence, this
petition.
Issue:
Whether or not respondent is entitled to moral and exemplary damages,
attorneys fees and litigation expenses.
Ruling:
The Court denies the petition.
In awarding damages in libel cases, the court is given ample discretion to
determine the amount, depending upon the facts of the particular case. Article 2219
of the Civil Code expressly authorizes the recovery of moral damages in cases of
libel, slander or any other form of defamation. However, while no proof of
pecuniary loss is necessary in order that moral damages may be awarded, x x x it is
nevertheless essential that the claimant should satisfactorily show the existence of
the factual basis of damages and its causal connection to defendants acts.
Considering that Alexis sufficiently justified his claim for damages (i.e. he testified
that he was embarrassed by the said letters [and] ashamed to show his face in
[sic] government offices), the Court finds him entitled to moral and exemplary
damages.
However, the Court equitably reduce the amounts awarded because even
though the letters were libellous, respondent has not suffered such grave or
substantial damage to his reputation to warrant receiving P5,000,000 as moral
damages and P100,000.00 as exemplary damages. In fact, he was able to
successfully secure an elected position in recent years. Accordingly, the Court
reduce the award of moral damages from P5,000,000 to P100,000 and exemplary
damages from P100,000 to P20,000.
The award of attorneys fees is not proper because respondent failed to
justify satisfactorily his claim, and both the trial and appellate courts failed to
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explicitly state in their respective decisions the rationale for the award. It is an
accepted doctrine that the award thereof as an item of damages is the exception
rather than the rule, and counsels fees are not to be awarded every time a party
wins a suit. The power of the court to award attorneys 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. In all events, the court must explicitly state in the text
of the decision, and not only in the decretal portion thereof, the legal reason for the
award of attorneys fees. The same is true for the award of litigation expenses
because respondent failed to satisfactorily justify his claim.
Hence, the Court ruled that (1) moral damages is reduced from P5,000,000 to
P100,000; (2) the award of exemplary damages is reduced from P100,000 to
P20,000; and (3) litigation expenses and attorneys fees are deleted.
RICARDO C. HONRADO vs. GMA NETWORK FILMS, INC.
G.R. No. 204702, January 14, 2015, J. Carpio
In a licensing contract, the essence of which is the transfer by the licensor,
Honrado to the licensee, GMA Films, for a fee, of the exclusive right to telecast the
films listed in the Agreement. Stipulations for payment of commission to the
licensor is incongruous to the nature of such contracts unless the licensor merely
acted as agent of the film owners. Nowhere in the Agreement, however, did the
parties stipulate that Honrado signed the contract in such capacity. Being a
stranger to such arrangements, they are not entitled to complain of any breach by
Honrado of his contracts with the film owners than the film owners are for any
breach by a stranger of its Agreement with aforementioned. The trial court awarded
attorneys fees to Honrado as it deemed it just and reasonable to do so, using the
amount provided by Honrado on the witness stand (P100,000). Undoubtedly,
attorneys fees may be awarded if the trial court deems it just and equitable.
Such ground, however, must be fully elaborated in the body of the ruling. Its mere
invocation, without more, negates the nature of attorneys fees as a form of actual
damages.
Facts:
On December 1998, respondent GMA Network Films, Inc. (GMA Films) entered
into a TV Rights Agreement with petitioner under which Ricardo Honrado, as
licensor of 36 films, granted to GMA Films, for a fee, the exclusive right to telecast
the 36 films for a period of three years. Under Paragraph 3 of the Agreement, the
parties agreed that all betacam copies of the said films should pass through
broadcast quality test conducted by GMA-7, the TV station operated by GMA
Network, Inc. (GMA Network), an affiliate of GMA Films. The parties also agreed to
submit the films for review by the Movie and Television Review and Classification
Board (MTRCB) and stipulated on the remedies in the event that MTRCB bans the
telecasting of any of the films.
Two of the films covered by the Agreement were Evangeline Katorse and
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Bubot for which GMA Films paid P1.5 million each.
In 2003, GMA Films sued Honrado in the RTC to collect money representing
the fee it paid for mentioned two movies. GMA Films alleged that it rejected
Evangeline Katorse because its running time was too short for telecast and
Honrado incomplete remittance to the owner of Bubot, Juanita Alano, keeping for
himself the balance of a portion of such. GMA Films prayed for the return of such
amount on the theory that an implied trust arose between the parties as petitioner
fraudulently kept it for himself.c
Honrado denied liability, counter-alleging that after GMA Films rejected
Evangeline Katorse, he replaced it with another film, Winasak na Pangarap, which
GMA Films accepted. As proof of such acceptance, he invoked a certification of GMA
Network, attesting that such film is of good broadcast quality, a film certification.
Regarding the fee GMA Films paid for Bubot, he alleged that he had settled his
obligation to Alano. Alternatively, he alleged that GMA Films, being a stranger to the
contracts he entered into with the owners of the films in question, has no
personality to question his compliance with the terms of such contracts. Honrado
counterclaimed for attorneys fees.
The RTC ruled in favor of Honrado, it gave credence to petitioners defense
that he replaced Evangeline Katorse with Winasak na Pangarap. On the disposal of
the fee GMA Films paid for Bubot, the trial court rejected GMA Films theory of
implied trust, finding insufficient GMA Films proof that petitioner pocketed any
portion of the fee in question.
On appeal to the Court of Appeals, it reversed the formers ruling, concluded
that petitioners retention of a portion of the fee for Bubot gave rise to an implied
trust between him and GMA Films, obligating Honrado, as trustee, to return to GMA
Films, as beneficiary, the amount claimed by the latter. Thus, the present petition.
Issue:
Whether or not the Court of Apeals erred in finding Honrado liable for breach
of the Agreement and breach of trust?
Ruling:
No, Honrado committed no breach of contract or trust.
GMA Films own witness, Jose Marie Abacan, then Vice-President for Program
Management of GMA Network, testified during trial that it was GMA Network which
rejected Winasak na Pangarap because the latter considered the film bomba. In
doing so, GMA Network went beyond its assigned role under the Agreement of
screening films to test their broadcast quality and assumed the function of MTRCB
to evaluate the films for the propriety of their content. This runs counter to the clear
terms of Paragraphs 3 and 4 of their Agreement.
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The Agreement, is a licensing contract, the essence of which is the transfer
by the licensor, Honrado to the licensee, GMA Films, for a fee, of the exclusive right
to telecast the films listed in the Agreement. Stipulations for payment of
commission to the licensor is incongruous to the nature of such contracts unless
the licensor merely acted as agent of the film owners. Nowhere in the Agreement,
however, did the parties stipulate that Honrado signed the contract in such capacity.
On the contrary, the Agreement repeatedly refers to Honrado as licensor and GMA
Films as licensee. Nor did the parties stipulate that the fees paid by GMA Films for
the films listed in the Agreement will be turned over by licensor Honrado to the film
owners. Instead, the Agreement merely provided that the total fees will be paid in
three installments as per Paragraph 3.
We entertain no doubt that Honrado forged separate contractual
arrangements with the owners of the films listed in the Agreement, spelling out the
terms of payment to the latter. Whether or not Honrado complied with these terms,
however, is a matter to which GMA Films holds absolutely no interest. Being a
stranger to such arrangements, GMA Films is no more entitled to complain of any
breach by Honrado of his contracts with the film owners than the film owners are for
any breach by GMA Films of its Agreement with aforementioned.
We find it unnecessary to pass upon the question whether an implied trust
arose between the parties, as held by the appellate court. Such conclusion was
grounded on the erroneous assumption that GMA Films holds an interest in the
disposition of the licensing fees it paid to licensor Honrado.
The trial court awarded attorneys fees to Honrado as it deemed it just and
reasonable to do so, using the amount provided by Honrado on the witness stand
(P100,000). Undoubtedly, attorneys fees may be awarded if the trial court deems
it just and equitable. Such ground, however, must be fully elaborated in the body
of the ruling. Its mere invocation, without more, negates the nature of attorneys
fees as a form of actual damages.
SPOUSES ROLANDO AND HERMINIA SALVADOR vs. SPOUSES ROGELIO AND
ELIZABETH RABAJA AND ROSARIO GONZALES,
The award of damages to Spouses Rabaja cannot be sustained by this Court.
The filing alone of a civil action should not be a ground for an award of moral
damages in the same way that a clearly unfounded civil action is not among the
grounds for moral damages. Article 2220 of the New Civil Code provides that to
award moral damages in a breach of contract, the defendant must act fraudulently
or in bad faith. In this case, Spouses Rabaja failed to sufficiently show that Spouses
Salvador acted in a fraudulent manner or with bad faith when it breached the
contract of sale. Thus, the award of moral damages cannot be warranted.
Facts:
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Spouses Rabaja learned that Spouses Salvador were looking for a buyer of
their land where Spouses Rabaja also leased. Spouses Rabaja and Spouses Salvador
then entered into a contract of sale wherein Gonzales, administrator of the subject
property, received the considerations paid by Spouses Rabaja pursuant to the
Special Power of Attorney issued by Spouses Salvador in favor of Gonzales.
Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja
that they did not receive any payment from Gonzales. This prompted Spouses
Rabaja to suspend further payment of the purchase price. Spouses Rabaja filed an
action for rescission of contract against Spouses Salvador and Gonzales.
In their complaint, the Spouses Rabajas demanded the rescission of the
contract to sell praying that the amount of P950,000.00 they previously paid to
Spouses Salvador be returned to them. They likewise prayed that damages be
awarded due to the contractual breach committed by Spouses Salvador. Spouses
Salvador filed their answer with counterclaim and cross-claim contending that there
was no meeting of the minds between the parties and that the SPA in favor of
Gonzales was falsified. In fact, they filed a case for falsification against Gonzales,
but it was dismissed because the original of the alleged falsified SPA could not be
produced. They further averred that they did not receive any payment from Spouses
Rabaja through Gonzales. In her defense, Gonzales filed her answer stating that the
SPA was not falsified and that the payments of Spouses Rabaja amounting to
P950,000.00 were all handed over to Spouses Salvador.
Issue:
Whether or not Spouses Rabaja and Gonzales are entitled to awards of actual,
moral, exemplary damages and attorneys fees.
Ruling:
No.
The award of damages to Spouses Rabaja cannot be sustained by this Court.
The filing alone of a civil action should not be a ground for an award of moral
damages in the same way that a clearly unfounded civil action is not among the
grounds for moral damages. Article 2220 of the New Civil Code provides that to
award moral damages in a breach of contract, the defendant must act fraudulently
or in bad faith. In this case, Spouses Rabaja failed to sufficiently show that Spouses
Salvador acted in a fraudulent manner or with bad faith when it breached the
contract of sale. Thus, the award of moral damages cannot be warranted.
As to the award of exemplary damages, Article 2229 of the New Civil Code
provides that exemplary damages may be imposed by way of example or correction
for the public good, in addition to the moral, temperate, liquidated or compensatory
damages. The claimant must first establish his right to moral, temperate, liquidated
or compensatory damages. In this case, considering that Spouses Rabaja failed to
prove moral or compensatory damages, then there could be no award of exemplary
damages.
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With regard to attorneys fees, neither Spouses Rabaja nor Gonzales is
entitled to the award. The settled rule is that no premium should be placed on the
right to litigate and that not every winning party is entitled to an automatic grant of
attorneys fees. The RTC reasoned that Gonzales was forced to litigate due to the
acts of Spouses Salvador. The Court does not agree. Gonzales, as agent of Spouses
Salvador, should have expected that she would be called to litigation in connection
with her fiduciary duties to the principal.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF
PUBLIC WORKS AND HIGHWAYS vs. ARLENE R. SORIANO
Effectively, therefore, the debt incurred by the government on account of the
taking of the property subject of an expropriation constitutes a forbearance which
runs contrary to the trial courts opinion that the same is in the nature of indemnity
for damages calling for the application of Article 2209 of the Civil Code.
Nevertheless, in line with the recent circular of the Monetary Board of the BSP-MB
No. 799, Series of 2013, effective July 1, 2013, the prevailing rate of interest for
loans or forbearance of money is six percent (6%) per annum, in the absence of an
express contract as to such rate of interest.
The records of this case reveal that DPWH did not delay in its payment of just
compensation as it had deposited the pertinent amount in full due to respondent on
January 24, 2011, or four (4) months before the taking thereof, which was when the
RTC ordered the issuance of a Writ of Possession and a Writ of Expropriation on May
27, 2011. The amount deposited was deemed by the trial court to be just, fair, and
equitable, taking into account the well-established factors in assessing the value of
land, such as its size, condition, location, tax declaration, and zonal valuation as
determined by the BIR. Considering, therefore, the prompt payment by the DPWH of
the full amount of just compensation as determined by the RTC, the Court finds that
the imposition of interest thereon is unjustified and should be deleted.
Facts:
Petitioner Republic of the Philippines, represented by the Department of
Public Works and Highways (DPWH), filed a Complaint for expropriation against
respondent Arlene Soriano (Soriano), the registered owner of a parcel of land
consisting of an area of 200 square meters, situated at Gen. T. De Leon, Valenzuela
City, and covered by TCT No. V-13790. DPWH averred that pursuant to Republic Act
(RA) No. 8974, otherwise known as An Act to Facilitate the Acquisition of Right-OfWay, Site or Location for National Government Infrastructure Projects and for other
Purposes, the property sought to be expropriated shall be used in implementing
the construction of the North Luzon Expressway (NLEX)- Harbor Link Project
(Segment 9) from NLEX to MacArthur Highway, Valenzuela City.
DPWH duly deposited to the Acting Branch Clerk of Court the amount of
P420,000.00 representing 100% of the zonal value of the subject property. RTC
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ordered the issuance of a Writ of Possession and a Writ of Expropriation for failure of
respondent, or any of her representatives, to appear despite notice during the
hearing called for the purpose. RTC appointed members of the Board of
Commissioners for the determination of just compensation. However, the trial court
subsequently revoked the appointment of the Board for their failure to submit a
report as to the fair market value of the property to assist the court in the
determination of just compensation and directed the parties to submit their
respective position papers. Thereafter, the case was set for hearing.
According to the RTC, the records of the case reveal that DPWH adduced
evidence to show that the total amount deposited is just, fair, and equitable. DPWH
alleged that pursuant to a Certification issued by the Bureau of Internal Revenue
(BIR), Revenue Region No. 5, the zonal value of the subject property in the amount
of P2,100.00 per square meter is reasonable, fair, and just to compensate the
defendant for the taking of her property in the total area of 200 square meters. In
fact, Tax Declaration No. C-018-07994 submitted by DPWH, shows that the value of
the subject property is at a lower rate of P400.00 per square meter. Also, as testified
to by Associate Solicitor III Julie Mercurio, and as affirmed by the photographs
submitted, the subject property is poorly maintained, covered by shrubs and weeds,
and not concretely-paved. It is located far from commercial or industrial
developments in an area without a proper drainage system, can only be accessed
through a narrow dirt road, and is surrounded by adjacent dwellings of sub-standard
materials.
RTC considered Soriano to have waived her right to adduce evidence and to
object to the evidence submitted by DPWH for her continued absence despite being
given several notices to do so. RTC rendered its Decision declaring DPWH to have
lawful right to acquire possession of and title to 200 square meters of Sorianos
parcel of land covered by TCT V-13790 necessary for the construction of the NLEX
Harbor Link Project (Segment 9) from NLEX to MacArthur Highway Valenzuela City,
condemning portion to the extent of 200 square meters of the above-described
parcel of land including improvements thereon, if there be any, free from all liens
and encumbrances and ordering the DPWH to pay Soriano Php2,100.00 per square
meter or the sum of Php420,000.00 for the 200 square meters as fair, equitable,
and just compensation with legal interest at 12% per annum from the taking of the
possession of the property.
DPWH filed a Motion for Reconsideration maintaining that pursuant to BSP
Circular No. 799, Series of 2013, which took effect on July 1, 2013, the interest rate
imposed by the RTC on just compensation should be lowered to 6% for the instant
case falls under a loan or forbearance of money. RTC reduced the interest rate to 6%
per annum not on the basis of the aforementioned Circular, but on Article 2209 of
the Civil Code.
DPWH filed the instant petition invoking that Soriano is not entitled to the
legal interest of 6% per annum on the amount of just compensation of the subject
property as there was no delay on the part of DPWH.
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Issue:
Whether or not Soriano is entitled to the legal interest of 6% per annum on
the amount of just compensation of the subject property.
Ruling:
No. Considering, therefore, the prompt payment by the DPWH of the full
amount of just compensation as determined by the RTC, the Court finds that the
imposition of interest thereon is unjustified and should be deleted.
At the outset, it must be noted that the RTCs reliance on National Power
Corporation v. Angas is misplaced for the same has already been overturned by our
more recent ruling in Republic v. Court of Appeals, wherein we held that the
payment of just compensation for the expropriated property amounts to an effective
forbearance on the part of the State, to wit:
Aside from this ruling, Republic notably overturned the Courts
previous ruling in National Power Corporation v. Angas which held that
just compensation due for expropriated properties is not a loan or
forbearance of money but indemnity for damages for the delay in
payment; since the interest involved is in the nature of damages rather
than earnings from loans, then Art. 2209 of the Civil Code, which fixes
legal interest at 6%, shall apply.
In Republic, the Court recognized that the just compensation due to the
landowners for their expropriated property amounted to an effective forbearance on
the part of the State. Applying the Eastern Shipping Lines ruling, the Court fixed the
applicable interest rate at 12% per annum, computed from the time the property
was taken until the full amount of just compensation was paid, in order to eliminate
the issue of the constant fluctuation and inflation of the value of the currency over
time.
Effectively, therefore, the debt incurred by the government on account of the
taking of the property subject of an expropriation constitutes a forbearance which
runs contrary to the trial courts opinion that the same is in the nature of indemnity
for damages calling for the application of Article 2209 of the Civil Code.
Nevertheless, in line with the recent circular of the Monetary Board of the BSP-MB
No. 799, Series of 2013, effective July 1, 2013, the prevailing rate of interest for
loans or forbearance of money is six percent (6%) per annum, in the absence of an
express contract as to such rate of interest.
Notwithstanding the foregoing, the Court finds that the imposition of interest
in this case is unwarranted in view of the fact that as evidenced by the
acknowledgment receipt signed by the Branch Clerk of Court, DPWH was able to
deposit with the trial court the amount representing the zonal value of the property
before its taking. As often ruled by the Court, the award of interest is imposed in the
nature of damages for delay in payment which, in effect, makes the obligation on
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the part of the government one of forbearance to ensure prompt payment of the
value of the land and limit the opportunity loss of the owner. However, when there
is no delay in the payment of just compensation, the Court has not hesitated in
deleting the imposition of interest thereon for the same is justified only in cases
where delay has been sufficiently established.
The records of this case reveal that DPWH did not delay in its payment of just
compensation as it had deposited the pertinent amount in full due to respondent on
January 24, 2011, or four (4) months before the taking thereof, which was when the
RTC ordered the issuance of a Writ of Possession and a Writ of Expropriation on May
27, 2011. The amount deposited was deemed by the trial court to be just, fair, and
equitable, taking into account the well-established factors in assessing the value of
land, such as its size, condition, location, tax declaration, and zonal valuation as
determined by the BIR.
Considering, therefore, the prompt payment by the DPWH of the full amount
of just compensation as determined by the RTC, the Court finds that the imposition
of interest thereon is unjustified and should be deleted.
PEOPLE OF THE PHILIPPINES vs. BENJAMIN CASAS Y VINTULAN
G.R. No. 212565, February 25, 2015, J. Perlas-Bernabe
The formula for the computation of loss of earning capacity is as follows:
Net earning capacity = Life Expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)], where life expectancy = 2/3 (80 - the age of the
deceased).
Facts:
Two (2) criminal Informations were filed before the RTC charging Casas of the
Murder of Joel Tabiley Gulla (Joel)and the Frustrated Murder of Eligio 5 Ruiz y
Ricardo6 (Eligio). During arraignment, Casas entered a plea of not guilty. After which,
joint trial on the merits ensued.d
The prosecution alleges that on December 24, 2007, Casas, accompanied by
a certain Ron-Ron (Ron-Ron), went to a certain taho factory located in San Juan
City, looking for a certain Jesus. Failing to find the person he was looking for, Casas
brandished a knife and stuck it into a pail used for making taho. Consequently,
Eligio, an employee of the taho factory, confronted Casas, saying to the latter,
Benjie [(referring to Casas)], bakit ang yabang mo? Kung hindi mo makita ang
kalaban mo, dapat hanapin mo na lang. Casas replied Gusto mo ito? (referring to
his knife). Eligio told Casas to get rid of the knife, which the latter gave to Ron-Ron.
Eligio and Casas then had a fistfight. During the ensuing melee, Casas took the
knife from Ron-Ron and stabbed Eligio twice while the latter was fleeing. Casas,
during his continued pursuit of Eligio, then ran into Joel, who, for his part, tried to
help Eligio with the use of a bamboo pole. However, Joel slipped, fell face first on
the floor, and was prostrate. There and then, Casas stabbed him twice, the first
blow entering his back and exiting at the front of his torso, and the second blow
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hitting the left side of his abdomen. Casas managed to overtake Eligio, and stabbed
him again on the stomach. Fearing that Casas would kill him, Eligio grabbed a
plastic stool and hit Casas on the head with it, forcing the latter to drop the knife
and cease the attack. PO1 Silverio R. Fuentes (PO1 Fuentes) claimed that he was
riding his motorcycle on the date of the incident when he met PO3 Eduardo Fronda
(PO3 Fronda) who asked for assistance as the latter saw a bloodied male. The two
immediately proceeded towards the victim, who turned out to be Casas, and asked
him what happened. The latter replied that he had just stabbed someone. After
confirming that there was indeed a stabbing incident nearby, PO1 Fuentes and PO3
Fronda arrested Casas.
After the prosecution rested its case, Casas filed a demurrer to evidence on
the basis of the alleged inconsistencies in the testimonies of the prosecution
witnesses, which the RTC denied. After the demurrers denial, the defense changed
its theory as Casas admitted that he stabbed both Joel and Eligio but interposed
self-defense to justify his actions. RTC convicted Casas of Murder and Attempted
Homicide. On appeal, CA affirmed the RTCs conviction of Casas. Aggrieved, Casas
filed the instant appeal.
Issue:
Whether the CA awarded the correct amount of damages.
Ruling:
The downgrading of Casass conviction in Crim. Case No. 136842 results in
the deletion of the award of P30,000.00 in exemplary damages. Further, keeping
with recent jurisprudence, the Court is impelled to increase the award of moral
damages from P30,000.00 to P75,000.00, as well as delete the award of P12,500.00
in actual damages and, in lieu thereof, award temperate damages in the higher
amount of P25,000.00. The Court also perceives error in the award of P37,200.00 in
loss of earning capacity since the established formula thereof was incorrectly
applied.
The formula for the computation of loss of earning capacity is as follows:
Net earning capacity = Life Expectancy x [Gross Annual Income - Living
Expenses (50% of gross annual income)], where life expectancy = 2/3 (80 the age of the deceased).
Thus, operating under the established facts as found by the RTC that Joel was
22 when he was killed by Casas, and that he had monthly salary of P1,000.00 to
P1,500.00 as a utility man, the loss of earning capacity is computed as such:
Net earning capacity = [2/3(80-22)] x [(1500 x 12) - ((1,500 x 12) x 50%)]
=
[2/3(58)]x
[P18,000.00
P9,000.00]
=P348,000.00
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Accordingly, the award of loss of earning capacity is increased from
P37,200.00 to P348,000.00as above-computed. Meanwhile, the civil indemnity
award of P75,000.00 stands.
In similar light, the Court modifies the award of moral damages in Crim.
Case No. 136843 from P10,000.00 to P20,000.00 to conform with recent
jurisprudence.
Finally, interest at the rate of six percent (6%) per annum shall be imposed on
all damages awarded, in both Crim. Case Nos. 136842 and 136843, from the
date of finality of judgment until fully paid.
FAJ CONSTRUCTION & DEVELOPMENT CORPORATION vs. SUSAN M. SAULOG
FAJ Construction was found guilty of violating the construction agreement for
its defective and incomplete work, delay, and for unjustified abandonment of the
project. Susan argued that the issue of whether the trial and appellate courts
correctly decided the amount of damages is a factual issue which is beyond the
jurisdiction of this Court. The Supreme Court held that it is not a trier of facts and
does not normally undertake the re-examination of the evidence presented by the
contending parties during trial.
Facts:
FAJ Construction and Development Corporation and Susan M. Saulog entered
into an Agreement6(construction agreement) for the construction of a residential
building in San Lorenzo Village, Makati City for a contract price of
P12,500,000.00.Construction of the building commenced, and Susan made a
corresponding total payment to petitioner in the amount of P10,592,194.80.
However, for the October 31 and November 6, 2000 progress billing statements
sent by FAJ in the total amount of P851,601.58, Susan refused to pay.
FAJ filed with the RTC of Quezon City a civil case for collection of a sum of
money with damages against Susan. Susan filed a counterclaim claiming that she
stopped paying for the reason that the construction work of FAJ Construction was
not only delayed, but defective; and that it abandoned the construction work,
incomplete and with many defects. She had to finish the work abandoned by
plaintiff, incurring substantial additional expenses therefor.
The trial court rendered its Decision in favor Susan. It dismissed FAJ's
complaint for failure to prosecute. The CA rendered the assailed decision affirming
the decision of the trial court.
Issues:
1. Whether or not FAJ Construction is liable for actual damages, and in imposing
the penalty for delay and awarding interest onall amounts due
Ruling:
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On the issue of liability, the Court finds relying on the identical findings of
the trial and appellate courts that FAJ Construction is guilty of violating the
construction agreement, for its defective and incomplete work, delay, and for
unjustified abandonment of the project. Indeed, the Court finds no reason to disturb
the identical pronouncements of the trial court and the CA. The same holds true
with respect to the issue of damages raised by FAJ; it requires an inquiry into the
facts, which is no longer this Courts realm. In a case previously decided by
this ponente concerning a construction contract and where similar allegations of
abandonment, delay and defective workmanship were advanced, it was held that
"Petitioner endeavors to convince us to determine, yet again, the weight,
credence, and probative value of the evidence presented. This cannot be done in
this petition for review on certiorari under Rule 45 of the Rules of Court where only
questions of law may be raised by the parties and passed upon by us. In Fong v.
Velayo, we defined a question of law as distinguished from a question of fact, viz:
A question of law arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the doubt arises as to the truth
or falsity of the alleged facts. For a question to be one of law, the same must not
involve an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a
review of the evidence presented, the [question] posed is one of fact. Thus, the test
of whether a question is one of law or of fact is not the appellation given to such
question by the party raising the same; rather, it is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in which
case, it is a question of law; otherwise, it is a question of fact.
It has already been held that the determination of the existence of a breach
of contract is a factual matter not usually reviewable in a petition filed under Rule
45. We will not review, much less reverse, the factual findings of the Court of
Appeals especially where, as in this case, such findings coincide with those of the
trial court, since we are not a trier of facts x xx."
Since Susan suffered damages as a result of FAJ Constructiondefective and
delayed work and unjustified abandonment of the project, the principle of damnum
absque injuria cannot apply. The principle cannot apply when there is an abuse of a
persons right.
NEGLIGENCE
DR. FILOTEO A. ALANO vs.ZENAIDA MAGUD-LOGMAO
G.R. No. 175540, April 7, 2014, J. Diosdado M. Peralta
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It also clearly stated that permission or authorization to retrieve and remove
the internal organs of the deceased was being given ONLY IF the provisions of the
applicable law had been complied with. Such instructions reveal that Dr. Alanoacted
prudently by directing his subordinates to exhaust all reasonable means of locating
the relatives of the deceased. He could not have made his directives any clearer. He
even specifically mentioned that permission is only being granted IF the
Department of Surgery has complied with all the requirements of the law. Verily, Dr.
Alano could not have been faulted for having full confidence in the ability of the
doctors in the Department of Surgery to comprehend the instructions, obeying all
his directives, and acting only in accordance with the requirements of the law.
Facts:
Plaintiff-appellee ZenaidaMagud-Logmao is the mother of deceased

ArnelitoLogmao. Defendant-appellant Dr. FiloteoAlano is the Executive Director of
the National Kidney Institute (NKI).ArnelitoLogmao, then eighteen (18) years old,
was brought to the East Avenue Medical Center (EAMC) in Quezon City by two
sidewalk vendors, who allegedly saw the former fall from the overpass near in
Cubao, Quezon City.
Dr. Cabrera reported that Logmao was drowsy with alcoholic breath, was
conscious and coherent; that the skull x-ray showed no fracture, that a resident
physician of NKI, who was rotating at EAMC, suggested that Logmao be transferred
to NKI; and that after arrangements were made, Logmao was transferred to NKI
As Lugmoso had no relatives around, Jennifer B. Misa, Transplant Coordinator,

was asked to locate his family by enlisting police and media assistance. Chairman of
the Department of Surgery, observed that the severity of the brain injury of
Lugmoso manifested symptoms of brain death. He requested the Laboratory Section
to conduct a tissue typing and tissue cross-matching examination, so that should
Lugmoso expire despite the necessary medical care and management and he would
be found to be a suitable organ donor and his family would consent to organ
donation, the organs thus donated could be detached and transplanted promptly to
any compatible beneficiary.
Jennifer Misa then contacted several radio and television stations to request
for air time for the purpose of locating the family of AngelitoLugmoso. Dr. Ona was
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informed that Lugmoso had been pronounced brain dead by Dr. Abdias V. Aquino, a
neurologist. As the extensive search for the relatives of Lugmoso yielded no positive
result and time being of the essence in the success of organ transplantation, Dr.
Ona requested Dr. Filoteo A. Alano, Executive Director of NKI, to authorize the
removal of specific organs from the body of Lugmoso for transplantation purposes
upon learning that Lugmoso was a suitable organ donor and that some NKI patients
awaiting organ donation had blood and tissue types compatible with Lugmoso.
Upon receiving the news, Zenaida and her other children went to La Funeraria
Oro, where they saw Arnelito inside a cheap casket. She filed with the court a quo a
complaint for damages against Dr. Emmanuel Lenon, National Kidney Institute et al.
They alleged that defendants conspired to remove the organs of Arnelito while the
latter was still alive and that they concealed his true identity.
RTC rendered judgment finding only Dr. FiloteoAlano liable for damages to
plaintiff and dismissing the complaint against the other defendants for lack of legal
basis which was affirmed by CA.
Issue:
Whether Zenaida's sufferings were brought about by Dr. Alanos alleged

negligence in granting authorization for the removal or retrieval of the internal
organs of Zenaida's son who had been declared brain dead.
Ruling:
No, Dr. FiloteoAlano is not negligent in granting authorization for the removal
or retrieval of the internal organs Zenaida's son who had been declared brain dead.
A careful reading of the above shows that Dr. FiloteoAlano instructed his
subordinates to "make certain" that "all reasonable efforts" are exerted to locate the
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patient's next of kin, even enumerating ways in which to ensure that notices of the
death of the patient would reach said relatives. It also clearly stated that permission
or authorization to retrieve and remove the internal organs of the deceased was
being given ONLY IF the provisions of the applicable law had been complied with.
Such instructions reveal that Dr. Alano acted prudently by directing his subordinates
to exhaust all reasonable means of locating the relatives of the deceased. He could
not have made his directives any clearer. He even specifically mentioned that
permission is only being granted IF the Department of Surgery has complied with all
the requirements of the law. Verily, Dr. FiloteoAlanocould not have been faulted for
having full confidence in the ability of the doctors in the Department of Surgery to
comprehend the instructions, obeying all his directives, and acting only in
accordance with the requirements of the law.
Prior to performing the procedure for retrieval of the deceased's internal

organs, the doctors concerned also the sought the opinion and approval of the
Medico-Legal Officer of the NBI.
Thus, there can be no cavil that Dr. Alano employed reasonable means to
disseminate notifications intended to reach the relatives of the deceased.
DAVAO HOLIDAY TRANSPORT SERVICES CORPORATIONvs. SPOUSES
EULOGIO AND CARMELITA EMPHASIS
Contending that it exercised extraordinary diligence in the selection and
supervision of its drivers, petitioner argues that it should be absolved from any
liability for damages caused by its employee. The SC ruled that when an employee
causes damage due to his own negligence while performing his own duties, there
arises the juristantum presumption that his employer is negligent, rebuttable only
by proof of observance of the diligence of a good father of a family. Failure however
of petitioner to establish the modes and measures it adopted to ensure the proper
selection and supervision of its employees, petitioner therefore should be held
liable for the damages cause by its employee.
Facts:
Petitioner Davao Holiday was the owner and operator of Holiday Taxi No. 177
which figured in an accident that caused the death of a 12 year-old boy named
Christian Emphasis. The taxicab was then being driven by Orlando Tungal along
Airport Road in Davao City when it bumped Christian, who was then riding a bicycle.
Thereafter, information for reckless imprudence resulting in homicide was
filed against Tungal. Meanwhile, the parents of Christian, the Spouses Emphasis,
filed a separate action for damages and attorneys fees arising from the vehicular
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accident against both petitioner Davao Holiday and Tungal. Upon the agreement of
the parties, the two cases were jointly tried.
In the criminal case, the RTC found Tungal guilty beyond reasonable doubt of
the crime of reckless imprudence resulting in homicide. In the civil case, petitioner
Davao Holiday and Tungal were ordered by the RTC to pay the Spouses, jointly and
severally, the damages incurred by the latter. Aggrieved by the RTC decision,
petitioner Davao Holiday appealed the decision of the RTC in the civil case to the
CA. It argued that it should be absolved of any liability for damages, as it exercised
extraordinary diligence in the selection and supervision of its drivers, including
Tungal. The Court of Appeals affirmed the decision of the RTC and ruled that
petitioner was liable for damages. Hence, this petition.
Issue:
Whether or not petitioner Davao Holiday is liable for damages.
Ruling:
Yes, it is.
The Court finds the petition devoid of merit.
Article 2180 of the New Civil Code provides that an obligation for damages is
demandable not only for ones own acts or omissions, but also for those of persons
for whom he is responsible. Employers, in particular, shall be liable for the damages
caused by their employees acting within the scope of their assigned tasks. The
responsibility of employers shall only cease upon proof that they observed all the
diligence of the good father of a family to prevent damage.
The CA correctly held that the petitioner, being Tungals employer, was
presumed liable to the heirs of Christian after a finding that it was Tungal who
should be faulted for the accident that caused the death of the child. In Cang v.
Cullen, the Court emphasized that when an employee causes damage due to his
own negligence while performing his own duties, there arises the juristantum
presumption that his employer is negligent, rebuttable only by proof of observance
of the diligence of a good father of a family. In the selection of prospective
employees, employers are required to examine them as to their qualifications,
experience and service records. With respect to the supervision of employees,
employers must formulate standard operating procedures, monitor their
implementation and impose disciplinary measures for breaches thereof. These facts
must be shown by concrete proof, including documentary evidence.
The petitioner failed in this aspect. There then appears no cogent reason for
the Court to depart from the RTCs and CAs observation that the petitioner failed to
establish the modes and measures it adopted to ensure the proper selection and
supervision of Tungal.
This makes proper the order upon the petitioner to
compensate the spouses Emphasis for damages. As the CA pointed out:
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In the instant case, save for the self-serving testimony of witness Romero,
Holiday did not present documentary proof of Tungals qualification, experience and
service records. Even the result of the actual driving tests was not presented to be
examined by the court a quo. The claim of trainings and constant monitoring of all
their drivers including Tungal are unsubstantiated.
In addition, Holiday presented no record of Tungal attending those trainings.
There was also no record of their so-called constant monitoring of their drivers.
They claimed having installed radios on every cab they operate for the purpose of
reminding their drivers to drive safely but, no recordings were ever made to prove
such call every now and then. Holiday also failed to establish that they also monitor
speed of its taxi during its daily trips, considering that it is engaged in
transportation business, particularly delivering peoplevto and from places. For
these, We uphold the court a quos finding that Holiday had been negligent in the
selection and supervision of its driver Tungal.
CAGAYAN ELECTRIC COOPERATIVE, INC. REPRESENTED BY ITS GENERAL
MANAGER AND CHIEF EXECUTIVE OFFICER, GABRIEL A. TORDESILLAS vs.
ALAN RAPANAN AND MARY GINE TANGONAN
G.R. No. 199886, December 3, 2014, J. Villarama Jr.
1 died and 2 suffered injury due to mishap along the highway. The
respondents contended that the cause of death and injuries was due to live tension
wire of Cagayan Electric Cooperative Inc. The court ruled there was no negligence
on the part of Cagayan Electric Cooperative Inc. Thus, there is no negligence on the
part of petitioner that was allegedly the proximate cause of Camilos death and
Rapanans injuries. From the testimonies of petitioners employees and the excerpt
from the police blotter, this Court can reasonably conclude that, at the time of that
fatal mishap, said wires were quietly sitting on the shoulder of the road, far enough
from the concrete portion so as not to pose any threat to passing motor vehicles
and even pedestrians. Hence, if the victims of the mishap were strangled by said
wires, it can only mean that either the motorcycle careened towards the shoulder or
even more likely, since the police found the motorcycle not on the shoulder but still
on the road, that the three passengers were thrown off from the motorcycle to the
shoulder of the road and caught up with the wires
Facts:
A motorcycle with three of its passengers figured in a mishap along the
National Highway of Maddalero Buguey Cagayan. It was driven by its owner Camilo
Tangonan who died from the accident while his companion respondents suffered
injuries. Wives of the respondents filed a complaint for damages against Cagayan
Electric Cooperative Inc. They alleged that while the victims were traversing the
National highway, they were struck and electrocuted by a live tension wire from one
of the electric posts owned by Cagayan Electric Cooperative Inc. They contended
that the mishap was due to the negligence of Cagayan Electric Cooperative Inc.
when it failed to fix and change said live tension wire despite being immediately
informed by the residents in the area that it might pose immediate danger to
persons, animals, vehicles that are passing by along the national highway. Cagayan
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Electric Cooperative Inc. in its defense contended that the faulted wires were due to
typhoons and they cannot be blamed for such was due to a fortuitous event.
Issue:
Whether or not the Cagayan Electric Cooperative Inc. negligence was the
proximate cause of death of Camilo and injuries of the respondents
Ruling:
No petitioner Cagayan Electric Cooperative Inc. was not negligent
Negligence is defined as the failure to observe for the protection of the
interest of another person that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.
Article 2176 of the Civil Code provides that [w]hoever by act or omission
causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is a quasi-delict.
Under this provision, the elements necessary to establish a quasi-delict case
are: (1) damages to the plaintiff; (2) negligence, by act or omission, of the
defendant or by some person for whose acts the defendant must respond, was
guilty; and (3) the connection of cause and effect between such negligence and the
damages.
The presence of the first element is undisputed because the unfortunate
incident brought about the death of Camilo and physical injuries to Rapanan. This
Court, however, finds that the second and third elements are lacking thus
precluding the award of damages in favor of respondents. Adviento, petitioners
employee testified that their electric poles along the highways, including the one
where the mishap took place, were erected about four to five meters from the
shoulder of the road. Another employee of petitioner, Rasos, testified that after the
typhoons hit Cagayan, he together with his co-employees, after checking the
damage to the electric lines, rolled the fallen electric wires and placed them at the
foot of the electric poles so as to prevent mishaps to pedestrians and vehicles
passing by. Their testimonies were corroborated by what was recorded in the Police
Blotter of the Buguey Police Station, Buguey, Cagayan after SPO2 Tactac
investigated on the incident.
Thus, there is no negligence on the part of petitioner that was allegedly the
proximate cause of Camilos death and Rapanans injuries. From the testimonies of
petitioners employees and the excerpt from the police blotter, this Court can
reasonably conclude that, at the time of that fatal mishap, said wires were quietly
sitting on the shoulder of the road, far enough from the concrete portion so as not
to pose any threat to passing motor vehicles and even pedestrians. Hence, if the
victims of the mishap were strangled by said wires, it can only mean that either the
motorcycle careened towards the shoulder or even more likely, since the police
found the motorcycle not on the shoulder but still on the road, that the three
passengers were thrown off from the motorcycle to the shoulder of the road and
caught up with the wires. As to how that happened cannot be blamed on petitioner
but should be attributed to Camilos over speeding as concluded by the police after
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it investigated the mishap. The mishap already occurred even while they were on
the road and away from petitioner's electric wires and was not caused by the latter
as alleged by respondents. It just so happened that after the motorcycle tilted and
slid, the passengers were thrown off to the shoulder where the electric wires were.
This Court hence agrees with the trial court that the proximate cause of the mishap
was the negligence of Camilo.
Had Camilo driven the motorcycle at an average speed, the three passengers
would not have been thrown off from the vehicle towards the shoulder and
eventually strangulated by the electric wires sitting thereon. Moreover, it was also
negligent of Camilo to have allowed two persons to ride with him and for. Rapanan
to ride with them when the maximum number of passengers of a motorcycle is two
including the driver. This most likely even aggravated the situation because the
motorcycle was overloaded which made it harder to drive and control. When the
plaintiffs own negligence was the immediate and proximate cause of his injury, he
cannot recover damages.
RUKS KONSULT AND CONSTRUCTION vs. ADWORLD SIGN AND
ADVERTISING CORPORATION* AND TRANSWORLD MEDIA ADS, INC.
G.R. No. 204866, January 21, 2015, J. Perlas-Bernabe
The petitioners was found negligent by both the RTC and the Court of
Appeals and ordered to pay jointly and severally for damages. The petitioners
allege that they are not negligent. The Supreme Court ruled that as the omission to
do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do. It is the failure to
observe for the protection of the interest of another person that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such
other person suffers injury. CA correctly affirmed the RTCs finding that Transworld
and Ruks are guilty of negligence.
Facts:
The instant case arose from a complaint for damages filed by Adworld against
Transworld and Comark International Corporation (Comark) before the RTC. In the
complaint, Adworld alleged that it is the owner of a 75 ft. x 60 ft. billboard structure
located at EDSA Tulay, Guadalupe, Barangka Mandaluyong, which was misaligned
and its foundation impaired when, on August 11, 2003, the adjacent billboard
structure owned by Transworld and used by Comark collapsed and crashed against
it. Resultantly, on August 19, 2003, Adworld sent Transworld and Comark a letter
demanding payment for the repairs of its billboard as well as loss of rental income.
On August 29, 2003, Transworld sent its reply, admitting the damage caused by its
billboard structure on Adworlds billboard, but nevertheless, refused and failed to
pay the amounts demanded by Adworld. As Adworlds final demand letter also went
unheeded, it was constrained to file the instant complaint, praying for damages in
the aggregate amount of P474,204.00, comprised of P281,204.00 for materials,
P72,000.00 for labor, and P121,000.00 for indemnity for loss of income.
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2015)
In its Answer with Counterclaim, Transworld averred that the collapse of its
billboard structure was due to extraordinarily strong winds that occurred instantly
and unexpectedly, and maintained that the damage caused to Adworlds billboard
structure was hardly noticeable. Transworld likewise filed a Third-Party Complaint
against Ruks, the company which built the collapsed billboard structure in the
formers favor. It was alleged therein that the structure constructed by Ruks had a
weak and poor foundation not suited for billboards, thus, prone to collapse, and as
such, Ruks should ultimately be held liable for the damages caused to Adworlds
billboard structure.
RTC ultimately ruled in Adworlds favor, and accordingly, declared, inter alia,
Transworld and Ruks jointly and severally liable to Adworld. The CA denied Rukss
appeal and affirmed the ruling of the RTC. It adhered to the RTCs finding of
negligence on the part of Transworld and Ruks which brought about the damage to
Adworlds billboard.
Issue:
The primordial issue for the Courts resolution is whether or not the CA
correctly affirmed the ruling of the RTC declaring Ruks jointly and severally liable
with Transworld for damages sustained by Adworld.
Ruling:
The petition is without merit.
At the outset, it must be stressed that factual findings of the RTC, when
affirmed by the CA, are entitled to great weight by the Court and are deemed final
and conclusive when supported by the evidence on record. Absent any exceptions
to this rule such as when it is established that the trial court ignored, overlooked,
misconstrued, or misinterpreted cogent facts and circumstances that, if considered,
would change the outcome of the case such findings must stand.
Jurisprudence defines negligence as the omission to do something which a
reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do. It is the failure to observe for the protection of the
In this case, the CA correctly affirmed the RTCs finding that Transworlds
initial construction of its billboards lower structure without the proper foundation,
and that of Rukss finishing its upper structure and just merely assuming that
Transworld would reinforce the weak foundation are the two (2) successive acts
which were the direct and proximate cause of the damages sustained by Adworld.
Worse, both Transworld and Ruks were fully aware that the foundation for the
formers billboard was weak; yet, neither of them took any positive step to reinforce
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the same. They merely relied on each others word that repairs would be done to
such foundation, but none was done at all. Clearly, the foregoing circumstances
show that both Transworld and Ruks are guilty of negligence in the construction of
the formers billboard, and perforce, should be held liable for its collapse and the
resulting damage to Adworlds billboard structure. As joint tortfeasors, therefore,
they are solidarily liable to Adworld. Verily, [j]oint tortfeasors are those who
command, instigate, promote, encourage, advise, countenance, cooperate in, aid or
abet the commission of a tort, or approve of it after it is done, if done for their
benefit. They are also referred to as those who act together in committing wrong or
whose acts, if independent of each other, unite in causing a single injury. Under
Article 2194 of the Civil Code, joint tortfeasors are solidarily liable for the resulting
damage. In other words, joint tortfeasors are each liable as principals, to the same
extent and in the same manner as if they had performed the wrongful act
themselves. The Courts pronouncement in People v. Velasco is instructive on this
matter, to wit:
Where several causes producing an injury are concurrent and each is an
efficient cause without which the injury would not have happened, the injury
may be attributed to all or any of the causes and recovery may be had
against any or all of the responsible persons although under the
circumstances of the case, it may appear that one of them was more
culpable, and that the duty owed by them to the injured person was not
same. No actors negligence ceases to be a proximate cause merely because
it does not exceed the negligence of other actors. Each wrongdoer is
responsible for the entire result and is liable as though his acts were the sole
cause of the injury.
There is no contribution between joint [tortfeasors] whose liability is solidary
since both of them are liable for the total damage. Where the concurrent or
successive negligent acts or omissions of two or more persons, although
acting independently, are in combination the direct and proximate cause of a
single injury to a third person, it is impossible to determine in what proportion
each contributed to the injury and either of them is responsible for the whole
injury.
In conclusion, the CA correctly affirmed the ruling of the RTC declaring Ruks
jointly and severally liable with Transworld
R TRANSPORT CORPORATION vs. LUISITO G. YU

Negligence has been 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.
Verily, foreseeability is the fundamental test of negligence. It is the omission to do
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something which a reasonable man, guided by those
considerations which
something which a prudent and reasonable man would not do. The records show
that driver Gimena was clearly running at a reckless speed. He did not take the
necessary precaution and instead, drove on and bumped the deceased despite
being aware that he was traversing a commercial center where pedestrians were
crossing the street. Gimena should have observed due diligence of a reasonably
prudent man by slackening his speed and proceeding cautiously while passing the
area.
Facts:
At around 8:45a.m of December 12, 1993, Loreta J. Yu, after having alighted
from a passenger bus in front of Robinson's Galleria along EDSA was hit and run
over by a bus driven by Antonio P. Gimena, who was then employed by petitioner R
Transport Corporation. Loreta was immediately rushed to Medical City Hospital
where she was pronounced dead on arrival.
On February 3, 1994, the husband of the deceased, respondent Luisito G. Yu,
filed a Complaint for damages before the RTC against petitioner R Transport, Antonio
Gimena, and Metro Manila Transport Corporation (MMTC) for the death of his wife.
MMTC denied its liability since it is merely the registered owner of the bus,
the actual owner, being petitioner R Transport. It explained that under the Bus
Installment Purchase Program of the government, MMTC merely purchased the
subject bus, for resale to petitioner R Transport, which will operate the same within
Metro Manila. Since it was not actually operating the bus which killed respondents
wife, nor was it the employer of the driver, MMTC alleged that the complaint
against it should be dismissed.
R Transport alleged that respondent had no cause of action against it for it
had exercised due diligence in the selection and supervision of its employees and
drivers and that its buses are in good condition.
The driver Antonio Gimena was declared in default for his failure to file an
answer to the complaint.
The trial court rendered judgment in favor of respondent Yu. The CA affirmed
the Decision of the RTC. Hence, the present petition.
Issue:
Whether or not the CA erred when it ruled that R transport is liable for the
damages caused by the negligence of its employee.
Ruling:
The Court disagrees.
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After a review of the records of the case, we find no cogent reason to reverse
the rulings of the courts below. Both the trial and appellate courts found driver
Gimena negligent in hitting and running over the victim and ruled that his
negligence was the proximate cause of her death.
Negligence has been 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. Verily,
foreseeability is the fundamental test of negligence. It is the omission to do
something which a reasonable man, guided by those
considerations which
something which a prudent and reasonable man would not do.
The records show that driver Gimena was clearly running at a reckless speed.
As testified by the police officer on duty at the time of the incident and indicated in
the Autopsy Report, not only were the deceaseds clothes ripped off from her body,
her brain even spewed out from her skull and spilled over the road. Indeed, this
Court is not prepared to believe petitioners contention that its bus was travelling at
a normal speed in preparation for a full stop in view of the fatal injuries sustained
by the deceased. The location wherein the deceased was hit and run over indicates
Gimenas negligence. The bus driven by Gimena bumped the deceased in a loading
and unloading area of a commercial center. The fact that he was approaching such
a busy part of EDSA should have already cautioned the driver of the bus. In fact,
upon seeing that a bus has stopped beside his lane should have signalled him to
step on his brakes to slow down for the possibility that said bus was unloading its
passengers in the area. Unfortunately, he did not take the necessary precaution and
instead, drove on and bumped the deceased despite being aware that he was
traversing a commercial center where pedestrians were crossing the street. Gimena
should have observed due diligence of a reasonably prudent man by slackening his
speed and proceeding cautiously while passing the area.
Under Article 2180 of the New Civil Code, employers are liable for the
damages caused by their employees acting within the scope of their assigned tasks.
Once negligence on the part of the employee is established, a presumption instantly
arises that the employer was remiss in the selection and/or supervision of the
negligent employee. To avoid liability for the quasi-delict committed by its
employee, it is incumbent upon the employer to rebut this presumption by
presenting adequate and convincing proof that it exercised the care and diligence of
a good father of a family in the selection and supervision of its employees.
Article 2180 of the New Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
xxxx
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Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
Unfortunately, the records of this case are bereft of any proof showing the
exercise by petitioner of the required diligence. As observed by the CA, no evidence
of whatever nature was ever presented depicting petitioners due diligence in the
selection and supervision of its driver, Gimena, despite several opportunities to do
so. In fact, in its petition, apart from denying the negligence of its employee and
imputing the same to the bus from which the victim alighted, petitioner merely
reiterates its argument that since it is not the registered owner of the bus which
bumped the victim, it cannot be held liable for the damage caused by the same.
Nowhere was it even remotely alleged that petitioner had exercised the required
diligence in the selection and supervision of its employee. Because of this failure,
petitioner cannot now avoid liability for the quasi-delict committed by its negligent
employee.
Finally, the petitioner, citing the case of Vargas vs. Langcay, contends that it
is the registered owner of the vehicle, rather than the actual owner, who must be
jointly and severally liable with the driver of the passenger vehicle for damages
incurred by third persons as a consequence of injuries or death sustained in the
operation of said vehicle.
The contention is devoid of merit. While the Court therein ruled that the
registered owner or operator of a passenger vehicle is jointly and severally liable
with the driver of the said vehicle for damages incurred by passengers or third
persons as a consequence of injuries or death sustained in the operation of the said
vehicle, the Court did so to correct the erroneous findings of the Court of Appeals
that the liability of the registered owner or operator of a passenger vehicle is merely
subsidiary, as contemplated in Art. 103 of the Revised Penal Code.
In no case did the Court exempt the actual owner of the passenger vehicle
from liability. On the contrary, it adhered to the rule followed in the cases of Erezo
vs. Jepte, Tamayo vs. Aquino, and De Peralta vs. Mangusang, that the registered
owner or operator has the right to be indemnified by the real or actual owner of the
amount that he may be required to pay as damage for the injury caused.
The right to be indemnified being recognized, recovery by the registered
owner or operator may be made in any form-either by a crossclaim, third-party
complaint, or an independent action. The result is the same.
While We held in Tamayo that the responsibility of the registered owner and
actual operator of a truck which caused the death of its passenger is not solidary,
We noted therein that the same is due to the fact that the action instituted was one
for breach of contract, to wit:
The decision of the Court of Appeals is also attacked insofar as it holds that
inasmuch as the third-party defendant had used the truck on a route not covered by
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the registered owner's franchise, both the registered owner and the actual owner
and operator should be considered as joint tortfeasors and should be made liable in
accordance with Article 2194 of the Civil Code. This Article is as follows:
Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict
is solidary.
But the action instituted in the case at bar is one for breach of contract, for
failure of the defendant to carry safely the deceased for her destination. The liability
for which he is made responsible, i.e., for the death of the passenger, may not be
considered as arising from a quasi-delict. As the registered owner Tamayo and his
transferee Rayos may not be held guilty of tort or a quasi-delict; their responsibility
is not solidary as held by the Court of Appeals.
The question that poses, is how should the holder of the certificate of public
convenience, Tamayo, participate with his transferee, operator Rayos, in the
damages recoverable by the heirs of the deceased passenger, if their liability is not
that of Joint tortfeasors in accordance with Article 2194 of the Civil Code.
The following considerations must be borne in mind in determining this
question. As Tamayo is the registered owner of the truck, his responsibility to the
public or to any passenger riding in the vehicle or truck must be direct. But as the
transferee, who operated the vehicle when the passenger died, is the one directly
responsible for the accident and death he should in turn be made responsible to the
registered owner for what the latter may have been adjudged to pay. In operating
the truck without transfer thereof having been approved by the Public Service
Commission, the transferee acted merely as agent of the registered owner and
should be responsible to him (the registered owner), for any damages that he may
cause the latter by his negligence.
However, it must be noted that the case at hand does not involve a breach of
contract of carriage, as in Tamayo, but a tort or quasi-delict under Article 2176, in
relation to Article 2180 of the New Civil Code. The liability for which petitioner is
being made responsible actually arises not from a pre-existing contractual relation
between petitioner and the deceased, but from a damage caused by the negligence
of its employee. Petitioner cannot, rely on our ruling in Tamayo and escape its
solidary liability for the liability of the employer for the negligent conduct of its
subordinate is direct and primary, subject only to the defense of due diligence in the
selection and supervision of the employee.
This Court has consistently been of the view that it is for the better protection
of the public for both the owner of record and the actual operator to be adjudged
jointly and severally liable with the driver. As stated by the appellate court, "the
principle of holding the registered owner liable for damages notwithstanding that
ownership of the offending vehicle has already been transferred to another is
designed to protect the public and not as a shield on the part of unscrupulous
transferees of the vehicle to take refuge in order to free itself from liability arising
from its own negligent act. "
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Hence, considering that the negligence of driver Gimena was sufficiently
proven by the records of the case, and that no evidence of whatever nature
was presented by petitioner to support its defense of due diligence in the selection
and supervision of its employees, petitioner, as the employer of Gimena, may be
held liable for damages arising from the death of respondent Yu's wife.
UNKNOWN OWNER OF THE VESSEL M/V CHINA JOY, SAMSUN SHIPPING LTD.,
AND INTER-ASIA MARINE TRANSPORT, INC. vs. ASIAN TERMINALS, INC.
G.R. No. 195661, March 11, 2015, J. Reyes
ATI suffered damage due to the fault of petitioners negligence. However,
petitioners contended that they should not be held liable for there was no
negligence on their part. The court ruled that Negligence, on the other hand, is
defined as the failure to observe that degree of care, precaution and vigilance that
the circumstances justly demand, whereby another suffers injury. In the case under
consideration, the parties do not dispute the facts of damage upon ATIs unloader,
and of such damage being the consequence of someones negligence. However, the
petitioners deny liability claiming that it was not established with reasonable
certainty whose negligence had caused the co-mingling of the metal bars with the
soybean meal cargo. The Court, on this matter, agrees with the CAs disquisition
that the petitioners should be held jointly and severally liable to ATI. ATI cannot be
faulted for its lack of direct access to evidence determinative as to who among the
shipowner, Samsun, ContiQuincyBunge and Inter-Asia should assume liability. The
CA had exhaustively discussed why the doctrine of res ipsa loquitur applies.
Facts:
Cargo ship M/V China Joy (the Vessel) arrived at the Mariveles Grain
Terminal Wharf, operated by ATI. According to the Berth Term Grain Bills of Lading,
the Vessel carried soybean meal that had been shipped by ContiQuincyBungean
exporter of soybean meal and related products, in favor of several consignees in the
Philippines. Under the Charter Party Agreement over M/V China Joy,
ContiQuincyBunge represented itself as the Charterer of the Vessel, with San Miguel
Foods, Inc. as Co-Charterer, and Samsun represented itself as the Agent of the
Shipowners. Samsun is a foreign corporation not doing business in the Philippines.
On 3 February 1997 ATI used its SiwertellUnloader No. 2 to unload the
soybean meal from the Vessels Hold No. 2. The SiwertellUnloader is a pneumatic
vacubator that uses compressed gas to vertically move heavy bulk grain from within
the hatch of the ship in order to unload it off the ship. The unloading operations
were suddenly halted when the head of Unloader No. 2 hit a flat low-carbon or
mild steel bar measuring around 8 to 10 inches in length, 4 inches in width, and 1
inch in thickness that was in the middle of the mass of soybean meal. The flat
steel bar lodged itself between the vertical screws of Unloader No. 2, causing
portions of screw numbers 2 and 3 to crack and be sheared off under the torsional
load.
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According to the quotation of BMH Marine AB Sweden, the sole manufacturer
of Siwertellunloaders, the replacement cost of each screw is US$12,395.00 or
US$24,790.00 for the 2 screws plus freight. The labor cost to remove and reassemble the screws is estimated at US$2,000.00. On 4 February 1997, ATI sent
a Note of Protest to the Master of the Vessel for the damages sustained by its
unloading equipment as a result of encountering the flat steel bar among the
soybean meal. However, the Vessels Master wrote a note on theProtest stating that
it is not responsible for the damage because the metal piece came from the cargo
and not from the vessel itself. On 5 March 1997, ATI sent a claim to defendant [InterAsia] for the amount of US$37,185.00 plus US$2,000.00 labor cost representing the
damages sustained by its unloading equipment. Inter-Asia rejected ATIs claim for
the alleged reason that it is not the Shipowners Agent. Inter-Asia informed ATI that
its principal is Samsun. Moreover, according to Inter-Asia, the owner of the Vessel is
Trans-Pacific Shipping Co., c/o Lasco Shipping Company. Inter-Asia, however, offered
to relay ATIs claim to Trans-Pacific through Samsun. As previously noted,
the Charter Party Agreement states Samsun to be the Agent of the Shipowners, but
since Samsun is a foreign corporation not licensed to do business in the Philippines,
it transacted its business through Inter-Asia. Hence, Inter-Asia is the Agent of the
Agent of the Shipowners. When negotiations for settlement failed, ATI filed the
instant Complaint for Damages against Samsun, Inter-Asia and the Unknown
Owner of the Vessel M/V China Joy
Issue:
Whether or not petitioners are liable for the damage sustained by ATI
Ruling:
Yes, they are liable.
The Court agrees with the CA that the petitioners are liable to ATI for the
damage sustained by the latters unloader. However, the Court finds the petitioners
liability to be based on quasi-delict and not on a contract of carriage. The Court
likewise deems it proper to modify the rate of interests on the amount of damages
imposed by the CA upon the petitioners.
The Court notes that the shipowner and shipowners agent, Samsun, are all
juridical entities not registered and not doing business in the Philippines. It was the
charterers agent, Inter-Asia, a duly-registered domestic corporation, which had filed
the instant petition for itself and on behalf of the shipowner and Samsun. In the
course of the proceedings too, none of the parties had raised issues anent the
validity of the service of summons and the courts acquisition of jurisdiction over the
persons of the petitioners. The petitioners present two issues for the Courts
resolution, to wit: (a) the applicability of the doctrine of res ipsa loquitur in the case
at bar; and (b) who participated and should thus assume liability for the loading of
the
soybean
meal
cargo.
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The Court agrees with the CA anent ATIs entitlement to the payment of
damages from the petitioners and the applicability of the doctrine of res ipsa
loquitur. However, the Court finds as misplaced the CAs application of the laws on
maritime commerce and contracts of carriage for reasons discussed below. There is
no contract of carriage between the petitioners and ATI.
There is no contract of carriage between ATI, on one hand, and the
shipowner, Samsun, ContiQuincyBunge L.L.C., and Inter-Asia, on the other. It
likewise bears stressing that the subject of the complaint, from which the instant
petition arose, is not the damage caused to the cargo, but to the equipment of an
arrastre operator. Further, ATIs contractual relation is not with the petitioners, but
with the consignee and with the Philippine Ports Authority (PPA).
In Delgado Brothers, Inc. v. Home Insurance Company and Court of Appeals,
the Court discusses the functions of an arrastre operator, Under this provision,
petitioners functions as arrastre operator are (1) to receive, handle, care for, and
deliver all merchandise imported and exported, upon or passing over Governmentowned wharves and piers in the Port of Manila, (2) as well as to record or cheek all
merchandise which may be delivered to said port at shipside, and in general[,] (3)
to furnish light and water services and other incidental services in order to
undertake its arrastre service. Note that there is nothing in those functions which
relate to the trade and business of navigation x xx, nor to the use or operation of
vessels x xx. Both as to the nature of the functions and the place of their
performance (upon wharves and piers shipside), petitioners services are clearly not
maritime. As we held in the Macondray case, they are no different from those of a
depositary or warehouseman. Granting, arguendo, that petitioners arrastre service
depends on, assists, or furthers maritime transportation x xx, it may be deemed
merely incidentalto its aforementioned functions as arrastre operator and does not,
thereby, make petitioners arrastre service maritime in character.
The functions of an arrastre operator involve the handling of cargo deposited
on the wharf or between the establishment of the consignee or shipper and the
ships tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operators duty is to take good care of the goods and to turn them over to the party
entitled to their possession.
The legal relationship between an arrastre operator and a consignee is akin
to that between a warehouseman and a depositor. As to both the nature of the
functions and the place of their performance, an arrastre operators services are
clearly not maritime in character.
In Insurance Company of North America v. Asian Terminals, Inc.,the Court
explained that the liabilities of the arrastre operator for losses and damages are set
forth in the contract for cargo handling services it had executed with the PPA.
Corollarily then, the rights of an arrastre operator to be paid for damages it sustains
from handling cargoes do not likewise spring from contracts of carriage.
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However, in the instant petition, the contending parties make no references
at all to any provisions in the contract for cargo handling services ATI had executed
with the PPA.
In Taylor v. Manila Electric Railroad and Light Co., the Court explained that to
establish a plaintiffs right to recovery for quasi-delicts, three elements must exist,
to wit: (a) damages to the plaintiff; (b) negligence by act or omission of which
defendant personally, or some person for whose acts it must respond, was guilty;
and (c) the connection of cause and effect between the negligence and the damage.
Negligence, on the other hand, is defined as the failure to observe that
degree of care, precaution and vigilance that the circumstances justly demand,
whereby another suffers injury. In the case under consideration, the parties do not
dispute the facts of damage upon ATIs unloader, and of such damage being the
consequence of someones negligence. However, the petitioners deny liability
claiming that it was not established with reasonable certainty whose negligence had
caused the co-mingling of the metal bars with the soybean meal cargo. The Court,
on this matter, agrees with the CAs disquisition that the petitioners should be held
jointly and severally liable to ATI. ATI cannot be faulted for its lack of direct access
to evidence determinative as to who among the shipowner, Samsun,
ContiQuincyBunge and Inter-Asia should assume liability. The CA had exhaustively
discussed why the doctrine of res ipsa loquitur applies. The metal bars which
caused damage to ATIs unloader was found co-mingled with the cargo inside Hold
No. 2 of the ship, which was then within the exclusive control of the petitioners.
Thus, the presumption that it was the petitioners collective negligence, which
caused the damage, stands. This is, however, without prejudice to the petitioners
rights to seek reimbursements among themselves from the party whose negligence
primarily caused the damage.
GROSS MISCONDUCT
DR. IDOL L. BONDOC vs. MARILOU R. MANTALA
G.R. No. 203080, November 12, 2014, J. Villarma, Jr.
A physician is guilty of gross misconduct when he chose to conduct a normal
delivery and deliberately left her patient to a midwife and two inexperienced
assistants despite knowing that the patient was under prolonged painful labor and
about to give birth to a macrosomic baby by vaginal delivery which resulted to a
stillborn baby and the loss of her reproductive capacity. A physician should be
dedicated to provide competent medical care with full professional skill in
accordance with the current standards of care, compassion, independence and
respect for human dignity.
Facts:
Respondent Marilou Mantala was admitted at the Oriental Mindoro Provincial
Hospital (OMPH) on April 3, 2009, at around 11:00 in the morning, with referral from
the Bansud Municipal Health Office (BMHO. ) Mantala alleged that inside the
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delivery room of OMPH, she was attended to by Dr. Bondoc who instructed the
midwife and two younger assistants to press down on respondents abdomen and
even demonstrated to them how to insert their fingers into her vagina. Thereafter,
petitioner went out of the delivery room and later, his assistants also left. As she
labored in pain, she felt the movement of her baby inside her womb and the
intermittent stiffening of her abdomen.
At about 4:00 in the afternoon, Bondoc returned to the delivery room. Since
Mantala could no longer bear the pain, she requested Dr. Bondoc to perform a
cesarean section but this was not done. The midwife and the younger assistants
again pressed down on her abdomen causing excruciating pain on her ribs and
made her very weak. They repeatedly did this pressing until the baby and placenta
came out. When she regained consciousness, she was already at the recovery room.
She learned that an operation was performed on her by petitioner to remove her
ruptured uterus but what depressed her most was her stillborn baby and the loss of
her reproductive capacity. The next day, she was transferred to a ward. She noticed
her very swollen vulva and her surgical wound open with liquid squirting from it. Her
wound was regularly cleaned by a nurse. On April 9, 2009, she was discharged
notwithstanding that the suture on her wound needs to be fixed and she still has a
cough. At home, she took the antibiotics, cough medicine and multivitamins
prescribed by petitioner.
Joel Mantala claimed that at the OMPH at around 2:30 in the afternoon when
her wife was still laboring, petitioner talked to him and told her that the baby is too
big and if it comes out alive it will probably be abnormal so that it would be better if
the baby is stillborn. He further averred that despite the pleas of her wife for a
cesarean operation, petitioner insisted on a normal delivery during which she
almost died. A certain Dr. Fabon also testified on their favor.
In his counter-affidavit, petitioner blamed respondent for risking her own life
in not seeking immediately a higher level of medical care and instead preferring a
TBA who is prohibited under a 2006 provincial circular to handle deliveries at home.
He emphasized that upon admission the fetal heart tone is no longer appreciated
and maintained that diligent care was extended to respondent during her stay at
OMPH.
The Office of the Deputy Ombudsman for Luzon rendered a Decision finding
Dr. Bondoc administratively liable for Grave Misconduct, which was subsequently
affirmed by the CA.
Issue:
Whether or not Dr. Bondoc is guilty of grave misconduct in failing to attend to
Mantala when she was having prolonged difficult labor and vaginal delivery.
Ruling:
Yes, he is.
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Misconduct is defined as a transgression of some established and definite
rule of action, more particularly, unlawful behavior or gross negligence by a public
officer, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. It generally means wrongful,
improper or unlawful conduct motivated by a premeditated, obstinate or intentional
purpose. The term, however, does not necessarily imply corruption or criminal
intent. To constitute an administrative offense, misconduct should relate to or be
connected with the performance of the official functions and duties of a public
officer. On the other hand, when the elements of corruption, clear intent to violate
the law or flagrant disregard of established rule are manifest, the public officer shall
be liable for grave misconduct.
In this case, both the Ombudsman and CA found the petitioner guilty of grave
misconduct in failing to attend to respondent when she was having prolonged
difficult labor and vaginal delivery after being diagnosed with macrosamia and
polyhydramnios.
As per the admitting diagnosis submitted by Dr. Bondoc, the latter was aware
of macrosomia and the fetal heartbeat not appreciated. He also maintains that
respondents baby was already dead due to prolonged labor but she had insisted on
having a normal delivery. However, this claim is belied by the sworn statements of
respondent, her husband and her sisters, all of whom averred that they requested
for a cesarean section as per the advice given by Dr. Atienza who examined her in
March 2009, and as confirmed at the Bansud Health Center where she was told that
it would be risky for her to have a normal delivery. Moreover, Joel Mantala asserted
that what petitioner said to him was that the baby was too big and if born alive it
would probably have abnormalities so it would be better that the baby is stillborn.
The Court is more inclined to believe respondents version which was duly
corroborated by Dr. Fabon who heard petitioner saying that: "Meron pa nga kami sa
DR macrosomnia, polyhydramnios pa, pero paanakin na lang yon. Abnormal din
naman ang bata kahit mabuhay." This puts into doubt petitioners supposed finding
that the baby was already dead upon respondents admission at OMPH and that it
was respondent who insisted on a normal delivery. Even assuming that petitioner
had actually confirmed intrauterine fetal death, this only aggravates the patients
condition and it was incumbent upon petitioner as the obstetrician on duty to
personally attend to her and render appropriate management or treatment.
Furthermore, in deliberately leaving the respondent to a midwife and two
inexperienced assistants despite knowing that she was under prolonged painful
labor and about to give birth to a macrosomic baby by vaginal delivery, petitioner
clearly committed a dereliction of duty and a breach of his professional obligations.
The gravity of respondents condition is highlighted by the expected complications
she suffered her stillborn baby, a ruptured uterus that necessitated immediate
surgery and blood transfusion, and vulvar hematomas.
Page 446 of 483

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Article II, Section 1 of the Code of Medical Ethics of the Medical Profession in
the Philippines states:
A physician should attend to his patients faithfully and conscientiously. He
should secure for them all possible benefits that may depend upon his professional
skill and care. As the sole tribunal to adjudge the physicians failure to fulfill his
obligation to his patients is, in most cases, his own conscience, violation of this rule
on his part is discreditable and inexcusable.
A doctors duty to his patient is not required to be extraordinary. The standard
contemplated for doctors is simply the reasonable average merit among ordinarily
good physicians, i.e.reasonable skill and competence. Even by this standard,
petitioner fell short when he routinely delegated an important task that requires his
professional skill and competence to his subordinates who have no requisite training
and capability to make crucial decisions in difficult childbirths.
Petitioners proffered excuse that it was the practice in OMPH to allow
midwives to administer to patients during deliveries, is unacceptable. No proof of
such alleged hospital practice such as an official written directive was presented.
Besides, it is doubtful whether hospital administrators would remedy personnel
shortage by permitting inexperienced staff, by themselves, to handle laboring
patients with high-risk pregnancies and maternal/fetal complications.
As to the two other scheduled CS performed by petitioner on the same day,
this will not exculpate him from administrative liability. As correctly pointed out by
the CA, there was no showing of similar urgency in the said operations, and
petitioner could have referred respondent to another competent physician.
Petitioner thus not only committed a dereliction of duty, but also transgressed
the ethical norms of his profession when he failed to render competent medical care
with compassion and respect for his patients dignity. A physician should be
dedicated to provide competent medical care with full professional skill in
accordance with the current standards of care, compassion, independence and
respect for human dignity.
Finally, we find no merit in petitioner's argument that the CA should have at
least considered as mitigating circumstances his being a first offender, his 16 years
in government service, and that he had not acted in bad faith and with clear intent
to violate the law and established rules. Jurisprudence is replete with cases
declaring that a grave offense cannot be mitigated by the fact that the accused is a
first time offender or by the length of service of the accused. While in most cases,
length of service is considered in favor of the respondent, it is not considered where
the offense committed is found to be serious or grave.
RES IPSA LOQUITUR
VICENTE JOSEFA vs. MANILA ELECTRICCOMPANY
G.R. No. 182705, July 18, 2014, J.Brion
Page 447 of 483

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For the doctrine of res ipsa loquitur to apply, the complainant must show
that: (1) the accident is of such character as to warrant an inference that it would
not have happened except for the defendants negligence (2) the accident must
have been caused by an agency or instrumentality within the exclusive
management or control of the person charged with the negligence complained of
and (3) the accident must not have been due to any voluntary action or contribution
on the part of the person injured. The present case satisfies all the elements of res
ipsa loquitur.
Facts:
At around 1:45 p.m. on April 21, 1991, a dump truck, ajeepney and a car
figured in a vehicular accident along Ortigas Avenue, Pasig City. As a result of the
accident, a45-footwooden electricity post, three 75 KVA transformers ,and other
electrical line attachments were damaged. Upon investigation, respondent Manila
Electric Company(Meralco) discovered that it was the truck with plate number
PAK874and registered in Josefas name that hit the electricity post.
In a letter dated April 19, 1993, Meralco demanded from Josefa
reimbursement for the replacement cost of the electricity post and its attachments,
but Josefa refused to pay. Thus, on September 28, 1993, Meralco sued Josefa and
Pablo Manoco, the truck driver, for damages before the Regional Trial Court (RTC) of
Pasig City.
The RTC dismissed the complaint for insufficiency of evidence. The RTC held
that Meralco failed to establish that it was the truck that hit the electricity post. The
RTC ruled that SPO2 Galangs account of the accident was merely hearsay since he
did not personally witness the incident. It also did not give probative value to the
police blotter entry since the accident had long occurred in 1991. The RTC likewise
denied Meralcos claim for actual damages for lack of evidentiary support.
The CA reversed the RTC ruling and held that the RTC erred in disregarding
the parties stipulation at the pretrial that it was the truck that hit the electricity
post. TheCA also found that Bautista was Josefas employee when the accident
occurred since Josefa did not specifically deny this material allegation in the
amended complaint. It likewise noted that the sheriffs return stated that Bautista
was under Josefas employ until 1993.
Josefa filed the present petition after the CA denied his motion for
reconsideration.
Issues:
1. Whether Bautista exercised due diligence in driving when the truck hit the
electricity post
Page 448 of 483

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2. Whether Josefa is vicariously liable for Bautistas negligence under
paragraph
5,
Article 2180 of the Civil Code
Ruling:
1. No. Baustista is presumed to be negligent in driving the truck under the
doctrine of res ipsa loquitur
Nonetheless, in some cases where negligence is difficult to prove, the
doctrine of res ipsa loquitur permits an inference of negligence on the part of the
defendant or some other person who is charged with negligence where the thing or
transaction speaks for itself. This doctrine postulates that, as a matter of common
knowledge and experience and in the absence of some explanation by the
defendant who is charged with negligence, the very nature of occurrences may
justify an inference of negligence on the part of the person who controls the
instrumentality causing the injury. In other words, res ipsa loquitur is grounded on
the superior logic of ordinary human experience that negligence may be deduced
from the mere occurrence of the accident itself.
The procedural effect of res ipsa loquitur in quasi-delict cases is that the
defendants negligence is presumed. In other words, the burden of evidence shifts
to the defendant to prove that he did not act with negligence. This doctrine thus
effectively furnishes a bridge by which the complainant, without knowledge of the
cause of the injury, reaches over to the defendant, who knows or should know the
cause, for any explanation of care exercised by him to prevent the injury. For this
doctrine to apply, the complainant must show that: (1) the accident is of such
character as to warrant an inference that it would not have happened except for the
defendants negligence (2) the accident must have been caused by an agency or
instrumentality within the exclusive management or control of the person charged
with the negligence complained of and (3) the accident must not have been due to
any voluntary action or contribution onthe part of the person injured.
The present case satisfies all the elements of res ipsa loquitur. It is very
unusual and extraordinary for the truck to hit an electricity post, an immovable and
stationary object, unless Bautista, who had the exclusive management and control
of the truck, acted with fault or negligence.
2. Yes. Josefa is vicariously liable under paragraph 5, Article 2180of the Civil
Code.
The finding that Bautista acted with negligence in driving the truck gives rise
to the application of paragraph5, Article 2180 of the Civil Code which holds the
employer vicariously liable for damages caused by his employees within the scope
of their assigned tasks. In the present case, Josefa avoids the application of this
provision by denying that Bautista was his employee at the time of the incident.
Page 449 of 483

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Josefa cannot evade his responsibility by mere denial of his employment
relations with Bautista in the absence of proof that his truck was used without
authorization or that it was stolen when the accident occurred. In quasi-delict
cases, the registered owner of a motor vehicle is the employer of its driver in
contemplation of law. The registered owner of any vehicle, even if not used for
public service, would primarily be responsible to the public or to third persons for
injuries caused while the vehicle was being driven on highways or streets. The
purpose of motorvehicle registration is precisely to identify the owner so that if any
injury is caused by the vehicle, responsibility can be imputed to the registered
owner.
In order for Josefa to be relieved of his vicarious liability, he must show that
he exercised due diligence in the selection and supervision of Bautista. In concrete
terms, Josefa should show by competent object or documentary evidence that he
examined Bautista as to the latters qualifications, experience and service records
prior to employment. He should likewise prove by competent object or documentary
evidence that he formulated standard operating procedures, monitored their
implementation and imposed disciplinary measures for breach of these procedures.
However, Josefa failed to overcome the presumption of negligence against him
since he waived his right to present evidence during trial. The Supreme Court is
thus left with no other conclusion other than to rule that Josefa is primarily liable for
all natural and probable consequences of Bautistas negligence.
TORTFEASORS
RUKS KONSULT AND CONSTRUCTION vs. ADWORLD SIGN AND ADVERTISING
CORPORATION* AND TRANSWORLD MEDIA ADS, INC.,
G.R. No. 204866, January 21, 2015, J. Perlas-Bernabe
Pursuant to Article 2194, joint tortfeasors are solidarily liable. They are each
liable as principals, to the same extent and in the same manner as if they had
performed the wrongful act themselves. When a construction of a billboards lower
structure without the proper foundation by the first contractor, and that of the
second contractors finishing its upper structure and just merely assuming that the
first would reinforce the weak foundation are the two successive acts which were
the direct and proximate cause of the damages sustained by the company who
hired their services. Worse, both contractors were fully aware that the foundation
for the billboard was weak; yet, neither of them took any positive step to reinforce
such foundation, but none was done at all.
Facts:
Adworld Sign and Advertising Corporation (Adworld) filed a complaint for
damages against Transworld and Comark International Corporation (Comark) before
the RTC. In the complaint, Adworld alleged that it is the owner of a 75 ft. x 60 ft.
billboard structure located at EDSA Tulay, Guadalupe, Barangka Mandaluyong,
which was misaligned and its foundation impaired when, on August 11, 2003, the
adjacent billboard structure owned by Transworld and used by Comark collapsed
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and crashed against it. Resultantly, on August 19, 2003, Adworld sent Transworld
and Comark a letter demanding payment for the repairs of its billboard as well as
loss of rental income. On August 29, 2003, Transworld sent its reply, admitting the
damage caused by its billboard structure on Adworlds billboard, but nevertheless,
refused and failed to pay the amounts demanded by Adworld. Thus, the latter was
constrained to file the instant complaint, praying for damages and indemnity for
loss
of
income.
In its Answer with Counterclaim, Transworld averred that the collapse of its
billboard structure was due to extraordinarily strong winds that occurred instantly
and unexpectedly, and maintained that the damage caused to Adworlds billboard
structure was hardly noticeable. It likewise filed a Third-Party Complaint against
RuksKonsult and Construction (Ruks), the company which built the collapsed
billboard structure in the formers favor. It was alleged therein that the structure
constructed by Ruks had a weak and poor foundation not suited for billboards, thus,
prone to collapse, and as such, Ruks should ultimately be held liable for the
damages caused to Adworlds billboard structure.
For its part, Comark denied liability for the damages caused to Adworlds
billboard structure, maintaining that it does not have any interest on Transworlds
collapsed billboard structure as it only contracted the use of the same. In this
relation, Comark prayed for exemplary damages from Transworld for unreasonably
including
it
as
a
party-defendant
in
the
complaint.
Lastly, Ruks admitted that it entered into a contract with Transworld for the
construction of the latters billboard structure, but denied liability for the damages
caused by its collapse. It contended that when Transworld hired its services, there
was already an existing foundation for the billboard and that it merely finished the
structure according to the terms and conditions of its contract with the latter.
Eventually, the RTC ultimately ruled in Adworlds favor, and accordingly,
declared, inter alia, Transworld and Ruks jointly and severally liable to the former.
While Transworlds appeal was dismissed due to failure to file an appellants brief on
time, the CA, in Ruks appeal, upheld the decision of the lower court. Dissatisfied,
Ruks moved for reconsideration,which was, however, denied. Hence, this petition.
Issue:
Whether or not Ruksshall be jointly and severally liable with Transworld for
damages sustained by Adworld.
Ruling:
The petition is without merit.
This Court sees no cogent reason to deviate from the findings of the RTC and
the CA and their uniform conclusion that both Transworld and Ruks committed acts
resulting in the collapse of the formers billboard, which in turn, caused damage to
the adjacent billboard of Adworld. Hence, the CA correctly affirmed the ruling of the
RTC declaring Ruks jointly and severally liable with Transworld for damages
sustained by Adworld.
Jurisprudence defines negligence as the omission to do something which a
reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do. It is the failure to observe for the protection of the
Page 451 of 483

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In this case, the CA correctly affirmed the RTCs finding that Transworlds
initial construction of its billboards lower structure without the proper foundation,
and that of Rukss finishing its upper structure and just merely assuming that
Transworld would reinforce the weak foundation are the two (2) successive acts
which were the direct and proximate cause of the damages sustained by Adworld.
Worse, both Transworld and Ruks were fully aware that the foundation for the
formers billboard was weak; yet, neither of them took any positive step to reinforce
such foundation, but none was done at all. Clearly, the foregoing circumstances
show that both Transworld and Ruks are guilty of negligence in the construction of
the formers billboard, and perforce, should be held liable for its collapse and the
resulting damage to Adworlds billboard structure. As joint tortfeasors, pursuant to
Article 2194, therefore, they are solidarily liable to Adworld. In other words, joint
tortfeasors are each liable as principals, to the same extent and in the same
manner as if they had performed the wrongful act themselves. The Courts
pronouncement in People v. Velasco is instructive on this matter, to wit:
Where several causes producing an injury are concurrent and each is
an efficient cause without which the injury would not have happened,
the injury may be attributed to all or any of the causes and recovery
may be had against any or all of the responsible persons although
under the circumstances of the case, it may appear that one of them
was more culpable, and that the duty owed by them to the injured
person was not same. No actors negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other
actors. Each wrongdoer is responsible for the entire result and is liable
as though his acts were the sole cause of the injury.
There is no contribution between joint [tortfeasors] whose liability is
solidary since both of them are liable for the total damage. Where the
concurrent or successive negligent acts or omissions of two or more
persons, although acting independently, are in combination the direct
and proximate cause of a single injury to a third person, it is
impossible to determine in what proportion each contributed to the
injury and either of them is responsible for the whole injury. x xx.
(Emphases and underscoring supplied)
ATTORNEYS FEES
WILLAWARE PRODUCTS CORPORATION vs. JESICHRIS MANUFACTURING
CORPORATION
When the plaintiff in a case of unfair competition under the Civil Code fails to
satisfactorily prove that it had lost income, yet the trial court awarded actual
damages in the amount claimed by the plaintiff, and the CA deleted such an award
Page 452 of 483

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and awarded in its place nominal damages, the award of attorneys fees must also
be lowered.
Facts:
Respondent Jesichris Manufacturing Company (Jesichris), a partnership
engaged in manufacturing and distributing plastic and metal products, including
plastic-made automotive parts, filed with the RTC a complaint for damages for unfair
competition withprayer for permanent injunction to enjoin petitioner Willaware
Products Corporation (Willaware), which is engaged in the manufacturing and
distributing plastic kitchenware products, from manufacturing and distributing
plastic-made automotive parts similar to those of Jesichris.
Jesichris asserted that as a result of Willawares deliberate copying and
selling of its plastic-made automotive products, Jesichris suffered damages in terms
of lost and unrealized profits in the amount of TWO MILLION PESOS (P
2,00,000.00)as of the date of its complaint. Furthermore, it incurred attorneys fees
and litigation expenses in the amount of FIVE HUNDRED THOUSAND PESOS (P
500,000.00).
The RTC ruled in favor of Jesichris, holding that Willaware clearly invaded the
rights or interest of respondent by deliberately copying and performing acts
amounting to unfair competition. The RTC found Willaware liable to Jesichris Two
Million (P2,000,000.00) Pesos, as actual damages,
One Hundred Thousand (P100,000.00) Pesos as attorneys fees and One Hundred
Thousand (P100,000.00) Pesos for exemplary damages.
The CA affirmed with modification the RTC decision. It found however, no
basis for the award of actual damages. The claim of actual damages was not duly
proven, as the income statement of Jesichris which showed a decline in its sales, did
not disclose if this pertains to the subject automotive parts or to the other products
of Jesichris. In any event, it was clearly shown that there was unfair competition on
the part of Willaware that prejudiced Jesichris. The award of nominal damages in the
amount of Two Hundred Thousand Pesos (P200,000.00) was proper in order to
recognize and vindicate Jesichris rights. The RTCs award of attorneys fees and
exemplary damages was also maintained. The CA deleted the P 2 million actual
damages and awarded the P200,000.00 nominal damages in its place.
Issue:
Should the attorneys fees also be lowered?
Ruling:
Since the award of Two Million Pesos (P2,000,000.00) in actual damages had
been deleted and in its place Two Hundred Thousand Pesos (P200,000.00) in
nominal damages is awarded, the attorney's fees should concomitantly be modified
and lowered to Fifty Thousand Pesos (P50,000.00).
Page 453 of 483

2015)
RICARDO A. DALUSONG vs. EAGLE CLARC SHIPPING PHILIPPINES, INC., et
al.
G.R. No. 204233, September 3, 2014, Acting C.J. Carpio
Attorneys fees is not available when the defendant employer is not guilty of
bad faith. Thus, when the company-designated physician gave the seafarer a final,
permanent partial disability grading beyond the 120-day period but before the 240
day maximum, then the latter is not entitled to permanent disability benefits. The
employer is not in bad faith in refusing to give the seafarer full disability benefits;
thus the award of attorneys fees in favor of the seafarer is unwarranted.
Facts:
Petitioner Ricardo Dalusong was hired by respondents Eagle Clarc Shipping
Philippines, Inc., Norfield Offshore AS, and/or Capt. Leopoldo Arcillar as Able Seaman
on board their vessel. While he was working on board, the vessel suddenly moved
due to a swell, and a crew member fell directly on Daluson, injuring his right foot.
He was brought to the hospital in Texas, where he was diagnosed with a fractured
ankle and his foot was placed in cast. Later, he was repatriated to the Philippines.
One month after physical therapy, Dr. Cruz, the company-designated doctor,
gave Dalusongan interim disability grading based on the POEA schedule of disability
of grade 8 thatis moderate rigidity or one third loss of motion or lifting power of
thetrunk. Upon further rehabilitation, Dalusongs condition improved. On July 2010,
the company-designated doctor issued a final disability gradingunder the POEA
schedule of disability of grade 11 - complete immobilityof an ankle joint in normal
position. Dalusong disagreed with thedisability assessment and consulted Dr.
NicanorEscutin, a physician of hisown choice. In his Disability Report, Dr. Escutin
found Dalusong to be suffering from PARTIAL PERMANENTDISABILITY. Dr. Escutin
concluded that Dalusongis unfit for seaduty inwhatever capacity as seaman.
Dalusong filed with the NLRC a complaint against privaterespondents,
claiming full disability benefits of US$ 80,000.00, sick wages, damages,
andattorneys fees. The LA ruled that Dalusong sufferedfrom partial permanent
disability, and held respondents liable to Dalusong in the amount of US$ 12,551
representing disability benefits plus attorneys fees equivalent to 10% of the total
award.
The NLRC modified the LA decision, and held that Dalusong was totally and
permanently unfit to perform his usual duties and responsibilities, but it did not
sustain the US$80,000.00 disability benefits claimed by Dalusong in the absence of
a CBA supporting such claim.
The CA reinstated the LA decision, but ruled that the award of attorneys fees
is unwarranted since there was no showing that private respondents acted in bad
faith.
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Issue:
Did respondents act with bad faith as to warrant award attorneys fees?
Ruling:
Just because the seafarer is unable to perform his job and is undergoing
medical treatment for more than 120 days does not automatically entitle the
seafarer to total and permanent disability compensation. Before the maximum 240day medical treatment period expired, Dalusong was issued a final disability grade
11 which is merely equivalent to a permanent partial disability, since under Section
32 of the POEA-SEC, only those classified under grade 1 are considered total and
permanent disability. Clearly, Dalusong is only entitled to permanent partial
disability compensation, since his condition cannot be considered as permanent
total disability.
The Court likewise agrees with the Court of Appeals in deleting the award of
attorney's fees. Private respondents were justified in insisting that Dalusong is only
entitled to US$ 12,551 compensation for his grade 11 disability. There was no bad
faith on the part of private respondents which would warrant the award of attorney's
fees.
CIVIL LIABILITY
ANTONIO M. GARCIA vs. FERRO CHEMICALS, INC.,
Ferro Chemicals, Inc. joined the public prosecutor in filing the petition for
certiorari before this court. Ramon Garcia, President of Ferro Chemicals, Inc., signed
the verification and certification of non-forum shopping of the petition for certiorari.
When the civil action for the recovery of civil liability ex delicto is instituted with the
criminal action, whether by choice of private complainant (i.e., no reservation is
made or no prior filing of a separate civil action) or as required by the law or rules,
the case will be prosecuted under the direction and control of the public
prosecutor. The civil action cannot proceed independently of the criminal case.
Facts:
Antonio Garcia, as seller, and Ferro Chemicals, Inc., through Ramon Garcia, as
buyer, entered into a deed of absolute sale and purchase of shares of stock on July
15, 1988. These shares of stock were in the name of Antonio Garcia. On March 3,
1989, a deed of right of repurchase over the same shares of stock subject of the
deed of absolute sale and purchase of shares of stock was entered into between
Antonio Garcia and Ferro Chemicals, Inc.
Before the end of the 180-day period, Antonio Garcia exercised his right to
repurchase the properties. However, Ferro Chemicals, Inc. did not agree to the
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repurchase of the shares of stock. Thus, Antonio Garcia filed an action for specific
performance and annulment of transfer of shares.
On September 6, 1989, the class A share in Alabang Country Club, Inc. and
proprietary membership in the Manila Polo Club, Inc., which were included in the
contracts entered into between Antonio Garcia and Ferro Chemicals, Inc., were sold
at public auction to Philippine Investment System Organization.
RTC found Antonio Garcia not guilty of estafa, and no civil liability was
awarded to Ferro Chemicals, Inc. However, at present, there is a conflicting decision
from the Court of Appeals awarding Ferro Chemicals, Inc. civil indemnity arising
from the offense charged.
On August 25, 1997, Ferro Chemicals, Inc. appealed to the Court of Appeals
the order of the Regional Trial Court as to the civil aspect of the case. On October
15, 1997, the Makati City Prosecutors Office and Ferro Chemicals, Inc. also filed a
petition for certiorari the SC, assailing the Regional Trial Courts decision which was
subsequently dismissed. On the other hand, the Court of Appeals, in its
decision dated August 11, 2005, granted the appeal and awarded Ferro Chemicals,
Inc. the amount of 1 million for actual loss and found that Antonio Garcia failed to
disclose the Philippine Investment and Savings Organizations lien over the club
shares.
Issue:
Whether Ferro Chemicals, Inc. was entitled to the awards given as civil
liability ex delicto
Ruling:
When the civil action for the recovery of civil liability ex delicto is instituted
with the criminal action, whether by choice of private complainant (i.e., no
reservation is made or no prior filing of a separate civil action) or as required by the
law or rules, the case will be prosecuted under the direction and control of the
public prosecutor. The civil action cannot proceed independently of the criminal
case. This includes subsequent proceedings on the criminal action such as an
appeal. In any case, Ferro Chemicals, Inc. joined the public prosecutor in filing the
petition for certiorari before this court. Ramon Garcia, President of Ferro Chemicals,
Inc., signed the verification and certification of non-forum shopping of the petition
for certiorari.
The Court must clarify, however, that private complainants in criminal cases
are not precluded from filing a motion for reconsideration and subsequently an
appeal on the civil aspect of a decision acquitting the accused. An exception to the
rule that only the Solicitor General can bring actions in criminal proceedings before
the Court of Appeals or this court is when the private offended party questions the
civil aspect of a decision of a lower court.
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However, if the state pursues an appeal on the criminal aspect of a decision
of the trial court acquitting the accused and private complainant/s failed to reserve
the right to institute a separate civil action, the civil liability ex delicto that is
inherently attached to the offense is likewise appealed. The appeal of the civil
liability ex delicto is impliedly instituted with the petition for certiorari assailing the
acquittal of the accused. Private complainant cannot anymore pursue a separate
appeal from that of the state without violating the doctrine of non-forum shopping.
On the other hand, the conclusion is different if private complainant reserved
the right to institute the civil action for the recovery of civil liability ex delicto before
the Regional Trial Court or institute a separate civil action prior to the filing of the
criminal case in accordance with Rule 111 of the Rules of Court. In these situations,
the filing of an appeal as to the civil aspect of the case cannot be considered as
forum shopping. This is not the situation here.
OTHER LAWS WHICH ARE EXCLUDED FROM THE SYLLABUS
EUFROCINA NIEVES vs. ERNESTO DULDULAO and FELIPE PAJARILLO
G.R. No. 190276, April 2, 2014, J. Perlas-Bernabe
Agricultural lessees, being entitled to security of tenure, may be ejected from
their landholding only on the grounds provided by law. These grounds the
existence of which is to be proven by the agricultural lessor in a particular case
are enumerated in Section 36 of Republic Act No. (RA) 3844, otherwise known as
the Agricultural Land Reform Code. In this case, it was established that the
agricultural lessees willfully and deliberately failed to pay the lease rentals when
they fell due, which is one of the grounds for dispossession of their landholding as
provided in said provision of law.
Facts:
Eufrocina Nieves (Nieves) is the owner of a piece of agricultural rice land with
an area of six (6) hectares, more or less (subject land). Ernesto Duldulao and Felipe
Pajarillo (respondents) are tenants and cultivators of the subject land who are
obligated to each pay leasehold rentals of 45 cavans of palay for each cropping
season, one in May and the other in December.
Claiming that respondents failed to pay their leasehold rentals since 1985
which had accumulated to 446.5 and 327 cavans of palay, respectively, Nieves filed
a petition before the DARAB Office of the Provincial Adjudicator (PARAD), seeking
the ejectment of respondents from the subject land for nonpayment of rentals.
Prior to the filing of the case, a mediation was conducted before the Office of
the Municipal Agrarian Reform Officer and Legal Division where respondents
admitted being in default in the payment of leasehold rentals equivalent to 200 and
327 cavans of palay, respectively, and promised to pay the same. Subsequently,
however, in their answer to the petition, both respondents manifested their lack of
intention to renege on their obligations to pay the leasehold rentals due, explaining
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that the supervening calamities, such as the flashfloods and typhoons that affected
the area prevented them from complying.
The PARAD declared that the tenancy relations between the parties had been
severed by respondents failure to pay their back leasehold rentals, thereby
ordering them to vacate the subject land and fulfill their rent obligations.
Respondents elevated the case on appeal. The Department of Agrarian
Reform Adjudication Board (DARAB) issued a Decision affirming the findings of the
PARAD that indeed, respondents were remiss in paying their leasehold rentals and
that such omission was willful and deliberate, justifying their ejectment from the
subject land.
Respondents then elevated the matter to the CA. The CA granted
respondents petition for review, thereby reversing the ruling of the DARAB
terminating the tenancy relations of the parties. While it found respondents to have
been remiss in the payment of their leasehold rentals, it held that the omission was
not deliberate or willful.
Issue:
Whether or not the CA correctly reversed the DARABs ruling ejecting
respondents from the subject land.
Ruling:
No. The CA erred in reversing the DARABs ruling.
Agricultural lessees, being entitled to security of tenure, may be ejected from
their landholding only on the grounds provided by law. These grounds the
existence of which is to be proven by the agricultural lessor in a particular case
are enumerated in Section 36 of Republic Act No. (RA) 3844, otherwise known as
the Agricultural Land Reform Code, which read as follows:
Section
36.
Possession
of
Landholding
Exceptions.
Notwithstanding any agreement as to the period or future surrender, of
the land, an agricultural lessee shall continue in the enjoyment and
possession of his landholding except when his dispossession has been
authorized by the Court in a judgment that is final and executory if
after due hearing it is shown that:
x
x
x
(6) The agricultural lessee does not pay the lease rental when it falls
due: Provided, That if the nonpayment of the rental shall be due to
crop failure to the extent of seventy-five per centum as a result of a
fortuitous event, the nonpayment shall not be a ground for
dispossession, although the obligation to pay the rental due that
particular crop is not thereby extinguished; or
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To eject the agricultural lessee for failure to pay the leasehold rentals under
item 6 of the abovecited provision, jurisprudence instructs that the same must be
willful and deliberate in order to warrant the agricultural lessees dispossession of
the land that he tills.
While respondents indeed admit that they failed to pay the full amount of
their respective leasehold rentals as they become due, they claim that their default
was on account of the debilitating effects of calamities like flashfloods and
typhoons. This latter assertion is a defense provided under the same provision
which, if successfully established, allows the agricultural lessee to retain possession
of his landholding. The records of this case are, however, bereft of any showing that
the aforestated claim was substantiated by any evidence tending to prove the
same. Keeping in mind that bare allegations, unsubstantiated by evidence, are not
equivalent to proof, the Court cannot therefore lend any credence to respondents
fortuitous event defense.
Respondents failure to pay leasehold rentals to the landowner also appears
to have been willful and deliberate. They, in fact, do not deny and therefore
admit the landowners assertion that their rental arrearages have accumulated
over a considerable length of time, i.e., from 1985 to 2005 but rely on the fortuitous
event defense, which as abovementioned, cannot herein be sustained. The term
willful means voluntary and intentional, but not necessarily malicious, while the
term deliberate means that the act or omission is intentional, premeditated or
fully considered. These qualities the landowner herein had successfully
established in relation to respondents default in this case. Accordingly, their
dispossession from the subject land is warranted under the law.
CHARLES BUMAGAT, et al. vs. REGALADO ARRIBAY
G.R. No. 194818, June 9, 2014, J. Del Castillo
A case involving agricultural land does not immediately qualify it as an
agrarian dispute. The mere fact that the land is agricultural does not ipso facto
make the possessor an agricultural lessee or tenant; there are conditions or
requisites before he can qualify as an agricultural lessee or tenant, and the subject
matter being agricultural land constitutes simply one condition. In order to qualify
as an agrarian dispute, there must likewise exist a tenancy relation between the
parties. Thus, when farmer-beneficiaries of PD 27 who are registered owners of
agricultural lands filed a complaint for forcible entry against a person whose claim
of ownership over the same parcels of land emanates from a donation by the heirs
of the original owner, it is a civil case within the jurisdiction of the ordinary courts,
as all the elements for an agrarian dispute are not present.
Facts:
Petitioners Charles Bumagat, et al., registered owners, successors-in-interest
or possessors of agricultural land, filed a complaint with the MCTC for forcible entry
against respondent Regalado Arribay. They alleged that Arribay with the aid of
armed goons, and through the use of intimidation and threats of physical harm
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entered the above-described parcels of land and ousted them from their lawful
possession.
Arribay moved to dismiss the complaint, claiming that the subject properties
are agricultural lands, which thus renders the dispute an agricultural matter and
subject to the exclusive jurisdiction of the Department of Agrarian Reform
Adjudication Board (DARAB). The METC denied Arribays motion, finding that the
pleadings failed to show the existence of a tenancy or agrarian relationship between
the parties. Arribay filed his answer, claiming that the petitioners titles have been
ordered cancelled by the DAR and he is now the owner of most of the parcels of
land under the controversy, the remaining portions belonging to his principals.
Arribay also claimed that the petitioners became farmer-beneficiaries under PD 27,
and the parcels of land originally belonging to Romulo Taggueg, Sr. were awarded to
them. Subsequently, the heirs of Romulo, Sr. sought to cancel petitioners titles.
The heirs won the case and new titles over the property were issued in their favor.
One of the heirs transferred his title in favor of Arribay.
The MCTC ruled in favor of the petitioners, holding that it had jurisdiction over
the case and that while Arribay and his principals have been issued titles over the
subject property, Arribay cannot take the law into his own hands and unilaterally
eject the petitioners from the land. The RTC affirmed the MCTC decision. The CA
reversed the RTC and held that the jurisdiction lied with the DARAB, petitioners
titles were obtained pursuant to PD 27, and under the 1994 DARAB rules of
procedure, cases involving the issuance, correction and cancellation of Certificates
of Land Ownership Award (CLOAs) and Emancipation Patents (EPs) which are
registered with the Land Registration Authority fall under DARAB jurisdiction.
Issue:
Did the DARAB lack jurisdiction over the case?
Ruling:
The petition is granted.
What the appellate court failed to realize, however, is the fact that as
between petitioners and Arribay, there is no tenurial arrangement, not even an
implied one. As correctly argued by petitioners, a case involving agricultural land
does not immediately qualify it as an agrarian dispute. The mere fact that the land
is agricultural does not ipso facto make the possessor an agricultural lessee or
tenant. There are conditions or requisites before he can qualify as an agricultural
lessee or tenant, and the subject being agricultural land constitutes just one
condition. For the DARAB to acquire jurisdiction over the case, there must exist a
tenancy relation between the parties. [I]n order for a tenancy agreement to take
hold over a dispute, it is essential to establish all its indispensable elements, to wit:
1) that the parties are the landowner and the tenant or agricultural lessee;
2) that the subject matter of the relationship is an agricultural land;
3) that there is consent between the parties to the relationship;
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4) that the purpose of the relationship is to bring about agricultural production;
5) that there is personal cultivation on the part of the tenant or agricultural lessee;
and
6) that the harvest is shared between the landowner and the tenant or agricultural
lessee.
In the present case, it is quite evident that not all of these conditions are present.
For one, there is no tenant, as both parties claim ownership over the property.
Besides, when petitioners obtained their emancipation patents and
subsequently their certificates of title, they acquired vested rights of absolute
ownership over their respective landholdings. It presupposes that the grantee or
beneficiary has, following the issuance of a certificate of land transfer, already
complied with all the preconditions required under P.D. No. 27, and that the
landowner has been fully compensated for his property. And upon the issuance of
title, the grantee becomes the owner of the landholding and he thereby ceases to
be a mere tenant or lessee. His right of ownership, once vested, becomes fixed and
established and is no longer open to doubt or controversy. Petitioners became the
owner[s] of the subject property upon the issuance of the emancipation patents
and, as such, [enjoy] the right to possess the samea right that is an attribute of
absolute ownership.
MARIANO JOSE, FELICISIMO JOSE, DECEASED, SUBSTITUTED BY HIS
CHILDREN MARIANO JOSE, CAMILO JOSE, TIBURCIA JOSE, FERMINA JOSE,
AND VICTORIA JOSE vs. ERNESTO M. NOVIDA, RODOLFO PALAYPAY, JR.,
ALEX M. BELARMINO, RODRIGO LIBED, LEONARDO L. LIBED, BERNARDO B.
BELARMINO, BENJAMIN G. ACOSTA, MODESTO A. ORLANDA, WARLITO B.
MEJIA, MAMERTO B. BELARMINO, MARCELO O. DELFIN AND HEIRS OF
LUCINO A. ESTEBAN, REPRESENTED BY CRESENCIA M. VDA. ESTEBAN
G.R. No. 177374, July 2, 2014, J. Del Castillo
In Heirs of Lazaro Gallardo vs. Soliman, the DARAB has exclusive jurisdiction
over cases involving the cancellation of registered EPs; the DAR Secretary, on the
other hand, has exclusive jurisdiction over the issuance, recall or cancellation of EPs
or Certificates of Land Ownership Awards that are not yet registered with the
Register of Deeds.
Thus, since certificates of title have been issued in the respective names of
the respondents as early as in 1990, the DAR Region I Director had no jurisdiction to
cancel their titles; the same is true with respect to the DAR Secretary. Thus, their
respective January 30, 1991 and August 22, 1995 Orders are null and void;
consequently, respondents EPs and titles subsists, contrary to petitioners claim
that they have been cancelled. Void judgments or orders have no legal and binding
effect, force or efficacy for any purpose; in contemplation of law, they are
nonexistent.
Facts:
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In 1990, respondents were each granted, as farmer beneficiaries,
Emancipation Patents (EPs) and Certificates of Title over portions of land forming
part of a 16.4 hectare agricultural estate in Pangasinan, which was placed within the
coverage of Operation Land Transfer (OLT). On the other hand, in January 1991,
petitioners filed with the Region I Office of the DAR a petition seeking
reinvestigation of the issuance of certain emancipation patents in favor of
respondents and claiming therein that they are the bona fide and actual tenanttillers of the subject agricultural estate. The DAR Region I Director immediately
issued an order upholding the rights of petitioner over the said estate.
In December 1991, respondents filed a complaint for recovery of possession,
accounting, liquidation and damages against petitioners with the Region I Office of
the DARAB. In their suit, they assert that Felicisimo Jose was the original tenant of
the subject property and he obtained loans from one Benigno Siobal and one
Rogelio Cerezo, which were secured by a mortgage over the subject estate.
Furthermore, according to respondents, Felicisimo Jose failed to redeem the
property from the lenders and he abandoned the same when he migrated to the
USA and became a naturalized citizen thereof. Thus, with the sanction of the DAR,
the owners subdivided the land and sold portion thereof to respondents who were
unlawfully dispossessed therefrom by Felicisimo Jose when he returned from the
USA. On the contrary, petitioners alleged that in addition to Felicisimo, Mariano and
Virgilio, the subject property was being cultivated by their other siblings and the
loans obtained from Siobal and Cerezo were properly settled.
Subsequently, the DARAB issued a decision which held, among others, that
there was abandonment on the part of Felicisimo Jose of his possession and
cultivation of the landholding or estate in question and so the respondents should
be the rightful beneficiaries thereof. In the meantime, the DAR Secretary issued an
order affirming the decision reached by the DAR Region I Director but upon motion
for reconsideration the former conceded jurisdiction over the case with the DARAB.
Petitioners then interposed an appeal with DARAB Quezon City and later with
the CA. Both appellate bodies affirmed the findings of the Provincial Adjudicator and
thus sustaining the rights of respondents as tenant-beneficiaries of the subject
estate.
Issue:
Whether or not the DARAB has jurisdiction over the instant case.
Ruling:
YES, the DARAB exercises jurisdiction over cases involving cancellation of
emancipation patents, such as the case at bar, that are already registered with the
Register of Deeds.
When petitioners filed in January 1991 their petition with the DAR Region I
Office, certificates of title have been issued to the respondents. Consequently, it is
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the DARAB and not the DAR Region I or the DAR Secretary that has exclusive
jurisdiction over the case pursuant to law and the DARAB Rules of Procedure. In
particular, the jurisdiction of the DARAB in relation to this case is set forth in Section
1(f), Rule II of the DARAB Rules of Procedure, which provides that [t]hose involving
the issuance, correction and cancellation of Certificates of Land Ownership Award
(CLOAs) and Emancipation Patents (EPs) which are registered with the Land
Registration Authority. In contrast, Administrative Order No. 06-00 governing the
quasi-judicial functions of the DAR, under Section 2(d) respecting jurisdiction
provides that [i]ssuance, recall or cancella-tion of Certificates of Land Transfer
(CLTs) and CARP Beneficiary Certificates (CBCs) in cases outside the purview of P.D.
No. 816, including the issuance, recall or cancellation of EPs or CLOAs not yet
registered with the Register of Deeds.
In Heirs of Lazaro Gallardo vs. Soliman, the DARAB has exclusive jurisdiction
over cases involving the cancellation of registered EPs; the DAR Secretary, on the
other hand, has exclusive jurisdiction over the issuance, recall or cancellation of EPs
or Certificates of Land Ownership Awards that are not yet registered with the
Register of Deeds.
Thus, since certificates of title have been issued in the respective names of
the respondents as early as in 1990, the DAR Region I Director had no jurisdiction to
cancel their titles; the same is true with respect to the DAR Secretary. Thus, their
respective January 30, 1991 and August 22, 1995 Orders are null and void;
consequently, respondents EPs and titles subsists, contrary to petitioners claim
that they have been cancelled. Void judgments or orders have no legal and binding
effect, force or efficacy for any purpose; in contemplation of law, they are
nonexistent.
LAND BANK OF THE PHILIPPINES vs. JOSE T. LAJOM, represented by
PORFIRIO RODRIGUEZ et al
G.R. No. 184982 & 185048, August 20, 2014, J. Perlas-Bernabe
Properties of the Lajoms were taken due to the Agrarian Reform Program.
Just compensation was partially given. The Lajoms contested the computation of
just compensation due to an alleged error in the applicable law. The Court ruled
that the date of taking of the subject land for purposes of computing just
compensation should be reckoned from the issuance dates of the emancipation
patents. An emancipation patent constitutes the conclusive authority for the
issuance of a Transfer Certificate of Title in the name of the grantee. It is from the
issuance of an emancipation patent that the grantee can acquire the vested right of
ownership in the landholding, subject to the payment of just compensation to the
landowner.
Facts:
Jose T. Lajom (Lajom) and his mother Vicenta Vda. De Lajom (Vda. De Lajom)
were the registered owners of several parcels of land with an aggregate area of 27
hectares located at Alua, San Isidro, Nueva Ecija. Sometime in 1991, a 24-ha., more
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or less, portion of the subject land was placed under the government's Operation
Land Transfer Program pursuant to Presidential Decree No. 27,10 otherwise known
as the "Tenants Emancipation Decree," as amended. Accordingly, the Department of
Agrarian Reform (DAR), through the Land Bank of the Philippines (LBP), offered to
pay Lajom the following amounts as just compensation for the following constitutive
areas of the subject portion: (a) 19,434.00 for 11.3060 has.; (b) 17,505.65 for
2.4173 has.; and (c) 80,733.45 for 10.3949 has. (DAR valuation). Records show,
however, that despite non-payment of the offered just compensation, DAR granted
twelve (12) Emancipation Patents to several farmer-beneficiaries.
Lajom rejected the DAR valuation and, instead, filed an amended Petition for
determination of just compensation and cancellation of land transfers against the
DAR, the LBP, and the said farmer-beneficiaries. He alleged, inter alia, that in
computing the amount of just compensation, the DAR erroneously applied the
provisions of PD 27 and Executive Order No. (EO) 228, that have been repealed by
"Comprehensive Agrarian Reform Law of 1988. In sum, Lajom stressed that the DAR
valuation was arrived at without due process, highly prejudicial and inimical to his
and his heirs property rights.
The RTC rejected the DAR valuation. On appeal, the CA affirmed with
modification the RTC Decision, deleting the award of 6% interest p.a. and, in lieu
thereof, ordered LBP to pay Lajom, through his representatives and/or heirs, interest
by way of damages at the rate of 12% p.a. on the just compensation award of
P3,858,912.00 from March 11, 2004 until fully paid. Hence, this petition.
Issue:
1. Whether or not Republic Act No. (RA) 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988 is the applicable law at the case at
hand
2. When is the reckoning point for the payment of just compensation
3. Whether or not the award of damages as held by the CA is proper
Ruling:
1. The applicable law is Republic Act No. (RA) 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988.
Case law instructs that when the agrarian reform process under PD 27
remains incomplete and is overtaken by RA 6657, such as when the just
compensation due the landowner has yet to be settled, as in this case, such just
compensation should be determined and the process concluded under RA 6657,
with PD 27 and EO 228 applying only suppletorily. Hence, where RA 6657 is
sufficient, PD27 and EO 228 are superseded.
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2015)
Records show that even before Lajom filed a petition for the judicial
determination of just compensation in May 1993, RA 6657 had already taken effect
on June 15, 1988. Similarly, the emancipation patents had been issued in favor of
the farmer-beneficiaries prior to the filing of the said petition, and both the taking
and the valuation of the subject portion occurred after the passage of RA 6657.
Quite evidently, the matters pertaining to the correct just compensation award for
the subject portion were still in contention at the time RA 6657 took effect; thus, as
correctly ruled by the CA, its provisions should have been applied, with PD 27 and
EO 228 applying only suppletorily.
2. The reckoning point of the payment of just compensation is at the time of taking.
As to the proper reckoning point, it is fundamental that just compensation
should be determined at the time of the propertys taking. Taking may be deemed
to occur, for instance, at the time emancipation patents are issued by the
government.
Since the emancipation patents in this case had been issued between the
years 1994 and 1998, the just compensation for the subject portion should then be
reckoned therefrom, being considered the "time of taking" or the time when the
landowner was deprived of the use and benefit of his property. On this score, it must
be emphasized that while the LBP is charged with the initial responsibility of
determining the value of lands placed under the land reform and, accordingly, the
just compensation therefor, its valuation is considered only as an initial
determination and, thus, not conclusive. Verily, it is well-settled that it is the RTC,
sitting as a Special Agrarian Court, which should make the final determination of
just compensation in the exercise of its judicial function.
3. Damages may be awarded however not based on the just compensation but due
to the delay in payment.
With respect to the commonly raised issue on interest, the RTC may impose
the same on the just compensation award as may be justified by the circumstances
of the case and in accordance with prevailing jurisprudence. The Court has
previously allowed the grant of legal interest in expropriation cases where there was
delay in the payment of just compensation, deeming the same to be an effective
forbearance on the part of the State. To clarify, this incremental interest is not
granted on the computed just compensation; rather, it is a penalty imposed for
damages incurred by the landowner due to the delay in its payment. Thus, legal
interest shall be pegged at the rate of 12% p.a. from the time of taking until June
30, 2013. Thereafter, or beginning July 1, 2013, until fully paid, just compensation
shall earn interest at the new legal rate of 6% p.a., conformably with the
modification on the rules respecting interest rates introduced by Bangko Sentral ng
Pilipinas Monetary Board Circular No. 799, Series of 2013
RENATO L. DELFINO, SR. (Deceased), Represented by his Heirs, namely:
GRACIA DELFINO, GREGORIO A. DELFINO; MA. ISABEL A. DELFINO, RENATO
A. DELFINO, JR., MA. REGINA DELFINO ROSELLA, MA. GRACIA A. DELFINO,
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2015)
MARIANO A. DELFINO, MA. LUISA DELFINO GREGORIO and REV. FR.
GABRIELA. DELFINO vs. AVELINO K. ANASAO and ANGEL K. ANASAO
(Deceased and represented by his sole heir, SIXTO C. ANASAO)
G.R. No. 197486, September 10, 2014, J. VILLARAMA, JR.
The right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner; Provided, however, That in case the area
selected for retention by the landowner is tenanted, the tenant shall have the
option to choose whether to remain therein or be a beneficiary in the same or
another agricultural land with similar or comparable features. In case the tenant
chooses to remain in the retained area, he shall be considered a leaseholder and
shall lose his right to be a beneficiary under this Act. In case the tenant chooses to
be a beneficiary in another agricultural land, he loses his right as a leaseholder to
the land retained by the landowner. The tenant must exercise this option within a
period of one (1) year from the time the landowner manifests his choice of the area
for retention.
Facts:
In October 1975, Delfino sold the 20.8108-hectare coconut land covered by
TCT No. T-26381 (T-69595), leaving him with 14.6717 hectares of rice land. The
tenanted portion (9.8597 hectares) being tilled by respondents Avelino K. Anasao
and Angel K. Anasao, and another farmer, Rodriguez P. Dacumos was placed under
Operation Land Transfer (OLT) pursuant to Presidential Decree No. 27 (PD 27). After
full payment to the Land Bank of the Philippines of the amortizations, the farmerbeneficiaries were issued Emancipation Patents (EPs). The remaining area of 3.2942
hectares covered by OLT was not issued with EPs.
On February 8, 1992, prior to the registration of the EPs in the Registry of
Deeds, Delfino filed an Application for Retention over the entire 14.6717-hectare
rice land. Upon the recommendation of the Department of Agrarian Reform (DAR),
Laguna Provincial Office, the DAR Regional Office IV Director issued an Order dated
June 22, 1993 denying retention of the 9.8597 hectares but granting retention over
the 4.8120 hectares which was not covered by OLT.
Delfino appealed to then DAR Secretary Ernesto D. Garilao who issued an
Order dated February 28, 1995 setting aside the Order of the DAR Regional Director
of Region IV dated June 22, 1993, thus petitioner is hereby given the maximum of
five (5) hectares from the tenanted portion as his retained area.
A motion for reconsideration by way of motion for intervention was filed by
respondent. In his Order dated December 13, 1995, Secretary Garilao denied the
motion for utter lack of merit. Respondents appealed to the OP but later withdrew
the appeal and instead filed a petition for review in the CA (CAG.R. SP No. 39761).
By Resolution dated March 15, 1996, the CAs Third Division dismissed the petition
for being insufficient in form and substance. Respondents motion for
reconsideration was likewise denied under Resolution dated January 28, 1997. Entry
of judgment was issued by the CA on said case.
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Meanwhile, on August 24, 1995, Delfino sold two hectares of his tenanted
riceland covered by TCT Nos. T-26378 (T-69592) situated in Barangay Tagapo, Sta.
Rosa, Laguna, to SM Prime Holdings, Inc. Though covered by OLT, no EP had been
issued on this portion under TCT No. T-26378 (T-69592). A new certificate of title
(TCT No. T-389984) in the name of SM Prime Holdings, Inc. was issued on February
25, 1997.
On September 13, 1995, Delfino filed before the Provincial Agrarian Reform
Adjudicator (PARAD) a petition for cancellation of the EPs previously issued to
respondents on the basis of the DAR Secretarys Order dated December 13, 1995
granting him five hectares as retention area (DCN- IV-La-0437-95).
On February 17, 1997, respondents filed before the Office of the DAR
Secretary a Motion for Clarificatory Judgment praying that an administrative
determination be made of the particular portion to be retained and whether such
right of retention will result in the cancellation of EPs already distributed to farmerbeneficiaries identified as of October 21, 1972.
Meanwhile, in a Joint dated February 19,1997, Provincial Adjudicator Barbara
P. Tan granted Delfinos petition for cancellation of EPs. A writ of execution was
issued on May 19, 1997 directing the DARAB Provincial Sheriff toretrieve the owners
duplicate copies of the subject EPs for purposes of cancellation and/or annotation.
Respondents then filed a petition for certiorari inthe CA (CA-G.R. SP No. 44285) to
annul the said writ and enjoin its implementation.
In their Supplemental Motion (to the Motion for Clarificatory Judgment),
respondents pointed out that Delfino acted in bad faith when he sold a portion of
the OLT-covered land in favor of SM Prime Holdings, Inc. without the required DAR
clearance. They also prayed that the DAR Secretary order the PARAD to stop the
implementation of the Joint Order in DARAB Case No. DCN-IV-La-0437-95. In his
Order dated August 8, 1997, Secretary Garilao denied respondents motion.
On September 20, 2001, respondents filed a Petition to Annul and/or Cancel
the DAR Secretarys Orders dated February 28, 1995, December 13, 1995 and
August 8, 1997. On February 2, 2006, DAR Secretary Nasser C. Pangandaman
issued an Order denying the petition to annul/cancel the subject orders and
clarifying the February 28, 1995 Order of Secretary Garilao.
Delfino filed a motion for reconsideration which was denied by Secretary
Pangandaman in his Order dated May 30, 2007.
Respondents appealed the Orders dated February 2, 2006 and May 30, 2007
to the OP. On February 6, 2008, the OP rendered its Decision partly granting the
appeal by nullifying the portion of the May 30, 2007 Order of Secretary
Pangandaman which clarified Secretary Garilaos February 28, 1995 Order. Said
office ruled that the two hectares sold to SM Prime Holdings, Inc. would not bring
about any ambiguity in the execution of the Order dated February 28, 1995, in
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2015)
relation to the December 13, 1995 and August 8, 1997 Orders, and that whatever
remains after deducting the 9.6717 hectares reserved for the farmer-beneficiaries
pertains to Delfino. As to the remaining portion of the May 30, 2007 Order of
Secretary Pangandaman, the same was upheld.
Respondents motion for reconsideration was denied under the OPs
Resolution dated September 30, 2008.
The case was elevated by respondents to the CA via a petition for review
under Rule 43. By Decision dated January 31, 2011, the CA reversed the OPs ruling
and reinstated the Orders dated February 2, 2006 and May 30, 2007 of Secretary
Pangandaman. According to the CA, the ambiguity in the February 28, 1995 Order of
Secretary Garilao lies in its failure to specify as to which portion of the 14.617
hectares should the five hectares retention area of Delfino be taken. Thus, even
after the said order had become final and executory, the DAR Secretary is not
precluded from making the necessary amendments/clarifications thereof so that the
fallo would at least conform with the body of said order and so that the same could
readily be executed with dispatch. But since Delfino sold two hectares to SM Prime
Holdings, Inc. before the ambiguity could be properly addressed by DAR, the CA
found no reversible error in the February 2, 2006 Order clarifying the ambiguity and
in the May 30, 2007 Order stating the rationale for such clarification.
Delfino, represented by his surviving heirs (petitioners) filed a motion for
reconsideration but the CA denied it. Hence, this petition for review.
Issue:
Whether the inclusion of the two hectare portion sold to SM Prime Holdings,
Inc. in Delfinos retention area was in derogation of Section 6 of Republic Act No.
6657 (RA 6657), otherwise known as Comprehensive Agrarian Reform Program.
Ruling:
Heirs of Delfino, Sr., are hereby allowed to choose three hectares of their
retention area from the remaining portions of Delfino, Sr.s landholding situated in
Sta. Rosa, Laguna, subject to the conditions laid down in Section 6 of RA 6657 and
DAR regulations. Respondents are likewise entitled to exercise the rights granted to
tenants-beneficiaries affected by landowners retention.
In the landmark case of Association of Small Landowners in the Phils., Inc. v.
Secretary of Agrarian Reform, this Court held that landowners who have not yet
exercised their retention rights under PD 27 are entitled to the new retention rights
under RA 6657. Section 6 of the latter law defines the nature and incidents of the
landowners right to retention, thus:
SEC. 6. Retention Limits Except as otherwise provided in this Act, no
person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors
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governing a viable family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in
no case shall retention by the landowner exceed five (5) hectares.
Three (3) hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least fifteen (15)
years of age; and (2) that he is actually tilling the land or directly
managing the farm: Provided, That landowners whose land have been
covered by Presidential Decree No. 27 shall be allowed to keep the
area originally retained by them thereunder; Provided, further, That
original homestead grantees or their direct compulsory heirs who still
own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said
homestead.
The right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner; Provided, however, That in case the area
selected for retention by the landowner is tenanted, the tenant shall have the
option to choose whether to remain therein or be a beneficiary in the same or
another agricultural land with similar or comparable features. In case the tenant
chooses to remain in the retained area, he shall be considered a leaseholder and
shall lose his right to be a beneficiary under this Act. In case the tenant chooses to
be a beneficiary in another agricultural land, he loses his right as a leaseholder to
the land retained by the landowner. The tenant must exercise this option within a
period of one (1) year from the time the landowner manifests his choice of the area
for retention. In all cases, the security of tenure of the farmers or farmworkers on
the land prior to the approval of this Act shall be respected.
AUTOMAT REALTY AND DEVELOPMENT CORPORATION, LITO CECILIA AND
LEONOR LIM vs. SPOUSES MARCIANO DELA CRUZ, SR. AND OFELIA DELA
CRUZ
When Automat asked the spouses to vacate the premises, the
spouses refused to vacate unless they were paid compensation. They claimed they
were agricultural tenants [who] enjoyed security of tenure under the law. The
Court ruled that tenancy relationship cannot be presumed. The allegation of its
existence must be proven by evidence, and working on anothers landholding raises
no presumption of an agricultural tenancy. Consequently, the landowners consent
to an agricultural tenancy relationship must be shown.
Facts:
Automat is the registered owner of two parcels of land located in Barangay
Malitlit, Sta. Rosa, Laguna. Lim was the real estate broker behind Automats
purchase of the property. Spouses Dela Cruz sometimes referred to Lim some Sta.
Rosa real estate properties available for sale.
The land was not occupied in 1990 when it was purchased by Automat. Ofelia dela
Cruz volunteered her services to Lim as caretaker to prevent informal settlers from
Page 469 of 483

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entering the property. Automat agreed, through its authorized administrator, Lim,
on the condition that the caretaker would voluntarily vacate the premises upon
Automats demand.
Spouses Dela Cruz family stayed in the property as rent-paying tenants. They
cultivated and improved the land. Sometime in August 2000, Automat asked the
spouses to vacate the premises but the spouses refused to vacate unless they were
paid compensation. They claimed they were agricultural tenants [who] enjoyed
security of tenure under the law. The spouses filed a petition for maintenance of
peaceful possession agaisnt Automat but it was dismissed.
The PARAD found it undisputed that when petitioners entered the property in
1990, it was already classified as residential, commercial, and industrial land. Thus,
it is legally impossible for the property to be the subject of an agricultural tenancy
relationship However, DARAB reversed and set aside the PARAD's decision.
The Court of Appeals affirmed the DARAB.
Meanwhile, the Department of Agrarian Reform (DAR) Region IV-A
CALABARZON issued two orders, both dated March 30, 2010, exempting the
property from coverage of the Comprehensive Agrarian Reform Program
(CARP). Automat submits that in light of the exemption orders, as a matter of law,
the subject properties were never subject to the jurisdiction of the DARAB, which
issued the decision erroneously affirmed by the Court of Appeals.
The spouses argue that petitioners inaction or failure to refute their
occupation and cultivation of the land for the past 10 years, coupled with the
acceptance of payments for use of the land, is indicative of consent, if not
acquiescence to tenancy relations.
Issues:
1. Whether an agricultural tenancy relationship exists between Automat and
Spouses Dela Cruz
2. Whether the DAR exemption orders have an effect on the DARABs earlier
exercise of jurisdiction.
Ruling:
1. No. The elements to constitute a tenancy relationship are the following:
(1) the parties are the landowner and the tenant or agricultural lessee; (2) the
subject matter of the relationship is agricultural land; (3) there is consent between
the parties to the relationship; (4) the purpose of the relationship is to bring about
agricultural production; (5) there is personal cultivation on the part of the tenant or
agricultural lessee; and (6) the harvest is shared between the landowner and the
tenant or agricultural lessee.
There must be substantial evidence on the presence of all these requisites;
otherwise, there is no de jure tenant. Only those who have established de
jure tenant status are entitled to security of tenure and coverage under tenancy
laws.
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(1) This court has held that a MARO certification concerning the presence or
the absence of a tenancy relationship between the contending parties, is considered
merely preliminary or provisional, hence, such certification does not bind the
judiciary.
The amended certification does not bind this court. Several elements must be
present before the courts can conclude that a tenancy relationship exists. MARO
certifications are limited to factual determinations such as the presence of actual
tillers. It cannot make legal conclusions on the existence of a tenancy agreement.
Thus, petitioners reliance on the amended MARO certification fails to persuade.
(2) The land in this case cannot be considered as agricultural land.
The exemption orders clearly provide that the lands were reclassified to nonagricultural prior to June 15, 1988, or prior to the effectivity of Republic Act No.
6657 known as the Comprehensive Agrarian Reform Law of 1988 (CARL). Section
3(c) of the CARL defines agricultural land as land devoted to agricultural activity
as defined in this Act and not classified as mineral, forest, residential, commercial or
industrial land.
(3) This court has ruled that [t]enancy is not a purely factual relationship
dependent on what the alleged tenant does upon the land [but] is also a
legal relationship. Tenancy relationship cannot be presumed. The allegation of its
existence must be proven by evidence, and working on anothers landholding raises
no presumption of an agricultural tenancy. Consequently, the landowners consent
to an agricultural tenancy relationship must be shown.
While the court agrees with the conclusion that no agricultural tenancy
relationship can exist in this case, the Court finds that the element of consent in
establishing a relationship, not necessarily of agricultural tenancy, is present.
The court finds that Automat consented to a relationship with respondent
spouses when (a) through petitioner Lim, it constituted respondent Ofelia dela Cruz
as caretaker of the property with the understanding that she would vacate when
asked by Automat, and (b) it accepted rental payments from respondent spouses.
2. No. The DARAB has primary and exclusive jurisdiction, both original and
appellate, to determine and adjudicate all agrarian disputes involving the
implementation of the [CARP] . . . and other agrarian laws and their implementing
rules
and
regulations:
Agrarian dispute has been defined under Section 3(d) of Republic Act No. 6657 as
referring to any controversy relating to tenurial arrangements, whether leasehold,
tenancy, stewardship or otherwise, over lands devoted to agriculture. . . .
This court has held that jurisdiction of a tribunal, including a quasi- judicial
office or government agency, over the nature and subject matter of a petition or
complaint is determined by the material allegations therein and the character of the
relief prayed for irrespective of whether the petitioner or complainant is entitled to
any or all such reliefs.
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The DAR exemption orders have determined with certainty that the lands
were reclassified as non-agricultural prior to June 15, 1988. Consequently, the
petition filed by respondent spouses in 2000 before the PARAD did not involve
"lands devoted to agriculture" and, necessarily, it could not have involved any
controversy relating to such land. Absent an "agrarian dispute," the instant case
cannot fall under the limited jurisdiction ofthe DARAB as a quasi-judicial body.
REMIGIO D. ESPIRITU and NOEL AGUSTIN

vs. LUTGARDA TORRES DEL ROSARIO represented by SYLVIA R. ASPERILLA
Lands classified as non-agricultural in zoning ordinances approved by the
Housing and Land Use Regulatory Board or its predecessors prior to June 15, 1998
are outside the coverage of the compulsory acquisition program of the
Comprehensive Agrarian Reform Law.
However, there has to be substantial
evidence to prove that lands sought to be exempted fall within the non-agricultural
classification. In this case del Rosario failed to prove with substantial evidence that
the subject property is industrial property and as such is not sufficient to rebut the
findings of both the Department of Agrarian Reform and the Office of the President.
Facts:
In 1978, the City Council of Angeles City, Pampanga, enacted Zoning
Ordinance No. 13, Series of 1978, classifying areas in Barangay Margot and
Barangay Sapang Bato, Angeles City, as agricultural land.
Pursuant to this ordinance, Lutgarda Torres del Rosario (del Rosario) allegedly
requested the City Zoning Administrator to exempt from the zoning classification Lot
Nos. 854 and 855 located in Barangay Margot and Barangay Sapang Bato, Angeles
City. The land is covered by Transfer Certificate of Title with an area of 164.7605
hectares. The request was allegedly approved on March 7, 1980 by Angeles City
Development Coordinator/Zoning Administrator, and the lots were allegedly
reclassified as non-agricultural or industrial lots.
On June 10, 1988, the Comprehensive Agrarian Reform Law (Republic Act No.
6657) was enacted.
On October 10, 2000, del Rosario, through her representative Sylvia R.
Asperilla (Asperilla), filed an application for exemption with the Department of
Agrarian Reform, seeking to exempt Lot Nos. 854 and 855 from the Comprehensive
Agrarian Reform Program (CARP) coverage. On February 19, 2004, then Secretary
of Agrarian Reform Roberto M. Pagdanganan (Secretary Pagdanganan) issued an
order granting the application for exemption.
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On March 26, 2004, farmers in del Rosarios landholdings, led by Remigio
Espiritu (Espiritu), filed a motion for reconsideration of the order. They argued that
under Zoning Ordinance No. 13, Series of 1978, Housing and Land Use Regulatory
Board Resolution No. 705, Series of 2001, and Angeles City Council Resolution No.
3300, Series of 2001, the landholdings were classified as agricultural, not industrial.
They argued that as per certifications by the Housing and Land Use Regulatory
Board, the landholdings were within the agricultural zone, and there was no zoning
ordinance passed that reclassified the area into other land uses.
The motion was given due course by the Department of Agrarian Reform, this
time headed by Secretary Nasser C. Pangandaman (Secretary Pangandaman).
Hence, on June 15, 2006, then Secretary Pangandaman issued an order granting the
motion for reconsideration and revoking the earlier order of then Secretary of
Agrarian Reform Pagdanganan.
She then filed her motion for reconsideration of the order dated June 15,
2006. The motion was dated February 9, 2007.
Acting on del Rosarios motion for reconsideration, Secretary Pangandaman
found that the certifications issued by the Housing and Land Use Regulatory Board
classified the landholdings as agricultural before June 15, 1988. Based on the
ocular inspections conducted by the Center for Land Use Policy, Planning and
Implementation (CLUPPI), the land remained agricultural and was planted with sugar
cane and corn. Accordingly, Secretary Pangandaman denied del Rosarios motion.
Del Rosario filed a notice of appeal before the Office of the President on
March 27, 2008.
The Office of the President, through then Deputy Executive Secretary for
Legal Affairs Manuel B. Gaite (Deputy Executive Secretary Gaite), rendered the
decision dismissing the appeal for lack of merit.
Aggrieved, del Rosario filed a petition for review before the Court of Appeals.
The Court of Appeals rendered a decision granting the petition. The Court of
Appeals stated that del Rosario was indeed prevented from participating in the
proceedings that led to the issuance of Secretary Pangandamans order when the
notices were sent to her other address on record. It also found that the decision
issued by then Deputy Executive Secretary Gaite was void since it violated Article
VII, Section 13 of the Constitution.
Their motion for reconsideration having been denied, petitioners, namely
Remigio Espiritu and Noel Agustin, now come before the Supreme Court via a
petition for review on certiorari, seeking to set aside the ruling of the Court of
Appeals.
Issue:
Page 473 of 483

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Whether the subject property is agricultural or industrial.
Ruling:
Respondents landholdings were agricultural, not industrial.
Prior to the enactment of Republic Act No. 6657, lands were classified into
agricultural, residential, or industrial by law or by zoning ordinances enacted by
local government units. In Heirs of Luna v. Afable:
It is undeniable that local governments have the power to reclassify
agricultural into non-agricultural lands. Section 3 of RA No. 2264 (The Local
Autonomy Act of 1959) specifically empowers municipal and/or city councils
to adopt zoning and subdivision ordinances or regulations in consultation
with the National Planning Commission. By virtue of a zoning ordinance, the
local legislature may arrange, prescribe, define, and apportion the land
within its political jurisdiction into specific uses based not only on the
present, but also on the future projection of needs. It may, therefore, be
reasonably presumed that when city and municipal boards and councils
approved an ordinance delineating an area or district in their cities or
municipalities as residential, commercial, or industrial zone pursuant to the
power granted to them under Section 3 of the Local Autonomy Act of 1959,
they were, at the same time, reclassifying any agricultural lands within the
zone for non-agricultural use; hence, ensuring the implementation of and
compliance with their zoning ordinances.
Accordingly, lands are considered exempt from the coverage of Republic Act
No. 6657 if the following requisites are present:
1. Lands were zoned for non-agricultural use by the local government unit;
and
2. The zoning ordinance was approved by the Housing and Land
UseRegulatory Board before June 15, 1998.
In revoking the prior order of exemption, Secretary Pangandaman took note
of the following considerations:
1. The Certification dated 18 November 2003, of Mr. David D. David,
Planning Officer IV and Zoning Administrator of the City of Angeles states
that the City Planning and Development Office, Zoning Administration Unit
(CPDO-ZAU) certifies that subject property covered by TCT is classified as
agricultural based on the certified photocopy of Zoning Ordinance,
Ordinance No. 13, Series of 1978, issued by the Housing and Land Use
Regulatory Board, Regional Office;
2. Also, upon verification with HLURB, we were informed that as per copy of
the approved Zoning Plan of 1978, the subject properties were classified
as agricultural. The said Zoning Plan of 1978 was approved under NCC
Plan dated 24 September 1980; and
Page 474 of 483

2015)
3. Based on the ocular inspection conducted by the CLUPPI Inspection Team,
it was found that the area remained agricultural. In fact, it is still
dominantly planted with sugar cane and corn.
These findings were sustained on appeal by the Office of the President
The factual findings of administrative agencies are generally given great
respect and finality by the courts as it is presumed that these agencies have the
knowledge and expertise over matters under their jurisdiction.
Both the
Department of Agrarian Reform and the Office of the President found respondent's
lands to be agricultural. We see no reason to disturb these findings.
SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN vs.

BPI FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO
It bears emphasizing that Republic Act No. 6552 aimed to protect buyers of
real estate on installment payments, not borrowers or mortgagors who obtained a
housing loan to pay the costs of their purchase of real estate and used the real
estate as security for their loan. The "financing of real estate in installment
payments" referred to in Section 3, should be construed only as a mode of payment
vis--vis the seller of the real estate, and excluded the concept of bank financing
that was a type of loan. Accordingly, Sections 3, 4 and 5, supra, must be read as to
grant certain rights only to defaulting buyers of real estate on installment, which
rights are properly demandable only against the seller of real estate
The Sps. Sebastians insistence would have been correct if the monthly
amortizations being paid to BPI Family arose from a sale or financing of real estate.
In their case, however, the monthly amortizations represented the installment
payments of a housing loan that BPI Family had extended to them as an employees
benefit. The monthly amortizations they were liable for was derived from a loan
transaction, not a sale transaction, thereby giving rise to a lender-borrower
relationship between BPI Family and the petitioners.
Facts:
Page 475 of 483

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The Jaime and Evangeline are spouses who used to work for BPI Family. At the
time material to this case, Jaime was the Branch Manager of BPI Family in Quezon
City and Evangeline was a bank teller in Manila.
They availed themselves of a housing loan from BPI Family as one of the
benefits extended to its employees. To secure the payment of the loan, they
executed a real estate mortgage in favor of BPI Family over the property in Bulaca.
Apart from that, Jaime signed an undated letter-memorandum addressed to BPI
Family, stating he authorize BPI to automatically deduct an amount from his salary
or any money due to him to be applied to his loan.
The Sps. Sebastians monthly loan amortizations were regularly deducted

from Jaimes monthly salary. However, Jaime received a notice of termination from
BPI Familys Vice President, Severino P. Coronacion, informing him that he had been
terminated from employment due to loss of trust and confidence resulting from his
wilful non-observance of standard operating procedures and banking laws.
Evangeline also received a notice of termination, telling her of the cessation of her
employment on the ground of abandonment. Both notices contained a demand for
the full payment of their outstanding loans from BPI Family
They filed a complaint for illegal dismissal against BPI Family in the National
Labor Relations Commission (NLRC). In the meantime, BPI Family instituted a
petition for the foreclosure of the real estate mortgage. To prevent the foreclosure of
their property, the petitioners filed against the respondents their complaint for
injunction and damages with application for preliminary injunction and restraining
order in RTC alleging that their obligation was not yet due and demandable
considering that the legality of their dismissal was still pending resolution by the
labor court and a grace period was made available by virtue of RA 6552. RTC
dismiss the case as well as Banks Counterclaim which was affirmed in toto by RTC.
Issues:
Whether or not the foreclosure of appellants real estate mortgage was

premature.
Page 476 of 483

2015)
Ruling:
No, the foreclosure of appellants real estate mortgage was not premature.
Republic Act No. 6552 was enacted to protect buyers of real estate on
installment payments against onerous and oppressive conditions. Having paid
monthly amortizations for two years and four months, the petitioners now insist that
they were entitled to the grace period within which to settle the unpaid
amortizations without interest. Otherwise, the foreclosure of the mortgaged
property should be deemed premature inasmuch as their obligation was not yet due
and demandable.
The Sps. Sebastians insistence would have been correct if the monthly
amortizations being paid to BPI Family arose from a sale or financing of real estate.
In their case, however, the monthly amortizations represented the installment
payments of a housing loan that BPI Family had extended to them as an employees
benefit. The monthly amortizations they were liable for was derived from a loan
transaction, not a sale transaction, thereby giving rise to a lender-borrower
relationship between BPI Family and the petitioners.
It bears emphasizing that Republic Act No. 6552 aimed to protect buyers of
real estate on installment payments, not borrowers or mortgagors who obtained a
housing loan to pay the costs of their purchase of real estate and used the real
estate as security for their loan. The "financing of real estate in installment
payments" referred to in Section 3, should be construed only as a mode of payment
vis--vis the seller of the real estate, and excluded the concept of bank financing
that was a type of loan. Accordingly, Sections 3, 4 and 5, supra, must be read as to
grant certain rights only to defaulting buyers of real estate on installment, which
rights are properly demandable only against the seller of real estate.
The CA correctly found that there was basis to declare the Sps. Sebastians
entire outstanding loan obligation mature as to warrant the foreclosure of their
mortgage. It is settled that foreclosure is valid only when the debtor is in default in
the payment of his obligation. Here, the records show that the petitioners were
defaulting borrowers.
Page 477 of 483

2015)
Even if it turns out the appellants were not validly terminated from their
employment, there is valid reason to foreclose the mortgaged property. Appellants
themselves admit that they were in arrears when they made the late payments.
While this admission was not in the course of the testimony of appellant Jaime
Sebastian, this was done during the hearing of the case when the trial judge
propounded the question to him. Hence, this constitutes judicial admission. An
admission, verbal or written, made by a party in the course of the trial or other
proceedings in the same case does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no
such admission is made. Judicial admissions are those made voluntarily by a party,
which appear on record in the proceedings of the court.
LAND BANK OF THE PHILIPPINES vs. JAIME K. IBARRA, ANTONIO K.
IBARRA, JR., LUZ IBARRA VDA. DE JIMENEZ, LEANDRO K IBARRA, and
CYNTHIA IBARRA-GUERRERO
G.R. No. 182472, November 24, 2014, J. Peralta
It is on equitable considerations that the Court bases the retroactive
application of RA No. 6657 for it would be highly inequitable on the part of the
landowners to compute just compensation using the values not at the time of the
payment but at the time of the taking in 1972, considering that the government
and the farmer-beneficiaries have already benefitted from the land. The CA was
correct in ruling that the agrarian reform process in this case was still incomplete
for just compensation due to respondents had yet to be settled. Considering that
R.A. No. 6657 was already in effectivity before the completion of the process, the
just compensation should be determined and the process concluded under this law,
notwithstanding the fact that the subject property was acquired under PD 27.
Facts:
Respondents Jaime K. Ibarra, Antonio K. Ibarra, Jr., Luz Ibarra Vda. de Jimenez,
Leandro K. Ibarra, and Cynthia Ibarra-Guerrero are the registered owners of a parcel
of agricultural land consisting of a total area of 6.2773 hectares, situated in Lubao,
Pampanga. Pursuant to the governments Land Reform Program, the Department of
Agrarian Reform (DAR) acquired 6.0191 hectares of said property and placed it
under the coverage of Presidential Decree (PD) No. 27.
Respondents filed a Complaint for the Determination of Just Compensation
before the RTC of San Fernando City, Pampanga. Thereafter, they filed with the RTC
an Omnibus Motion for the Issuance of an Order Authorizing Plaintiffs to Withdraw
Amount Deposited in their Name and Amount to be Withdrawn Must be Fixed in
Accordance with Section 18 of Republic Act (RA) No. 6657.
The RTC issued an Order directing petitioner Land Bank of the Philippines to
make a provisional payment to respondents in the amount of P136,110.64. On
March 17, 2005, petitioner filed its Compliance manifesting its conformity with said
Order.
Page 478 of 483

2015)
On March 21, 2007, the RTC rendered a Decision, which it later amended in
its Amended Decision, by modifying the computation of the respondent Department
of Agrarian Reform (DAR), as approved by respondent Land Bank of the Philippines
(LBP), to wit:
To pay the petitioners the sum of P539,160.08 in cash and bond pursuant to
Section 18 of R. A. No. 6657 less the amount received in cash and bond as
provisional payment pending the determination on the merits of this case with
savings bank rate of interest from April 2001 until the date of finality of this
Decisions.
When the RTC denied petitioners Motion for Reconsideration, petitioner filed
a Petition for Review with the CA.
The CA ruled on the basis of our more recent ruling in Land Bank of the
Philippines v. Hon. Natividad, wherein We held that the seizure of landholdings in
expropriation proceedings under PD No. 27 did not take place on the date of
effectivity of PD No. 27, but will actually take effect on the payment of just
compensation. The CA explained that in the present case, although the
expropriation proceeding was initiated under PD No. 27, the agrarian reform process
was still incomplete considering that the just compensation to be paid to
respondents has yet to be settled. Taking into account the passage of RA No. 6657
before the completion of the agrarian reform process, the CA, held that the just
compensation should be determined in accordance with said law, and not with PD
No. 27 and EO No. 228. Hence, the formula should necessarily be as follows: Land
Value = (Capitalized Net Income x 0.6) + (Comparable Sales x 0.3) + (Market Value
per Tax Declaration x 0.1).
However, considering that the RTC arrived at the valuation of the subject
portion of the property in the amount of P539,160.88 based on the formula provided
by PD No. 27 and EO No. 228 instead of RA No. 6657, the CA remanded the case
back to the RTC for the final determination of just compensation in accordance with
RA No. 6657.
Issue:
Whether or not the CA erred when it refused to resolve the issue of valuation
for the acquired property in accordance with P.D no. 27 and E.O no. 228 and
jurisprudence applicable thereto.
Ruling:
We rule in favor of respondents.
The issue in this case has long been laid to rest by this Court. In numerous
rulings, We have held that the seizure of properties covered by PD No. 27 did not
take place on October 21, 1972, but upon the payment of just compensation.
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Acquisition of property under the Operation Land Transfer Program under PD No. 27
does not mean that the computation of just compensation must be governed by
the same law. In determining the applicable formula, the date of the payment of just
compensation must be taken into consideration for such payment marks the
completion of the agrarian reform process. If the agrarian reform process is still
incomplete as when just compensation is not settled prior to the passage of RA No.
6657, it should be computed in accordance with said law despite the fact that the
property was acquired under PD No. 27. Clearly, by law and jurisprudence, R.A. No.
6657, upon its effectivity, became the primary law in agrarian reform covering all
then pending and uncompleted processes, with P.D. No. 27 and E.O. No. 228 being
only suppletory to the said law.
As the Court explained in Land Bank of the Philippines v. Natividad in the following
wise:
It would certainly be inequitable to determine just compensation based on
the guideline provided by PD 27 and EO 228 considering the DARs failure to
determine the just compensation for a considerable length of time. That just
compensation should be determined in accordance with RA 6657, and not
PD27 or EO 228, is imperative considering that just compensation should be
the full and fair equivalent of the property taken from its owner by the
expropriator, the equivalent being real, substantial, full and ample.
It is on equitable considerations that We base the retroactive application of
RA No. 6657 for it would be highly inequitable on the part of the landowners to
compute just compensation using the values not at the time of the payment but at
the time of the taking in 1972, considering that the government and the farmerbeneficiaries have already benefitted from the land.
Petitioners contention that RA No. 6657 does not apply to tenanted rice and
corn lands is erroneous. We have had several occasions in which we expressly
recognized the applicability of RA No. 6657 to rice and corn lands covered by PD No.
27 on the basis of our ruling in Paris v. Alfeche which state:
Considering the passage of RA 6657 before the completion of the application
of the agrarian reform process to the subject lands, the same should now be
completed under the said law, with PD 27 and EO 228 having only suppletory effect.
This ruling finds support in Land Bank of the Philippines v. CA, wherein the Court
stated:
We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn
lands under PD 27. Section 75 of RA 6657 clearly states that the provisions of PD 27
and EO 228 shall only have a suppletory effect. Section 7 of the Act also provides
Sec. 7. Priorities. The DAR, in coordination with the PARC shall plan and
program the acquisition and distribution of all agricultural lands through a period of
ten (10) years from the effectivity of this Act. Lands shall be acquired and
distributed as follows:
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Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all
private lands voluntarily offered by the owners for agrarian reform; x x x and all
other lands owned by the government devoted to or suitable for agriculture, which
shall be acquired and distributed immediately upon the effectivity of this Act, with
the implementation to be completed within a period of not more than four (4) years.
This demonstrates that RA 6657 includes PD 27 lands among the properties
which the DAR shall acquire and distribute to the landless. And to facilitate the
acquisition and distribution thereof, Secs. 16, 17, and 18 of the Act should be
adhered to.
The CA was, therefore, correct in ruling that the agrarian reform process in
this particular case was still incomplete for just compensation due to respondents
had yet to be settled. Considering that R.A. No. 6657 was already in effectivity
before the completion of the process, the just compensation should be determined
and the process concluded under this law, notwithstanding the fact that the subject
property was acquired under PD 27.
MONCAYO INTEGRATED SMALL-SCALE MINERS ASSOCIATION, INC.
(MISSMA) vs. SOUTHEAST MINDANAO GOLD MINING CORP. (SMGMC),
BALITE INTEGRATED SMALL-SCALE MINING CORP., (BISSMICO) ET AL.
G.R. No. 149638 (consolidated), December 10, 2014, J. Leonen
The issue in these two consolidated cases involves the tightly contested
Diwalwal Gold Rush Area (DGRA) in Mt. Diwata, Mindanao, specifically, the 729hectare portion excluded from SMGMCs Mineral Production Sharing Agreement
application (MPSA No. 128), and declared as Peoples Small Scale Mining Area.
SMGMC was the assignee of the original holder of a permit to explore (EP 133)
covering 4,941 hectares of DGRA. Due to supervening events, [the Court] declares
the petitions moot and academic.
Facts:
The issue in these two consolidated cases involves the tightly contested
Diwalwal Gold Rush Area (DGRA) in Mt. Diwata, Mindanao, specifically, the 729hectare portion excluded from SMGMCs Mineral Production Sharing Agreement
application (MPSA No. 128), and declared as Peoples Small Scale Mining Area.
SMGMC was the assignee of the original holder of a permit to explore (EP 133)
covering 4,941 hectares of DGRA.
Some of the respondent companies, other mining groups and individuals filed
adverse claims against MPSA No. 128. Pursuant to Sec. 77 of the Philippine Mining
Act, the DENR consti-tuted a panel of arbitrators and which later on dismissed all
the claims against MPSA No. 128. The denial was contested before the Mines
Adjudication Board (MAB) which reversed the challenged decision. Consequently,
while appeals were pending with the CA, the Provincial Mining Regulatory Board of
Davao (PMRB) acted on the decision of the MAB and undertook the publication of
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the MPSA which again met opposition. Nevertheless, the PMRB dismissed the
oppositions and then segregated and declared the 729-hectare gold rich area as
Peoples Small Mining Area.
This decision by the PMRB was upheld by the DENR Secretary and then
originally by the CA. Upon motions for reconsideration, the appellate court set aside
and annulled the decision of the DENR Secretary for having been issued with grave
abuse of discretion in excess of his juris-diction. It held that SMGMC may apply and
be entitled to a particular area within the 729-hectare Peoples Small-Scale
Mining Area, subject to the fulfilment of several conditions and that the DENR
Secretary erred in subdividing and designating the resulting portions to certain
entities, which are not in consonance with the MAB decision.
Issue:
Whether or not SMGMC still has the right to claim the 729-hectare portion.
Ruling:
NO, the recent developments affecting this case have already mooted this
issue.
The Courts decision in Apex Mining vs. SMGMC has rendered inutile deciding
squarely the issue in the instant case.
SMGMC filed the petition docketed as G.R. No. 132475 assailing the January
6, 1998 MAB decision excluding the 729-hectares area and questioning the validity
of DAO No. 66. MISSMA and other mining claimants filed the other petition docketed
as G.R. No. 132528. Both of these petitions were remanded to the CA, which
declared the MAB decision as null and void.
Consequently, Apex filed a petition docketed as G.R. Nos. 152613 and
152628; Balite Communal Portal Mining Cooperative, Inc. filed a petition docketed
as G.R. Nos. 152619-20; and the MAB and its members filed a petition docketed as
G.R. Nos. 152870-71.87 All these petitions were consolidated, and [the Court]
rendered its decision entitled Apex Mining v. SMGMC on June 23, 2006, and
resolution on November 20, 2009. The 2006 decision held, among others, that EP
133 of [Marcopper Mining Corp.] has EXPIRED on 7 July 1994 and that its
subsequent transfer to [SMGMC] on 16 February 1994 is void.
Furthermore, since [the Court] has declared that the DENR Secretary had no
authority to issue DAO No. 66 declaring 729 hectares of the Agusan-Davao-Surigao
Forest Reserve as forest land open for small-scale mining purposes subject to
existing and valid private rights, both the PMRB decision, and the DENR Secretarys
decision affirming it with modification, are conse-quently overturned for lack of
basis in delineating the 729 hectares from the MPSA.
Page 482 of 483

2015)
The 2009 resolution in Apex Mining v. SMGMC also ruled that the State,
through the Executive Department, should it so desire, may now award mining
operations in the disputed area to any qualified entities it may determine and the
Mines and Geosciences Bureau may process exploration permits pending before it,
taking into consideration the applicable mining laws, rules and regulations relative
thereto.
Indeed, then President Macapagal-Arroyo issued Proclamation No. 297
excluding an area in Moncayo, Compostela Valley, declaring this as a mineral
reservation and as an environ-mentally critical area. DENR A.O. No. 2002-18
followed, declaring an emergency situation in this gold rush area and ordering the
stoppage of all mining operations. E.O. No. 217 thereafter created the National Task
Force Diwalwal.
Page 483 of 483

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