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1

DIRECTOR OF LANDS VS FUNTILLAR


G.R. No. L-68533 May 23, 1986

FACTS:

This is a petition to review the decision of the


respondent court which affirmed the adjudication by the
land registration court of a parcel of land in favor of the
private respondents.
The land was part of the property originally
belonging to one Candida Fernandez whose ownership
and possession began sometime during her lifetime and
extended until 1936 when she died. Sometime in 1940
or 1941, the parcel of land was forfeited in favor of the
government for failure to pay real estate taxes. However,
the same was redeemed in 1942 by Vitaliano Aguirre,
one of the three children of Candida Fernandez, who
was then the administrator of the property. A final deed
of sale was executed by the Provincial Treasurer in favor
of Vitaliano Aguirre.
The heirs of Candida Fernandez later partitioned
the property among themselves. The particular lot now
was adjudicated in favor of the applicants-respondents.
In 1972, private respondents, who were the
grandchildren of Fernandez, applied for the registration
of a parcel of land.
The Director of Lands and Director of Forest
Development filed an opposition alleging that neither
applicants nor their predecessor-in-interest possessed
sufficient title to the land; that neither applicants, nor
their predecessors have been in open, continuous,
exclusive and notorious possession and occupation of
the land for at least thirty (30) years immediately
preceding the filing of the application; and that the land
is a portion of the public domain belonging to the
Republic of the Philippines.

ISSUE:
Whether or not private respondents have
established possession for at least thirty years to entitle
them to confirmation of imperfect title and registration
under the law

HELD:
Yes. Long before Candidas death in 1936, she
already possessed the disputed property. This
possession must be tacked to the possession of her
heirs, through administrator Vitaliano Aguirre, and later
to the possession of the private respondents
themselves, who are Candida's grandchildren.

The fact of possession is bolstered by the


forfeiture in 1940 of the land in favor of the government.
It would be rather absurd under the circumstances of this
case to rule that the government would order the
forfeiture of property for non-payment of real estate
taxes if the property is forest land. It is also reasonable
to rule that the heirs of Candida Fernandez redeemed
the property because they wanted to keep the land of
the deceased in the possession of their family, thus
continuing prior possession. From 1936 and earlier up to
1972 is more than the required period.
2

ARRADAZA VS CA & LARRAZABAL

G.R. No. 50422 February 8, 1989


FACTS:
The petitioners were the legitimate children of
spouses Ignacio Arradaza and Marcelina Quirino who
died on August 31, 1974 and sometime in July 1944,
respectively. In 1941, Ignacio Arradaza and Marcelina
Quirino purchased from spouses Gervacio Villas and
Jovita Tabudlong a piece of land. The deed of sale was
lost during the war and Original Certificate of Title No.
35901 was therefore issued in the name of Gervacio
Villas and Jovita Tabudlong but they recognized the
vendee spouses as the real owners of the land.
On October 21, 1947,Ignacio Arradaza sold the
same land to Estelita Magalona Bangloy. She took over
possession of the land, declared it for taxation purpose
and paid taxes thereon. On February 13, 1963 while the
land was still in the name of spouses Villas, Larrazabal
purchased the property from Estelita Magalona Bangloy
which was evidenced by a "Deed of Sale of a Parcel of
Land" executed in favor of Larrazabal. Original
Certificate of Title No. 35901 was cancelled and Transfer
Certificate of Title No. 4581 was issued in the name of
private respondent and the land was declared for
taxation purposes.
On January 18, 1975, petitioners filed an action
against private respondent before the CFI of Leyte to
recover their pro-indiviso one-half (1/2) share of the land
as heirs of Ignacio Arradaza and Marcelina Quirino, and
to exercise the right of legal redemption over one-half
(1/2) of the property sold by their deceased father while
he was already a widower on October 21, 1947.
Private respondent on the other hand, maintains
that prescription has set in because the predecessors-ininterest of petitioners were not registered owners
protected by Act 496, He asserts that when the
transaction occurred on October 21, 1947 the Code of
Civil Procedure was still in force. The prescriptive period
was only ten (10) years irrespective of the good or bad
faith of Estelita M. Bangloy.
The trial court rendered a Summary Judgment
in favor of the private respondent which was affirmed by
the Court of Appeals. Hence, this petition.
ISSUE:

Whether or not the action of petitioners has


prescribed and is barred by the statute of limitations
HELD:
Yes. On the issue of prescription, the Court has
ruled in numerous decisions that an action for recovery
of title, or possession of, real property or an interest
therein can only be brought within ten (10) years after
the cause of action accrues. In the instant case, the
cause of action for reconveyance must be deemed to
have occurred on October 21, 1947 when the deed of
sale in favor of Estelita M. Bangloy who immediately
took possession of the land was executed.
In the same manner, petitioners' action is
inevitably barred by the equitable principle of laches.
Petitioners were aware that the land was in the actual
possession of private respondent and his predecessorin-interest, but did nothing to immediately claim it or
verify the status of their possession. The Court finds it
unbelievable that in the span of more than twenty-seven
(27) years, the petitioners would not have taken any step
to verify the status of the land of their father which had
been in the possession of private respondents during all
that time.
3

DAVID VS BANDIN

G.R. No. L-48322 April 8, 1987


FACTS:
During their lifetime, the spouses Juan Ramos
and Fortunate Calibo, were the owners of two parcels of
land; the Talon Property and Laong property. Both
spouses died intestate, leaving as heirs two legitimate
children, Candida and Victoriana Ramos, and granddaughter, Agapita Ramos, daughter of their deceased
Sora Anastacio. Candida and Victoriana died intestate
on February 16, 1955 and December 12,1931,
respectively.
Candida Ramos; her niece, Agapita Ramos; and
her nephew, Eulogio Bandin, sold a portion of the Talon
property to the spouses Rufino 0. Miranda and Natividad
Guinto. This portion was divided into three lots. Parcel 1
was subsequently sold to Narciso Velasquez and Albino
Miranda. Parcels 2 and 3 were subsequently sold to
Jose Ramirez and Sotero Ramirez, repectively, who
registered these properties and obtained OCT Nos. 2027
and 2029 in their respective names. The remaining
portion of the Talon property was extrajudicially
partitioned on September 17, 1955 among the heirs of
Candida Ramos and was subdivided in seven lots. Lot 5
was given to Victoria Martin, who was able to register
the land and was issued OCT No. 3706. Lot 6 was given
to Maximina Martin, who also was able to register the
land and was issued OCT No. 3707. A portion of these
lots were subsequently sold to Magno de la Cruz who
was able to obtain TCT.
The Laong property was sold by Candida
Ramos and her children on December 19, 1943 to
Hermogenes Lucena, husband of Juanita Martin, one of

the daughters of Candida. On September 23, 1959,


Juanita (then widowed) sold the property to the spouses
Gregorio and Mary Venturanza. On January 21, 1965,
the Venturanzas, in a deed of sale also signed by
Juanita Martin, conveyed a portion of the property to the
spouses Felipe and Antonia David. Juanita Martin was
able to register the property in her name and was issued
OCT No. 8916 on July 1, 1971.
On June 14, 1963, respondents, who were the
heirs of Victoriana except for Agapita, filed a complaint
for the recovery and partition of property. A decision was
rendered by the trial court, in favor of the plaintiffs,
declaring, however, that certain properties could no
longer be reconveyed to plaintiffs since they had been
transferred to purchasers who bought them in good faith
for value. Not satisfied with the decision, both plaintiffs
and defendants appealed to the Court of Appeals which
nullified the transfers made to the defendants who were
declared by the trial court as purchasers in good faith.
ISSUES:
1. Whether or not private respondents' claim is
barred by prescription
2. Whether or not petitioners were buyers in
good faith
HELD:
1. No. Respondents claim is not barred by
laches and prescription since it was not shown that they
were guilty of negligence or slept on their rights. They
sent a letter of demand to the heirs of Candida Ramos
on April 23, 1963, and filed their complaint against them
on June 14, 1963, or within a period of approximately
eight (8) years from Candida's death.
2. G.R. No. L-48322: Petitioners Felipe David
and Antonia G. David were buyers in bad faith. They
bought the property when it was still unregistered land.
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. One who purchases
an unregistered land does so at his peril His claim of
having bought the land in good faith, i.e. without notice
that some other person has a right to, or interest in, the
property, would not protect him if it turns out that the
seller does not actually own the property.
G.R.No. L-49867:
The court held that
petitioners Jose Ramirez and the heirs of Ambrocia P.
Vda. de Ramirez (widow of Sotero Ramirez), were not
purchasers in good faith, not having made diligent
investigation of the true ownership of the properties they
bought, but relied merely on the tax declaration shown to
them by the seller, Rufino Miranda.
The issue of good faith or bad faith of the buyer
is relevant only where the subject of the sale is
registered land and the purchaser is buying the same
from the registered owner, whose title to the land is
clean. In such case, the purchaser who relies on the
clean title of the registered owner is protected if he is a

purchaser in good faith for value. In the instant case,


what petitioners bought were unregistered lands.
G.R. No. L-49712: Petitioner Magno de la Cruz
was a purchaser in good faith. The property purchased
by him from Victoria Martin and Maximina Martin were
registered lands, covered by Torrens title. Being a
purchaser in good faith for value, Magno de la Cruz is
protected by the law. In the absence of a showing that
he had actual notice of the defect in the title of the
vendors or that he is a buyer in bad faith the deed of
sale in his favor and the corresponding certificate of title
issued in his name cannot be nullified and cancelled.
4

GALLARDO VS. INTERMEDIATE APPELLATE


COURT
G.R. No. 67742; Oct. 29, 1987

BUENAVENTURA VS. COURT OF APPEALS

FACTS:
Sought to be declared null and void ab initio are
certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana
Landrito in favor of their co-defendant children. The
petitioners contend that there was no actual valid
consideration and that assuming that there was
consideration in the sums reflected the properties are
more than three-fold times more valuable than the small
sums appearing therein. The RTC ruled in favor of the
defendants and dismissed the case. RTCs ruling was
affirmed by CA. Hence the appeal.
ISSUE:
Whether or not there was a valid consideration in the
deeds
of
sale
HELD:
If there is a meeting of the minds of the parties
as to the price, the contract of sale is valid, despite the
manner of payment, or even the breach of that manner
of payment. If the real price is not stated in the contract,
then the contract of sale is valid but subject to
reformation.
Art. 1355. Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influence.
Article 1470 of the Civil Code further provides:Gross
inadequacy of price does not affect a contract of sale,
except as may indicate a defect in the consent, or that
the parties really intended a donation or some other act
or
contract.
Petitioners failed to prove any of the instances
mentioned in Articles 1355 and 1470 of the Civil Code

which would invalidate, or even affect, the Deeds of


Sale. Indeed, there is no requirement that the price be
equal to the exact value of the subject matter of sale. All
the respondents believed that they received the
commutative
value
of
what
they
gave.

FRANCISCO VS. CA

FACTS OF THE CASE:


Records show that Francisco Lim, entered into a
contract of lease with Benito Dy for a period of 3 years,
from 1976 to 1979. After the stipulated term expired the
respondent refused to leave the premises, so Francisco
Lim filed an ejectment suit against Benito Dy. This case
was then taken over by a judicially approved
compromise agreement which provides an automatic
increase in rent of 20% every 3 years. On 1985 Dy,
informed Lim of his intention to renew the lease up to
1988, Lim did not agree to the renewal.
In 1987 another ejectment suit was filed by Lim after the
failure of Dy to vacate the premises. It was dismissed by
the RTC and later affirmed by the CA for the following
reasons: (1) the stipulation in the compromise
agreement which allows the lessee (Benito Dy) to stay
on the premises as long as he needs it and can pay
rents is valid, being a resolutory condition, and therefore
beyond the ambit of art 1308 of the NCC; and (2) the
compromise agreement has the effect of res judicata.
ISSUES

OF

THE

CASE:

Was the stipulation in the compromise agreement which


allows the lessee to stay on the premises as long as he
needs
it
and
can
pay
rents
is
valid?
- No, since the stipulation for as long as the defendant
needed the premises and can meet and pay said
increases is a purely potestative condition because
it leaves the effectivity and enjoyment of leasehold
rights to the sole and exclusive will of the lessee.
- The continuance, effectivity, and fulfillment of a contract
of lease cannot be made to depend exclusively upon the
free and uncontrolled choice of the lessee between
continuing payment of the rentals or not, completely
depriving the owner of any say in the matter. Mutuality
does not obtain in such a contract of lease and no
equality exists between the lessor and the lessee.
7

MATEO VS. DIAZ

G.R. No. 137305; Jan. 17, 2002


FACTS:
The petitioners, are the sons of Simeona
Manuel-Matias and her husband, in her second
marriage, Claro Mateo.

The respondents, are the children of the


petitioners' half-sisters.
Both parties are after the 11-hectare land with
OCT no. 206 under the name of Claro Mateo, married to
Simeona Mateo.
On February 15, 1979, in San Carlos City,
Pangasinan, the brothers Quirino Mateo and Matias
Mateo executed a DEED OF EXTRA-JUDICIAL
PARTITION
whereunder they partitioned between
themselves alone, to the exclusion of their half-sisters
Cornelia Mateo-Diaz and Felisa Mateo-Policarpio, that
11-hectare parcel of Riceland covered by OCT No. 206.
It was not explained if, at the time the brothers executed
the deed, any or both of their half-sisters were already
dead. In any event, the deed of extra-judicial partition
was duly published in a daily newspaper, the Balita.
It was through this publication that the
respondents found out about said partition. Hence, they
filed a civil complaint of Declaration of Nullity of ExtraJudicial Partition with Damages with the CFI of Bulacan
and a separate criminal complaint for falsification of
documents, both against the petitioners.
The CFI, now RTC, ruled in favor of the
respondents. The petitioners appealed with the CA but
the latter affirmed the RTC's decision. Hence, the
petition for review on certiorari with the Supremen Court.
ISSUE:
Whether or not the prescription and the
equitable principle of laches are applicable in derogation
of the title of the registered owner.
HELD:
No, the prescription and the equitable principle
of laches are applicable in derogation of the title of the
registered owner.
The Supreme Court held in Barcelona v.
Barcelona that: The property in litigation, being
registered land under the provisions of Act 496, is not
subject to prescription, and it may not be claimed that
imprescriptibility is in favor only of the registered owner,
because as we have held in the cases of Teofila de
Guinoo, et al., v. Court of Appeals, (97 Phil. 235) and Gil
Atun, et al., v. Eusebio Nuez (97 Phil. 762), prescription
is unavailing not only against the registered owner, but
also against his hereditary successors because the latter
merely step into the shoes of the decedent by operation
of law and are merely the continuation of the personality
of their predecessor in interest.
In the present case, the land involved is
registered under the Torrens system in the name of
petitioners father Claro Mateo. There is no question
raised with respect to the validity of the title. The factual
issue now raised is that petitioners had slept on their
rights and had not taken any positive step to assert their
rights and interests over the land covered by OCT No.
206. The records will show that immediately after
petitioners discovered the existence of OCT No. 206 in
1977 or 1978, they took steps to assert their rights
thereto. They divided the land between the two of them

in an extra-judicial partition. Then petitioners filed the


case below to recover ownership and possession as the
only surviving children of the original owner, the late
Claro Mateo.
8

FEBTC V. QUERMIT

G.R. No. 148582; Jan. 16, 2002


FACTS:
Respondent Estrella O. Querimit worked as
internal auditor of the Philippine Savings Bank (PSB) for
19 years, from 1963 to 1992. On November 24, 1986,
she opened a dollar savings account in petitioner's
Harrison Plaza branch,4 for which she was issued four
(4) Certificates of Deposit, each certificate representing
the amount of $15,000.00. The certificates were to
mature in 60 days, on January 23, 1987, and were
payable to bearer at 4.5% interest per annum.
In January 1993, her husband died and Estrella
returned to the Philippines. She went to petitioner
FEBTC to withdraw her deposit but, to her dismay, she
was told that her husband had withdrawn the money in
deposit.Through counsel, respondent sent a demand
letter to petitioner FEBTC. In another letter, respondent
reiterated her request for updating and payment of the
certificates of deposit, including interest earned. As
petitioner FEBTC refused respondent's demands, the
latter filed a complaint, joining in the action Edgardo F.
Blanco, Branch Manager of FEBTC Harrison Plaza
Branch, and Octavio Espiritu, FEBTC President.
Petitioner FEBTC alleged that it had given
respondent's
late
husband
Dominador
an
"accommodation" to allow him to withdraw Estrella's
deposit.

ISSUE:
1. Whether or not the petitioner had already paid
the respondent.

2. Whether or not the petitioner


observed the diligence required by the
nature of its business.
HELD:
1. No, the PetiTiconderoga has not paid the
respondent.
The Supreme Court held that a certificate of
deposit is defined as a written acknowledgment by a
bank or banker of the receipt of a sum of money on
deposit which the bank or banker promises to pay to the
depositor, to the order of the depositor, or to some other
person or his order, whereby the relation of debtor and
creditor between the bank and the depositor is created.
The principles governing other types of bank deposits
are applicable to certificates of deposit, as are the rules
governing promissory notes when they contain an
unconditional promise to pay a sum certain of money

absolutely.The principle that payment, in order to


discharge a debt, must be made to someone authorized
to receive it is applicable to the payment of certificates of
deposit. Thus, a bank will be protected in making
payment to the holder of a certificate indorsed by the
payee, unless it has notice of the invalidity of the
indorsement or the holder's want of title. A bank acts at
its peril when it pays deposits evidenced by a certificate
of deposit, without its production and surrender after
proper indorsement. As a rule, one who pleads payment
has the burden of proving it. Even where the plaintiff
must allege non-payment, the general rule is that the
burden rests on the defendant to prove payment, rather
than on the plaintiff to prove payment. The debtor has
the burden of showing with legal certainty that the
obligation has been discharged by payment.
In this case, the certificates of deposit were
clearly marked payable to "bearer," which means, to
"[t]he person in possession of an instrument, document
of title or security payable to bearer or indorsed in
blank." Petitioner should not have paid respondent's
husband or any third party without requiring the
surrender of the certificates of deposit.
2. No, the petitioner bank did not observe the
proper dilI gence required by the nature of its business.
The Supreme Court held that the business of
banks is impressed with public interest, the degree of
diligence required of banks is more than that of a good
father of the family or of an ordinary business firm. The
fiduciary nature of their relationship with their depositors
requires them to treat the accounts of their clients with
the highest degree of care. A bank is under obligation to
treat the accounts of its depositors with meticulous care
whether such accounts consist only of a few hundred
pesos or of millions of pesos. Responsibility arising from
negligence in the performance of every kind of obligation
is demandable.
In the present case, Petitioner failed to prove
payment of the subject certificates of deposit issued to
the respondent and, therefore, remains liable for the
value of the dollar deposits indicated thereon with
accrued interest.
9

DBP V. CA AND CAJES


G.R. No. 129471; april 28, 2000

FACTS:
The land in dispute consisting of 19.4 hectares
was originally owned by Ulipiano Mumar, whose
ownership since 1917 was evidenced by Tax
Declaration No. 3840. In 1950, Mumar sold the land to
respondent Cajes who was issued Tax Declaration No.
R-1475 that same year. Cajes occupied and cultivated
the said land. In 1969, unknown to Cajes, Jose Alvarez
succeeded in obtaining the registration of a parcel of
land with an area of 1,512, 468.00 square meters, in his
name for which he was issued OCT No. 546 on June 16,

1969. The parcel of land included the 19.4 hectares


occupied by respondent. Alvarez never occupied nor
introduced improvements on said land.
In 1972, Alvarez sold the land to the spouses
Gaudencio and Rosario Beduya to whom TCT No.
10101 was issued. That same year, the spouses Beduya
obtained a loan from petitioner DBP for P526,000.00
and, as security, mortgaged the land covered by TCT
No. 10101 to the bank. In 1978, the SAAD Investment
Corp., and the SAAD Agro-Industries, Inc., represented
by Gaudencio Beduya, and the spouses Beduya
personally executed another mortgage over the land in
favor of DBP to secure a loan of P1,430,000.00. The
spouses Beduya later failed to pay their loans, as a
result of which, the mortgage on the property was
foreclosed and sold to DBP as the highest bidder. As
the spouses Beduya failed to redeem the property, DBP
consolidated its ownership. It appears that Cajes had
also applied for a loan from DBP in 1978, offering his
19.4 hectare property under Tax Declaration No. D-2247
as security for the loan. Cajes loan application was later
approved. However, it was found that the land
mortgaged by Cajes was included in the land covered by
TCT No. 10101 in the name of the spouses Beduya.
DBP, therefore, cancelled the loan and demanded
immediate payment of the amount. Cajes paid the loan
to DBP for which the former was issued a Cancellation
of Mortgage releasing the property in question from
encumbrance. DBP asked Cajes to vacate the property.
As the latter refused to do so, DBP filed a complaint for
recovery of possession with damages against him. The
RTC of Tagbilaran City declared DBP the lawful owner
of the entire land covered by TCT No. 10101 on the
ground that the decree of registration was binding upon
the land.
ISSUE:
Who has better right to the land in dispute, DBP
or Cajes?

HELD:
Cajes has better right. In the present case,
Cajes has been in actual, open, peaceful and continuous
possession of the property since 1950. His claim based
on actual occupation of the land is bolstered by the Tax
Declarations issued in his name. Together with his actual
possession of the land, these tax declarations constitute
strong evidence of ownership of the land occupied by
him. More importantly, it was established that
respondent, having been in possession of the land since
1950, was the owner of the property when it was
registered by Jose Alvarez in 1969, his possession
tacked to that of his predecessor-in-interest, Mumar,
which dates back to 1917. Clearly, more than 30 year
had elapsed before a decree of registration was issued
in favor of Alvarez. This uninterrupted adverse
possession of the land for more than 30 years could only

ripen into ownership of the land through acquisitive


prescription which is a mode of acquiring ownership and
other real rights over immovable property. Prescription
requires public, peaceful, uninterrupted and adverse
possession of the property in the concept of an owner for
ten (10) years, in case the possession is in good faith
and with a just title. Accordingly, the land in question
must be reconveyed in favor of Cajes, the true and
actual owner thereof, reconveyance being clearly the
proper remedy in this case.

10

VILLAMOR VS. CA

[G.R. No. 97332. October 10, 1991.]


FACTS:
Macaria Labingisa Reyes was the owner of a
600-square meter lot located at Baesa, Caloocan City
(TCT [18431] 18938, Register of Deeds of Rizal). In July
1971, Macaria sold a portion of 300 sq. ms. of the lot to
the Spouses Julio and Marina Villamor for the total
amount of P21,000.00. Earlier, Macaria borrowed
P2,000.00 from the spouses which amount was educted
from the total purchase price of the 300 sq. m. Lot sold.
The portion sold to the Villamor spouses is now covered
by TCT 39935 while the remaining portion which is still in
the name of Macaria Labingisa- is covered by TCT
39934. On 11 November 1971, Macaria executed a
Deed of option in favor of Villamor in which the
remaining 300 sq. m. portion (TCT No. 39934) of the lot
would be sold to Villamor under the conditions stated
therein. According to Macaria, when her husband,
Roberto Reyes, retired in 1984, they offered to
repurchase the lot sold by them to the Villamor spouses
but Marina Villamor refused and reminded them instead
that the Deed of Option in fact gave them the option to
purchase the remaining portion of the lot. The Villamors,
on the other hand, claimed that they had expressed their
desire to purchase the remaining 300 sq. m. portion of
the lot but the Reyes had been ignoring them.
On 13 July 1987, after conciliation proceedings
in the barangay level failed, the Villamors filed a
complaint for specific performance against the Reyes
before the RTC Caloocan City (Branch 121, Civil Case
C-12942). On 26 July 1989, judgment was rendered by
the trial court in favor of the Villamor spouses, ordering
the Reyeses to sell the land to the Villamors, to pay the
the latter the sum of P3,000 as attorneys fees, and to
pay the cost of suit. The court dismissed the
counterclaim for lack of merit. Not satisfied with the
decision of the trial court, the Reyes spouses appealed
to the Court of Appeals (CA-GR CV 24176). On 12
February 1991, the Court of Appeals rendered a decision
reversing the decision of the trial court and dismissing
the complaint. The reversal of the trial courts decision
was premised on the finding of respondent court that the
Deed of Option is void for lack of consideration. The

Villamor spouses brought the petition for review on


certiorari before the Supreme Court.
ISSUE:
Whether or not the Deed of Option whereby the
private respondents agreed to sell their lot to petitioners
is valid.
HELD:
No. An optional contract is a privilege existing in
one person, for which he had paid a consideration and
which gives him the right to buy, for example, certain
merchandise or certain specified property, from another
person, if he chooses, at any time within the agreed
period at a fixed price .
The deed of option entered into by the parties
in the present case had unique features. The first part
covered the statement on the sale of the 300 sq. m.
portion of the lot to Spouses Villamor at the price of P70
per sq. m. which was higher than the actual reasonable
prevailing value of the lands in that place at that time (of
sale). The second part stated that the only reason why
the Villamor spouses agreed to buy the said lot at a
much higher price is because the vendor also agreed to
sell to the Villamors the other half-portion of 300 square
meters of the land. Had the deed stopped there, there
would be no dispute that the deed is really an ordinary
deed of option granting the Villamors the option to buy
the remaining 300 sq. m.-half portion of the lot in
consideration for their having agreed to buy the other
half of the land for a much higher price. But, the deed of
option went on and stated that the sale of the other half
would be made whenever the need of such sale arises,
either on our part or on the part of the Spouses Julio
Villamor and Marina V. Villamor. It was not only the
Villamors who were granted an option to buy for which
they paid a consideration. The Reyes as well were
granted an option to sell should the need for such sale
on their part arise.
11

PHILIPPINE AMERICAN LIFE AND GENERAL


INSURANCE COMPANY VS. VALENCIABAGALACSA

[GR 139776, 1 August 2002]


FACTS:
On 20 June 1995, Eduardo, Celso and Ruben Z.
Lumaniog, as legitimate children and forced heirs of their
late father, Faustino Lumaniog, filed with the Regional
Trial Court of Libmanan, Camarines Sur, a complaint for
recovery of sum of money against the Philippine
American Life and General Insurance Company
(Philamlife) alleging that: their father was insured by
Philamlife under Life Insurance Policy1305486 with a
face value of P50,000.00; their father died of coronary
thrombosis" on 25 November 1980; on 22 June 1981,
they claimed and continuously claimed for all the
proceeds and interests under the life insurance policy in

the amount of P641,000.00, despite repeated demands


for payment and/or settlement of the claim due from
Philamlife, the last of which is on 1 December 1994,
Philamlife finally refused or disallowed said claim on 14
February 1995; and so, they filed their complaint.
Philamlife filed an Answer with Counterclaim and
Motion to Dismiss, contending that the cause of action
had prescribed and that the Lumaniogs are guilty of
laches; that it had denied the latter's claim in a letter
dated 12 March 1982, signed by its then Assistant Vice
President, Amado Dimalanta, on ground of concealment
on the part of the deceased insured Faustino when he
asserted in his application for insurance coverage that
he had not been treated for indication of "chest pain,
palpitation, high blood pressure, rheumatic fever, heart
murmur, heart attack or other disorder of the heart or
blood vessel" when in fact he was a known hypertensive
since 1974; that the Lumaniogs sent a letter dated 25
May 1983 requesting for reconsideration of the denial; in
a letter dated 11July 1983, it reiterated its decision to
deny the claim for payment of the proceeds; more than
10 years later, or on 1 December 1994, it received a
letter from Jose C. Claro, a provincial board member of
the province of Camarines Sur, reiterating the early
request for reconsideration which it denied in a letter
dated 14 February 1995.
The Lumaniogs opposed the motion to dismiss.
On 7 June 1996, the RTC issued an Order as to the
necessity of trial on merits. Philamlife's motion for
reconsideration was denied by the RTC in its Order
dated 22 December 1997 upholding however in the
same Order the claim of the Lumaniogs' counsel that the
running of the 10-year period was "stopped" on 25 May
1983 when they requested for a reconsideration of the
denial and it was only on 14 February 1995 when
Philamlife finally decided to deny their claim that the 10year period began to run. Philamlife filed a petition for
certiorari (CA-GR 47885) in the Court of Appeals and
after the comment of the Lumaniogs and reply of
Philamlife, the appellate court rendered its Decision,
dated 30 April 1999, dismissed the petition for lack of
merit. Philamlife filed the petition for review on certiorari.
ISSUE:
Whether the complaint filed by the Lumaniogs
for payment of life insurance proceeds is already barred
by prescription of action, or whether an extrajudicial
demand made after an action has prescribed shall cause
the revival of the action.
HELD:
Philamlife had specifically alleged in the Answer
that it had denied the Lumaniogs' claim per its letter
dated 11 July 1983. Hence, due process demands that it
be given the opportunity to prove that the Lumaniogs
had received said letter. Said letter is crucial to
Philamlife's defense that the filing of the complaint for
recovery of sum of money in June 1995 is beyond the
10-year rescriptive period. The RTC committed a grave

abuse of discretion when, in resolving the motion for


reconsideration of Philamlife, it arbitrarily ruled in its
Order dated 12 December 1997, that the period of 10
years had not yet lapsed. It based its finding on a mere
explanation of the Lumaniogs' counsel and not on
evidence presented by the parties as to the date when to
reckon the prescriptive period. The ruling of the RTC that
the cause of action of the Lumaniogs had not prescribed,
is arbitrary and patently erroneous for not being founded
on evidence on record, and therefore, the same is void.
Consequently, while the Court of Appeals did not err in
upholding the 7 June 1986 Order of the RTC, it
committed a reversible error when it declared that the
RTC did not commit any grave abuse of discretion in
issuing the Order dated 12 December 1997. The
Supreme Court thus partially granted the petition, setting
aside the decision of the Court of Appeals dated 30 April
1999 insofar only as it upheld the RTC Order dated 12
December 1997. A new judgment was entered reversing
and setting aside the Order dated 12 December 1997 of
the Regional Trial Court of Libmanan, Camarines Sur
(Branch 56) and affirming its Order dated 20 June 1995.
Said RTC was directed to proceed with dispatch with
Civil Case L-787.
12

BASA V. REPUBLIC

G.R. NO. 45277; AUGUST 5, 1985


FACTS:
In a demand letter dated August 31, 1967, the
Commissioner of Internal Revenue assessed against
Augusto Basa deficiency income taxes for 1957 to 1960
totalling
P16,353.12.[*]
As may be noted, the deficiencies were based on the
taxpayer's failure to report in full his capital gains on the
sales of land. This omission or underdeclaration of
income justified the imposition of 50% surcharge.
The taxpayer did not contest the assessments in the Tax
Court. On the assumption that the assessments had
become final and incontestable, the Commissioner on
September 3, 1975 sued the taxpayer in the Manila
Court of First Instance for the collection of said amount.
The trial court in a decision dated April 20, 1976
affirmed the assessments and ordered Basa to pay
P16,353.12 plus 5% surcharge and one percent monthly
interest from August 31, 1967 to August 31, 1970.
Instead of appealing to this Court directly, Basa tried to
appeal, to the Court of Appeals. He did not perfect his
appeal within the reglementary period. The trial court
dismissed it in its order dated October 1, 1976.
On December 23, 1976 Basa filed the instant special
civil action of certiorari wherein he assailed the trial
court's
decision.

ISSUE:

HELD:

Whether the decision of the Court of First


Instance of Manila (not the Tax Court) in an income tax
case is reviewable by the Appellate Court or by this

Yes
In Art 1150 CC The time for prescription of all
kinds of actions, when there in no special provision
which ordains otherwise, shall be counted from the day
they may be brought.
Art 1149 CC Period of prescription is 5 years
from the right of action accrues.
The action has long prescribed because she
married Arturo Tolentino on April 21, 1945; Civil Code
took effect on August 30, 1950; She acquired knowledge
that Consuelo David was still using the surname
Tolentino in 1951.
She should have filed the case after she
obtained knowledge that Consuelo David was still using
the surname Tolentino. The case was filed on November
23, 1971 or 20 years after she obtained knowledge.

Court.

HELD:
The issue of prescription raised by him is
baseless. The assessments were predicated on the fact
that his income tax returns, if not fraudulent, were false
because he underdeclared his income. In such a case,
the deficiency assessments may be made within ten
years after the discovery of the falsity or omission. The
court action should be instituted within five years after
the assessment but this period is suspended during the
time that the Commission is prohibited from instituting a
court action.
As explained in the Solicitor General's
memorandum, Basa's requests for reinvestigation tolled
the prescriptive period of five years within which court
action may be brought (Commissioner of Internal
Revenue vs. Capital Subdivision, Inc., 119 Phil. 1051;
Collector of Internal Revenue vs. Suyoc Consolidated
Mining Company, 104 Phil. 819). Moreover, the issue of
prescription should have been raised in the Tax Court.

13

16

17

18

REPUBLIC VS. RICARTE


19

14
20
15

TOLENTINO VS. CA

FACTS:
Private respondent Consuelo David married
Arturo Tolentino in 1931. The marriage was dissolved
and terminated in 1943 pursuant to the law during the
Japanese occupation by a decree of absolute divorce on
the grounds of desertion and abandonment by the wife
for at least 3 continuous years.
Arturo Tolentino then married Pilar Adorable but
she died soon after the marriage. After that, Constancia
married Arturo Tolentino on April 21, 1945 and they had
3 children. Constancia Tolentino is the present legal wife
of Arturo Tolentino.
Consuelo David continued using the surname
Tolentino after the divorce and up to the time that the
complaint was filed. Her usage of the surname Tolentino
was authorized by the family of Arturo Tolentino
(brothers and sisters).
In RTC, Consuelo David should discontinue her
usage of the surname of Tolentino. The CA decision
reversed that of the RTCs.
ISSUE:
WON the petitioners cause of action has
already prescribed

21
22

PNB VS. CA

FACTS:
Province of Isabela issued several checks drawn
against its account with PNB (P) in favor of Ibarrola (R),
as payments for the purchase of medicines.
The checks were delivered to Rs agents who
turned them over to R, except 23 checks amounting to
P98k.
Due to failure to receive full amount, R filed case
against P
LC, CA and SC ordered PNB to pay however, all
3 courts failed to specify the legal rate of interest 6% or
12%
ISSUE:
WoN the rate to be used is 6%
HELD:
YES!
This case does not involve a loan, forbearance
of money or judgment involving a loan or forbearance of

money as it arose from a contract of sale whereby R did


not receive full payment for her merchandise.
When an obligation arises from a contract of
purchase and sale and not from a contract of loan or
mutuum, the applicable rate is 6% per annum as
provided in Art. 2209 of the NCC
6% from filing of complaint until full payment
before finality of judgment.
12% from finality of judgment.
23

HEIRS OF LUIS BACUS, ET. AL., VS. CA

FACTS:
On 1984 Luis Bacus leased to Faustino Duray a
parcel of agricultural land with total land area of 3,002 of
square meters, in Cebu. The lease was for six years
ending in 1990, the contract contained an option to buy
clause. Under the said option, the lessee had the
exclusive and irrevocable right to buy 2,000 square
meters 5 years from a year after the effectivity of the
contract, at P200 per square meter. That rate shall be
proportionately adjusted depending on the peso rate
against the US dollar, which at the time of the execution
of
the
contract
was
14
pesos.
Close to the expiration of the contract Luis Bacus died
on 1989, after Duray informed the heirs of Bacus that
they are willing and ready to purchase the property
under the option to buy clause. The heirs refused to sell,
thus Duray filed a complaint for specific performance
against the heirs of Bacus. He showed that he is ready
and able to meet his obligations under the contract with
Bacus. The RTC ruled in favor of the Durays and the CA
later affirmed the decision.
ISSUE:
Can the heirs of Luis Bacus be compelled to sell the
portion of the lot under the option to buy clause?
- Yes, Obligations under an option to buy are reciprocal
obligations. The performance of one obligation is
conditioned on the simultaneous fulfillment of the other
obligation. In other words, in an option to buy, the
payment of the purchase price by the creditor is
contingent upon the execution and delivery of the deed
of
sale
by
the
debtor.
- When the Durays exercised their option to buy the
property their obligation was to advise the Bacus of their
decision and readiness to pay the price, they were not
yet obliged to make the payment. Only upon the Bacus
actual execution and delivery of the deed of sale were
they
required
to
pay.
- The Durays did not incur in delay when they did not yet
deliver the payment nor make a consignation before the
expiration of the contract. In reciprocal obligations,
neither party incurs in delay if the other party does not
comply or is not ready to comply in a proper manner with
what is incumbent upon him. Only from the moment one
of the parties fulfills his obligation, does delay by the

other

begin.

HELD:
The petition is DENIED nad the decision of the Court of
Appeals
is
AFFIRMED.
Obligations

and

Contracts

Terms:

Reciprocal Obligations- Those which arise from the


same cause, and in which each party is a debtor and a
creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to
be performed simultaneously such that the performance
of one is conditioned upon the simultaneous fulfillment of
the other