CRESENCIO BAÑO v.

BACHELOR EXPRESS
GR No. 191703| March 12, 2012

DOCTRINE OF THE CASE

Gross negligence is "one that is characterized by the want of even slight care, acting or omitting to act in a situation
where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences insofar
as other persons may be affected."

PERLAS-BERNABE, J.:

FACTS: Wenifredo Salvaña was driving the bus owned by Bachelor Express, Inc./Ceres Liner, Inc. along the
national highway at Magdum, Tagum City bound for Davao City. He overtook a Lawin PUJ jeepney while
negotiating a blind curve in a descending road causing him to intrude into the opposite lane and bump the 10-
wheeler Hino dump truck of petitioner Cresencio Baño running uphill from the opposite direction. The
collision resulted in damage to both vehicles, the subsequent death of the truck driver, Amancio Asumbrado,
and serious physical injuries to bus driver Salvaña.

Baño and the heirs of Asumbrado filed a complaint for quasi-delict, damages and attorney's fees
against respondents, accusing Salvaña of negligently driving the bus causing it to collide with the dump truck.

Respondents denied liability, claiming that prior to the collision, the bus was running out of control
because of a problem in the steering wheel system which could not have been avoided despite their
maintenance efforts. Instead, they claimed that Asumbrado had the last clear chance to avoid the collision
had he not driven the dump truck at a very fast speed.

ISSUE
Whether Salvaña was grossly negligent in driving the bus even after he had discovered the
malfunction in its steering wheel.

RULING
YES. Gross negligence is "one that is characterized by the want of even slight care, acting or
omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally with
a conscious indifference to consequences insofar as other persons may be affected."

In the present case, records show that when bus driver Salvaña overtook the jeepney in front of him,
he was rounding a blind curve along a descending road. Considering the road condition and that there was
only one lane on each side of the center line for the movement of traffic in opposite directions, it would have
been more prudent for him to confine his bus to its proper place. Having thus encroached on the opposite
lane in the process of overtaking the jeepney, without ascertaining that it was clear of oncoming traffic that
resulted in the collision with the approaching dump truck driven by deceased Asumbrado, Salvaña was
grossly negligent in driving his bus. He was remiss in his duty to determine that the road was clear and not to
proceed if he could not do so in safety.
 SUMMARY FORMAT

Q: Wenifredo Salvaña was driving the bus owned by Bachelor Express, Inc./Ceres Liner, Inc. along
the national highway when he overtook a PUJ jeepney while negotiating a blind curve in a
descending road causing him to intrude into the opposite lane and bump the 10-wheeler Hino dump
truck of petitioner Cresencio Baño running uphill from the opposite direction. The collision resulted
in damage to both vehicles, the subsequent death of the truck driver, Amancio Asumbrado, and
serious physical injuries to bus driver Salvaña. A complaint for quasi-delict was filed against Salvaña
for negligently driving the bus causing it to collide with the dump truck. Respondents denied
liability, claiming that prior to the collision; the bus was running out of control because of a problem
in the steering wheel system which could not have been avoided despite their maintenance efforts.
Instead, they claimed that Asumbrado had the last clear chance to avoid the collision had he not
driven the dump truck at a very fast speed. Was Salvaña grossly negligent?

A: Yes. When bus driver Salvaña overtook the jeepney in front of him, he was rounding a blind curve along a
descending road. Considering the road condition and that there was only one lane on each side of the center
line for the movement of traffic in opposite directions, it would have been more prudent for him to confine
his bus to its proper place. Having thus encroached on the opposite lane in the process of overtaking the
jeepney, without ascertaining that it was clear of oncoming traffic that resulted in the collision with the
approaching dump truck driven by deceased Asumbrado, Salvaña was grossly negligent in driving his bus. He
was remiss in his duty to determine that the road was clear and not to proceed if he could not do so in safety.
 ANICETO BANGIS SUBSTITUTED BY HIS HEIRS v. ADOLFO
GR No. 190875| June 13, 2012

DOCTRINE OF THE CASE

For the contract of antichresis to be valid, Article 2134 of the Civil Code requires that "the amount of the principal
and of the interest shall be specified in writing; otherwise the contract of antichresis shall be void."

PERLAS-BERNABE, J.:

FACTS: The spouses Adolfo were the original registered owners of a 126,622 square meter lot issued on
December 15, 1954 located in Valencia, Malaybalay, Bukidnon. This property was mortgaged to the then
Rehabilitation Finance Corporation (now Development Bank of the Philippines or DBP) on August 18, 1955,
and upon default in the payment of the loan obligation, was foreclosed and ownership was consolidated in
DBP's name Serafin Adolfo, Sr., however, repurchased the same on December 1, 1971, a year after his wife
died in 1970.

Sometime in 1975, Adolfo allegedly mortgaged the subject property for the sum of P12,500.00 to
Aniceto Bangis who immediately took possession of the land. The said transaction was, however, not reduced
into writing. When Adolfo died, his heirs executed a Deed of Extrajudicial Partition covering the subject
property. On May 26, 1998, the said property was subdivided and separate titles were issued in names of the
Heirs of Adolfo.

In June 1998, the Heirs of Adolfo expressed their intention to redeem the mortgaged property from
Bangis but the latter refused, claiming that the transaction between him and Adolfo was one of sale. During
the conciliation meetings in the barangay, Bangis' son, Rudy Bangis, showed them a copy of a deed of sale
and a certificate of title to the disputed lot. The parties having failed to amicably settle their differences, a
certificate to file action was issued by the barangay.

The RTC and CA ruled that the contract between the plaintiffs and defendants as a mere mortgage
or antichresis and since the defendants have been in the possession of the property in 1975 up to the present
time enjoying all its fruits or income.

ISSUE
Whether the transaction between the parties was one of sale and not a mortgage or antichresis.

RULING
THERE WAS NEITHER AN ANTICHRESIS NOR SALE. For the contract of antichresis to
be valid, Article 2134 of the Civil Code requires that "the amount of the principal and of the interest shall be
specified in writing; otherwise the contract of antichresis shall be void." In this case, the Heirs of Adolfo were
indisputably unable to produce any document in support of their claim that the contract between Adolfo and
Bangis was an antichresis, hence, the CA properly held that no such relationship existed between the parties.
On the other hand, the Heirs of Bangis presented an Extra-Judicial Settlement with Absolute Deed
of Sale to justify their claimed ownership and possession of the subject land. However, notwithstanding that
the subject of inquiry is the very contents of the said document, only its photocopy was presented at the trial
without providing sufficient justification for the production of secondary evidence, in violation of the best
evidence rule embodied under Section 3 in relation to Section 5 of Rule 130 of the Rules of Court.
In sum, the Heirs of Bangis failed to establish the existence and due execution of the subject deed on
which their claim of ownership was founded. Consequently, the RTC and CA were correct in affording no
probative value to the said document.
 SUMMARY FORMAT

Q: The spouses Adolfo were the original registered owners of a lot. This property was mortgaged to
the then Rehabilitation Finance Corporation (now Development Bank of the Philippines or DBP)
and upon default in the payment of the loan obligation, was foreclosed and ownership was
consolidated in DBP's name Serafin Adolfo, Sr., however, repurchased the same on December 1,
1971, a year after his wife died in 1970. Sometime in 1975, Adolfo allegedly mortgaged the subject
property for the sum of P12,500.00 to Aniceto Bangis who immediately took possession of the land.
The said transaction was, however, not reduced into writing. When Adolfo died, his heirs executed a
Deed of Extrajudicial Partition covering the subject property. The Heirs of Adolfo expressed their
intention to redeem the mortgaged property from Bangis but the latter refused, claiming that the
transaction between him and Adolfo was one of sale. The RTC and CA ruled that the contract
between the plaintiffs and defendants as a mere mortgage or antichresis and since the defendants
have been in the possession of the property in 1975 up to the present time enjoying all its fruits or
income. Was the transaction one of sale, or a mortgage or antichresis?

A: THERE WAS NEITHER AN ANTICHRESIS NOR SALE. For the contract of antichresis to be
valid, Article 2134 of the Civil Code requires that "the amount of the principal and of the interest shall be
specified in writing; otherwise the contract of antichresis shall be void." In this case, the Heirs of Adolfo were
indisputably unable to produce any document in support of their claim that the contract between Adolfo and
Bangis was an antichresis, hence, the CA properly held that no such relationship existed between the parties.
On the other hand, the Heirs of Bangis presented an Extra-Judicial Settlement with Absolute Deed of Sale to
justify their claimed ownership and possession of the subject land. However, notwithstanding that the subject
of inquiry is the very contents of the said document, only its photocopy was presented at the trial without
providing sufficient justification for the production of secondary evidence, in violation of the best evidence
rule embodied under Section 3 in relation to Section 5 of Rule 130 of the Rules of Court. In sum, the Heirs of
Bangis failed to establish the existence and due execution of the subject deed on which their claim of
ownership was founded. Consequently, the RTC and CA were correct in affording no probative value to the
said document.
 ROSENA FONTELAR OGAWA v. ELIZABETH GACHE MENIGISHI
G.R. No. 193089 | July 09, 2012

DOCTRINE OF THE CASE

A mere written and signed acknowledgment that money was received is not an actionable document, as there are no
terms and conditions found therein from which a right or obligation may be established. Hence, it cannot be considered an
actionable document upon which an action or defense may be founded. Consequently, there was no need to deny its genuineness
and due execution under oath in accordance with Section 8, Rule 8 of the Rules of Civil Procedure.

PERLAS-BERNABE, J.:

FACTS: Petitioner Rosena Fontelar Ogawa filed a complaint for sum of money, damages, breach of good
human relation and unjust enrichment before the RTC against respondent Elizabeth Gache Menigishi,
alleging that the latter borrowed from her the amounts of P15,000.00, P100,000.00 and P8,000.00, in
September 2000, August 2001, and March 2003, respectively. Unable to pay, respondent offered to sell her
building and its improvements in Sorsogon City to petitioner for a consideration of P1,500,000.00 with the
agreement that her outstanding loans with petitioner be deducted from the purchase price and the balance
payable in installments.

As partial payment for the properties, petitioner remitted the following amounts to respondent: (a)
P150,000.00 through the account of her friend Emma Fulleros on October 23, 2003; and (b) P250,772.90 by
way of bank remittance to respondent's Equitable-PCI Bank Account on December 8, 2003. Having paid
huge amounts and in order to protect her proprietary rights, petitioner then demanded for the execution of
the corresponding deed of sale, but respondent backed out from the deal and reneged on her obligations.

In her Answer with Counterclaim, respondent specifically denied her indebtedness to petitioner and claimed
that it was the latter who owed her 1,000,000.00 Yen, equivalent to about P500,000.00, as evidenced by a
receipt. In partial payment of her indebtedness, petitioner, thus, remitted the amounts of P150,000.00 and
P250,000.00 to respondent, leaving a balance of P100,000.00. Respondent also sought reimbursement of the
advances she allegedly made for the wedding expenses of petitioner and Yashoyuki in the amount of
4,000,000.00 Yen. While she admitted offering her property for sale to petitioner, respondent explained that
the sale did not materialize as petitioner failed to produce the stipulated downpayment.

ISSUE
1. Whether or not the disputed receipt sufficiently established respondent's counterclaim that petitioner
owed her 1,000,000.00 Yen?

RULING
No. A receipt is defined as a written and signed acknowledgment that money or good was delivered
or received. Exhibit 1, upon which respondent relies to support her counterclaim, sufficiently satisfies this
definition. However, while indubitably containing the signatures of both parties, a plain reading of the
contents of Exhibit 1 negates any inference as to the nature of the transaction for which the 1,000,000 Yen
was received and who between the parties is the obligor and the obligee.

What is apparent is a mere written and signed acknowledgment that money was received. There are
no terms and conditions found therein from which a right or obligation may be established. Hence, it cannot
be considered an actionable document upon which an action or defense may be founded. Consequently, there
was no need to deny its genuineness and due execution under oath in accordance with Section 8, Rule 8 of
the Rules of Civil Procedure.

The manifestation made in open court by Atty. Gerona, petitioner's counsel, cannot be construed as
an admission of her liability. It cannot be clearly ascertained who between the two signatories is the obligor
and obligee. Atty. Gerona's statement that the one who usually prepares the receipt is the obligor or the
creditor did not conclusively imply that petitioner owed respondent 1M Yen, or vice versa. Hence, absent any
other evidence to prove the transaction for which the receipt was issued, the Court cannot consider Exhibit 1
as evidence of a purported loan between petitioner and respondent which the former categorically denied.

It is settled that the burden of proof lies with the party who asserts his/her right. In a counterclaim,
the burden of proving the existence of the claim lies with the defendant, by the quantum of evidence required
by law, which in this case is preponderance of evidence. (Rule 133, Sec 1). "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 evidence" or "greater weight of credible evidence. From the evidence on
record, it is clear that respondent failed to prove her counterclaim by preponderance of evidence.
 SUMMARY FORMAT

Q: Roseña Ogawa filed a complaint for sum of money before the RTC against Elizabeth Gache
Menigishi, alleging that she partially paid Menigishi Php 400 000 for execution of deed of sale over
Menigishi’s building plus improvements in Sorsogon. However, Menigishi backed out from the deal
and reneged on her obligations. Ogawa then filed complaint for sum of money, damages, breach of
good human relation and unjust enrichment. Menigishi filed her answer with counterclaim where
she denied her indebtedness. She also claimed that it was Ogawa who owed her 1,000,000.00 Yen, as
evidenced by a receipt. Is the disputed receipt sufficiently established respondent's counterclaim
that petitioner owed her 1,000,000.00 Yen?

A: No. A receipt is defined as a written and signed acknowledgment that money or good was delivered or
received. What is apparent is a mere written and signed acknowledgment that money was received. There are
no terms and conditions found therein from which a right or obligation may be established. Hence, it cannot
be considered an actionable document upon which an action or defense may be founded. Consequently, there
was no need to deny its genuineness and due execution under oath in accordance with Section 8, Rule 8 of
the Rules of Civil Procedure.
 SPS. ROLANDO D. SOLLER AND NENITA T. SOLLER v. HEIRS OF JEREMIAS ULAYAO
GR No. 175552 | July 18, 2012

DOCTRINE OF THE CASE

Relief by summary judgment can only be allowed after compliance with the minimum requirement of vigilance by the
court in a summary hearing considering that this remedy is in derogation of a party's right to a plenary trial of his case. At any
rate, a party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, or
that the issue posed in the complaint is so patently unsubstantial as not to constitute a genuine issue for trial, and any doubt as to
the existence of such an issue is resolved against the movant.

PERLAS-BERNABE, J.:

FACTS: Spouses Soller are allegedly the registered owners of a parcel of land situated in Poblacion, Bansud,
Oriental Mindoro. Petitioners and their predecessors-in-interest were purportedly in open, peaceful, and
continuous possession of the property in the concept of owner since time immemorial.

However, in February 1996, the original defendant, now-deceased Jeremias Ulayao, and all persons
claiming rights under him, allegedly by means of force, violence, stealth and intimidation, entered into the
possession of the land and, despite repeated demands to desist, constructed a house on the property. This
prompted petitioners to bring the matter before the barangay, but conciliation failed. Thus, petitioners
instituted a complaint for recovery of possession with damages before the MCTC of Bansud, Oriental
Mindoro.

In Jeremias' Answer, he denied petitioners' allegations and raised the special and affirmative defense
of acquisitive prescription, as he had purportedly been in long, continuous and adverse possession of the
property for more than thirty (30) years. Jeremias also claimed that when Paulina Lusterio, petitioners'
predecessor-in-interest, surreptitiously had the property registered in her name under a free patent, the
Community Environment and Natural Resources Office (CENRO) conducted an investigation, upon
Jeremias' protest, and found that it was the latter who was in actual occupation and possession of the
property. The CENRO thus recommended that the title issued in Paulina's name be revoked in order for the
property to be reverted back to the state. To further support his defense of acquisitive prescription, Jeremias
claimed that his house and other permanent improvements still exist on the property.

The MCTC rendered a Summary Judgment upon a finding that no genuine issue of fact had been
tendered by the answer. It held that petitioners' claim to the disputed property was issued in their names,
which is indefeasible and cannot be attacked collaterally.

ISSUE
Is there propriety of rendering a summary judgment?

RULING
NO. Summary judgments are proper when, upon motion of the plaintiff or the defendant, the court
finds that the answer filed by the defendant does not tender a genuine issue as to any material fact and that
one party is entitled to a judgment as a matter of law. In Viajar v. Estenzo, the Court explained:

“Relief by summary judgment is intended to expedite or promptly dispose of cases where the facts
appear undisputed and certain from the pleadings, depositions, admissions and affidavits. But if there
be a doubt as to such facts and there be an issue or issues of fact joined by the parties, neither one of
them can pray for a summary judgment. Where the facts pleaded by the parties are disputed or
contested, proceedings for a summary judgment cannot take the place of a trial.
 Relief by summary judgment can only be allowed after compliance with the minimum requirement of
vigilance by the court in a summary hearing considering that this remedy is in derogation of a party's
right to a plenary trial of his case. At any rate, a party who moves for summary judgment has the
burden of demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in
the complaint is so patently unsubstantial as not to constitute a genuine issue for trial, and any doubt
as to the existence of such an issue is resolved against the movant.”

In this case, records show that the original defendant, Jeremias, raised the special and affirmative
defense of acquisitive prescription in his answer, claiming that he was in open, continuous and notorious
possession or the disputed property as, in fact, his house and other permanent improvements are still existing
thereon. As succinctly explained by the CA in its assailed Decision, the defense of acquisitive prescription
inevitably involves the issue of actual, physical and material possession, which is always a question of fact.
The existence of this issue therefore necessitates, for its proper resolution, the presentation of competent and
relevant evidence, which can only be done in the course of a full-blown trial.
 SUMMARY FORMAT

Q: Spouses Soller and their predecessors-in-interest were purportedly in open, peaceful, and
continuous possession of the subject property in the concept of owner since time immemorial.
However, the original defendant, Jeremias Ulayao, and all persons claiming rights under him,
allegedly by means of force, violence, stealth and intimidation, entered into the possession of the
land and, despite repeated demands to desist, constructed a house on the property. Thus, petitioners
instituted a complaint for recovery of possession with. In Jeremias' Answer, he denied petitioners'
allegations and raised the special and affirmative defense of acquisitive prescription, as he had
purportedly been in long, continuous and adverse possession of the property for more than thirty
(30) years. The MCTC rendered a Summary Judgment upon a finding that no genuine issue of fact
had been tendered by the answer. It held that petitioners' claim to the disputed property was issued
in their names, which is indefeasible and cannot be attacked collaterally. Is there propriety of
rendering a summary judgment?

A: NO. Relief by summary judgment can only be allowed after compliance with the minimum requirement of
vigilance by the court in a summary hearing considering that this remedy is in derogation of a party's right to
a plenary trial of his case. At any rate, a party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is so
patently unsubstantial as not to constitute a genuine issue for trial, and any doubt as to the existence of such
an issue is resolved against the movant.

In this case, records show that the original defendant, Jeremias, raised the special and affirmative
defense of acquisitive prescription in his answer, claiming that he was in open, continuous and notorious
possession or the disputed property as, in fact, his house and other permanent improvements are still existing
thereon. As succinctly explained by the CA in its assailed Decision, the defense of acquisitive prescription
inevitably involves the issue of actual, physical and material possession, which is always a question of fact.
The existence of this issue therefore necessitates, for its proper resolution, the presentation of competent and
relevant evidence, which can only be done in the course of a full-blown trial.
 JOSE VICENTE ATILANO II v. JUDGE TIBING A. ASAALI
GR No. 174982 | September 10, 2012

DOCTRINE OF THE CASE

It is well-settled that no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are
not bound by a judgment rendered by the court. Execution of a judgment can only be issued against one who is a party to the
action, and not against one who, not being a party thereto, did not have his day in court. Due process dictates that a court decision
can only bind a party to the litigation and not against innocent third parties.

PERLAS-BERNABE, J.:

FACTS: Atlantic Merchandising, Inc. filed an action for revival of judgment against Zamboanga Alta
Consolidated, Inc. (ZACI) before the RTC of Zamboanga City. Accordingly, the RTC revived the judgment
and ordered ZACI to pay private respondent the amount of P673,536.54 representing its principal obligation,
interest, attorney's fees and costs, plus 12% legal interest per annum computed from the time of the filing of
the complaint until the same is fully paid. ZACI was likewise directed to pay private respondent attorney's
fees equivalent to 15% of the unpaid amount as well as expenses of litigation and costs.

A writ of execution was issued to enforce the decision but because it was returned unsatisfied, private
respondent sought the examination of ZACI's debtors, which included petitioners as its stockholders. In the
course of the proceedings, petitioners denied liability for any unpaid subscriptions with ZACI and offered
various documentary evidence to support their claim.

The RTC noted that ZACI had folded up and ceased business operations as early as 1983, and when
inquiries regarding its paid-in capital were made in 1992, or almost ten (10) years later, no changes were
reflected in the company books.

Finding petitioners to be indebted to ZACI as its incorporators in the aggregate amount of

P750,000.00 by way of unpaid stock subscriptions on the basis of the records of the SEC, the RTC ordered
petitioners to settle their obligations to the capital stock of ZACI.

ISSUE
Whether the RTC Decision directing petitioners to pay private respondent the alleged unpaid stock
subscriptions to ZACI is tantamount to a denial of due process of law.

RULING
YES. Records show that petitioners merely became involved in this case when, upon failure to
execute the revived final judgment in its favor in Civil Case No. 3776, respondent sought to examine the
debtors of ZACI, the judgment obligor, which included petitioners on the allegation that they had unpaid
stock subscriptions to ZACI, as its incorporators and stockholders. During the proceedings, petitioners
vehemently denied any such liability or indebtedness.

Under the circumstances, therefore, the RTC should have directed respondent to institute a separate
action against petitioners for the purpose of recovering their alleged indebtedness to ZACI, in accordance
with Section 43, Rule 39 of the Rules of Court, which provides:

Section 43. Proceedings when indebtedness denied or another person claims the property. If it
appears that a person or corporation, alleged to have property of the judgment obligor or to be
indebted to him, claims an interest in the property adverse to him or denies the debt, the court may
authorize, by an order made to that effect, the judgment obligee to institute an action against such
person or corporation for the recovery of such interest or debt, forbid a transfer or other disposition
of such interest or debt within one hundred twenty (120) days from notice of the order, and may
 punish disobedience of such order as for contempt. Such order may be modified or vacated at any
time by the court which issued it, or the court in which the action is brought, upon such terms as
may be just.

It is well-settled that no man shall be affected by any proceeding to which he is a stranger, and
strangers to a case are not bound by a judgment rendered by the court. Execution of a judgment can only be
issued against one who is a party to the action, and not against one who, not being a party thereto, did not
have his day in court. Due process dictates that a court decision can only bind a party to the litigation and not
against innocent third parties.

Petitioners were total strangers to the civil case between ZACI and respondent, and to order them to
settle an obligation which they persistently denied would be tantamount to deprivation of their property
without due process of law. The only power of the RTC, in this case, is to make an order authorizing
respondent to sue in the proper court to recover an indebtedness in favor of ZACI. It has no jurisdiction to
summarily try the question of whether petitioners were truly indebted to ZACI when such indebtedness is
denied. On this note, it bears stressing that stock subscriptions are considered a debt of the stockholder to
the corporation.
 SUMMARY FORMAT

Q: Atlantic Merchandising, Inc. filed an action for revival of judgment against Zamboanga Alta
Consolidated, Inc. (ZACI) before the RTC of Zamboanga City. Accordingly, the RTC revived the
judgment and ordered ZACI to pay private respondent the amount of P673,536.54 representing its
principal obligation, interest, attorney's fees and costs, plus 12% legal interest per annum computed
from the time of the filing of the complaint until the same is fully paid. ZACI was likewise directed
to pay private respondent attorney's fees equivalent to 15% of the unpaid amount as well as expenses
of litigation and costs. In the course of the proceedings, petitioners denied liability for any unpaid
subscriptions with ZACI and offered various documentary evidence to support their claim. Finding
petitioners to be indebted to ZACI as its incorporators in the aggregate amount of P750,000.00 by
way of unpaid stock subscriptions on the basis of the records of the SEC, the RTC ordered
petitioners to settle their obligations to the capital stock of ZACI. Is the order of the RTC proper?

A: NO. It is well-settled that no man shall be affected by any proceeding to which he is a stranger, and
strangers to a case are not bound by a judgment rendered by the court. Execution of a judgment can only be
issued against one who is a party to the action, and not against one who, not being a party thereto, did not
have his day in court. Due process dictates that a court decision can only bind a party to the litigation and not
against innocent third parties.

Petitioners were total strangers to the civil case between ZACI and respondent, and to order them to
settle an obligation which they persistently denied would be tantamount to deprivation of their property
without due process of law. The only power of the RTC, in this case, is to make an order authorizing
respondent to sue in the proper court to recover an indebtedness in favor of ZACI. It has no jurisdiction to
summarily try the question of whether petitioners were truly indebted to ZACI when such indebtedness is
denied. On this note, it bears stressing that stock subscriptions are considered a debt of the stockholder to
the corporation.
 LIVING v. MALAYAN INSURANCE COMPANY
GR No. 193753| September 26, 2012

DOCTRINE OF THE CASE

The nature of the solidary obligation under the surety does not make one an indispensable party.

PERLAS-BERNABE, J.:

FACTS: Petitioner was the main contractor of the FOC Network Project of Globe Telecom in Mindanao. In
connection with the project, petitioner entered into a Sub-Contract Agreement with DMI, under which the
latter was tasked to undertake an underground open-trench work. Petitioner required DMI to give a bond, in
the event that DMI fails to perform its obligations under the Agreement. Thus, DMI secured surety and
performance bonds from respondent Malayan Insurance Company, Inc. to answer: (1) for the unliquidated
portion of the downpayment, and (2) for the loss and damage that petitioner may suffer, respectively, should
DMI fail to perform its obligations under the Agreement. Under the bonds, respondent bound itself jointly
and severally liable with DMI.

During the course of excavation and restoration works, the DPWH issued a work-stoppage order
against DMI after finding the latter's work unsatisfactory. Notwithstanding the said order, however, DMI still
failed to adopt corrective measures, prompting petitioner to terminate the Agreement and seek
indemnification from respondent. However, respondent effectively denied petitioner's claim on the ground
that the liability of its principal, DMI, should first be ascertained before its own liability as a surety attaches.
Hence, the instant complaint, premised on respondent's liability under the surety and performance bonds
secured by DMI.

Seeking the dismissal of the complaint, respondent claimed that DMI is an indispensable party that
should be impleaded and whose liability should first be determined before respondent can be held liable.

On the other hand, petitioner asserted that respondent is a surety who is directly and primarily liable
to indemnify petitioner, and that the bond is "callable on demand"[12] in the event DMI fails to perform its
obligations under the Agreement.

The RTC dismissed the complaint without prejudice, for failure to implead DMI as a party
defendant. It ruled that before respondent could be held liable on the surety and performance bonds, it must
first be established that DMI, with whom petitioner had originally contracted, had indeed violated the
Agreement. DMI, therefore, is an indispensable party that must be impleaded in the instant suit.

ISSUE
Whether DMI is an indispensable party in this case.

RULING
NO. Records show that when DMI secured the surety and performance bonds from respondent in
compliance with petitioner's requirement, respondent bound itself "jointly and severally" with DMI for the
damages and actual loss that petitioner may suffer should DMI fail to perform its obligations under the
Agreement, as follows:

“That we, DOU MAC INC. as Principal, and MALAYAN INSURANCE CO., INC., x xx are held
firmly bound unto LIVING @ SENSE INC. in the sum of FIVE MILLION ONE HUNDRED
SEVENTY ONE THOUSAND FOUR HUNDRED EIGHTY EIGHT AND 00/100 PESOS
ONLY (PHP ***5,171,488.00), PHILIPPINE Currency, for the payment of which sum, well and
truly to be made, we bind ourselves, our heirs, executors, administrators, successors and assigns,
jointly and severally, firmly by these presents xxx.”
 The term "jointly and severally" expresses a solidary obligation granting petitioner, as creditor, the
right to proceed against its debtors, i.e., respondent or DMI.

The nature of the solidary obligation under the surety does not make one an indispensable party. An
indispensable party is a party-in-interest without whom no final determination can be had of an action, and
who shall be joined mandatorily either as plaintiffs or defendants. The presence of indispensable parties is
necessary to vest the court with jurisdiction, thus, without their presence to a suit or proceeding, the
judgment of a court cannot attain real finality. The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties but even as to
those present.

In this case, DMI is not an indispensable party because petitioner can claim indemnity directly from
respondent, having made itself jointly and severally liable with DMI for the obligation under the bonds.
Therefore, the failure to implead DMI is not a ground to dismiss the case, even if the same was without
prejudice.

Moreover, even on the assumption that DMI was, indeed, an indispensable party, the RTC
committed reversible error in dismissing the complaint. Failure to implead an indispensable party is not a
ground for the dismissal of an action, as the remedy in such case is to implead the party claimed to be
indispensable, considering that parties may be added by order of the court, on motion of the party or on its
own initiative at any stage of the action
 SUMMARY FORMAT

Q: Petitioner was the main contractor of the FOC Network Project of Globe Telecom in Mindanao.
In connection with the project, petitioner entered into a Sub-Contract Agreement with DMI, under
which the latter was tasked to undertake an underground open-trench work. Petitioner required
DMI to give a bond, in the event that DMI fails to perform its obligations under the Agreement.
Under the bonds, respondent bound itself jointly and severally liable with DMI. During the course of
excavation and restoration works, the DPWH issued a work-stoppage order against DMI after
finding the latter's work unsatisfactory. Notwithstanding the said order, however, DMI still failed to
adopt corrective measures, prompting petitioner to terminate the Agreement and seek
indemnification from respondent. However, respondent effectively denied petitioner's claim on the
ground that the liability of its principal, DMI, should first be ascertained before its own liability as a
surety attaches. Respondent claimed that DMI is an indispensable party that should be impleaded
and whose liability should first be determined before respondent can be held liable. On the other
hand, petitioner asserted that respondent is a surety who is directly and primarily liable to indemnify
petitioner, and that the bond is "callable on demand" in the event DMI fails to perform its
obligations under the Agreement. The RTC dismissed the complaint without prejudice, for failure to
implead DMI as a party defendant. It ruled that before respondent could be held liable on the surety
and performance bonds, it must first be established that DMI, with whom petitioner had originally
contracted, had indeed violated the Agreement. DMI, therefore, is an indispensable party that must
be impleaded in the instant suit. Is DMI an indispensable party in this case?

A: NO. The nature of the solidary obligation under the surety does not make one an indispensable party. An
indispensable party is a party-in-interest without whom no final determination can be had of an action, and
who shall be joined mandatorily either as plaintiffs or defendants.

In this case, DMI is not an indispensable party because petitioner can claim indemnity directly from
respondent, having made itself jointly and severally liable with DMI for the obligation under the bonds.
Therefore, the failure to implead DMI is not a ground to dismiss the case, even if the same was without
prejudice.
 ASSOCIATED MARINE OFFICERS AND SEAMEN'S UNION OF THE PHILIPPINES
PTGWO-ITF v NORIEL DECENA
G.R. No. 178584 | October 8, 2012

DOCTRINE OF THE CASE:

A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds itself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

PERLAS-BERNABE, J.:

FACTS: PTGWO-ITF (petitioner) is a duly registered labor organization engaged in an on-going Shelter
Program, which offers residential lots and fully-furnished houses to its members-seafarers under a
reimbursement scheme requiring no down payment and no interest on the principal sum advanced for the
acquisition and development of the land and the construction of the house.

Petitioner entered into a contract under the Shelter Program with one of its members, Noriel Decena,
allowing the latter to take possession of a house and lot located in Cavite, with the obligation to reimburse
petitioner the cost (US$28,563) thereof in 180 equal monthly payments. It was stipulated in said contract that,
in case respondent fails to remit three (3) monthly reimbursement payments, he shall be given a 3-month
grace period within which to remit his arrears, otherwise, the contract shall be automatically revoked or
cancelled and respondent shall voluntarily vacate the premises without need of demand or judicial action.

Subsequently, respondent failed to pay twenty-five (25) monthly reimbursement payments, despite demands.
Hence, petitioner cancelled the contract and treated all his reimbursement payments as rental payments for
his occupancy of the house and lot. For failure of the respondent to heed the demands, petitioner filed a
complaint before the barangay lupon and, eventually, a case for unlawful detainer, before the Municipal Trial
Court of Cavite.

ISSUE:
Whether or not the contract entered into by the parties is a contract to sell.

RULING:
Yes. It is basic that a contract is what the law defines it to be, and not what it is called by the contracting
parties. The Shelter Contract Award granted to respondent expressly stipulates that "upon completion of
payment of the full payment, the UNION shall execute a Deed of Transfer and shall cause the issuance of
the corresponding Transfer Certificate of Title in favor of and in the name of the AWARDEE." It cannot be
denied, therefore, that the parties herein entered into a contract to sell in the guise of a reimbursement
scheme requiring respondent to make monthly reimbursement payments which are, in actuality, installment
payments for the value of the subject house and lot.
However, with regard to the case of Unlawful detainer, the case will not prosper for the failure of the
petitioner to prove that the contract was rescinded in accordance with R.A. No. 6552 which requires notarial
act of rescission and refund to the buyer, which would have been the basis for the illegality of respondents
possession of the subject premises.
 SUMMARY FORMAT

Q: PTGWO-ITF (petitioner) is a duly registered labor organization engaged in an on-going Shelter Program,
which offers residential lots and fully-furnished houses to its members-seafarers under a reimbursement
scheme requiring no down payment and no interest on the principal sum advanced for the acquisition and
development of the land and the construction of the house. Petitioner entered into a contract under the
Shelter Program with one of its members, Noriel Decena, with the obligation to reimburse petitioner the full
amount thereof in 180 equal monthly payments. It was stipulated in the contract that if the respondent fails
to pay 3 monthly reimbursements, he shall be given a 3-month grace period to remit his arrears, otherwise the
contract will be cancelled. Subsequently, the respondent failed to pay 25 monthly reimbursements, Hence the
petitioner cancelled the contract and treated it as rental payments for his occupancy of the house and lot. And
thereafter file a case for unlawful detainer. What was the contract entered into by the parties?

A: The contract entered into was a contract to sell. A contract to sell is defined as a bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof
to the prospective buyer, binds itself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase price. The Shelter Contract
Award granted to respondent expressly stipulates that "upon completion of payment of the full payment, the
UNION shall execute a Deed of Transfer and shall cause the issuance of the corresponding Transfer
Certificate of Title in favor of and in the name of the AWARDEE." It cannot be denied, therefore, that the
parties herein entered into a contract to sell in the guise of a reimbursement scheme requiring respondent to
make monthly reimbursement payments which are, in actuality, installment payments for the value of the
subject house and lot.
 NAPOLEON D. NERI et. al v HEIRS OF HADJI YUSOP UY
G.R. No. 194366|October 10, 2012

DOCTRINE OF THE CASE: 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.

PERLAS-BERNABE, J.:

FACTS: Anunciacion Neri (Anunciacion) had seven children, two (2) from her first marriage with Gonzalo
Illut (Gonzalo), namely: Eutropia and Victoria, and five (5) from her second marriage with Enrique Neri
(Enrique), namely: Napoleon, Alicia, Visminda, Douglas and Rosa. Throughout the marriage of spouses
Enrique and Anunciacion, they acquired several homestead properties.

Anunciacion died intestate. Her husband, Enrique, in his personal capacity and as natural guardian of his
minor children Rosa and Douglas, together with Napoleon, Alicia, and Visminda executed an Extra-Judicial
Settlement of the Estate with Absolute Deed of Sale adjudicating among themselves the said homestead
properties, and thereafter, conveying them to the late spouses Hadji Yusop Uy and Julpha Ibrahim Uy.

The Children of Gonzalo filed a complaint for annulment of sale of the said homestead properties against
spouses Uy before the RTC, assailing the validity of the sale for having been sold within the prohibited
period. The complaint was later amended to include Eutropia and Victoria as additional plaintiffs for having
been excluded and deprived of their legitimes as children of Anunciacion from her first marriage.

ISSUE:
Whether or not the sale of the subject property to spouses Uy was valid

RULING:
Yes. But only to the respective shares of Enrique, Napoleon, Alicia, Visminda and Rosa. All the petitioners
herein are indisputably legitimate children of Anunciacion from her first and second marriages and are
entitled to inherit from her in equal shares. Hence, in the execution of the Extra-Judicial Settlement of the
Estate with Absolute Deed of Sale in favor of spouses Uy, all the heirs of Anunciacion should have
participated. Considering that Eutropia and Victoria were admittedly excluded and that then minors Rosa and
Douglas were not properly represented therein, the settlement was not valid and binding upon them and
consequently, a total nullity.

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.
 SUMMARY FORMAT

Q: Anunciacion Neri (Anunciacion) had seven children, two (2) from her first marriage with Gonzalo Illut
(Gonzalo), namely: Eutropia and Victoria, and five (5) from her second marriage with Enrique Neri
(Enrique), namely: Napoleon, Alicia, Visminda, Douglas and Rosa. Throughout the marriage of spouses
Enrique and Anunciacion, they acquired several homestead properties. Anunciacion died intestate. Her
husband, Enrique, in his personal capacity and as natural guardian of his minor children executed an Extra-
Judicial Settlement of the Estate with Absolute Deed of Sale adjudicating among themselves the said
homestead properties, and thereafter, conveying them to the spouses Uy. The Children of Gonzalo filed a
complaint assailing the validity of the sale as it was sold within the prohibited period and that they were
excluded in the partition of the said estate. Was the sale executed in favor of Spouses Uy valid?

A: Yes. But only to the respective shares of Enrique, Napoleon, Alicia, Visminda and Rosa. All the
petitioners herein are indisputably legitimate children of Anunciacion from her first and second marriages and
are entitled to inherit from her in equal shares. Hence, in the execution of the Extra-Judicial Settlement of
the Estate with Absolute Deed of Sale in favor of spouses Uy, all the heirs of Anunciacion should have
participated. Considering that Eutropia and Victoria were admittedly excluded and that then minors Rosa and
Douglas were not properly represented therein, the settlement was not valid and binding upon them and
consequently, a total nullity. 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.
 PHILIPPINE BANKING CORPORATION v ARTURO DY et al.
G.R. No. 183774|November 14, 2012

DOCTRINE OF THE CASE: The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title.

PERLAS-BERNABE, J.:

FACTS: Cipriana was the registered owner of a lot situated in Cebu. She and her husband, respondent Jose
Delgado (Jose), entered into an agreement with a certain Cecilia Tan (buyer) for the sale of the said property.
It was agreed that the buyer shall make partial payments from time to time and pay the balance when Cipriana
and Jose (Sps. Delgado) are ready to execute the deed of sale and transfer the title to her.

At the time of sale, the buyer was already occupying a portion of the property where she operates a noodle
(bihon) factory while the rest was occupied by tenants which Sps. Delgado undertook to clear prior to full
payment. Being then ready to pay the balance, the buyer demanded the execution of the deed, which was
refused. Eventually, the buyer learned of the sale of the property to the Dys and its subsequent mortgage to
petitioner Philippine Banking Corporation (Philbank), prompting the filing of the Complaint for annulment
of certificate of title, specific performance and/or reconveyance with damages against Sps. Delgado, the Dys
and Philbank.

Sps. Delgado in their answer contended that there was no perfected sale because the latter was not willing to
pay the asking price. They also interpose a cross-claim against the Dy’s and said that the contract was a
fictitious contract and was merely to enable Sps. Dy to use the said property as collateral for their loan
application with Phil. Bank.

For their part Dys denied knowledge of the sale between the buyer and Sps Delgado and contended that they
had validly acquired the said property

On the other hand, the Phil Bank claimed that it is an innocent mortgagee.

ISSUE:
Whether or not Phil Bank is a mortgagee in good faith.

RULING:
Yes. The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with property
covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title.
In the case of banks and other financial institutions, however, greater care and due diligence are required
since they are imbued with public interest, failing which renders the mortgagees in bad faith. Thus, before
approving a loan application, it is a standard operating practice for these institutions to conduct an ocular
inspection of the property offered for mortgage and to verify the genuineness of the title to determine the
real owner(s) thereof. In this case, while Philbank failed to exercise greater care in conducting the ocular
inspection of the properties offered for mortgage, its omission did not prejudice any innocent third parties. In
particular, the buyer did not pursue her cause and abandoned her claim on the property. On the other hand,
Sps. Delgado were parties to the simulated sale in favor of the Dys which was intended to mislead Philbank
into granting the loan application. Thus, no amount of diligence in the conduct of the ocular inspection could
have led to the discovery of the complicity between the ostensible mortgagors (the Dys) and the true owners
(Sps. Delgado).
 SUMMARY FORMAT

Q: Cipriana was the registered owner of a lot situated in Cebu. She and her husband, respondent Jose
Delgado (Jose), entered into an agreement with a certain Cecilia Tan (buyer) for the sale of the said property.
It was agreed that the buyer shall make partial payments from time to time and pay the balance when Cipriana
and Jose (Sps. Delgado) are ready to execute the deed of sale and transfer the title to her. When the buyer,
was ready to pay and asked for the execution of the deed of sale the Sps. Delgado refused. Thereafter , the
buyer learned that the said property was sold to Sps. Dy and was mortgaged to Phil. Bank. Tan thereafter
filed a Complaint for annulment of certificate of title, specific performance and/or reconveyance with
damages against Sps. Delgado, the Dys and Philbank. The Bank claims that it is an innocent mortgagee.

A: Yes. The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with property
covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of the title.
Sps. Delgado were parties to the simulated sale in favor of the Dys which was intended to mislead Philbank
into granting the loan application. Thus, no amount of diligence in the conduct of the ocular inspection could
have led to the discovery of the complicity between the ostensible mortgagors (the Dys) and the true owners
(Sps. Delgado).
 AURELIA GUA-AN et. Al v GERTRUDES QUIRINO
G.R. No. 198770|November 12, 2012

DOCTRINE OF THE CASE: The right to repurchase the subject property even beyond the 12-year
(original and extended) period, allowing in the meantime the continued possession of Ernesto pending
payment of the consideration. Under these conditions and in accordance with Article 1602 the pacto de retro
sale to be in reality an equitable mortgage.

PERLAS-BERNABE, J.:

FACTS: Subject of the instant case agricultural land situated Bukidnon covered by Certificate of Land
Transfer in the name of Prisco Quirino, Sr. issued by the Ministry (now Department) of Agrarian

Prisco executed a Deed of Conditional Sale (deed) covering the subject landholding to Ernesto Bayagna
(Ernesto) under the condition that the former has the right to repurchase the land.

Ernesto thereupon possessed and cultivated the subject land for more than 10 years before Prisco offered to
redeem the same, which was refused. Instead, Ernesto allowed the former owner of the land, petitioner
Aurelia Gua-An (Aurelia), through her daughter, petitioner Sonia Gua-An Mamon (Sonia), to redeem the lot.
Subsequently, Prisco passed away.

Respondent Gertrudes Quirino, Prisco's widow, represented by their son, Elmer, filed before the Office of
the Agrarian Reform Regional Adjudicator (RARAD) a Complaint for Specific Performance, Redemption,
Reinstatement and Damages with Application for Writ of Preliminary Injunction and TRO against Ernesto
and petitioners.

RARAD dismissed the complaint for lack of merit. On appeal to DARAB it cancelled the CLT in Prisco’s
name and ordered to reallocate the subject landholding to qualified beneficiary. The CA on the other hand
reversed the decision of DARAB and ruled that the Contract between Prisco and Ernesto was a mere
equitable mortgage hence not a prohibited transaction under P.D. 27 which limits the transfer or conveuances
of the landholdings.

ISSUES:
Whether or not Prisco has lost the rights over the said property and has no right to redeem the said property

RULING:
Yes. A perusal of the Deed of Conditional Sale reveals the real intention of the parties not to enter into a
contract of sale but merely to secure the payment of the P40,000.00 loan of Prisco. This is evident from the
fact that the latter was given the right to repurchase the subject property even beyond the 12-year (original
and extended) period, allowing in the meantime the continued possession of Ernesto pending payment of the
consideration. Under these conditions and in accordance with Article 1602 of the Civil Code, the CA did not
err in adjudging the pacto de retro sale to be in reality an equitable mortgage. However, contrary to the
finding of the CA, the subject transaction is covered by the prohibition under P.D. No. 27 and R.A. No. 6657
which include transfer of possession of the landholding to the vendee a retro, Ernesto, who, not being a
qualified beneficiary, remained in possession thereof for a period of eleven (11) years. The fact that Prisco
surrendered possession and cultivation of the subject land to Ernesto, not for a mere temporary period, but
for a period of 11 years without any justifiable reason. Such act constituted abandonment despite his avowed
intent to resume possession of the land upon payment of the loan. It is a ground for cancellation by the
DARAB of an award to the agrarian reform beneficiary. Consequently, respondent and/or Prisco's heirs had
lost any right to redeem the subject landholding.
 SUMMARY FORMAT

Q: Subject of the instant case agricultural land situated Bukidnon covered by Certificate of Land Transfer in
the name of Prisco Quirino, Sr. issued by the Ministry (now Department) of Agrarian Prisco executed a Deed
of Conditional Sale (deed) covering the subject landholding to Ernesto Bayagna (Ernesto) under the
condition that the former has the right to repurchase the land. Ernesto thereupon possessed and cultivated
the subject land for more than 10 years before Prisco offered to redeem the same, which was refused.
Respondent Gertrudes Quirino, Prisco's widow, represented by their son, Elmer, filed before the Office of
the Agrarian Reform Regional Adjudicator (RARAD) a Complaint for Specific Performance, Redemption,
Reinstatement and Damages with Application for Writ of Preliminary Injunction and TRO against Ernesto
and petitioners. Is the Priscos entitled to redeem the property.

A: No. The fact that Prisco surrendered possession and cultivation of the subject land to Ernesto, not for a
mere temporary period, but for a period of 11 years without any justifiable reason. Such act constituted
abandonment despite his avowed intent to resume possession of the land upon payment of the loan. It is a
ground for cancellation by the DARAB of an award to the agrarian reform beneficiary. Consequently,
respondent and/or Prisco's heirs had lost any right to redeem the subject landholding.
 IN THE MATTER OF THE PETITION FOR THE PROBATE OF THE LAST WILL AND
TESTAMENT OF ENRIQUE S. LOPEZ RICHARD B. LOPEZ, v DIANA JEANNE LOPEZ et.
al
G.R. No. 189984|November 12, 2012

DOCTRINE OF THE CASE: The attestation must state the number of pages used upon which the will is written. The
purpose of the law is to safeguard against possible interpolation or omission of one or some of its pages and prevent any increase or
decrease in the pages

PERLAS-BERNABE, J.:

FACTS: Enrique S. Lopez (Enrique) died leaving his wife, Wendy B. Lopez, and their four legitimate
children, namely, petitioner Richard and the respondents Diana, Marybeth and Victoria as compulsory heirs.
Before Enrique’s death, he executed a Last Will and Testament and constituted Richard as his executor and
administrator.

Sometime in 1999, Richard filed a petition for the probate of his father's Last Will and Testament before the
RTC of Manila with prayer for the issuance of letters testamentary in his favor. Marybeth opposed the
petition contending that the purported last will and testament was not executed and attested as required by
law, and that it was procured by undue and improper pressure and influence on the part of Richard. The said
opposition was also adopted by Victoria.

After submitting proofs of compliance with jurisdictional requirements, Richard presented the attesting
witnesses including the notary public who notarized the will. They testified that the late Enrique read and
signed the will on each and every page, they also read and signed the same in the latter's presence and of one
another. Photographs of the incident were taken and presented during trial.

The RTC disallowed the probate of the will for failure to comply with Article 805 of the Civil Code which
requires a statement in the attestation clause of the number of pages used upon which the will is written. The
CA affirmed the decision of The RTC.

ISSUE:
Whether or not there was a valid will.

RULING:

No. ART. 805. Provides that “The attestation shall state the number of pages used upon which the will is written, and the
fact that the testator signed the will and every page thereof, or caused some other person to write his name, under his express
direction, in the presence of the instrumental witnesses, and that the latter witnessed and signed the will and all the pages thereof
in the presence of the testator and of one another.” While on the other hand, ART. 809 provides that “In the absence of
bad faith, forgery, or fraud, or undue and improper pressure and influence, defects and imperfections in the form of attestation or
in the language used therein shall not render the will invalid if it is proved that the will was in fact executed and attested in
substantial compliance with all the requirements of Article 805.” The law is clear that the attestation must state the
number of pages used upon which the will is written. The purpose of the law is to safeguard against possible
interpolation or omission of one or some of its pages and prevent any increase or decrease in the pages.

While Article 809 allows substantial compliance for defects in the form of the attestation clause, The rule
must be limited to disregarding those defects that can be supplied by an examination of the will itself: But the
total number of pages, and whether all persons required to sign did so in the presence of each other must
substantially appear in the attestation clause, being the only check against perjury in the probate proceedings.
 SUMMARY FORMAT

Q: Enrique S. Lopez (Enrique) died leaving his wife, Wendy B. Lopez, and their four legitimate children,
namely, petitioner Richard and the respondents Diana, Marybeth and Victoria as compulsory heirs. Before
Enrique’s death, he executed a Last Will and Testament and constituted Richard as his executor and
administrator. Sometime in 1999, Richard filed a petition for the probate of his father's Last Will and
Testament before the RTC of Manila. Marybeth opposed the petition contending that the purported last will
and testament was not executed and attested as required by law, and that it was procured by undue and
improper pressure and influence on the part of Richard. The said opposition was also adopted by Victoria.
Was there a valid will?

A: No. While Article 809 allows substantial compliance for defects in the form of the attestation clause, The
rule must be limited to disregarding those defects that can be supplied by an examination of the will itself: But
the total number of pages, and whether all persons required to sign did so in the presence of each other must
substantially appear in the attestation clause, being the only check against perjury in the probate proceedings
 WILLEM BEUMER v AVELINA AMORES
G.R. No. 195670 |December 3, 2012

DOCTRINE OF THE CASE: A claim for reimbursement of the value of purchased parcels of Philippine land instituted by
a foreigner against his former Filipina spouse, cannot prosper on the ground of equity where it is clear that he willingly and
knowingly bought the property despite the prohibition against foreign ownership of Philippine land enshrined under Section 7,
Article XII of the 1987 Philippine Constitution.

PERLAS-BERNABE, J.:

FACTS: Petitioner, a Dutch National, and respondent, a Filipina, were married. After several years, the RTC
of Negros Oriental, declared the nullity of their marriage on the basis of the former’s psychological
incapacity.

Consequently, petitioner filed a Petition for Dissolution of Conjugal Partnership praying for the distribution
of the properties claimed to have been acquired during the subsistence of their marriage.

In defense, respondent averred that, with the exception of their two (2) residential houses on Lots 1 and 2142,
she and petitioner did not acquire any conjugal properties during their marriage, the truth being that she used
her own personal money to purchase the other properties. During trial, petitioner testified that while Lots 1,
2142, 5845 and 4 were registered in the name of respondent, these properties were acquired with the money
he received from the Dutch government as his disability benefit since respondent did not have sufficient
income to pay for their acquisition.

The RTC of Negros Oriental rendered its Decision, dissolving the parties’ conjugal partnership, awarding all
the parcels of land to respondent as her paraphernal properties; the tools and equipment in favor of petitioner
as his exclusive properties; the two (2) houses standing on Lots 1 and 2142 as co-owned by the parties. The
CA affirmed the Decision of RTC.

ISSUE:
Whether or not the petitioner is entitled to reimbursement

RULING:
No. In any event, the Court cannot, even on the grounds of equity, grant reimbursement to petitioner given
that he acquired no right whatsoever over the subject properties by virtue of its unconstitutional purchase. It
is well-established that equity as a rule will follow the law and will not permit that to be done indirectly which,
because of public policy, cannot be done directly. Surely, a contract that violates the Constitution and the law
is null and void, vests no rights, creates no obligations and produces no legal effect at all. Corollary thereto,
under Article 1412 of the Civil Code, petitioner cannot have the subject properties deeded to him or allow
him to recover the money he had spent for the purchase thereof. The law will not aid either party to an illegal
contract or agreement; it leaves the parties where it finds them. Indeed, one cannot salvage any rights from an
unconstitutional transaction knowingly entered into.
 SUMMARY FORMAT

Q: Petitioner, a Dutch National, and respondent, a Filipina, were married. After several years, the RTC of
Negros Oriental, declared the nullity of their marriage on the basis of the former’s psychological incapacity.
Consequently, petitioner filed a Petition for Dissolution of Conjugal Partnership praying for the distribution
of the properties claimed to have been acquired during the subsistence of their marriage. Is the Petitioner
entitled for the reimbursement for the purchase price of the subject lots?

A: No. In any event, the Court cannot, even on the grounds of equity, grant reimbursement to petitioner
given that he acquired no right whatsoever over the subject properties by virtue of its unconstitutional
purchase. The law will not aid either party to an illegal contract or agreement; it leaves the parties where it
finds them. Indeed, one cannot salvage any rights from an unconstitutional transaction knowingly entered
into.
 GOTESCO PROPERTIES v. SPS. EUGENIO AND ANGELINA FAJARDO
G.R. No. 201167 | February 27, 2013

DOCTRINE OF THE CASE

Mutual restitution is required in cases involving rescission under Article 1191. This means
bringing the parties back to their original status prior to the inception of the contract. Article 1385 of the Civil Code provides,
thus: “Rescission creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; consequently, it can be carried out only
when he who demands rescission can return whatever he may be obligated to restore.”

PERLAS-BERNABE, J.:

FACTS: Respondent-spouses Eugenio and Angelina Fajardo entered into a Contract to Sell (contract) with
petitioner-corporation Gotesco Properties, Inc. (GPI) for the purchase of a 100-square meter lot. The subject
lot is a portion of a bigger lot covered by Transfer Certificate of Title (TCT) No. 244220 (mother title).

Under the contract, Sps. Fajardo undertook to pay the purchase price of P126,000.00 within a 10-
year period, including interest. GPI, on the other hand, agreed to execute a final deed of sale (deed) in favor
of Sps. Fajardo upon full payment of the stipulated consideration. However, despite its full payment of the
purchase price and subsequent demands, GPI failed to execute the deed and to deliver the title and physical
possession of the subject lot. Thus, Sps. Fajardo filed before the Housing and Land Use Regulatory Board-
Expanded National Capital Region Field Office (HLURB-ENCRFO) a complaint for specific performance or
rescission of contract with damages against GPI and the members of its Board of Directors.

Petitioners claimed that the failure to deliver the title to Sps. Fajardo was beyond their control
because while GPI's petition for inscription of technical description (LRC Case No. 4211) was favorably
granted by the trial court, the same was reversed by the CA; this caused the delay in the subdivision of the
property into individual lots with individual titles. Petitioners thus argued that Article 1191 of the Civil Code
– remained inapplicable since they were actually willing to comply with their obligation but were only
prevented from doing so due to circumstances beyond their control.

ISSUES
1. Whether there was a substantial breach of contract from the side of GPI that may be a ground to
rescind the contract?
2. Whether mutual restitution under Art. 1385 of the Civil Code is applicable to cases involving
rescission under Article 1191?

RULING
1. Yes. In a contract to sell, the seller's obligation to deliver the corresponding certificates of title is
simultaneous and reciprocal to the buyer's full payment of the purchase price. In this relation,
Section 25 of PD 957, which regulates the subject transaction, imposes on the subdivision owner
or developer the obligation to cause the transfer of the corresponding certificate of title to the
buyer upon full payment.

A perusal of the records show that GPI acquired the subject property on March 10, 1992
through a Deed of Partition and Exchange executed between it and Andres Pacheco, the former
registered owner of the property. GPI was issued TCT No. 244220 on March 16, 1992 but the
same did not bear any technical description. However, no plausible explanation was advanced by
the petitioners as to why the petition for inscription dated January 6, 2000, was filed only after
almost eight (8) years from the acquisition of the subject property.
 Neither did petitioners sufficiently explain why GPI took no positive action to cause the
immediate filing of a new petition for inscription within a reasonable time from notice of the CA
Decision which dismissed GPI’s earlier petition based on technical defects, this notwithstanding
Sps. Fajardo's full payment of the purchase price and prior demand for delivery of title. GPI filed
the petition before the RTC-Caloocan (LRC Case No. C-5026) only on November 23, 2006,
following receipt of the letter dated February 10, 2006 and the filing of the complaint on May 3,
2006, alternatively seeking refund of payments. While the court a quo decided the latter petition
for inscription in its favor, there is no showing that the same had attained finality or that the
approved technical description had in fact been annotated on TCT No. 244220, or even that the
subdivision plan had already been approved.

Despite petitioners’ allegation that the claim of BSP had been settled, there appears to
be no cancellation of the annotations in GPI’s favor. Clearly, the long delay in the performance
of GPI's obligation from date of demand on September 16, 2002 was unreasonable and
unjustified. It cannot therefore be denied that GPI substantially breached its contract to sell
with Sps. Fajardo which thereby accords the latter the right to rescind the same.

2. Yes. Mutual restitution under Art. 1385 of the Civil Code is required in cases involving
rescission under Article 1191. This means bringing the parties back to their original status prior
to the inception of the contract.

This Court has consistently ruled that this provision applies to rescission under
Article 1191: Since Article 1385 of the Civil Code expressly and clearly states that "rescission
creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interest."

It cannot be denied that only GPI benefited from the contract, having received full
payment of the contract price plus interests, while Sps. Fajardo remained prejudiced by the
persisting non-delivery of the subject lot despite full payment. As a necessary consequence, Sps.
Fajardo must be able to recover the price of the property pegged at its prevailing market value.
 SUMMARY FORMAT

Q: Respondent-spouses Eugenio and Angelina Fajardo entered into a Contract to Sell (contract)
with petitioner-corporation Gotesco Properties, Inc. (GPI) for the purchase of a 100-square meter lot.
The subject lot is a portion of a bigger lot covered by Transfer Certificate of Title (TCT) No. 244220
(mother title).

Under the contract, Sps. Fajardo undertook to pay the purchase price of P126,000.00 within a
10-year period, including interest. GPI, on the other hand, agreed to execute a final deed of sale
(deed) in favor of Sps. Fajardo upon full payment of the stipulated consideration. However, despite
its full payment of the purchase price and subsequent demands, GPI failed to execute the deed and
to deliver the title and physical possession of the subject lot. Thus, Sps. Fajardo filed before the
Housing and Land Use Regulatory Board-Expanded National Capital Region Field Office
(HLURB-ENCRFO) a complaint for specific performance or rescission of contract with damages
against GPI and the members of its Board of Directors. Was there a substantial breach of contract
from the side of GPI that may be a ground to rescind the contract and is mutual restitution is
applicable to cases involving rescission under Article 1191?

A: Yes. There was a substantial breach of contract from the side of GPI that may be a ground to rescind the
contract. It is settled that in a contract to sell, the seller's obligation to deliver the corresponding certificates of
title is simultaneous and reciprocal to the buyer's full payment of the purchase price. In this relation, Section
25 of PD 957, which regulates the subject transaction, imposes on the subdivision owner or developer the
obligation to cause the transfer of the corresponding certificate of title to the buyer upon full payment.

In addition, mutual restitution under Art. 1385 of the Civil Code is required in cases
involving rescission under Article 1191. This means bringing the parties back to their original status prior
to the inception of the contract.

This Court has consistently ruled that this provision applies to rescission under Article 1191:
Since Article 1385 of the Civil Code expressly and clearly states that "rescission creates the obligation to
return the things which were the object of the contract, together with their fruits, and the price with its
interest."
 RURAL BANK OF STA. BARBARA, INC. v. GERRY CENTENO
GR No. 200667 | March 11, 2013

DOCTRINE OF THE CASE

Section 33, Rule 39 of the Rules of Court provides that “upon 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. The possession of the property shall be given to the purchaser or last redemptioner
by the same officer unless a third party is actually holding the property adversely to the judgment
obligor.”

PERLAS-BERNABE, J.:

FACTS: Spouses Gregorio and Rosario Centeno were the previous owners of the subject lots, which they
mortgaged the foregoing properties in favor of petitioner Rural Bank of Sta. Barbara, Inc. as security for a
P1,753.65 loan. Sps. Centeno, however, defaulted on the loan, prompting petitioner to cause the extrajudicial
foreclosure of the said mortgage. Consequently, the subject lots were sold to the bank, being the highest
bidder at the auction sale.

Sps. Centeno failed to redeem the subject lots within the one-year redemption period pursuant to
Section 6 of Act No. 3135. Nonetheless, they still continued with the possession and cultivation of the
aforesaid properties. On March 14, 1988, Gerry Centeno, son of Sps. Centeno purchased the said lots from
his parents. Accordingly, Rosario Centeno paid the capital gains taxes on the sale transaction and tax
declarations were eventually issued in the name of Gerry. While the latter was in possession of the subject
lots, Rural Bank of Sta. Barbara, Inc. secured on November 25, 1997 a Final Deed of Sale thereof and in
1998, was able to obtain the corresponding tax declarations in its name.

On March 19, 1998, Rural Bank of Sta. Barbara, Inc. filed a petition for the issuance of a writ of
possession before the RTC, claiming entitlement to the said writ by virtue of the Final Deed of Sale covering
the subject lots. Gerry opposed the petition, asserting that he purchased and has, in fact, been in actual, open
and exclusive possession of the same properties for at least 15 years.

ISSUE
1. Whether or not Rural Bank of Sta. Barbara, Inc. is entitled to a writ of possession over the subject
lots?

RULING
Yes. It is well-established that after consolidation of title in the purchasers’ name for failure of the
mortgagor to redeem the property, the purchasers right to possession ripens into the absolute right of a
confirmed owner. At that point, the issuance of a writ of possession, upon proper application and proof of
title, to a purchaser in an extrajudicial foreclosure sale becomes merely a ministerial function, unless it appears
that the property is in possession of a third party claiming a right adverse to that of the mortgagor.

Section 33, Rule 39 of the Rules of Court provides that “upon 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. The possession of the property
shall be given to the purchaser or last redemptioner by the same officer unless a third party is
actually holding the property adversely to the judgment obligor.”

Gerry Centeno acquired the subject lots from his parents, Sps. Centeno, on March 14, 1988 after
they were purchased by Rural Bank of Sta. Barbara, Inc. and its Certificate of Sale at Public Auction was
registered with the Register of Deeds of Iloilo City in 1971. It cannot therefore be disputed that Gerry is a
mere successor-in-interest of Sps. Centeno. Consequently, he cannot be deemed as a third party who is
actually holding the property adversely to the judgment obligor under legal contemplation. Hence, the RTC
had the ministerial duty to issue as it did issue the said writ in petitioners favor.
 SUMMARY FORMAT

Q: Spouses Gregorio and Rosario Centeno previously owned the subject lots, which they mortgaged
in favor of Rural Bank of Sta. Barbara, Inc. as security for a P1,753.65 loan. Sps. Centeno, however,
defaulted on the loan, prompting the bank to cause the extrajudicial foreclosure of the mortgage.
Consequently, the subject lots were sold to the bank, being the highest bidder at the auction
sale.Sps. Centeno failed to redeem the subject lots within the one-year redemption period pursuant
to Section 6 of Act No. 3135. Yet, they still continued with the possession and cultivation of the
aforesaid properties.

Gerry Centeno, son of Sps. Centeno, later on purchased the said lots from his parents.
Accordingly, Rosario paid the capital gains taxes on the sale transaction and tax declarations were
eventually issued in the name of Gerry.

On March 19, 1998, Rural Bank of Sta. Barbara, Inc. filed a petition for the issuance of a writ
of possession before the trial court, claiming entitlement to the said writ by virtue of the Final Deed
of Sale covering the subject lots. Gerry opposed the petition, arguing that he purchased and has, in
fact, been in actual, open and exclusive possession of the same properties for at least 15 years. Is the
Rural Bank of Sta. Barbara, Inc. is entitled to a writ of possession over the subject lots?

A: Yes. It is well-established that after consolidation of title in the purchasers’ name for failure of the
mortgagor to redeem the property, the purchasers right to possession ripens into the absolute right of a
confirmed owner. At that point, the issuance of a writ of possession, upon proper application and proof of
title, to a purchaser in an extrajudicial foreclosure sale becomes merely a ministerial function, unless it appears
that the property is in possession of a third party claiming a right adverse to that of the mortgagor.

Gerry Centeno acquired the subject lots from his parents, Sps. Centeno, on March 14, 1988 after
they were purchased by Rural Bank of Sta. Barbara, Inc. and its Certificate of Sale at Public Auction was
registered with the Register of Deeds of Iloilo City in 1971. It cannot therefore be disputed that Gerry is a
mere successor-in-interest of Sps. Centeno. Consequently, he cannot be deemed as a third party who is
actually holding the property adversely to the judgment obligor under legal contemplation.
 LAND BANK OF THE PHILIPPINES v. EDUARDO M. CACAYURAN
G.R. No. 191667| April 17, 2013

DOCTRINE OF THE CASE

An ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its
organization and therefore beyond the powers conferred upon it by law. There are two (2) types of ultra vires acts: an act which is
outside of the municipality’s jurisdiction is considered as a void ultra vires act, while an act attended only by an irregularity but
remains within the municipality’s power is considered as an ultra vires act subject to ratification and/or validation.

PERLAS-BERNABE, J.:

FACTS: From 2005 to 2006, the Municipality’s Sangguniang Bayan passed certain resolutions to implement a
multi-phased plan (Redevelopment Plan) to redevelop the Agoo Public Plaza (Agoo Plaza) where the Imelda
Garden and Jose Rizal Monument were situated.

To finance phase 1 of the said plan, the SB initially passed Resolution No. 68-2005 on April 19, 2005,
authorizing then Mayor Eufranio Eriguel to obtain a loan from Land Bank and incidental thereto, mortgage a
2,323.75 square meter lot situated at the southeastern portion of the Agoo Plaza as collateral.

On March 7, 2006, the SB passed Resolution No. 58-2006, approving the construction of a commercial
center on the Plaza Lot as part of phase II of the Redevelopment Plan. To finance the project, Mayor Eriguel
was again authorized to obtain a loan from Land Bank, posting as well the same securities as that of the First
Loan. All previous representations and warranties of Mayor Eriguel related to the negotiation and obtention
of the new loan were ratified on September 5, 2006 through Resolution No. 128-2006. In consequence, Land
Bank granted a second loan in favor of the Municipality on October 20, 2006 in the principal amount of
P28,000,000.00 (Second Loan).

Unlike phase 1 of the Redevelopment Plan, the construction of the commercial center at the Agoo Plaza was
vehemently objected to by some residents of the Municipality. Led by respondent Eduardo Cacayuran, these
residents claimed that the conversion of the Agoo Plaza into a commercial center, as funded by the proceeds
from the First and Second Loans (Subject Loans), were "highly irregular, violative of the law, and detrimental
to public interests, and will result to wanton desecration of the said historical and public park." The foregoing
was embodied in a Manifesto, launched through a signature campaign conducted by the residents and
Cacayuran.

ISSUE
1. Whether or not the Subject Loans are ultra vires.

RULING
Yes. Generally, an ultra vires act is one committed outside the object for which a corporation is
created as defined by the law of its organization and therefore beyond the powers conferred upon it by law.
An act which is outside of the municipality’s jurisdiction is considered as a void ultra vires act, while an act
attended only by an irregularity but remains within the municipality’s power is considered as an ultra vires act
subject to ratification and/or validation.

Records disclose that the said loans were executed by the Municipality for the purpose of funding the
conversion of the Agoo Plaza into a commercial center pursuant to the Redevelopment Plan. However, the
conversion of the said plaza is beyond the Municipality’s jurisdiction considering the property’s nature as one
for public use and thereby, forming part of the public dominion. Accordingly, it cannot be the object of
appropriation either by the State or by private persons. Nor can it be the subject of lease or any other
contractual undertaking.
In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is contrary
to law, morals, good customs, public order or public policy is considered void and as such, creates no rights
or obligations or any juridical relations. Consequently, given the unlawful purpose behind the Subject Loans
which is to fund the commercialization of the Agoo Plaza pursuant to the Redevelopment Plan, they are
considered as ultra vires in the primary sense thus, rendering them void and in effect, non-binding on the
Municipality.
 SUMMARY FORMAT

Q: The Sangguniang Bayan of Agoo passed resolutions to implement a multi-phaesed plan to

redevelop Agoo Public Plaza and construct a commercial enter. It also authorized then Mayor
Eriguel to obtain a loan from Land Bank and secure mortgage on Agoo Plaza. Pending the Phase II
of the project, respondent, a resident-taxpayer, filed a Complaint against the SB and the officers and
claimed that the resolutions to convert Agoo Plaza into a commercial center was violative of law and
highly irregular. Are the Subject Loans ultra vires?

A: Yes. An ultra vires act is one committed outside the object for which a corporation is created as defined by
the law of its organization and therefore beyond the powers conferred upon it by law. An act which is outside
of the municipality’s jurisdiction is considered as a void ultra vires act, while an act attended only by an
irregularity but remains within the municipality’s power is considered as an ultra vires act subject to
ratification and/or validation.
FREDERICK VENTURA v. HEIRS OF SPS. EUSTACIO T. ENDAYA AND TRINIDAD
L. ENDAYA
G.R. No. 190016 | October 02, 2013

DOCTRINE OF THE CASE

A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively
to the latter upon his fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or compliance with
the other obligations stated in the contract to sell.

PERLAS-BERNABE, J.

FACTS: Dolores Ventura entered into a Contract to Sell with spouses Eustacio and Trinidad Endaya for the
purchase of two parcels of land covered by Transfer Certificates of Title (TCT) Nos. 392225 and (343392) S-
67975, denominated as Lots 8 and 9, Block 3, in Marian Road II, Marian Park, Parañaque City.

The contract to sell provides that the purchase price of P347,760.00 shall be paid by Dolores
through: (a) down payment of P103,284.00 upon execution of the contract; and (b) the balance of
P244,476.00 within a 15-year period, plus 12% interest per annum on the outstanding balance and 12%
interest per annum on arrearages.

In addition, all payments made shall be applied through: first, to the reimbursement of real estate
taxes and other charges; second, to the interest accrued to the date of payment; third, to the amortization of the
principal obligation; and fourth, to the payment of any other accessory obligation subsequently incurred by the
owner in favor of the buyer. It also imposed upon Dolores the obligation to pay the real property taxes over
the subject properties, or to reimburse Sps. Endaya for any tax payments made by them, plus 1% interest per
month. Upon full payment of the stipulated consideration, Sps. Endaya undertook to execute a final deed of
sale and transfer ownership over the same in favor of Dolores.

On November 28, 1996, Dolores’ children, Frederick Ventura, Marites Ventura-Roxas, and Philip
Ventura filed before the RTC a Complaint and, thereafter, an Amended Complaint for specific performance,
seeking to compel Sps. Endaya to execute a deed of sale over the subject properties. They averred that due to
the close friendship between their parents and Sps. Endaya, the latter did not require the then widowed
Dolores to pay the downpayment stated in the contract to sell and, instead, allowed her to pay amounts as her
means would permit. The payments were made in cash as well as in kind, and the same were recorded by
respondent Trinidad herself in a passbook given to Dolores to evidence the receipt of said payments. As of
June 15, 1996, the total payments made by Dolores and petitioners amounted to P952,152.00, which is more
than the agreed purchase price of P347,760.00, including the 12% interest per annum thereon computed on
the outstanding balance.

However, when petitioners demanded the execution of the corresponding deed of sale, Sps. Endaya refused.

ISSUE
1. Whether or not Spouses Endaya should execute a deed of sale over the subject properties in favor of
petitioners?

RULING
No. Spouses Endaya had no obligation to petitioners to execute a deed of sale over the subject
properties. A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the latter upon his fulfillment of the conditions agreed upon,
i.e., the full payment of the purchase price and/or compliance with the other obligations stated in the contract
to sell. Given its contingent nature, the failure of the prospective buyer to make full payment and/or abide by
his commitments stated in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer from arising.

As aptly pointed out by the CA, aside from the payment of the purchase price and 12% interest per
annum on the outstanding balance, the contract to sell likewise imposed upon petitioners the obligation to
pay the real property taxes over the subject properties as well as 12% interest per annum on the arrears.
However, the summary of payments as well as the statement of account submitted by petitioners clearly show
that only the payments corresponding to the principal obligation and the 12% interest p.a. on the outstanding
balance were considered in arriving at the amount of P952,152.00. The Court has examined the petition as
well as petitioners' memorandum and found no justifiable reason for the said omission. Hence, the reasonable
conclusion would therefore be that petitioners indeed failed to comply with all their obligations under the
contract to sell and, as such, have no right to enforce the same. Consequently, there lies no error on the part
of the CA in reversing the RTC Decision and dismissing petitioners’ complaint for specific performance
seeking to compel respondents to execute a deed of sale over the subject properties.
 SUMMARY FORMAT

Q: Dolores Ventura entered into a Contract to Sell with spouses Eustacio and Trinidad Endaya for
the purchase of two parcels of land located in Marian Road II, Marian Park, Parañaque City. The
contract to sell provides that the purchase price of P347,760.00 shall be paid by Dolores through: ( a)
down payment of P103,284.00 upon execution of the contract; and (b) the balance of P244,476.00
within a 15-year period, plus 12% interest per annum on the outstanding balance and 12% interest
per annum on arrearages.

Dolores’ children, Frederick Ventura, Marites Ventura-Roxas, and Philip Ventura filed a Complaint
and, thereafter, an Amended Complaint for specific performance, seeking to compel Sps. Endaya to
execute a deed of sale over the subject properties. They argued that their parents’ close friendship
with Sps. Endaya, allowed widowed Dolores to pay the downpayment stated in the contract to sell
and, instead, allowed her to pay amounts as her means would permit. The total payments made by
Dolores and petitioners amounted to P952,152.00, more than the agreed purchase price of
P347,760.00, including the 12% interest p.a. thereon computed on the outstanding balance.

When Dolores’ children demanded the execution of the corresponding deed of sale, Sps. Endaya
refused. Should Sps. Endaya execute a deed of sale over the subject properties in favor of Dolores’
children?

A: No. Spouses Endaya had no obligation to petitioners to execute a deed of sale over the subject properties.
A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the
said property exclusively to the latter upon his fulfillment of the conditions agreed upon, i.e., the full payment
of the purchase price and/or compliance with the other obligations stated in the contract to sell. Given its
contingent nature, the failure of the prospective buyer to make full payment and/or abide by his
commitments stated in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer from arising.
 HEIRS OF LATE SPS. FLAVIANO MAGLASANG AND SALUD ADAZA-MAGLASANG v.
MANILA BANKING CORPORATION
GR No. 171206| September 23, 2013

DOCTRINE OF THE CASE

Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured creditor has three
remedies/options that he may alternatively adopt for the satisfaction of his indebtedness. In particular, he may choose to: (a) waive
the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially
and prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other security and foreclose the same
before it is barred by prescription, without the right to file a claim for any deficiency.

PERLAS-BERNABE, J.:

FACTS: Spouses Maglasang obtained a credit line from respondent in the amount of P350,000.00 which was
secured by a real estate mortgage executed over seven of their properties located in Ormoc City and the
Municipality of Kananga, Province of Leyte. They availed of their credit line by securing loans in the amounts
of P209,790.50 and P139,805.83 on October 24, 1975 and March 15, 1976, respectively, both of which
becoming due and demandable within a period of one year. Further, the parties agreed that the said loans
would earn interest at 12% per annum and an additional 4% penalty would be charged upon default.

After Flaviano Maglasang died intestate, Edgar Maglasang was appointed as the administrator of
Flaviano's estate. The probate court, issued a Notice to Creditors for the filing of money claims against
Flaviano's estate. Accordingly, as one of the creditors of Flaviano, respondent notified the probate court of its
claim in the amount of P382,753.19 exclusive of interests and charges. During the pendency of the intestate
proceedings, Edgar and Oscar were able to obtain several loans from respondent, secured by promissory
notes which they signed.

The probate court terminated the proceedings with the surviving heirs executing an extra-judicial
partition of the properties of Flaviano's estate. The loan obligations owed by the estate to respondent,
however, remained unsatisfied due to respondent's certification that Flaviano's account was undergoing a
restructuring. Nonetheless, the probate court expressly recognized the rights of respondent under the
mortgage and promissory notes executed by the Sps. Maglasang, specifically, its "right to foreclose the same
within the statutory period."

In this light, respondent proceeded to extra-judicially foreclose the mortgage covering the Sps.
Maglasang's properties and emerged as the highest bidder at the public auction for the amount of
P350,000.00. There, however, remained a deficiency on Sps. Maglasang's obligation to respondent. Thus,
respondent filed a suit to recover the deficiency amount against the estate of Flaviano, his widow Salud and
petitioners.

The RTC and CA found that it was shown, by a preponderance of evidence, that petitioners, after
the extra-judicial foreclosure of all the properties mortgaged, still have an outstanding obligation in the
amount and as of the date as above-stated.

ISSUE
Was the award of the deficiency amount in favor of respondent proper?

RULING
NO. Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured
creditor has three remedies/options that he may alternatively adopt for the satisfaction of his indebtedness.
In particular, he may choose to: (a) waive the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and prove the deficiency as an ordinary
claim; and (c) rely on the mortgage exclusively, or other security and foreclose the same before it is barred by
prescription, without the right to file a claim for any deficiency.

It must, however, be emphasized that these remedies are distinct, independent and mutually exclusive
from each other; thus, the election of one effectively bars the exercise of the others. With respect to real
properties, the Court in Bank of America v. American Realty Corporation pronounced: In our jurisdiction, the
remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election
of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing
of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage,
pursuant to the provision of Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure,
such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of
justice but with the Office of the Sheriff of the province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
 SUMMARY FORMAT

Q: Spouses Maglasang obtained a credit line from respondent secured by a real estate mortgage
executed over seven of their properties. They availed of their credit line by securing loans in the
amounts of P209,790.50 and P139,805.83 both of which becoming due and demandable within a
period of one year. Further, the parties agreed that the said loans would earn interest at 12% per
annum and an additional 4% penalty would be charged upon default. The probate court, issued a
Notice to Creditors for the filing of money claims against Flaviano's estate. Accordingly, as one of
the creditors of Flaviano, respondent notified the probate court of its claim in the amount of
P382,753.19 exclusive of interests and charges. During the pendency of the intestate proceedings,
Edgar and Oscar were able to obtain several loans from respondent, secured by promissory notes
which they signed. The probate court terminated the proceedings with the surviving heirs executing
an extra-judicial partition of the properties of Flaviano's estate. The loan obligations owed by the
estate to respondent, however, remained unsatisfied due to respondent's certification that Flaviano's
account was undergoing a restructuring. Nonetheless, the probate court expressly recognized the
rights of respondent to foreclose the same within the statutory period. In this light, respondent
proceeded to extra-judicially foreclose the mortgage covering the Sps. Maglasang's properties.
However, there remained a deficiency on Sps. Maglasang's obligation to respondent. Thus,
respondent filed a suit to recover the deficiency amount against the estate of Flaviano, his widow
Salud and petitioners. Was the award of the deficiency amount in favor of respondent proper?

A: NO. Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured creditor
has three remedies/options that he may alternatively adopt for the satisfaction of his indebtedness. In
particular, he may choose to: (a) waive the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and prove the deficiency as an ordinary
claim; and (c) rely on the mortgage exclusively, or other security and foreclose the same before it is barred by
prescription, without the right to file a claim for any deficiency.
 HILARIA BAGAYAS v ROGELIO BAGAYAS
G.R. Nos 187308 & 187517 | September 18, 2013
DOCTRINE OF THE CASE
Proceedings under Section 108 of Presidential Decree No. 1529, or the Property Registration Decree, are in summary
in nature, contemplating corrections or insertions of mistakes which are only clerical but certainly not controversial issues.

PERLAS-BERNABE, J.:
FACTS:

Hilaria Bagayas filed a complaint against respondents for excluding her from inheriting from
the estate of her legally adoptive parents by falsifying a deed of absolute sale purportedly executed
by the deceased spouses transferring two parcels of land registered in their names to the defendants.
Respondents said, after the death of their parents, they executed a document denominated as
Deed of Extrajudicial Succession over the subject lands to effect the transfer of titles thereof to their
names. However, before they could register it, they found a Deed of Absolute sale transferring the
subject lands to them from the father’s old files, which they used by “reason of convenience” to
acquire title to the said lands.
RTC dismissed the complaint of the petitioner. Although she was able to prove that she is a
legally adoptive child of the deceased spouses, she failed to prove any of the instances that would
invalidate the deed of absolute sale.
She then filed actions to include her as registered owner to the extent of one-third of the
lands covered therein, by virtue of Section 108 of PD No. 1529 or the “Property Registration
Decree”. Her basis are, that she is a legally adoptive child and, the signature of the mother to the
absolute sale was falsified by the respondents (it was found by RTC that the signature was a mere
surplusage, as the subject lands belonged exclusively to the father). The petitions were dismissed
because of the principle of res judicata.
ISSUE:
1. Whether or not the dismissal of the earlier complaint on the ground that it in the nature of a
collateral attack on the certificates of title constitute a bar to a subsequent petition under
Section 108 of PD 1529 or the “Property Registration Decree”.
RULING:
It does not.
Section 108 of PD No. 1529 is used only for contemplating corrections or insertions of
mistakes which are only clerical but certainly not controversial issues.
Although Hilaria Bagayas was able to prove that she is a legally adoptive child, the action is
not proper. As her petition was of an annulment of sale and partition. She must first prove that she
is a co-owner of the estate and conveyance of her lawful shares. However, she failed to do so.
 As regards to her citing of Section 108 of PD No. 1529, it was improper; as her intent for
using it is as a mode of directly attacking the certificates of title issued to the Bagayas brothers. It
was ruled that it was not a direct attack, therefore cannot be used. The complaint is not covered by
the intention of the decree.
 SUMMARY FORMAT
Q: Hilaria Bagayas, an adoptive child, filed a complaint against her siblings who excluded
her from inheriting from the estate of their parents. She asked to include her as a registered
owner to the extent of one-third of the lands covered therein; citing Section 108 of PD No.
1529 or the “Property Registration Decree”. In an earlier complaint, she asked for the
annulment of a Deed of Absolute Sale in favor of her brothers wherein the RTC found
otherwise. They found that the lands where transferred to the brothers by the father’s
execution of the deed of sale before he died. Is the dismissal of the earlier complaint on the
ground that it is in the nature of a collateral attack on the certificates of title constitutes a
bar to a subsequent petition under Section 108 of PD No 1529?
A: It does not. Section 108 of PD No. 1529 in used only for contemplating corrections or
insertions of mistakes which are only clerical but certainly not controversial issues. Although Hilaria
Bagayas was able to prove that she is a legally adoptive child, the action is not proper. As her
petition was of an annulment of sale and partition. She must first prove that she is a co-owner of the
estate and conveyance of her lawful shares. However, she failed to do so. As regards to her citing of
Section 108 of PD No. 1529, it was improper; as her intent for using it is as a mode of directly
attacking the certificates of title issued to the Bagayas brothers. It was ruled that it was not a direct
attack, therefore cannot be used. The complaint is not covered by the intention of the decree.
 BANCO FILIPINO SAVINGS v TALA REALTY SERVICES CORPORATION
G.R. No. 158866 | September 9, 2013
DOCTRINE OF THE CASE
The Clean Hands Doctrine is used to deny equitable or legal relief to a party that has engaged in improper conduct.

PERLAS-BERNABE, J.:
FACTS:
In the course of the expansion of its operations, Banco Filipino needs to acquire real
properties to open new branch sites. However, there is a restriction imposed by Sections 25(a) and
34 of RA 337, where it limits a bank’s real estate investments to only 50% of its capital assets. So,
Banco Filipino, through its Board of Directors, decided to “warehouse” several of its properties.
Nancy L. Ty, Tomas B. Aguirre (he endorsed his share in Tala to Remedios A. Duspasquier),
and Pedro B. Aguirre, major stockholders of Banco Filipino, organized and incorporated Tala Realty
to purchase and hold the real properties of Banco Filipino in trust.
Banco Filipino and Tala Realty soon entered into a Trust Agreement; where Banco Filipino
sold some of its properties to Tala Realty, and Tala Realty leased these properties to Banco Filipino.
However, sometime later, Tala Realty denied the Trust Agreement, asserted ownership, and claimed
full title over the properties; which prompted Banco Filipino to file 17 complaints for reconveyance.
Respondents moved for the dismissal on the grounds of forum shopping, lack of cause of action, in
pari delicto, and the unenforceability of the trust agreement.
In G.R. No. 158866, which involved 2 parcels of land in La Union, RTC-LU granted the
defendants’ motion to dismiss on the ground of forum shopping; saying that all properties are
subject to the Trust Agreement. Thus, filing it in multiple courts constitute to forum shopping.
Banco Filipino countered that it is because the subject properties are in different localities and cities.
On appeal, CA affirmed with RTC-LU, finding that the reconveyance suits filed by Banco Filipino
were all based on the same Trust Agreement with Tala Realty.
In G.R. No. 181933, which involved 12 properties in Parañaque City, RTC-Parañaque
denied defendants’ motion to dismiss the complaint, finding no concurrence of the elements of litis
pendentia, and that Banco Filipino did not commit forum shopping. Nancy Ty contested to this.
However, on appeal, the CA affirmed with the trial court, saying the differences in the property
locations, as well as in the manner by which the trusts were repudiated, gave rise to a distinct cause
of action in all the reconveyance cases.
In G.R. No. 187551, which involved one property in Las Piñas City, RTC-Las Piñas granted
the defendants’ motion to dismiss; finding that all the elements of litis pendentia exists in the same
case before it. On appeal, CA dismissed the petition; not because of forum shopping, but because of
lack of cause of action. Wherein it was pronounced that the implied trust agreement between Banco
Filipino and Tala Realty was “inexistent and void for being contrary to law.”
ISSUE:
1. Whether or not the reconveyance complaints filed by Banco Filipino before the courts a quo
can be allowed to prosper.
RULING:
No. The Clean Hands Doctrine will not allow the creation or the use of a juridical relation
such as a trust to subvert, directly or indirectly, the law. Neither Banco Filipino nor Tala Realty came
to court with clean hands; neither will obtain relief from the court.
As such, Banco Filipino cannot demand reconveyance of the subject properties in the
present cases; neither can any affirmative relief be accorded to one party against the other since they
have been found to have acted in pari delicto.
Banco Filipino “warehoused” its branch site holding to Tala Realty to enable it to pursue its
expansion program and purchase new branch sites, and at the same time avoid the real property
holdings limit under Sections 25(a) and 34 of RA 337, or the General Banking Act, which it had
already reached.
Thus, for G.R. No. 158866 and G.R. No. 187551, wherein Banco Filipino are seeking
reversal for the CA decisions are dismissed. For G.R. No. 181933, the SC granted Nancy Ty’s
petition to reverse CA’s denial of her motions to dismiss the reconveyance cases.
 SUMMARY FORMAT
Q: Banco Filipino needs to acquire new real properties to open new branch sites in the
course of the expansion of its operations. However, Sections 25(a) and 34 of RA 337
imposed a limit to a bank’s real estate investment to only 50% of its capital assets. By doing
so, three of its major stockholders, organized and incorporated Tala Realty that will
“warehouse” several of its properties; the latter will purchase and hold the real properties of
Banco Filipino in trust. Sometime later, Tala Realty denied the trust agreement, asserted
ownership, and claimed full title over the properties. Which prompted Banco Filipino to file
complaints for reconveyance against Tala Realty. Will the reconveyance complaints filed by
Banco Filipino before the courts a quo can be allowed to prosper?
A: NO. The implied trust agreement between Banco Filipino and Tala Realty was “inexistent and
void for being contrary to law.” Ergo, Banco Filipino cannot demand reconveyance of its properties
based on the said implied trust, effectively depriving it of any cause of action. The Clean Hands
Doctrine will not allow the creation or the use of a juridical relation such as a trust to subvert,
directly or indirectly, the law. Neither Banco Filipino nor Tala Realty came to court with clean
hands; neither will obtain relief from the court.
 BOBBY TAN v GRACE ANDRADE
G.R. No. 171904 | August 7, 2013
DOCTRINE OF THE CASE
Article 126 of The Family Code provides that one cause for the termination of the conjugal partnership is upon the
death of either spouse.

PERLAS-BERNABE, J.:
FACTS:

Vda. Rosario is the registered owner of four parcels of land in Cebu City, which she
mortgaged to and subsequently foreclosed by Simon Dy. When it the redemption period was about
to expire, she asked for the assistance of Bobby Tan who agreed to redeem the properties.
Thereafter, she sold the lands to Bobby and his son Proceso, Jr. for P100,000.00 as evidence by a
Deed of Absolute Sale.
Proceso, Jr. executed a Deed of Assignment ceding to Bobby his rights and interest over the
properties for P50,000.00. However, Bobby extended an option to buy the subject properties in
favor of Proceso, Jr., giving him a period where he can purchase the same for P310,000.00. When
Proceso, Jr. failed to do so, Bobby consolidated his ownership over the properties.
The children of Vda. Rosario filed a complaint for reconveyance and annulment of deeds of
conveyance and damages against Bobby before the RTC; alleging that the transaction between them
was actually an equitable mortgage entered into to secure Vda. Rosario’s indebtedness to Bobby, and
not one of a sale. Bobby contended otherwise. He contended that the properties were solely owned
by Vda. Rosario and that he acquired them when Proceso, Jr. failed to exercise his option to buy
back the subjected properties.
RTC ruled that the transaction was a bona fide sale. On appeal, CA affirmed RTC’s finding
that the transaction was a bona fide sale. However, they ruled that by virtue of conjugal partnership,
the children of Vda. Rosario are her co-owners of the subjected lands. CA ordered Bobby to
reconvey to the children (Andrades) their share in the subject properties.
ISSUE:
1. Whether or not the transaction between Vda. Rosario and Bobby was of a contract of sale.
2. Whether or not the properties are conjugal in nature, thus making the children of Vda.
Rosario co-owners of them.
RULING:
As regards to the subject transaction, SC affirmed the lower court’s decision that it is a bona
fide sale.
As regards to the characterization of the subject properties, SC ruled that Vda. Rosario is the
sole owner of the parcel of lands. Conjugal partnership terminates upon the death of one spouse.
Vda. Rosario was already a widow when she sold the subjected lands to Bobby Tan. Therefore, at
the time of the sale, Vda. Rosario, a widow, can now dispose the properties on her own volition.
 SUMMARY FORMAT
Q: Vda. Rosario is the registered owner of 4 parcels of land, which she mortgaged to and
foreclosed. Upon the expiration of the redemption period, she asked the assistance of Bobby
Tan. Thereafter, she sold the lands to him. The children of Vda. Rosario said they are co-
owners as they are inheritors of their deceased father, whose approval was needed to dispose
the subject properties. Are the subject properties of conjugal in nature, thus making the
children of Vda. Rosario co-owners?
A: No. SC ruled that Vda. Rosario is the sole owner of the parcel of lands. Conjugal partnership
terminates upon the death of one spouse. Vda. Rosario was already a widow when she sold the
subjected lands to Bobby Tan. Therefore, at the time of the sale, Vda. Rosario, a widow, can now
dispose the properties on her own volition.
 HEIRS OF ALEJANDRA DELFIN v AVELINA RABADON
G.R. No. 165014 | July 31, 2013
DOCTRINE OF THE CASE
A Decree, over a land issued in favour of one, provides a secure, stable and trustworthy record of land ownership and
recorded interests therein so as to promote social and economic well-being and contribute to the national development.

PERLAS-BERNABE, J.:
FACTS:
According to the respondents, the subject property was owned by their predecessor-in-
interest, Emiliana Bacalso, by virtue to Decree No. 98992. Although it was lost during World War
II, there is still evidence that they are the rightful owners by virtue of an LRA certification, and a
certified copy from daybook entry. After the death of Emiliana, respondents took over possession
of the property until 1989; which they soon discovered that it was already in the possession of
Alejandra Delfin, where her families had already constructed houses thereon. Heirs of Alejandra
Delfin countered that the subject land was previously bought by Remegio Navares, their
predecessor-in-interest. However, when they asked to see a copy of the deed of sale, she could not
produce the same.
Petitioners countered that they inherited the property from their predecessor-in-interest,
Remegio Navares, who bought it but soon later, lost the certificate of title. Alejandra inherited the
subject property by virtue of an extra-judicial settlement and after its execution, her family took over
the possession of the same. To evidence their ownership, petitioners presented receipts of their
payment of realty taxes. They also contended that respondents are already barred by laches since
they filed their complaint 55 years after.
RTC ruled in favor of the Heirs of Alejandra Delfin as they were able to prove their
ownership through their payment of realty taxes. When on the other hand, respondents failed to
prove so. On appeal, CA reversed the decision; saying that it is the respondents who had better
right.
ISSUE:
1. Whether or not respondents have the better right to the ownership and possession of the
subject property.
HELD:
Yes, respondents have the better right to the ownership and possession of the subject
property. The basis is the LRA certification, daybook entry, and Decree No. 98992 that was issued
to Emiliana Bacalso. The Decree bars all claims and rights which arose as may have existed prior to
the decree of registration.
 SUMMARY FORMAT
Q: Respondents inherited the subject property from Emiliana Bacalso, by virtue of Decree
No. 98992. Sometime later, they found the heirs of Alejandra Delfin to be occupying the said
property, to which they even constructed houses there. The heirs argued they have better
right for it was inherited to them after it was bought by the predecessor from Emiliana
Bacalso; also, they are the ones paying the subject property’s realty taxes. Do the
respondents have the better right to the ownership and possession of the subject property?
A: Yes, respondents have the better right to the ownership and possession of the subject property.
The basis is the LRA certification, daybook entry, and Decree No. 98992 that was issued to
Emiliana Bacalso. The Decree bars all claims and rights which arose as may have existed prior to the
decree of registration.
 REPUBLIC OF THE PHILIPPINES v RICORDITO N. DE ASIS, JR.
G.R. No. 193874 | July 24, 2013
DOCTRINE OF THE CASE
RA No. 26 or the An Act Providing A Special Procedure For The Reconstitution of Torrens Certificates of Title
Lost Or Destroyed requires strict compliance, without which the SC is devoid of authority to pass upon and resolve the petition.

PERLAS-BERNABE, J.:
FACTS:
Respondent De Asis filed a verified amended petition of Reconstitution of TCT No. 8240 in
the name of his uncle, Lauriano De Asis. Respondent De Asis said he purchased the property from
his uncle through a Deed of Absolute Sale and the same is free from any encumbrances. However,
the original copy was destroyed by the fire in Quezon City Hall; hence, the amended petition is
based on the owner’s duplicate copy, which was in his possession.
RTC found merits on the case and requested LRA to furnished a copy of the title; likewise
ordered it be published in the Official Gazette at least 30 days prior to the scheduled hearing. The
OSG filed a notice of appearance and deputized the City Prosecutor of QC to be as counsel for the
Republic.
RTC granted the petition of Respondent De Asis. However, on appeal to the CA, Republic
said RTC erred in granting the amended petition because the issue was publish less than 30 days as
required by law; and, that the LRA’s report that the technical description of the subject property
overlaps with other properties, rendering doubtful the authenticity of the title sought to be
reconstituted. Nonetheless, CA affirmed the RTC ruling.
ISSUE:
1. Whether or not non-compliance with Sections 9 and 10 of RA 26 requiring publication of the
notice of hearing in two consecutive issues of the Official Gazette at least 30 days prior to the
date of hearing, a jurisdictional requisite.
HELD:
It is a jurisdictional requisite.
Reconstitution of Titles requires that (a) notice of the petition should be published in two
successive issues of the Official Gazette; and (b) publication should be made at least 30 days prior to
the date of hearing.
While it is true that the 30-day period in the case was short of only 3 days, the principle of
substantial compliance cannot apply, as the law requires strict compliance, without which the SC is
devoid of authority to pass upon and resolve the petition.
 SUMMARY FORMAT
Q: Respondent De Asis filed an amended petition to reconstitute TCT No. 8240 in favor of
his uncle, Lauriano De Asis; for the title was destroyed by the fire in the Quezon City Hall.
RTC found substance therefore required LRA to furnished a copy of the title and for the
Official Gazette publish such the title in two consecutive issues for at least 30 days prior to
the date of hearing. However, the latter was not duly complied with, it was short of 3 days.
Is the non-compliance of RA 26 requiring publication of notice of hearing in two
consecutive issued of the Official Gazette at least 30 days prior to the date of hearing, a
jurisdictional requisite?
A: Yes. Reconstitution of Titles requires that (a) notice of the petition should be published in two
successive issues of the Official Gazette; and (b) publication should be made at least 30 days prior to
the date of hearing. While it is true that the 30-day period in the case was short of only 3 days, the
principle of substantial compliance cannot apply, as the law requires strict compliance, without
which the SC is devoid of authority to pass upon and resolve the petition.
 LAURA E. PARAGUYA vs. SPOUSES ALMA ESCUREL-CRUCILLO and EMETRIO
CRUCILLO,* and the REGISTER OF DEEDS OF SORSOGON
G.R. No. 200265| December 2, 2013

DOCTRINE OF THE CASE

When the instrument presented is forged, even if accompanied by the owner’s duplicate certificate of title, the registered
owner does not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the property.

Based on Section 1 of PD 892, entitled "Discontinuance of the Spanish Mortgage System of Registration and of the
Use of Spanish Titles as Evidence in Land Registration Proceedings," Spanish titles can no longer be used as evidence of
ownership after six (6) months from the effectivity of the law, or starting August 16, 1976

PERLAS-BERNABE, J.:

FACTS:
On December 19, 1990, Paraguya filed before the RTC a Complaint against Sps. Crucillo and the RD for the
annulment of OCT No. P-17729 and other related deeds, with prayer for receivership and damages, alleging
that Escurel obtained the aforesaid title through fraud and deceit. Paraguya claimed that she is the lawful heir
to the subject properties left by her paternal grandfather, the late Ildefonso Estabillo (Estabillo), while Escurel
was merely their administrator and hence, had no right over the same.

On February 7, 1991, Sps. Crucillo filed their answer with motion to dismiss, averring that Paraguya’s
complaint had already been barred by laches and/or prescription. They further alleged, among others, that
Escurel, through her father, the late Angel Escurel, applied for a free patent over the subject properties,
resulting in the issuance of Free Patent No. V-3 005844 under OCT No. P-17792 in her name.

During trial, Paraguya testified as to how she came about owning the subject properties, presenting a
document entitled Recognition of Ownership and Possession dated December 1, 1972 executed by her
siblings, as well as a titulo posesorio issued sometime in 1983 or 1985 in the name of Estabillo. A representative
of the Community Environment and Naural Resources Office (CENRO), by the name of Ramon Escanilla,
also testified in Paraguya’s favor, stating that aside from an affidavit dated December 17, 1976 executed by
Escurel’s brother, Adonis Escurel (adonis), there were no other documents of ownership presented before
the Bureau of Lands in support of Escurel’s application for title.

The RTC ordered the annulment of OCT No. P-17729. Accordingly, it directed the RD to cancel the said
title and Sps. Escurillo to surrender ownership and possession of the subject properties to Paraguya.

On appeal, the CA reversed the RTC’s ruling and ordered the dismissal of Paraguya’s complaint. Aggrieved
Paraguya moved for reconsideration which for reconsideration which was however, denied on January 9,
2012.

ISSUE
Whether or not the CA correctly dismissed Paraguya’s complaint for annulment of title.

RULING
Yes. It is an established rule that a Torrens certificate of title is conclusive proof of ownership.
Verily, a party may seek its annulment on the basis of fraud or misrepresentation. However, such action must
be seasonably filed, else the same would be barred.

In this relation, Section 32 of PD 1529 provides that the period to contest a decree of registration
shall be one (1) year from the date of its entry and that, after the lapse of the said period, The Torrens
certificate of title issued thereon becomes incontrovertible and indefeasible
 The Court is impelled to sustain the CA’s dismissal of Paraguya’s complaint for annulment of CT
No. P-17729 since it was filed only on December 19, 1990, or more than eleven (11) years from the title’s
date of entry on August 24, 1979. Based on Section 32 of PD 1529, said title had become inconvertible and
indefeasible after the lapse of one (1) year from the date of its entry, thus barring Paraguya’s action for
annulment of title.

Even if the barring effect of Section 32 and the prescriptive period for reconveyance are discounted,
Paraguya’s complaint for annulment of title should be dismissed altogether since she merely relied on the titulo
posesorio issued in favor Estabillo sometime in 1983 or 1985. Based on Section 1 of PD 892, entitled
"Discontinuance of the Spanish Mortgage System of Registration and of the Use of Spanish Titles as
Evidence in Land Registration Proceedings," Spanish titles can no longer be used as evidence of ownership
after six (6) months from the effectivity of the law, or starting August 16, 1976.

Hence, since Paraguya only presented the titulo posesorio during the pendency of the instant case, or
during the 1990’s onwards, the CA was correct in not giving any credence to it at all.

WHEREFORE, the petition is DENIED. Accordingly, the Court of Appeal’s Decision dated June 27, 2011
and Resolution dated January 9, 2012 in CA-G.R. CV. No. 94764 are hereby AFFIRMED.

SO ORDERED.
 SUMMARY FORMAT

Q: Ildefonso died leaving a parcel of land in favor of her granddaughter Paraguya covered by a titulo
posesorio issued sometime in 1983 or 1985 in the name of the former. However, Paraguya found that
a title on the same land was issued in the name of Escurel, the administrator of her grandfather’s
estate. To protect her rights, she sought the annulment of Escurel’s title alleging that such was
obtained through fraud and deceit. In defense, Escurel stated that she acquired the title through her
father who applied for a free patent over the subject properties, resulting in the issuance of Free
Patent No. V-3 005844 under OCT No. P-17792 in her name. Should the trial court give due course to
Paraguya’s complaint?

A: No. Paraguya’s complaint for annulment of title should be dismissed altogether since she merely relied on
the titulo posesorio issued in favor Ildefonso sometime in 1983 or 1985. Based on Section 1 of PD 892, entitled
"Discontinuance of the Spanish Mortgage System of Registration and of the Use of Spanish Titles as
Evidence in Land Registration Proceedings," Spanish titles can no longer be used as evidence of ownership
after six (6) months from the effectivity of the law, or starting August 16, 1976.
 OPTIMUM DEVELOPMENT BANK vs.
SPOUSES BENIGNO V. JOVELLANOS and LOURDES R. JOVELLANOS
G.R. No. 189145 | December 4, 2013

DOCTRINE OF THE CASE

Three (3) requisites before the seller may actually cancel the contract must exist: first, the seller shall give the buyer a
60-day grace period to be reckoned from the date the installment became due; second, the seller must give the buyer a notice of
cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace
period; and third, the seller may actually cancel the contract only after thirty (30) days from the buyer’s receipt of the said notice of
cancellation/demand for rescission by notarial act.

PERLAS-BERNABE, J.:

FACTS:
On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell with Palmera Homes, Inc. (Palmera
Homes) for the purchase of a residential house and lot situated in Block 3, Lot 14, Villa Alegria Subdivision,
Caloocan City (subject property) for a total consideration of ₱1,015,000.00. Pursuant to the contract, Sps.
Jovellanos took possession of the subject property upon a down payment of ₱91,500.00, undertaking to pay
the remaining balance of the contract price in equal monthly installments of ₱13,107.00 for a period of 10
years starting June 12, 2005.

On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the Contract to Sell in favor of
petitioner Optimum Development Bank (Optimum) through a Deed of Assignment of even date.

On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of Contract to Sell for Sps.
Jovellanos’s failure to pay their monthly installments despite several written and verbal notices.

In a final Demand Letter dated May 25, 2006, Optimum required Sps. Jovellanos to vacate and deliver
possession of the subject property within seven (7) days which, however, remained unheeded. Hence,
Optimum filed, on November 3, 2006, a complaint for unlawful detainer before the MeTC, docketed as Civil
Case No. 06-28830. Despite having been served with summons, together with a copy of the complaint, Sps.
Jovellanos failed to file their answer within the prescribed reglementary period, thus prompting Optimum to
move for the rendition of judgment.

Thereafter, Sps. Jovellanos filed their opposition with motion to admit answer, questioning the jurisdiction of
the court, among others. Further, they filed a Motion to Reopen and Set the Case for Preliminary Conference,
which the MeTC denied.

On appeal, the RTC affirmed the MeTC’s judgment, holding that the latter did not err in refusing to admit
Sps. Jovellanos’ s belatedly filed answer considering the mandatory period for its filing. It also affirmed the
MeTC’s finding that the action does not involve the rights of the respective parties under the contract but
merely the recovery of possession by Optimum of the subject property after the spouses’ default.

The CA reversed and set aside the RTC’s decision, ruling to dismiss the complaint for lack of jurisdiction. It
found that the controversy does not only involve the issue of possession but also the validity of the
cancellation of the Contract to Sell and the determination of the rights of the parties thereunder as well as the
governing law, among others, Republic Act No. (RA) 6552.

ISSUE
Whether or not the CA correctly dismissed Paraguya’s complaint for annulment of title.
RULING
Yes. The petition is meritorious. What is determinative of the nature of the action and the court with
jurisdiction over it are the allegations in the complaint and the character of the relief sought, not the defenses
set up in an answer.

The only issue to be resolved in an unlawful detainer case is physical or material possession of the
property involved, independent of any claim of ownership by any of the parties involved.

In its complaint, Optimum alleged that it was by virtue of the April 26, 2005 Contract to Sell that
Sps. Jovellanos were allowed to take possession of the subject property. However, since the latter failed to
pay the stipulated monthly installments, notwithstanding several written and verbal notices made upon them,
it cancelled the said contract as per the Notice of Delinquency and Cancellation dated April 10, 2006. When
Sps. Jovellanos refused to vacate the subject property despite repeated demands, Optimum instituted the
present action for unlawful detainer on November 3, 2006, or within one year from the final demand made
on May 25, 2006.

Metropolitan Trial Courts are conditionally vested with authority to resolve the question of
ownership raised as an incident in an ejectment case where the determination is essential to a complete
adjudication of the issue of possession. Concomitant to the ejectment court’s authority to look into the claim
of ownership for purposes of resolving the issue of possession is its authority to interpret the contract or
agreement upon which the claim is premised. The authority granted to the MeTC to preliminarily resolve the
issue of ownership to determine the issue of possession ultimately allows it to interpret and enforce the
contract or agreement between the plaintiff and the defendant. To deny the MeTC jurisdiction over a
complaint merely because the issue of possession requires the interpretation of a contract will effectively rule
out unlawful detainer as a remedy. As stated, in an action for unlawful detainer, the defendant’s right to
possess the property may be by virtue of a contract, express or implied;

Interpretation of the contract between the plaintiff and the defendant is inevitable because it is the
contract that initially granted the defendant the right to possess the property; it is this same contract that the
plaintiff subsequently claims was violated or extinguished, terminating the defendant’s right to possess. The
MeTC’s ruling on the rights of the parties based on its interpretation of their contract is, of course, not
conclusive, but is merely provisional and is binding only with respect to the issue of possession.

The unlawful detainer suit filed by Optimum against Sps. Jovellanos for illegally withholding
possession of the subject property is similarly premised upon the cancellation or termination of the Contract
to Sell between them. It was well within the jurisdiction of the MeTC to consider the terms of the parties’
agreement in order to ultimately determine the factual bases of Optimum’s possessory claims over the subject
property. Proceeding accordingly, the MeTC held that Sps. Jovellanos’s non-payment of the installments due
had rendered the Contract to Sell without force and effect, thus depriving the latter of their right to possess
the property subject of said contract. The foregoing disposition aptly squares with existing jurisprudence. As
the Court similarly held in the Union Bank case, the seller’s cancellation of the contract to sell necessarily
extinguished the buyer’s right of possession over the property that was the subject of the terminated
agreement.

In a contract to sell, the prospective seller binds himself to sell the property subject of the agreement
exclusively to the prospective buyer upon fulfillment of the condition agreed upon which is the full payment
of the purchase price but reserving to himself the ownership of the subject property despite delivery thereof
to the prospective buyer.

The full payment of the purchase price in a contract to sell is a suspensive condition, the non-
fulfillment of which prevents the prospective seller’s obligation to convey title from becoming effective, as in
this case. Further, it is significant to note that given that the Contract to Sell in this case is one which has for
its object real property to be sold on an installment basis, the said contract is especially governed by – and
thus, must be examined under the provisions of – RA 6552, or the "Realty Installment Buyer Protection Act",
which provides for the rights of the buyer in case of his default in the payment of succeeding installments.
Breaking down the provisions of the law, the Court, in the case of Rillo v. CA, explained the mechanics of
cancellation under RA 6552 which are based mainly on the amount of installments already paid by the buyer
under the subject contract.

Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an
installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the
payment of succeeding installments.

Since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the MeTC, the
Court examines Optimum’s compliance with Section 4 of RA 6552 which is the provision applicable to
buyers who have paid less than two (2) years-worth of installments. Essentially, the said provision provides
for three (3) requisites before the seller may actually cancel the subject contract: first, the seller shall give the
buyer a 60-day grace period to be reckoned from the date the installment became due; second, the seller must
give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay the
installments due at the expiration of the said grace period; and third, the seller may actually cancel the
contract only after thirty (30) days from the buyer’s receipt of the said notice of cancellation/demand for
rescission by notarial act. In the present case, the 60-day grace period automatically operated in favor of the
buyers, Sps. Jovellanos, and took effect from the time that the maturity dates of the installment payments
lapsed. With the said grace period having expired bereft of any installment payment on the part of Sps.
Jovellanos, Optimum then issued a notarized Notice of Delinquency and Cancellation of Contract on April
10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell, Optimum gave Sps.
Jovellanos an additional thirty (30) days within which to settle their arrears and reinstate the contract, or sell
or assign their rights to another.

It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as
effectively cancelled – making as it did a final demand upon Sps. Jovellanos to vacate the subject property
only on May 25, 2006. Thus, based on the foregoing, the Court finds that there was a valid and effective
cancellation of the Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos had
already lost their right to retain possession of the subject property as a consequence of such cancellation, their
refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful detainer as
properly adjudged by the MeTC.
 SUMMARY FORMAT

Q: Spouses Jovellanos entered into a Contract to Sell with Palmera Homes for the purchase of a
residential house and lot payable for a period of 10 years. Later, Palmera Homes assigned all its
rights, title, and interest in favor of Optimum Bank. After some time, Optimum issued a Notice of
Delinquency and Cancellation of the Contract to Sell on April 10, 2006 for the spouses’ failure to pay
their monthly payments. Thereafter, a final Demand Letter dated May 25, 2006 was issued by
Optimum requesting the Sps. Jovellanos to vacate and deliver the properties which, however,
remained unheeded. This prompted Optimum to file an unlawful detainer case against the spouses.
Was the cancellation of the contract to sell valid?

A: Yes. The Maceda Law, R.A. No. 6552, recognizes in conditional sales of all kinds of real estate (industrial,
commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by
the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring
binding force. It also provides the right of the buyer on installments in case he defaults in the payment of
succeeding installments. Three (3) requisites before the seller may actually cancel the contract must exist: first,
the seller shall give the buyer a 60-day grace period to be reckoned from the date the installment became due;
second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the
buyer fails to pay the installments due at the expiration of the said grace period; and third, the seller may
actually cancel the contract only after thirty (30) days from the buyer’s receipt of the said notice of
cancellation/demand for rescission by notarial act.

It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as
effectively cancelled – making as it did a final demand upon Sps. Jovellanos to vacate the subject property
only on May 25, 2006. Thus, based on the foregoing, there was a valid and effective cancellation of the
Contract to Sell and since Sps. Jovellanos had already lost their right to retain possession of the subject
property as a consequence of such cancellation, their refusal to vacate and turn over possession to Optimum
makes out a valid case for unlawful detainer.
 METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO AND TIUOH
YAN, SPOUSES GUILLERMO AND MERCEDES DYCHIAO, AND SPOUSES VICENTE AND
FILOMENA DYCHIAO vs. ALLIED BANK CORPORATION
G.R. No. 177921 | December 4, 2013

DOCTRINE OF THE CASE

Absent any showing that the terms and conditions of the latter transactions have been, in any way, modified or novated
by the terms and conditions in the MoA, said contracts should be treated separately and distinctly from each other, such that the
existence, performance or breach of one would not depend on the existence, performance or breach of the other.

PERLAS-BERNABE, J.:

FACTS:
On various dates and for different amounts, Metro Concast, a corporation duly organized and existing under
and by virtue of Philippine laws and engaged in the business of manufacturing steel, through its officers,
obtained several loans from Allied Bank. These loan transactions were covered by a promissory note and
separate letters of credit/trust receipts.

By way of security, the individual petitioners executed several Continuing Guaranty/Comprehensive Surety
Agreements in favor of Allied Bank. Petitioners failed to settle their obligations under the aforementioned
promissory note and trust receipts, hence, Allied Bank, through counsel, sent them demand letters, all dated
December 10, 1998, seeking payment of the total amount of ₱51,064,093.62, but to no avail. Thus, Allied
Bank was prompted to file a complaint for collection of sum of money (subject complaint) against petitioners
before the RTC, docketed as Civil Case No. 00-1563. In their second Amended Answer, petitioners admitted
their indebtedness to Allied Bank but denied liability for the interests and penalties charged, claiming to have
paid the total sum of ₱65,073,055.73 by way of interest charges for the period covering 1992 to 1997.

They also alleged that the economic reverses suffered by the Philippine economy in 1998 as well as the
devaluation of the peso against the US dollar contributed greatly to the downfall of the steel industry, directly
affecting the business of Metro Concast and eventually leading to its cessation. Hence, in order to settle their
debts with Allied Bank, petitioners offered the sale of Metro Concast’s remaining assets, consisting of
machineries and equipment, to Allied Bank, which the latter, however, refused. Instead, Allied Bank advised
them to sell the equipment and apply the proceeds of the sale to their outstanding obligations. Accordingly,
petitioners offered the equipment for sale, but since there were no takers, the equipment was reduced into
ferro scrap or scrap metal over the years.

In 2002, Peakstar Oil Corporation (Peakstar), represented by one Crisanta Camiling (Camiling), expressed
interest in buying the scrap metal. Petitioners claimed that Atty. Peter Saw (Atty. Saw), a member of Allied
Bank’s legal department, acted as the latter’s agent. Eventually, with the alleged conformity of Allied Bank,
through Atty. Saw, a Memorandum of Agreement dated November 8, 2002 (MoA) was drawn between Metro
Concast, represented by petitioner Jose Dychiao, and Peakstar, through Camiling, under which Peakstar
obligated itself to purchase the scrap metal for a total consideration of ₱34,000,000.00. Unfortunately,
Peakstar reneged on all its obligations under the MoA. In this regard, petitioners asseverated that their failure
to pay their outstanding loan obligations to Allied Bank must be considered as force majeure, and since Allied
Bank was the party that accepted the terms and conditions of payment proposed by Peakstar, petitioners
must therefore be deemed to have settled their obligations to Allied Bank.

After trial on the merits, the RTC dismissed the subject complaint, holding that the "causes of action sued
upon had been paid or otherwise extinguished.” It ruled that since Allied Bank was duly represented by its
agent, Atty. Saw, in all the negotiations and transactions with Peakstar – considering that Atty. Saw drafted
the MoA, accepted the bank guarantee issued by Bankwise, and was apprised of developments regarding the
sale and disposition of the scrap metal – then it stands to reason that the MoA between Metro Concast and
Peakstar was binding upon said bank. The appellate court reversed and set aside the ruling of the RTC,
ratiocinating that there was "no legal basis in fact and in law to declare that when Bankwise reneged its
guarantee under the [MoA], herein [petitioners] should be deemed to be discharged from their obligations
lawfully incurred in favor of [Allied Bank]."

ISSUE
Whether or not the loan obligations incurred by the petitioners under the subject promissory note
and various trust receipts have already been extinguished

RULING
No. Article 1231 of the Civil Code states that obligations are extinguished either by payment or
performance, the loss of the thing due, the condonation or remission of the debt, the confusion or merger of
the rights of creditor and debtor, compensation or novation.

At the outset, the Court must dispel the notion that the MoA would have any relevance to the
performance of petitioners’ obligations to Allied Bank. The MoA is a sale of assets contract, while petitioners’
obligations to Allied Bank arose from various loan transactions. Absent any showing that the terms and
conditions of the latter transactions have been, in any way, modified or novated by the terms and conditions
in the MoA, said contracts should be treated separately and distinctly from each other, such that the
existence, performance or breach of one would not depend on the existence, performance or breach of the
other.

The performance or breach of the MoA bears no relation to the performance or breach of the
subject loan transactions, they being separate and distinct sources of obligations. The fact of the matter is that
petitioners’ loan obligations to Allied Bank remain subsisting for the basic reason that the former has not
been able to prove that the same had already been paid or, in any way, extinguished. In this regard,
petitioners’ liability, as adjudged by the CA, must perforce stand.
 SUMMARY FORMAT

Q: Metro Corporation obtained a loan from Allied Bank covered by promissory notes, letters of
credit, and trust receipts. By way of security, Metro’s officers individually executed a continuing
guaranty in favor of Allied Bank. Metro’s officers failed to settle their obligations prompting Allied
Bank to demand for payment to no avail. In order to settle their debts, they offered the sale of
Metro’s remaining assets (machines and equipment) to the Bank which the latter refused.
Meanwhile, Starpeak Corporation, acting through Allied Bank’s counsel, entered into an agreement
with Metro to buy the machines that were reduced to mere scraps of metals. Starpeak, unfortunately,
reneged on its obligation to Metro. In this regard, Metro asseverates that their failure to pay their
outstanding loan obligations to Allied Bank must be considered as force majeure, and since Allied
Bank was the party, through their counsel, that accepted the terms and conditions of payment
proposed by Starpeak, petitioners must therefore be deemed to have settled their obligations to
Allied Bank.

Were the loan obligations under the promissory notes, letters of credit, and trust receipts have
already been extinguished?

A: No. Article 1231 of the Civil Code states that obligations are extinguished either by payment or
performance, the loss of the thing due, the condonation or remission of the debt, the confusion or merger of
the rights of creditor and debtor, compensation or novation.

Starpeak and Metro’s agreement is a sale of assets contract, while Metro’s obligations to Allied Bank arose
from various loan transactions. Absent any showing that the terms and conditions of the latter transactions
have been, in any way, modified or novated by the terms and conditions in the Starpeak-Metro agreement,
said contracts should be treated separately and distinctly from each other, such that the existence,
performance or breach of one would not depend on the existence, performance or breach of the other.

The performance or breach of the agreement bears no relation to the performance or breach of the subject
loan transactions, they being separate and distinct sources of obligations. Metro’s loan obligations to Allied
Bank remain subsisting for the basic reason that the former has not been able to prove that the same had
already been paid or, in any way, extinguished.
 ACE FOODS, INC. vs. MICRO PACIFIC TECHNOLOGIES CO., LTD
G.R. No. 200602 | December 11, 2013

DOCTRINE OF THE CASE

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or promised. This may be
gleaned from Article 1458 of the Civil Code which defines a contract of sale. A contract of sale is classified as a consensual
contract, which means that the sale is perfected by mere consent. No particular form is required for its validity. Upon perfection of
the contract, the parties may reciprocally demand performance, i.e., the vendee may compel transfer of ownership of the object of the
sale, and the vendor may require the vendee to pay the thing sold.

PERLAS-BERNABE, J.:

FACTS:
On September 26, 2001, MTCL sent a letter-proposal for the delivery and sale of the subject products to be
installed at various offices of ACE Foods.

On October 29, 2001, ACE Foods accepted MTCL’s proposal and accordingly issued Purchase Order No.
100023 (Purchase Order) for the subject products. Thereafter, or on March 4, 2002, MTCL delivered the said
products to ACE Foods as reflected in Invoice No. 7733 (Invoice Receipt). The fine print of the invoice
states, inter alia, that "[t]itle to sold property is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD.
until full compliance of the terms and conditions of above and payment of the price" (title reservation
stipulation). After delivery, the subject products were then installed and configured in ACE Foods’s premises.
MTCL’s demands against ACE Foods to pay the purchase price, however, remained unheeded. Instead of
paying the purchase price, ACE Foods sent MTCL a Letter dated September 19, 2002, stating that it "ha[s]
been returning the [subject products] to [MTCL] thru [its] sales representative Mr. Mark Anteola who has
agreed to pull out the said [products] but had failed to do so up to now."

On October 16, 2002, ACE Foods lodged a Complaint against MTCL before the RTC, praying that the latter
pull out from its premises the subject products since MTCL breached its "after delivery services" obligations
to it, particularly, to: (a) install and configure the subject products; (b) submit a cost benefit study to justify the
purchase of the subject products; and (c) train ACE Foods’s technicians on how to use and maintain the
subject products. ACE Foods likewise claimed that the subject products MTCL delivered are defective and
not working. For its part, MTCL, in its Answer with Counterclaim, maintained that it had duly complied with
its obligations to ACE Foods and that the subject products were in good working condition when they were
delivered, installed and configured in ACE Foods’s premises. Thereafter, MTCL even conducted a training
course for ACE Foods’s representatives/employees; MTCL, however, alleged that there was actually no
agreement as to the purported "after delivery services." Further, MTCL posited that ACE Foods refused and
failed to pay the purchase price for the subject products despite the latter’s use of the same for a period of
nine (9) months. As such, MTCL prayed that ACE Foods be compelled to pay the purchase price, as well as
damages related to the transaction.

The RTC rendered a Decision directed MTCL to remove the subject products from ACE Foods’s premises
and pay actual damages and attorney fees. Dissatisfied, MTCL elevated the matter on appeal.

The CA reversed and set aside the RTC’s ruling, ordering ACE Foods to pay MTCL the amount of
₱646,464.00, plus legal interest at the rate of 6% per annum to be computed from April 4, 2002, and
attorney’s fees amounting to ₱50,000.00.

ISSUE
Whether ACE Foods should pay MTCL the purchase price for the subject products
RULING
Yes. A contract is what the law defines it to be, taking into consideration its essential elements, and
not what the contracting parties call it. The real nature of a contract may be determined from the express
terms of the written agreement and from the contemporaneous and subsequent acts of the contracting
parties. However, in the construction or interpretation of an instrument, the intention of the parties is
primordial and is to be pursued. The denomination or title given by the parties in their contract is not
conclusive of the nature of its contents.

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or
promised. This may be gleaned from Article 1458 of the Civil Code which defines a contract of sale. A
contract of sale is classified as a consensual contract, which means that the sale is perfected by mere
consent. No particular form is required for its validity. Upon perfection of the contract, the parties may
reciprocally demand performance, i.e., the vendee may compel transfer of ownership of the object of the sale,
and the vendor may require the vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, i.e., the full payment of the purchase price. A contract to sell may not even be considered as
a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale
until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of
consent is present, although it is conditioned upon the happening of a contingent event which may or may
not occur.

The parties have agreed to a contract of sale and not to a contract to sell. Bearing in mind its
consensual nature, a contract of sale had been perfected at the precise moment ACE Foods, as evinced by its
act of sending MTCL the Purchase Order, accepted the latter’s proposal to sell the subject products in
consideration of the purchase price of ₱646,464.00. From that point in time, the reciprocal obligations of the
parties – i.e., on the one hand, of MTCL to deliver the said products to ACE Foods, and, on the other hand,
of ACE Foods to pay the purchase price therefor within thirty (30) days from delivery – already arose and
consequently may be demanded. From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
 SUMMARY FORMAT

Q: MTCL sent a letter-proposal for the delivery and sale of the machines to be installed at various
offices of ACE Company to which the latter agreed for a purchase price of ₱ 5,000,000. Thereafter, it
delivered several machineries at ACE Company’s premises and installed the same. MTCL Company
demanded payment from ACE Company. However, they have sent a letter to MTCL Company
stating that they have been returning the machines to them thru one of their sales representative who
has agreed to pull the machines out but failed to do so. ACE Company filed a complaint against
MTCL Company praying that the latter pull out from its premises the subject machines. In defense,
MTCL Company posits that ACE Company refused to pay the purchase price therefor despite the
latter’s use of the machines. As such, MTCL Company prays that ACE Company be compelled to
pay the purchase price. Should ACE Company pay MTCL for the purchase price of the machines?

A: YES. Considering its consensual nature, a contract of sale had been perfected at the precise moment ACE
Company accepted the latter’s proposal to sell the machines in consideration of the purchase price of ₱
5,000,000. From that point in time, the reciprocal obligations of the parties – i.e., on the one hand, of MTCL
to deliver the said machines to ACE Company, and, on the other hand, of ACE Company to pay the
purchase price therefor after delivery – already arose and consequently may be demanded. From that
moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the
form of contracts.
 THE PRESIDENT OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS
vs. BTL CONSTRUCTION CORPORATION
G.R. No. 176439; G.R. No. 176718 | Jan. 15, 2014

DOCTRINE OF THE CASE

Article 1724 of the Civil Code governs the recovery of additional costs in contracts for a stipulated price (such as fixed
lump-sum contracts), as well as the increase in price for any additional work due to a subsequent change in the original plans and
specifications. Based on the same provision, such added costs can only be allowed upon the: (a) written authority from the
developer or project owner ordering or allowing the written changes in work; and (b) written agreement of parties with regard to the
increase in price or cost due to the change in work or design modification. Case law instructs that compliance with these two (2)
requisites is a condition precedent for recovery. The absence of one or the other condition thus bars the claim of additional costs.
Notably, neither the authority for the changes made nor the additional price to be paid therefor may be proved by any evidence
other than the written authority and agreement as abovementioned.

PERLAS-BERNABE, J.:

FACTS:
On January 10, 2000, COJCOLDS and BTL entered into a Construction Contract (Contract) for the latter’s
construction of the former’s meetinghouse facility at Barangay Cabug, Medina, Misamis Oriental (Medina
Project). However, due to bad weather conditions, power failures, and revisions in the construction plans (as
per Change Order Nos. 1 to 12 agreed upon by the parties), among others, the completion date of the
Medina Project was extended.

On May 18, 2001, BTL informed COJCOLDS that it suffered financial losses from another project (i.e., the
Pelaez Arcade II Project) and thereby requested that it be allowed to: (a) bill COJCOLDS based on 95% and
100% completion of the Medina Project; and (b) execute deeds of assignment in favor of its suppliers so that
they may collect any eventual payments directly from COJCOLDS. COJCOLDS granted said request which
BTL, in turn, acknowledged.

COJCOLDS terminated its Contract with BTL on August 17, 2001 and, thereafter, engaged the services of
another contractor, Vigor Construction (Vigor), to complete the Medina Project.

On November 12, 2003, BTL filed a complaint against COJCOLDS before the CIAC. The CIAC found both
parties’ claims to be partly meritorious. Dissatisfied with the CIAC’s ruling, COJCOLDS elevated the matter
to the CA which modified the decision.

ISSUES
Whether or not COJCOLDS is liable for the “additional works” performed by BTL, specifically the
concrete retaining wall and the works taken under Change Order Nos. 8 to 12

RULING
No. Article 1724 of the Civil Code governs the recovery of additional costs in contracts for a
stipulated price (such as fixed lump-sum contracts), as well as the increase in price for any additional work
due to a subsequent change in the original plans and specifications. Based on the same provision, such added
costs can only be allowed upon the: (a) written authority from the developer or project owner ordering or
allowing the written changes in work; and (b) written agreement of parties with regard to the increase in price
or cost due to the change in work or design modification. Case law instructs that compliance with these two
(2) requisites is a condition precedent for recovery. The absence of one or the other condition thus bars the
claim of additional costs. Notably, neither the authority for the changes made nor the additional price to be
paid therefor may be proved by any evidence other than the written authority and agreement as
abovementioned.
 There is neither a written authorization nor agreement covering the additional price to be paid for
the concrete retaining wall. This confirms the CA’s finding that the construction of the perimeter wall of the
Medina Project, which is included in the original plans and specifications for the same, already subsumes the
construction of the concrete retaining wall. Accordingly, COJCOLDS should not pay the amount of
P804,460.89 claimed by BTL as additional cost for the same.

BTL had, in fact, requested COJCOLDS to make the payments therefor directly to its suppliers in
view of its financial losses in another project. Hence, considering that COJCOLDS’s payment to BTL’s
suppliers already covered the costs of said additional works upon its own request and to its own credit, BTL
maintains no right to pursue such claim.
 SUMMARY FORMAT

Q: The Church of Jesus Christ (CJC) entered into a construction contract with JAO Builders for the
former’s meetinghouses in Makati. On May 18, 2001, JAO Builders informed CJC that it suffered
financial losses from another project which it handles and thereby requested that it be allowed to
execute deeds of assignment in favor of its suppliers so that they may collect any payments directly
from CJC to which the latter agreed. CJC, however, terminated its contract with JAO Builders and
engaged LAO Builders to complete the Makati houses. JAO Builders filed a complaint against CJC
for breach of contract and payment for the additional works performed by them. Is CJC liable for the
additional works?

A: No. Article 1724 of the Civil Code governs the recovery of additional costs in contracts for a stipulated
price (such as fixed lump-sum contracts), as well as the increase in price for any additional work due to a
subsequent change in the original plans and specifications. Based on the same provision, such added costs
can only be allowed upon the: (a) written authority from the developer or project owner ordering or allowing
the written changes in work; and (b) written agreement of parties with regard to the increase in price or cost
due to the change in work or design modification. Case law instructs that compliance with these two (2)
requisites is a condition precedent for recovery. The absence of one or the other condition thus bars the
claim of additional costs. Notably, neither the authority for the changes made nor the additional price to be
paid therefor may be proved by any evidence other than the written authority and agreement as
abovementioned.

There is neither a written authorization nor agreement covering the additional price to be paid for the
additional work. CJC should not pay JAO Builders of the additional works.
 THE HEIRS OF VICTORINO SARILI, NAMELY: ISABEL A. SARILI,* MELENCIA** S.
MAXIMO, ALBERTO A. SARILI, IMELDA S. HIDALGO, all herein represented by
CELSO A. SARILI vs. PEDRO F. LAGROSA, represented in this act by his Attorney-in-Fact
LOURDES LABIOS MOJICA
G.R. No. 193517| January 15, 2014

DOCTRINE OF THE CASE

When the instrument presented is forged, even if accompanied by the owner’s duplicate certificate of title, the registered
owner does not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the property.

PERLAS-BERNABE, J.:

FACTS:
Lagrosa filed a complaint against Sps. Sarili and the Register of Deeds of Caloocan City (RD) before the RTC,
alleging, that he is the owner of a certain parcel of land situated in Caloocan City covered by TCT No. 55979
(subject property) and has been religiously paying the real estate taxes therefor since its acquisition on
November 29, 1974. He is a resident of California, USA, and discovered during his vacation in the
Philippines that a new certificate of title to the subject property was issued by the RD in the name of
Victorino married to Isabel Amparo (Isabel) by virtue of a falsified Deed of Absolute Sale dated February 16,
1978 (February 16, 1978 deed of sale) purportedly executed by him and his wife, Amelia U. Lagrosa (Amelia).
He averred that the falsification of the said deed of sale was a result of the fraudulent, illegal, and malicious
acts committed by Sps. Sarili and the RD in order to acquire the subject property.

In their answer, Sps. Sarili maintained that they are innocent purchasers for value, having purchased the
subject property from one Ramon B. Rodriguez (Ramon), who possessed and presented a Special Power of
Attorney (subject SPA) to sell/dispose of the same, and, in such capacity, executed a Deed of Absolute
Sale dated November 20, 1992 (November 20, 1992 deed of sale) conveying the said property in their favor.
In this relation, they denied any participation in the preparation of the February 16, 1978 deed of sale, which
may have been merely devised by the "fixer" they hired to facilitate the issuance of the title in their names.

The RTC found respondent’s signature on the subject SPA as "the same and exact replica" of his signature in
the November 25, 1999 SPA in favor of his Mojica, his attorney-in-fact. Thus, with Ramon’s authority having
been established, it declared the November 20, 1992 deed of sale executed by the latter as "valid, genuine,
lawful and binding" and, as such, had validly conveyed the subject property in favor of Sps. Sarili. Aggrieved,
respondent appealed to the CA.

The CA granted respondent’s appeal and held that the RTC erred in its ruling since the November 20, 1992
deed of sale, which the RTC found "as valid and genuine," was not the source document for the transfer of
the subject property and the issuance of TCT No. 262218 in the name of Sps. Sarili but rather the February
16, 1978 deed of sale, the fact of which may be gleaned from the Affidavit of Late Registration executed by
Isabel (affidavit of Isabel).

Dissatisfied, petitioners moved for reconsideration which was, however, denied in a Resolution dated August
26, 2010, hence, the instant petition.

ISSUE
Whether or not there was a valid conveyance of the subject property to Sps. Sarili

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

However, a higher degree of prudence is required from one who buys from a person who is not the
registered owner, although the land object of the transaction is registered. In such a case, the buyer is
expected to examine not only the certificate of title but all factual circumstances necessary for him to
determine if there are any flaws in the title of the transferor. The buyer also has the duty to ascertain the
identity of the person with whom he is dealing with and the latter’s legal authority to convey the property.

The strength of the buyer’s inquiry on the seller’s capacity or legal authority to sell depends on the
proof of capacity of the seller. If the proof of capacity consists of a special power of attorney duly notarized,
mere inspection of the face of such public document already constitutes sufficient inquiry. If no such special
power of attorney is provided or there is one but there appears to be flaws in its notarial acknowledgment,
mere inspection of the document will not do; the buyer must show that his investigation went beyond the
document and into the circumstances of its execution.

It is undisputed that Sps. Sarili purchased the subject property from Ramos on the strength of the
latter’s ostensible authority to sell under the subject SPA. The said document, however, readily indicates flaws
in its notarial acknowledgment since the respondent’s community tax certificate (CTC) number was not
indicated thereon. Despite this irregularity, however, Sps. Sarili failed to show that they conducted an
investigation beyond the subject SPA and into the circumstances of its execution as required by prevailing
jurisprudence. Hence, Sps. Sarili cannot be considered as innocent purchasers for value.

The due execution and authenticity of the subject SPA are of great significance in determining the
validity of the sale entered into by Victorino and Ramon since the latter only claims to be the agent of the
purported seller (i.e., respondent). Article 1874 of the Civil Code provides that "[w]hen a sale of a piece of
land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void." In other words, if the subject SPA was not proven to be duly executed and authentic, then
it cannot be said that the foregoing requirement had been complied with; hence, the sale would be void.

After a judicious review of the case, taking into consideration the divergent findings of the RTC and
the CA on the matter, the Court holds that the due execution and authenticity of the subject SPA were not
sufficiently established under Section 20, Rule 132 of the Rules of Court as above-cited.

Respondent’s signature appearing on the subject SPA is not similar to his genuine signature
appearing in the November 25, 1999 SPA in favor of Lourdes, especially the signature appearing on the left
margin of the first page. More so he and his wife, Amelia, had immigrated to the USA since 1968 and
therefore could not have signed the subject SPA due to their absence.

Since Sps. Sarili’s claim over the subject property is based on forged documents, no valid title had
been transferred to them (and, in turn, to petitioners). Verily, when the instrument presented is forged, even
if accompanied by the owner’s duplicate certificate of title, the registered owner does not thereby lose his title,
and neither does the assignee in the forged deed acquire any right or title to the property.
 SUMMARY FORMAT

Q: Lagrosa owns a parcel of land located in Marikina City covered by TCT No. 55979. He had been
religiously paying the taxes thereon despite him being a resident of California, USA. When he came
back to the Philippines, he found out that a new certificate of title of his Marikina property was
issued by the Register of Deeds in the name of Spouses Victorino Sarili and Isabel Sarili. He filed a
complaint against the spouses and the RD for the recovery of such property and annulment of the
title. He further alleged that a falsified Deed of Absolute Sale was purportedly executed by him and
his wife that enabled the Sps. Sarili and the RD to acquire the Marikina property. Sps. Sarili
maintained that they are innocent purchasers for value, having purchased the Marikina property
from one Ramon Rodriguez by virtue of a Special Power of Attorney purportedly bearing the same
signature that Lagrosa used in a valid SPA in favor of his attorney-in-fact. The spouses further
denied that they participated to the execution of the fraudulent Deed of Absolute Sale. The trial
court found that the signature of Lagrosa was not the same signature in Ramon’s SPA. Was there a
valid conveyance of the Marikina property to the Sps. Sarili?

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

Lagrosa’s signature appearing on Ramon’s SPA is not similar to his genuine signature appearing in his
attorney-in-fact’s SPA. Since Sps. Sarili’s claim over the subject property is based on forged documents, no
valid title had been transferred to them (and, in turn, to petitioners). Verily, when the instrument presented is
forged, even if accompanied by the owner’s duplicate certificate of title, the registered owner does not thereby
lose his title, and neither does the assignee in the forged deed acquire any right or title to the property.
 UNION BANK OF THE PHILIPPINES vs.
DEVELOPMENT BANK OF THE PHILIPPINES
G.R. No. 191555| January 20, 2014

DOCTRINE OF THE CASE

A public servant is expected to exhibit, at all times, the highest degree of honesty and integrity, and is accountable to all
those he or she serves. Public officers – particularly those in custody of public funds – are held to the highest standards of ethical
behavior in both their public and private conduct and are expected to uphold public interest over personal interest at all times.

PERLAS-BERNABE, J.:

FACTS: Foodmasters, Inc. (FI) had outstanding loan obligations to both Union Bank’s predecessor-in-
interest, Bancom Development Corporation (Bancom), and to Development Bank of the Philippines (DBP).
FI and DBP entered into a Deed of Cession of Property In Payment of Debt (dacion en pago) whereby the
former ceded in favor of the latter certain properties (including a processing plant) in consideration of the
following:
(a) The full and complete satisfaction of FI’s loan obligations to DBP; and
(b) The direct assumption by DBP of FI’s obligations to Bancom in the amount of P17,000,000.00 (Assumed
Obligations).
DBP, as the new owner of the processing plant, leased back for 20 years the said property to FI
(Lease Agreement) which was, in turn, obliged to pay monthly rentals to be shared by DBP and Bancom.
DBP also entered into a separate agreement with Bancom (Assumption Agreement) whereby the former:
(a) Confirmed its assumption of FI’s obligations to Bancom; and
(b) Undertook to remit up to 30% of any and all rentals due from FI to Bancom which would serve as
payment of the assumed obligations, to be paid in monthly installments.
On May 23, 1979, FI assigned its leasehold rights under the Lease Agreement to Foodmasters
Worldwide, Inc. (FW). On May 9, 1984, Bancom conveyed all its receivables, including DBP’s assumed
obligations, to Union Bank. Claiming that the subject rentals have not been duly remitted despite its repeated
demands, Union Bank filed a collection case against DBP before the RTC.
DBP countered that the obligations it assumed were payable only out of the rental payments made by FI.
Since, FI had yet to pay the same, DBP’s obligation to Union Bank had not arisen.
RTC: Finding the complaint to be meritorious, RTC ordered:
(a) DBP to pay Union Bank the sum of P4,019,033.59, representing the amount of the subject rentals (which
constitutes 30% of FI’s [now FW’s] total rental debt), including interest until fully paid; and
(b) FW, as third-party defendant, to indemnify DBP, as third- party plaintiff, for its payments of the subject
rentals to Union Bank.
RTC ruled that when DBP failed to remit the subject rentals to Union Bank, it defaulted on its assumed
obligations.
On May 27, 1994, CA Set aside the RTC’s ruling, and consequently ordered:
(a) FW to pay DBP the amount of P32,441,401.85 representing the total rental debt incurred under the Lease
Agreement, and
(b) DBP, after having been paid by FW its unpaid rentals, to remit 30% thereof to Union Bank.
CA ruled that DBP did not default in its obligations to remit the subject rentals to Union Bank
precisely because it had yet to receive the rental payments of FW.
Union Bank and DBP filed separate petitions for review on certiorari before the Supreme Court.
The SC denied both petitions in a Resolution. SC upheld the CA’s finding that while DBP directly assumed
FI’s obligations to Union Bank, DBP was only obliged to remit to the latter 30% of the lease rentals collected
from FW, from which any deficiency was to be settled by DBP not later than December 29, 1998.
On May 16, 2001, Union Bank filed a motion for execution before the RTC, praying that DBP be
directed to pay the amount of P9,732,420.555 which represents the amount of the subject rentals (i.e., 30% of
the FW’s total rental debt in the amount of P32,441,401.85). DBP opposed Union Bank’s motion.
 On September 12, 2001, DBP filed its own motion for execution against FW.
The RTC granted both motions for execution of Union Bank and DBP on October 15, 2001 (Order
of Execution). As a result, a notice of garnishment against DBP were issued.
DBP filed a motion for reconsideration averring that the RTC prematurely ordered DBP to pay the
assumed obligations to Union Bank before FW’s payment. The motion was denied. Thus, DBP’s deposits
were eventually garnished. DBP then filed a petition for certiorari before the CA.
The CA dismissed DBP’s petition, finding that the RTC did not abuse its discretion when it issued
the October 15, 2001 Writ of Execution. DBP appealed the CA’s ruling before the SC.
On January 13, 2004, SC granted DBP’s appeal, and thereby reversed and set aside the CA’s ruling.
SC acknowledged that DBP’s obligation to Union Bank for remittance of the lease payments is contingent on
FW’s prior payment to DBP, and that any deficiency DBP had to pay by December 29, 1998 as per the
Assumption Agreement cannot be determined until after the satisfaction of FW’s own rental obligations to
DBP.
Union Bank moved for reconsideration which was denied by the SC.
DBP moved for the execution of the said decision before the RTC. The RTC then issued a writ of execution
(September 6, 2005 Writ of Execution), ordering Union Bank to return to DBP all funds it received pursuant
to the October 15, 2001 Writ of Execution.
On September 13, 2005, Union Bank filed a Manifestation and Motion to Affirm Legal
Compensation to the RTC, praying that the RTC apply legal compensation between itself and DBP in order
to offset the return of the funds it previously received from DBP.
Union Bank anchored its motion on two grounds, namely:
(a) on December 29, 1998, DBP’s assumed obligations became due and demandable; and
(b) considering that FW became non-operational and non-existent, DBP became primarily liable to the
balance of its assumed obligation, which as of Union Bank’s computation after its claimed set-off, amounted
to P1,849,391.87.
The RTC denied the above-mentioned motion for lack of merit. With Union Bank’s motion for
reconsideration having been denied, Union Bank filed a petition for certiorari with the CA. Pending
resolution, Union Bank issued a Manager’s Check amounting to P52,427,250.00 in favor of DBP, in
satisfaction of the Writ of Execution dated September 6, 2005.
The CA dismissed Union Bank’s petition, finding no grave abuse of discretion on the RTC’s part.
CA affirmed the denial of its motion to affirm legal compensation considering that:
(a) the RTC only implemented the Supreme Court’s January 13, 2004 Decision which by then had already
attained finality;
(b) DBP is not a debtor of Union Bank; and
(c) there is neither a demandable nor liquidated debt from DBP to Union Bank.
Union Bank moved for reconsideration which was denied in a Resolution dated February 26, 2010; hence, the
instant petition.

ISSUE
Was the CA correct in upholding the denial of Union Bank’s motion to affirm legal compensation?

RULING
Yes. The petition is bereft of merit. Compensation is defined as a mode of extinguishing obligations
whereby two persons in their capacity as principals are mutual debtors and creditors of each other with
respect to equally liquidated and demandable obligations to which no retention or controversy has been
timely commenced and communicated by third parties. The requisites therefor are provided under Article
1279 of the Civil Code which reads as follows:
Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of
the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that "when
all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of
the compensation."
Therefore, compensation could not have taken place between these debts for the apparent reason
that requisites 3 and 4 under Article 1279 of the Civil Code are not present. Since DBP’s assumed obligations
to Union Bank for remittance of the lease payments are – in the Court’s words – "contingent on the prior
payment thereof by FW to DBP," it cannot be said that both debts are due (requisite 3 of Article 1279 of the
Civil Code). Also, the Court observed that any deficiency that DBP had to make up for the full satisfaction of
the assumed obligations "cannot be determined until after the satisfaction of FW’s obligation to DBP." In
this regard, it cannot be concluded that the same debt had already been liquidated, and thereby became
demandable (requisite 4 of Article 1279 of the Civil Code). Thus, CA correctly upheld the denial of Union
Bank’s motion to affirm legal compensation
 SUMMARY

Q: Foodmasters, Inc. (FI) had outstanding loan obligations to both Union Bank’s predecessor-in-interest,
Bancom Development Corporation (Bancom), and to DBP.On May 21, 1979, FI and DBP, among others,
entered into a Deed of Cession of Property In Payment of Debt7(dacion en pago) whereby the former ceded
in favor of the latter certain properties (including a processing plant in Marilao, Bulacan [processing plant]) in
consideration of the following: (a) the full and complete satisfaction of FI’s loan obligations to DBP; and (b)
the direct assumption by DBP of FI’s obligations to Bancom in the amount of ₱17,000,000.00 (assumed
obligations).8On the same day, DBP, as the new owner of the processing plant, leased back9 for 20 years the
said property to FI (Lease Agreement) which was, in turn, obliged to pay monthly rentals to be shared by
DBP and Bancom.. DBP also entered into a separate agreement10 with Bancom (Assumption Agreement)
whereby the former: (a) confirmed its assumption of FI’s obligations to Bancom; and (b) undertook to remit
up to 30% of any and all rentals due from FI to Bancom (subject rentals) which would serve as payment of
the assumed obligations, to be paid in monthly installments. Claiming that the subject rentals have not been
duly remitted despite its repeated demands, Union Bank filed, on June 20, 1984, a collection case against DBP
before the RTC, docketed as Civil Case No. 7648.13 In opposition, DBP countered, among others, that the
obligations it assumed were payable only out of the rental payments made by FI. Thus, since FI had yet to
pay the same, DBP’s obligation to Union Bank had not arisen.14 In addition, DBP sought to implead FW as
third party-defendant in its capacity as FI’s assignee and, thus, should be held liable to Union Bank. Was
there leagal compensation?

A: NONE. The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that
"when all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law,
and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware
of the compensation."

Therefore, compensation could not have taken place between these debts for the apparent reason that
requisites 3 and 4 under Article 1279 of the Civil Code are not present. Since DBP’s assumed obligations to
Union Bank for remittance of the lease payments are – in the Court’s words – "contingent on the prior
payment thereof by FW to DBP," it cannot be said that both debts are due (requisite 3 of Article 1279 of the
Civil Code). Also, the Court observed that any deficiency that DBP had to make up for the full satisfaction of
the assumed obligations "cannot be determined until after the satisfaction of FW’s obligation to DBP." In
this regard, it cannot be concluded that the same debt had already been liquidated, and thereby became
demandable (requisite 4 of Article 1279 of the Civil Code). Thus, CA correctly upheld the denial of Union
Bank’s motion to affirm legal compensation
 Trade and Investment Development Corporation of the Philippines vs. Asia Paces
Corporation
G.R. No. 187403 | February 12, 2014

DOCTRINE OF THE CASE

Article 2079 of the Civil Code refers to a payment extension granted by the creditor to the principal debtor without the
consent of the guarantor or surety.

PERLAS-BERNABE, J.:

FACTS: Asia Paces Corporation (ASPAC) and Paces Industrial Corporation (PICO) entered into a sub-
contracting agreement with the Electrical Projects Company of Libya (ELPCO for the construction and
erection of a double circuit bundle phase conductor transmission line in the country of Libya. To finance
its working capital requirements, ASPAC obtained loans from foreign banks Banque Indosuez and PCI
Capital (Hong Kong) Limited (PCI Capital) which were secured by several Letters of Guarantee issued
by Trade and Investment Development Corporation of the Philippines (TIDCORP), then Philippine Export
and Foreign Loan Guarantee Corp. Under the Letters of Guarantee, TIDCORP irrevocably and
unconditionally guaranteed full payment of ASPAC’s loan obligations to Banque Indosuez and PCI Capital in
the event of default by the latter.

As a condition precedent to the issuance by TIDCORP of the Letters of Guarantee, ASPAC, PICO,
and ASPAC’s President, Nicolas C. Balderrama (Balderrama) had to execute several Deeds of Undertaking,
binding themselves to jointly and severally pay TIDCORP for whatever damages or liabilities it may incur
under the aforementioned letters. In the same light, ASPAC, as principal debtor, entered into surety
agreements (Surety Bonds) with Paramount, Phoenix, Mega Pacific and Fortune (bonding companies), as
sureties, also holding themselves solidarily liable to TIDCORP, as creditor, for whatever damages or liabilities
the latter may incur under the Letters of Guarantee.

ASPAC eventually defaulted on its loan obligations to Banque Indosuez and PCI Capital. Demand
letters to the bonding companies were sent but to no avail. Taking into account the moratorium request
issued by the Minister of Finance of the Republic of the Philippines, TIDCORP and its various creditor
banks, such as Banque Indosuez and PCI Capital, forged a Restructuring Agreement extending the maturity
dates of the Letters of Guarantee. The bonding companies were not privy to the Restructuring Agreement
and, hence, did not give their consent to the payment extensions. Nevertheless, following new payment
schedules, TIDCORP fully settled its obligations. Seeking payment for the damages and liabilities it had
incurred under the Letters of Guarantee and with its previous demands therefor left unheeded, TIIDCORP
filed a collection case against: (a) ASPAC, PICO, and Balderrama on account of their obligations under the
deeds of undertaking; and (b) the bonding companies on account of their obligations under the Surety Bonds.

The RTC partially granted TIDCORP’s complaint and thereby found ASPAC, PICO, and
Balderrama jointly and severally liable to TIDCORP but absolved the bonding companies from liability on
the ground that the moratorium request and the consequent payment extensions granted by Banque Indosuez
and PCI Capital in TIDCORP’s favor without their consent extinguished their obligations under the Surety
Bonds. On appeal, the CA upheld the ruling of RTC. Hence, this appeal filed by TIDCORP.

ISSUE
Whether or not the bonding companies’ liabilities to TIDCORP under the Surety Bonds have been
extinguished by the payment extensions granted by Banque Indosuez and PCI Capital to TIDCORP under
the Restructuring Agreement.

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

The payment extensions granted by Banque Indosuez and PCI Capital pertain to TIDCORP’s own
debt under the Letters of Guarantee wherein it (TIDCORP) irrevocably and unconditionally guaranteed full
payment of ASPAC’s loan obligations to the banks in the event of its (ASPAC) default. In other words, the
Letters of Guarantee secured ASPAC’s loan agreements to the banks. Under this arrangement, TIDCORP
therefore acted as a guarantor, with ASPAC as the principal debtor, and the banks as creditors.

Proceeding from the foregoing discussion, it is quite clear that there are two sets of transactions that
should be treated separately and distinctly from one another following the civil law principle of relativity of
contracts "which provides that contracts can only bind the parties who entered into it, and it cannot favor or
prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof." Verily,
as the Surety Bonds concern ASPAC’s debt to TIDCORP and not TIDCORP’s debt to the banks, the
payments extensions would not deprive the bonding companies of their right to pay their creditor
(TIDCORP) and to be immediately subrogated to the latter’s remedies against the principal debtor (ASPAC)
upon the maturity date. It must be stressed that these payment extensions did not modify the terms of the
Letters of Guarantee but only provided for a new payment scheme covering TIDCORP’s liability to the
banks. In fine, considering the inoperability of Article 2079 of the Civil Code in this case, the bonding
companies’ liabilities to TIDCORP under the Surety Bonds – except those issued by Paramount and covered
by its Compromise Agreement with TIDCORP – have not been extinguished.
 SUMMARY FORMAT

Q: : Asia Paces Corporation (ASPAC) and Paces Industrial Corporation (PICO) entered into a sub-
contracting agreement with the Electrical Projects Company of Libya (ELPCO for the construction and
erection of a double circuit bundle phase conductor transmission line in the country of Libya. To finance
its working capital requirements, ASPAC obtained loans from foreign banks Banque Indosuez and PCI
Capital (Hong Kong) Limited (PCI Capital) which were secured by several Letters of Guarantee issued
by Trade and Investment Development Corporation of the Philippines (TIDCORP), then Philippine Export
and Foreign Loan Guarantee Corp. Under the Letters of Guarantee, TIDCORP irrevocably and
unconditionally guaranteed full payment of ASPAC’s loan obligations to Banque Indosuez and PCI Capital in
the event of default by the latter. As a condition precedent to the issuance by TIDCORP of the Letters of
Guarantee, ASPAC, PICO, and ASPAC’s President, Nicolas C. Balderrama (Balderrama) had to execute
several Deeds of Undertaking, binding themselves to jointly and severally pay TIDCORP for whatever
damages or liabilities it may incur under the aforementioned letters. In the same light, ASPAC, as principal
debtor, entered into surety agreements (Surety Bonds) with Paramount, Phoenix, Mega Pacific and Fortune
(bonding companies), as sureties, also holding themselves solidarily liable to TIDCORP, as creditor, for
whatever damages or liabilities the latter may incur under the Letters of Guarantee. ASPAC
eventually defaulted on its loan obligations to Banque Indosuez and PCI Capital. Demand letters to
the bonding companies were sent but to no avail. Taking into account the moratorium request issued by
the Minister of Finance of the Republic of the Philippines, TIDCORP and its various creditor banks, such as
Banque Indosuez and PCI Capital, forged a Restructuring Agreement extending the maturity dates of the
Letters of Guarantee. The bonding companies were not privy to the Restructuring Agreement and, hence, did
not give their consent to the payment extensions. Nevertheless, following new payment schedules,
TIDCORP fully settled its obligations. Seeking payment for the damages and liabilities it had incurred under
the Letters of Guarantee and with its previous demands therefor left unheeded, TIIDCORP filed a collection
case against: (a) ASPAC, PICO, and Balderrama on account of their obligations under the deeds of
undertaking; and (b) the bonding companies on account of their obligations under the Surety Bonds.
Whether or not the bonding companies’ liabilities to TIDCORP under the Surety Bonds have been
extinguished by the payment extensions granted by Banque Indosuez and PCI Capital to TIDCORP
under the Restructuring Agreement.

A: NO. The Court finds that the payment extensions granted by Banque Indosuez and PCI Capital to
TIDCORP under the Restructuring Agreement did not have the effect of extinguishing the bonding
companies’ obligations to TIDCORP under the Surety Bonds, notwithstanding the fact that said extensions
were made without their consent. This is because Article 2079 of the Civil Code refers to a payment
extension granted by the creditor to the principal debtor without the consent of the guarantor or surety. In
this case, the Surety Bonds are suretyship contracts which secure the debt of ASPAC, the principal debtor,
under the Deeds of Undertaking to pay TIDCORP, the creditor, the damages and liabilities it may incur
under the Letters of Guarantee, within the bounds of the bonds’ respective coverage periods and amounts.
No payment extension was, however, granted by TIDCORP in favor of ASPAC in this regard; hence, Article
2079 of the Civil Code should not be applied with respect to the bonding companies’ liabilities to TIDCORP
under the Surety Bonds.
 Republic vs. Gracia
G.R. No. 171557 | February 12, 2014

DOCTRINE OF THE CASE

Psychological incapacity," as a ground to nullify a marriage under Article 36 of the Family Code, should refer to no
less than a mental – not merely physical – incapacity that causes a party to be truly incognitive of the basic marital covenants that
concomitantly must be assumed and discharged by the parties to the marriage which, as so expressed in Article 68 of the Family
Code, among others, include their mutual obligations to live together, observe love, respect and fidelity and render help and
support.

PERLAS-BERNABE, J.:

FACTS: Rodolfo and Natividad were married. On December 28, 1998, Rodolfo filed a verified complaint for
declaration of nullity of marriage before the RTC alleging that Natividad was psychologically incapacitated to
comply with her essential marital obligations. In compliance with the Order dated January 5, 1999 of the
RTC, the public prosecutor conducted an investigation to determine if collusion exists between Rodolfo and
Natividad and found that there was none. Trial on the merits then ensued.

In support of his complaint, Rodolfo testified, among others, that he first met Natividad when they
were students at the Barangay High School of Sindangan, and he was forced to marry her barely three (3)
months into their courtship in light of her accidental pregnancy. At the time of their marriage, he was 21 years
old, while Natividad was 18 years of age. He had no stable job and merely worked in the gambling cockpits as
"kristo" and "bangkero sa hantak." When he decided to join and train with the army, Natividad left their
conjugal home and sold their house without his consent. Thereafter, Natividad moved to Dipolog City where
she lived with a certain Engineer Terez (Terez), and bore him a child named Julie Ann Terez. After
cohabiting with Terez, Natividad contracted a second marriage on January 11, 1991 with another man named
Antonio Mondarez and has lived since then with the latter in Cagayan de Oro City. From the time Natividad
abandoned them in 1972, Rodolfo was left to take care of Ma. Reynilda and Ma. Rizzaand he exerted earnest
efforts to save their marriage which, however, proved futile because of Natividad’s psychological incapacity
that appeared to be incurable.

For her part, Natividad failed to file her answer, as well as appear during trial, despite service of
summons. Nonetheless, she informed the court that she submitted herself for psychiatric examination to Dr.
Cheryl T. Zalsos (Dr. Zalsos) in response to Rodolfo’s claims. Rodolfo also underwent the same examination.

In her two-page psychiatric evaluation report, Dr. Zalsos stated that both Rodolfo and Natividad
were psychologically incapacitated to comply with the essential marital obligations, finding that both parties
suffered from "utter emotional immaturity [which] is unusual and unacceptable behavior considered [as]
deviant from persons who abide by established norms of conduct." As for Natividad, Dr. Zalsos also
observed that she lacked the willful cooperation of being a wife and a mother to her two daughters. Similarly,
Rodolfo failed to perform his obligations as a husband, adding too that he sired a son with another woman.
Further, Dr. Zalsos noted that the mental condition of both parties already existed at the time of the
celebration of marriage, although it only manifested after. Based on the foregoing, Dr. Zalsos concluded that
the "couple’s union was bereft of the mind, will and heart for the obligations of marriage."
 On February 10, 1999, the Office of the Solicitor General (OSG), representing petitioner Republic of
the Philippines (Republic), filed an opposition to the complaint, contending that the acts committed by
Natividad did not demonstrate psychological incapacity as contemplated by law, but are mere grounds for
legal separation under the Family Code.

ISSUE
Whether or not the CA erred in sustaining the RTC’s finding of psychological incapacity.

RULING
YES. "Psychological incapacity," as a ground to nullify a marriage under Article 36 of the Family
Code, should refer to no less than a mental – not merely physical – incapacity that causes a party to be truly
incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties
to the marriage which, as so expressed in Article 68of the Family Code, among others, include their mutual
obligations to live together, observe love, respect and fidelity and render help and support. There is hardly
any doubt that the intendment of the law has been to confine the meaning of "psychological incapacity" to
the most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to
give meaning and significance to the marriage. In Santos v. CA (Santos), the Court first declared that
psychological incapacity must be characterized by: (a) gravity (i.e., it must be grave and serious such that the
party would be incapable of carrying out the ordinary duties required in a marriage); (b) juridical antecedence
(i.e., it must be rooted in the history of the party antedating the marriage, although the overt manifestations
may emerge only after the marriage); and (c) incurability (i.e., it must be incurable, or even if it were
otherwise, the cure would be beyond the means of the party involved). The Court laid down more definitive
guidelines in the interpretation and application of Article 36 of the Family Code in Republic of the Phils. v.
CA, whose salient points are footnoted hereunder. These guidelines incorporate the basic requirements that
the Court established in Santos.

Based on the evidence presented, there exists insufficient factual or legal basis to conclude that
Natividad’s emotional immaturity, irresponsibility, or even sexual promiscuity, can be equated with
psychological incapacity.

The RTC, as affirmed by the CA, heavily relied on the psychiatric evaluation report of Dr. Zalsos
which does not, however, explain in reasonable detail how Natividad’s condition could be characterized as
grave, deeply-rooted, and incurable within the parameters of psychological incapacity jurisprudence. Aside
from failing to disclose the types of psychological tests which she administered on Natividad, Dr. Zalsos
failed to identify in her report the root cause of Natividad's condition and to show that it existed at the time
of the parties' marriage. Neither was the gravity or seriousness of Natividad's behavior in relation to her
failure to perform the essential marital obligations sufficiently described in Dr. Zalsos's report. Further, the
finding contained therein on the incurability of Natividad's condition remains unsupported by any factual or
scientific basis and, hence, appears to be drawn out as a bare conclusion and even self-serving. In the same
vein, Dr. Zalsos's testimony during trial, which is essentially a reiteration of her report, also fails to convince
the Court of her conclusion that Natividad was psychologically incapacitated. Verily, although expert
opm10ns furnished by psychologists regarding the psychological temperament of parties are usually given
considerable weight by the courts, the existence of psychological incapacity must still be proven by
independent evidence. After poring over the records, the Court, however, does not find any such evidence
sufficient enough to uphold the court a quo's nullity declaration. To the Court's mind, Natividad's refusal to
live with Rodolfo and to assume her duties as wife and mother as well as her emotional immaturity,
irresponsibility and infidelity do not rise to the level of psychological incapacity that would justify the
nullification of the parties' marriage. Indeed, to be declared clinically or medically incurable is one thing; to
refuse or be reluctant to perform one's duties is another. To hark back to what has been earlier discussed,
psychological incapacity refers only to the most serious cases of personality disorders clearly demonstrative of
an utter insensitivity or inability to give meaning and significance to the marriage. In the final analysis, the
Court does not perceive a disorder of this nature to exist in the present case. Thus, for these reasons, coupled
too with the recognition that marriage is an inviolable social institution and the foundation of the family, the
instant petition is hereby granted.
 SUMMARY FORMAT

Q: : Rodolfo and Natividad were married. On December 28, 1998, Rodolfo filed a verified complaint for
declaration of nullity of marriage before the RTC alleging that Natividad was psychologically incapacitated to
comply with her essential marital obligations. In support of his complaint, Rodolfo testified, among others,
that he first met Natividad when they were students at the Barangay High School of Sindangan, and he was
forced to marry her barely three (3) months into their courtship in light of her accidental pregnancy. At the
time of their marriage, he was 21 years old, while Natividad was 18 years of age. He had no stable job and
merely worked in the gambling cockpits as "kristo" and "bangkero sa hantak." When he decided to join and
train with the army, Natividad left their conjugal home and sold their house without his consent. Thereafter,
Natividad moved to Dipolog City where she lived with a certain Engineer Terez (Terez), and bore him a child
named Julie Ann Terez. After cohabiting with Terez, Natividad contracted a second marriage on January 11,
1991 with another man named Antonio Mondarez and has lived since then with the latter in Cagayan de Oro
City. From the time Natividad abandoned them in 1972, Rodolfo was left to take care of Ma. Reynilda and
Ma. Rizzaand he exerted earnest efforts to save their marriage which, however, proved futile because of
Natividad’s psychological incapacity that appeared to be incurable. For her part, Natividad failed to file her
answer, as well as appear during trial, despite service of summons. Nonetheless, she informed the court that
she submitted herself for psychiatric examination to Dr. Cheryl T. Zalsos (Dr. Zalsos) in response to
Rodolfo’s claims. Rodolfo also underwent the same examination.

In her two-page psychiatric evaluation report, Dr. Zalsos stated that both Rodolfo and Natividad
were psychologically incapacitated to comply with the essential marital obligations, finding that both parties
suffered from "utter emotional immaturity [which] is unusual and unacceptable behavior considered [as]
deviant from persons who abide by established norms of conduct." As for Natividad, Dr. Zalsos also
observed that she lacked the willful cooperation of being a wife and a mother to her two daughters. On
February 10, 1999, the Office of the Solicitor General (OSG), representing petitioner Republic of the
Philippines (Republic), filed an opposition to the complaint, contending that the acts committed by Natividad
did not demonstrate psychological incapacity as contemplated by law, but are mere grounds for legal
separation under the Family Code. Should the marriage be dissolved?

A: NO. "Psychological incapacity," as a ground to nullify a marriage under Article 36 of the Family
Code, should refer to no less than a mental – not merely physical – incapacity that causes a party to be truly
incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties
to the marriage which, as so expressed in Article 68of the Family Code, among others, include their mutual
obligations to live together, observe love, respect and fidelity and render help and support. The RTC, as
affirmed by the CA, heavily relied on the psychiatric evaluation report of Dr. Zalsos which does not,
however, explain in reasonable detail how Natividad’s condition could be characterized as grave, deeply-
rooted, and incurable within the parameters of psychological incapacity jurisprudence. Aside from failing to
disclose the types of psychological tests which she administered on Natividad, Dr. Zalsos failed to identify in
her report the root cause of Natividad's condition and to show that it existed at the time of the parties'
marriage. Neither was the gravity or seriousness of Natividad's behavior in relation to her failure to perform
the essential marital obligations sufficiently described in Dr. Zalsos's report. To hark back to what has been
earlier discussed, psychological incapacity refers only to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. In the
final analysis, the Court does not perceive a disorder of this nature to exist in the present case. Thus, for these
reasons, coupled too with the recognition that marriage is an inviolable social institution and the foundation
of the family, the instant petition is hereby granted.
 Ligon vs. RTC Makati
G.R. No. 190028 | February 26, 2014

DOCTRINE OF THE CASE

Case law instructs that an attachment is a proceeding in rem, and, hence, is against the particular property, enforceable
against the whole world. Accordingly, the attaching creditor acquires a specific lien on the attached property which nothing can
subsequently destroy except the very dissolution of the attachment or levy itself. Such a proceeding, in effect, means that the
property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The lien continues until the debt
is paid, or sale is had under execution issued on the judgment, or until the judgment is satisfied, or the attachment discharged or
vacated in some manner provided by law. Thus, a prior registration of an attachment lien creates a preference, such that when an
attachment has been duly levied upon a property, a purchaser thereof subsequent to the attachment takes the property subject to
the said attachment.

PERLAS-BERNABE, J.:

FACTS: Petitioner Ligon filed a complaint for the collection of a sum of money with prayer for the issuance
of a writ of preliminary attachment against the Sps. Baladjay, a certain Olivia Marasigan (Marasigan), Polished
Arrow Holdings, Inc. (Polished Arrow), and its incorporators. The complaint alleges among others that the
spouses Baladjay enticed her to extend a short-term loan secured by a PDC which bounced upon
presentment, and that the subject property was transferred to respondent Polished Arrow allegedly
defendants’ dummy corporation to defraud creditors. The application for the writ was granted so the subject
property was levied upon by annotating the writ on the dorsal portion of TCT No. 9273.

While the case was pending, a similar complaint for the sum of money damages, and cancellation of
title with prayer for issuance of a writ of preliminary attachment was lodged before the RTC Makati by the
Sps Vicente against the same respondents. During the proceedings therein, a writ of preliminary attachment
also against the subject property was issued and annotated on the dorsal portion of TCT No. 9273.

While the case is still pending in QC, the Makati RTC rendered a decision rescinding the transfer of
the subject property to Polished Arrow upon a finding that the same was made in fraud of creditors.
Consequently, the Makati City RTC directed the Register of Deeds of Muntinlupa City to: (a) cancel TCT No.
9273 in the name of Polished Arrow; and (b) restore TCT No. 8502 “in its previous condition” in the name
of Rosario Baladjay. In the subsequent execution proceedings, the property was sold at a public auction to
respondent Ting.

The RTC Makati then ordered the RD under pain of contempt to issue a new certificate in favor of
Ting free from any liens and encumbrances.

Meanwhile, the QC RTC ruled in favor of Ligon who sought its execution and discovered the earlier
attachment annotation in her favor has been deleted.

ISSUE

Whether the CA erred in ruling that the Makati City RTC did not gravely abuse its discretion in issuing the
Assailed Orders.

RULING
 YES. Attachment is defined as a provisional remedy by which the property of an adverse party is
taken into legal custody, either at the commencement of an action or at any time thereafter, as a security for
the satisfaction of any judgment that may be recovered by the plaintiff or any proper party.

Case law instructs that an attachment is a proceeding in rem, and, hence, is against the particular
property, enforceable against the whole world. Accordingly, the attaching creditor acquires a specific lien on
the attached property which nothing can subsequently destroy except the very dissolution of the attachment
or levy itself. Such a proceeding, in effect, means that the property attached is an indebted thing and a virtual
condemnation of it to pay the owner's debt.

The lien continues until the debt is paid, or sale is had under execution issued on the judgment, or
until the judgment is satisfied, or the attachment discharged or vacated in some manner provided by law.
Thus, a prior registration of an attachment lien creates a preference, such that when an attachment has been
duly levied upon a property, a purchaser thereof subsequent to the attachment takes the property subject to
the said attachment. As provided under PD 1529, said registration operates as a form of constructive notice
to all persons. Applying these principles to this case, the Court finds that the CA erred in holding that the
RTC did not gravely abuse its discretion in issuing the Assailed Orders as these issuances essentially
disregarded, inter alia, Ligon's prior attachment lien over the subject property patently anathema to the nature
of attachment proceedings which is well-established in law and jurisprudence. In this case, Ligon, in order to
secure the satisfaction of a favorable judgment in the Quezon City Case, applied for and was eventually able
to secure a writ of preliminary attachment over the subject property on November 25, 2002, which was later
annotated on the dorsal portion of TCT No. 9273 in the name of Polished Arrow on December 3, 2002.
Notwithstanding the subsequent cancellation of TCT No. 9273 due to the Makati City RTC's December 9,
2004 Decision rescinding the transfer of the subject property from Sps. Baladjay to Polished Arrow upon a
finding that the same was made in fraud of creditors, Ligon's attachment lien over the subject property
continued to subsist since the attachment she had earlier secured binds the property itself, and, hence,
continues until the judgment debt of Sps. Baladjay to Ligon as adjudged in the Quezon City Case is satisfied,
or the attachment discharged or vacated in some manner provided by law. The grave abuse of discretion of
the Makati City RTC lies with its directive to issue a new certificate of title in the name of Ting (i.e., TCT No.
19756), free from any liens and encumbrances.

This course of action clearly negates the efficacy of Ligon's attachment lien and, also, defies the legal
characterization of attachment proceedings. It bears noting that Ligon's claim, secured by the aforesaid
attachment, is against Sps. Baladjay whose ownership over the subject property had been effectively restored
in view of the RTC's rescission of the property's previous sale to Polished Arrow. Thus, Sps. Ligon's
attachment lien against Sps. Baladjay as well as their successorsin-interest should have been preserved, and
the annotation thereof carried over to any subsequent certificate of title, the most recent of which as it
appears on record is TCT No. 31001 in the name of Techico, without prejudice to the latter's right to protect
his own ownership interest over the subject property.
 SUMMARY FORMAT

Q: : Petitioner Ligon filed a complaint for the collection of a sum of money with prayer for the issuance of a
writ of preliminary attachment against the Sps. Baladjay, a certain Olivia Marasigan (Marasigan), Polished
Arrow Holdings, Inc. (Polished Arrow), and its incorporators. The complaint alleges among others that the
spouses Baladjay enticed her to extend a short-term loan secured by a PDC which bounced upon
presentment, and that the subject property was transferred to respondent Polished Arrow allegedly
defendants’ dummy corporation to defraud creditors. The application for the writ was granted so the subject
property was levied upon by annotating the writ on the dorsal portion of TCT No. 9273.While the case was
pending, a similar complaint for the sum of money damages, and cancellation of title with prayer for issuance
of a writ of preliminary attachment was lodged before the RTC Makati by the Sps Vicente against the same
respondents. During the proceedings therein, a writ of preliminary attachment also against the subject
property was issued and annotated on the dorsal portion of TCT No. 9273.While the case is still pending in
QC, the Makati RTC rendered a decision rescinding the transfer of the subject property to Polished Arrow
upon a finding that the same was made in fraud of creditors. Consequently, the Makati City RTC directed the
Register of Deeds of Muntinlupa City to: (a) cancel TCT No. 9273 in the name of Polished Arrow; and (b)
restore TCT No. 8502 “in its previous condition” in the name of Rosario Baladjay. In the subsequent
execution proceedings, the property was sold at a public auction to respondent Ting.The RTC Makati then
ordered the RD under pain of contempt to issue a new certificate in favor of Ting free from any liens and
encumbrances. Meanwhile, the QC RTC ruled in favor of Ligon who sought its execution and discovered the
earlier attachment annotation in her favor has been deleted. Did the Makati City RTC gravely abuse its
discretion in issuing the Assailed Orders?

A: YES. Attachment is defined as a provisional remedy by which the property of an adverse party is
taken into legal custody, either at the commencement of an action or at any time thereafter, as a security for
the satisfaction of any judgment that may be recovered by the plaintiff or any proper party. Case law instructs
that an attachment is a proceeding in rem, and, hence, is against the particular property, enforceable against
the whole world. Accordingly, the attaching creditor acquires a specific lien on the attached property which
nothing can subsequently destroy except the very dissolution of the attachment or levy itself. Such a
proceeding, in effect, means that the property attached is an indebted thing and a virtual condemnation of it
to pay the owner's debt. The lien continues until the debt is paid, or sale is had under execution issued on the
judgment, or until the judgment is satisfied, or the attachment discharged or vacated in some manner
provided by law.
 Lozada vs. Bracewell
G.R. No. 179155 | April 2, 2014

DOCTRINE OF THE CASE

Case law instructs that for “as long as a final decree has not been entered by the (Land Registration Authority
[LRA]) and the period of one (1) year has not elapsed from the date of entry of such decree, the title is not finally adjudicated
and the decision in the registration proceeding continues to be under the control and sound discretion of the court rendering it

PERLAS-BERNABE, J.:

FACTS: Petitioner filed an application for registration and confirmation of title over a parcel of land which
was granted by the RTC of Makati City acting as a land registration court. Consequently, on July 10, 1997, the
LRA issued a Decree in the name of petitioner, who later obtained an OCT.

On February 6, 1998, within a year from the issuance of the aforementioned decree, James Bracewell,
Jr. (Bracewell) filed a petition for review of a decree of registration under Section 32 of Presidential Decree
No. (PD) 1529, otherwise known as the “Property Registration Decree,” before the RTC of Las Piñas City
claiming that a portion of such land was his as absolute owner and possessor and us fraudulently included in
the Decree.

He further averred that petitioner deliberately concealed the fact that he (Bracewell) is one of the
adjoining owners, and left him totally ignorant of the registration proceedings involving said lots. Instead of
impleading him, petitioner listed Bracewell’s grandmother, Maria Cailles, as an adjoining owner, although she
had already died by that time.

Finding that petitioner obtained Decree and OCT in bad faith, the Las Piñas City-RTC rendered a
Decision in favor of Bracewell, who had died during the pendency of the case and was substituted by Eulalia
Bracewell and his heirs.

The Las Piñas City-RTC faulted petitioner for deliberately preventing respondents from participating
and objecting to his application for registration when the documentary evidence showed that, as early as 1962,
Bracewell had been paying taxes for the subject lot; and that he (Bracewell) was recognized as the owner
thereof in the records of the Bureau of Lands way back in 1965, as well as in the City Assessor’s Office.

Petitioner argues that the Las Piñas City-RTC had no jurisdiction over a petition for review of a
decree of registration under Section 32 of PD 1529, which should be filed in the same branch of the court
that rendered the decision and ordered the issuance of the decree (Makati City)

The CA held that, since the petition for review was filed within one (1) year from the issuance of the
questioned decree, and considering that the subject lot is located in Las Piñas City, the RTC of said city had
jurisdiction over the case.

ISSUE
Whether or not the Las Piñas City-RTC has jurisdiction over the petition for review of decree, which was
issued as a result of the judgment rendered by the RTC of Makati City.

RULING
YES. Under the “Land Registration Act,” which was the law in force at the time of the
commencement by both parties of their respective registration proceedings — jurisdiction over all
applications for registration of title was conferred upon the Courts of First Instance (CFIs, now RTCs) of the
respective provinces in which the land sought to be registered is situated.

Subsequently, Batas Pambansa Bilang (BP) 129,[39] otherwise known as “The Judiciary
Reorganization Act of 1980,” was enacted and took effect on August 14, 1981, authorizing the creation of
RTCs in different judicial regions, including the RTC of Las Piñas City as part of the National Capital Judicial
Region. As pointed out by the court, the RTC of Las Piñas City was established “in or about 1994.”
Understandably, in February 1998, Bracewell sought the review of the Decree before the Las Piñas City-RTC,
considering that the lot subject of this case is situated in Las Piñas City.

It should be pointed out, however, that with the passage of PD 1529, the distinction between the
general jurisdiction vested in the RTC and the limited jurisdiction conferred upon it as a cadastral court was
eliminated.

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

Upon the expiration of said period of one year, the decree of registration and the certificate of title
issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may
pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.

As such, case law instructs that for “as long as a final decree has not been entered by the [LRA] and
the period of one (1) year has not elapsed from the date of entry of such decree, the title is not finally
adjudicated and the decision in the registration proceeding continues to be under the control and sound
discretion of the court rendering it.
 SUMMARY FORMAT

Q: : Petitioner filed an application for registration and confirmation of title over a parcel of land which was
granted by the RTC of Makati City acting as a land registration court. Consequently, on July 10, 1997, the
LRA issued a Decree in the name of petitioner, who later obtained an OCT. On February 6, 1998, within a
year from the issuance of the aforementioned decree, James Bracewell, Jr. (Bracewell) filed a petition for
review of a decree of registration under Section 32 of Presidential Decree No. (PD) 1529, otherwise known as
the “Property Registration Decree,” before the RTC of Las Piñas City claiming that a portion of such land
was his as absolute owner and possessor and us fraudulently included in the Decree.He further averred that
petitioner deliberately concealed the fact that he (Bracewell) is one of the adjoining owners, and left him
totally ignorant of the registration proceedings involving said lots. Instead of impleading him, petitioner listed
Bracewell’s grandmother, Maria Cailles, as an adjoining owner, although she had already died by that
time.Finding that petitioner obtained Decree and OCT in bad faith, the Las Piñas City-RTC rendered a
Decision in favor of Bracewell, who had died during the pendency of the case and was substituted by Eulalia
Bracewell and his heirs.The Las Piñas City-RTC faulted petitioner for deliberately preventing respondents
from participating and objecting to his application for registration when the documentary evidence showed
that, as early as 1962, Bracewell had been paying taxes for the subject lot; and that he (Bracewell) was
recognized as the owner thereof in the records of the Bureau of Lands way back in 1965, as well as in the City
Assessor’s Office.Petitioner argues that the Las Piñas City-RTC had no jurisdiction over a petition for review
of a decree of registration under Section 32 of PD 1529, which should be filed in the same branch of the
court that rendered the decision and ordered the issuance of the decree (Makati City)The CA held that, since
the petition for review was filed within one (1) year from the issuance of the questioned decree, and
considering that the subject lot is located in Las Piñas City, the RTC of said city had jurisdiction over the case.
Whether or not the Las Piñas City-RTC has jurisdiction over the petition for review of decree, which
was issued as a result of the judgment rendered by the RTC of Makati City.

A: YES. Under the “Land Registration Act,” which was the law in force at the time of the commencement by
both parties of their respective registration proceedings — jurisdiction over all applications for registration of
title was conferred upon the Courts of First Instance (CFIs, now RTCs) of the respective provinces in which
the land sought to be registered is situated. Subsequently, Batas Pambansa Bilang (BP) 129,[39] otherwise
known as “The Judiciary Reorganization Act of 1980,” was enacted and took effect on August 14, 1981,
authorizing the creation of RTCs in different judicial regions, including the RTC of Las Piñas City as part of
the National Capital Judicial Region. As pointed out by the court, the RTC of Las Piñas City was established
“in or about 1994.” Understandably, in February 1998, Bracewell sought the review of the Decree before the
Las Piñas City-RTC, considering that the lot subject of this case is situated in Las Piñas City. Upon the
expiration of said period of one year, the decree of registration and the certificate of title issued shall become
incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by
action for damages against the applicant or any other persons responsible for the fraud. As such, case law
instructs that for “as long as a final decree has not been entered by the [LRA] and the period of one (1) year
has not elapsed from the date of entry of such decree, the title is not finally adjudicated and the decision in
the registration proceeding continues to be under the control and sound discretion of the court rendering it.
 Nieves vs. Duldulao
G.R. No. 190276 | April 2,, 2014

DOCTRINE OF THE CASE

To eject the agricultural lessee for failure to pay the leasehold rentals, jurisprudence instructs that the same must be
willful and deliberate in order to warrant the agricultural lessee’s dispossession of the land that he tills.

PERLAS-BERNABE, J.:

FACTS: Petitioner is the owner of a piece of agricultural rice land with an area of six (6) hectares, more or
less, located at Dulong Bayan, Quezon, Nueva Ecija (subject land). Ernesto and Felipe (respondents) are
tenants and cultivators of the subject landwho 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 Ernesto and Felipe failed to pay their leasehold rentals since 1985 which had
accumulated to 446.5 and 327 cavans of palay, respectively, petitioner filed a petition on March 8, 2006 before
the DARAB Office of the Provincial Adjudicator (PARAD), seeking the ejectment of respondents from the
subject land for non-payment 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 in 2005 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 his answer to the petition, Ernesto claimed that he merely inherited a portion of the back
leasehold rentals from his deceased father, Eugenio Duldulao, but proposed to pay the arrearages in four (4)
installments beginning the dayatan cropping season in May 2006. On the other hand, Felipe denied incurring
any back leasehold rentals, but at the same time proposed to pay whatever there may be in six (6)
installments, also beginning the dayatan cropping season in May 2006. Both respondents manifested their lack
of intention to renege on their obligations to pay the leasehold rentals due, explaining that the supervening
calamities, such as the flashfloods and typhoons that affected the area prevented them from complying.

In a Decision dated July 6, 2006, 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.

With respect to Ernesto, the PARAD did not find merit in his claim that the obligation of his father
for back leasehold rentals, amounting to 446 cavans of palay, had been extinguished by his death. It held that
upon the death of the leaseholder, the leasehold relationship continues between the agricultural lessor and the
surviving spouse or next of kin of the deceased as provided by law; hence, the leasehold rent obligations
subsist and should be paid

As for Felipe, the PARAD found that his unpaid leasehold rentals had accumulated to 327 cavans of
palay, and that his refusal to pay was willful and deliberate, warranting his ejectment from the subject land.

Dissatisfied, respondents elevated the case on appeal. It was reversed by the CA.

ISSUE

Whether or not the CA correctly reversed the DARAB’s ruling ejecting respondents from the subject land
RULING
NO.

To eject the agricultural lessee for failure to pay the leasehold rentals, jurisprudence instructs that the
same must be willful and deliberate in order to warrant the agricultural lessee’s dispossession of the land that
he tills. In the present case, petitioner seeks the dispossession of respondents from the subject land on the
ground of non-payment of leasehold rentals based on item 6, Section 36 of RA 3844. 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 landowner’s 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 above-mentioned, cannot herein be sustained. In the case of Antonio v.
Manahan (Antonio), the Court, notwithstanding the tenants’ failure to prove their own fortuitous event
theory, pronounced that their failure to pay the leasehold rentals was not willful and deliberate. The records in
said case showed that the landowner actually rejected the rentals, which amounted only to 2 years-worth of
arrearages, i.e., 1993 and 2001, tendered by the tenants therein due to their supposed poor quality. This
circumstance was taken by the Court together with the fact that said tenants even exerted efforts to make up
for the rejected rentals through the payments made for the other years. In another case, i.e., Roxas v.
Cabatuando (Roxas), the Court similarly held that the tenants therein did not willfully and deliberately fail to
pay their leasehold rentals since they had serious doubts as to the legality of their contract with respect to
their non-sharing in the coconut produce, which thus prompted them to withhold their remittances in good
faith. In contrast to Antonio and Roxas, the landowner in this case never rejected any rental payment duly
tendered by respondents or their predecessors-in-interest. Neither was the legality of their agricultural
leasehold contract with the landowner ever put into issue so as to intimate that they merely withheld their
remittances in good faith. Thus, with the fortuitous event defense taken out of the equation, and considering
the examples in Antonio and Roxas whereby the elements of willfulness and deliberateness were not found to
have been established, the Court is impelled to agree with the DARAB that respondents herein willfully and
deliberately chose not to pay their leasehold rentals to the landowner when they fell due. 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.

At this juncture, the Court finds it apt to clarify that respondents’ purported substantial compliance –
as erroneously considered by the CA to justify its ruling against their dispossession – is applicable only under
the parameters of item 2, Section 36 of RA 3844, which is a separate and distinct provision from item 6
thereof. Item 2, Section 36 of RA 3844 applies to cases where the agricultural lessee failed to substantially
comply with any of the terms and conditions of the contract or any of the provisions of the Agricultural Land
Reform Code, unless his failure is caused by fortuitous event or force majeure; whereas item 6 refers to cases
where the agricultural lessee does not pay the leasehold rental when it falls due, provided that the failure to
pay is not due to crop failure to the extent of seventy-five per centum as a result of a fortuitous event.

As the present dispute involves the non-payment of leasehold rentals, it is item 6 – and not item 2 –
of the same provision which should apply. Examining the text of item 6, there is no indication that the
agricultural lessee’s substantial compliance with his rent obligations could be raised as a defense against his
dispossession. On the other hand, item 2 states that it is only the agricultural lessee’s "failure to substantially
comply" with the terms and conditions of the agricultural leasehold contract or the provisions of the
Agricultural Land Reform Code which is deemed as a ground for dispossession. Thus, it may be reasonably
deduced that the agricultural lessee’s substantial compliance negates the existence of the ground of
dispossession provided under item 2. While the failure to pay leasehold rentals may be construed to fall under
the general phraseology of item 2 – that is a form of non-compliance "with any of the terms and conditions
of the contract or any of the provisions of this Code," it is a long-standing rule in statutory construction that
general legislation must give way to special legislation on the same subject, and generally is so interpreted as
to embrace only cases in which the special provisions are not applicable - lex specialis derogat generali. In
other words, where two statutes are of equal theoretical application to a particular case, the one specially
designed therefor should prevail. Thus, consistent with this principle, the Court so holds that cases covering
an agricultural lessee’s non-payment of leasehold rentals should be examined under the parameters of item 6,
Section 36 of RA 3844 and not under item 2 of the same provision which applies to other violations of the
agricultural leasehold contract or the provisions of the Agricultural Land Reform Code, excluding the failure
to pay rent. In these latter cases, substantial compliance may – as above-explained – be raised as a defense
against dispossession.

In this relation, the Court observes that the CA’s reliance in the De Tanedo ruling was altogether
misplaced for the simple reason that the substantial compliance defense in that case was actually invoked
against a violation of a peculiar term and condition of the parties’ agricultural leasehold contract, particularly
requiring the payment of advance rentals "pursuant to [the agricultural lessee’s] agreement with the
landholders," and not his mere failure to pay the leasehold rentals regularly accruing within a particular
cropping season, as in this case.
 SUMMARY FORMAT

Q: : : Petitioner is the owner of a piece of agricultural rice land with an area of six (6) hectares, more or less,
located at Dulong Bayan, Quezon, Nueva Ecija (subject land). Ernesto and Felipe (respondents) are tenants
and cultivators of the subject landwho 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 Ernesto and Felipe failed to pay
their leasehold rentals since 1985 which had accumulated to 446.5 and 327 cavans of palay, respectively,
petitioner filed a petition on March 8, 2006 before the DARAB Office of the Provincial Adjudicator
(PARAD), seeking the ejectment of respondents from the subject land for non-payment 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 in 2005 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 his answer to the petition, Ernesto claimed that he merely inherited a portion of the back
leasehold rentals from his deceased father, Eugenio Duldulao, but proposed to pay the arrearages in four (4)
installments beginning the dayatan cropping season in May 2006. On the other hand, Felipe denied incurring
any back leasehold rentals, but at the same time proposed to pay whatever there may be in six (6)
installments, also beginning the dayatan cropping season in May 2006. Both respondents manifested their lack
of intention to renege on their obligations to pay the leasehold rentals due, explaining that the supervening
calamities, such as the flashfloods and typhoons that affected the area prevented them from complying. In a
Decision dated July 6, 2006, 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.With respect to Ernesto, the PARAD did not find merit in his
claim that the obligation of his father for back leasehold rentals, amounting to 446 cavans of palay, had been
extinguished by his death. It held that upon the death of the leaseholder, the leasehold relationship continues
between the agricultural lessor and the surviving spouse or next of kin of the deceased as provided by law;
hence, the leasehold rent obligations subsist and should be paidAs for Felipe, the PARAD found that his
unpaid leasehold rentals had accumulated to 327 cavans of palay, and that his refusal to pay was willful and
deliberate, warranting his ejectment from the subject land. Dissatisfied, respondents elevated the case on
appeal. It was reversed by the CA. Whether or not the CA correctly reversed the DARAB’s ruling
ejecting respondents from the subject land

A: NO. To eject the agricultural lessee for failure to pay the leasehold rentals, jurisprudence instructs that the
same must be willful and deliberate in order to warrant the agricultural lessee’s dispossession of the land that
he tills. In the present case, petitioner seeks the dispossession of respondents from the subject land on the
ground of non-payment of leasehold rentals based on item 6, Section 36 of RA 3844. 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.
 SPOUSES JOSE C. ROQUE et. al v. MA. PAMELA P. AGUADO et. al
G.R. No. 193787 | April 7, 2014

DOCTRINE OF THE CASE

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.

PERLAS-BERNABE, J.:

FACTS: On July 21, 1977, petitioners-spouses Roque and the original owners of the then unregistered Lot
18089 – namely, Rivero, et al. executed the 1977 Deed of Conditional Sale over a 1,231-sq. m. portion of Lot
18089 for a consideration of P30,775.00. The parties agreed that Spouses Roque shall make an initial payment
of P15,387.50 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 deed’s execution, Spouses Roque took possession and introduced
improvements on the subject portion which they utilized as a balut factory.

On August 12, 1991, Sabug, Jr, applied for a free patent over the entire Lot 18089 and was eventually
issued OCT No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her
personal capacity and in representation of Rivero, et al., executed the 1993 Joint Affidavit, acknowledging that
the subject portion belongs to Sps. Roque and expressed their willingness to segregate the same from the
entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through the 1999 Deed of Absolute Sale, sold Lot 18089
to Aguado for P2,500,000.00, who, in turn, caused the cancellationof OCT No. M-5955 and the issuance of
TCT No. M-96692 dated December 17, 199911 in her name.

Thereafter, Aguado obtained an P8,000,000.00 loan from the Land Bank secured by a mortgage over
Lot 18089. When she failed to pay her loan obligation, Land Bank commenced extra-judicial foreclosure
proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to redeem the
subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its name on
July 21, 2003.

On June 16, 2003, Spouses Roque filed a complaint for reconveyance, annulment of sale, deed of real
estate mortgage, foreclosure, and certificate of sale, and damages before the RTC.

ISSUE
1. Whether or not the action for reconveyance shall prosper?

RULING
No. This case involves a contract to sell. The Court held 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.

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, as in the case at bench.

In a contract to sell, there being no previous sale of the property, a third person buying such
property despite the fulfillment 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. The action for reconveyance shall fail.
 SUMMARY FORMAT

Q: Spouses Roque and the original owners of an unregistered lot executed a 1997 Deed of
Conditional Sale over a portion of a lot for P30,775.00. After the deed’s execution, Spouses Roque
took possession and introduced improvements on the subject portion which they utilized as a balut
factory. Sabug, Jr, applied for a free patent over the entire lot and was eventually issued an OCT in
his name. Sabug, Jr., through the 1999 Deed of Absolute Sale, sold the lot to Aguado for
P2,500,000.00, who, in turn, caused the cancellation of the OCT and the issuance of a TCT.
Aguado obtained an P8,000,000.00 loan from the Land Bank secured by a mortgage over the lot.
When she failed to pay her loan obligation, Land Bank commenced extra-judicial foreclosure
proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to
redeem the subject property, Land Bank consolidated its ownership and a TCT was issued in its
name. Spouses Roque then filed an action for reconveyance before the RTC. Will the action for
reconveyance prosper?

A: No. This case involves a contract to sell. The Court held 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.
In a contract to sell, there being no previous sale of the property, a third person buying such property despite
the fulfillment 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. The action for reconveyance shall fail.
 GOLDEN VALLEY EXPLORATION, INC.v. PINKIAN MINING COMPANY
G.R. No. 190080 | June 11, 2014

DOCTRINE OF THE CASE

As a general rule, the power to rescind an obligation must be invoked judicially and cannot be exercised solely on a
party’s 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.

PERLAS-BERNABE, J.:

FACTS: Pikian Mining Company (PMI) is the owner of 81 mining, 15 of which are covered by Mining Lease
Contracts, the remaining 66 had pending applications for lease. It entered into an Operating Agreement (OA)
with Golden Valley Exploration, Inc. (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. Later, PMC extra-judicially rescinded the OA upon GVEI’s violation of
Section 5.01, Article V thereof.

GVEI contested PMC’s extra-judicial rescission of the OA averring therein 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. PMC no longer responded to GVEI’s letter. It also reminded PMC of its prior
payment of the amount of P185,000.00 as future royalties in exchange for PMC’s express waiver of any
breach or default on the part of GVEI. Instead, it entered into a Memorandum of Agreement with Copper
Valley Inc., (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
1. Whether or not there was a valid rescission of the Operating Agreement?

RULING
Yes. The rescission is valid. As a general rule, the power to rescind an obligation must be invoked
judicially and cannot be exercised solely on a party’s 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.

With that in mind, the Court held that PMC’s unilateral rescission of the Operating Agreement (OA)
due to GVEI’s non-payment of royalties considering the parties’ express stipulation in the OA that said
agreement may be cancelled on such ground.
 SUMMARY FORMAT

Q: Pikian Mining Company (PMI) entered into an Operating Agreement (OA) with Golden Valley
Exploration, Inc. (GVEI), granting the latter "full, exclusive and irrevocable possession, use,
occupancy, and control over the mining claims and the processing and marketing of the products for
a period of 25 years. Later, PMC extra-judicially rescinded the OA upon GVEI’s violation of Section
5.01, Article V thereof. GVEI contested PMC’s extra-judicial rescission of the OA averring therein
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. PMC no longer responded to
GVEI’s letter. Is the rescission of the Operating Agreement valid?

A: Yes. The rescission is valid. As a general rule, the power to rescind an obligation must be invoked
judicially and cannot be exercised solely on a party’s 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. PMC’s unilateral rescission of the Operating Agreement (OA) due
to GVEI’s non-payment of royalties considering the parties’ express stipulation in the OA that said
agreement may be cancelled on such ground.
 ABOITIZ TRANSPORT SYSTEM CORPORATION v. CARLOS A. GOTHONG LINES
G.R. No. 198226, 198228 | July 18, 2014

DOCTRINE OF THE CASE

Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrator’s decision.
Necessarily, a contract is required for arbitration to take place and to be binding. The provision to submit to arbitration any
dispute arising therefrom and the relationship of the parties is part of that contract. As a rule, contracts are respected as the law
between the contracting parties and produce effect as between them, their assigns and heirs. Succinctly put, only those parties who
have agreed to submit a controversy to arbitration who, as against each other, may be compelled to submit to arbitration.

PERLAS-BERNABE, J.:

FACTS: ASC, CAGLI, and William Lines, Inc. (WLI), principally owned by the Aboitiz, Gothong, and
Chiongbian families, respectively, entered into an Agreement dated January 8, 1996, which was signed by Jon
Ramon Aboitiz for ASC, Benjamin D. Gothong (Gothong) for CAGLI, and respondent Chiongbian for
WLI. In the said Agreement, ASC and CAGLI agreed to transfer their shipping assets to WLI in exchange for
the latter’s shares of capital stock. The parties likewise agreed that WLI would run the merged shipping
business and be renamed "WG&A, Inc." Pertinently, Section 11.06 of the Agreement provides that all
disputes arising out of or in connection with the Agreement shall be finally settled by arbitration in
accordance with Republic Act No. (RA) 876, otherwise known as "The Arbitration Law," and that each of
the parties shall appoint one arbitrator, and the three arbitrators would then appoint the fourth arbitrator who
shall act as Chairman.

Sometime in 2002, the Chiongbian and Gothong families decided to sell their respective interests in
WLI/WG&A to the Aboitiz family. This resulted in the execution of a Share Purchase Agreement whereby
Aboitiz Equity Ventures (AEV) agreed to purchase and acquire the WLI/WG&A shares of the Chiongbian
and Gothong families. Thereafter, the corporate name of WLI/WG&A was changed to Aboitiz Transport
System Corporation (ATSC).

Six (6) years later, or in 2008, CAGLI sent a letter dated February 14, 2008 to ATSC demanding that
the latter pay the excess inventory it delivered to WLI amounting to 158,399,700.00. CAGLI likewise
demanded AEV and respondent Chiongbian that they refer their dispute to arbitration. In response, AEV
countered that the excess inventory had already been returned to CAGLI and that it should not be included
in the dispute, considering that it is an entity separate and distinct from ATSC. Thus, CAGLI was
constrained to file a complaint before the RTC against Chiongbian, ATSC, ASC, and AEV to compel them to
submit to arbitration.

For their part, ATSC and AEV moved for the dismissal of the case, contending that CAGLI did not
have a cause of action for arbitration since its claim had already been paid or otherwise, extinguished, and, in
any event, said action had already prescribed

ISSUE
1. Whether or not respondent Chiongbian should be excluded from the arbitration
proceedings.?

RULING
Yes. Section 2 of RA 876 specifies who may be subjected to arbitration, to wit: Two or more persons
or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at
the time of the submission and which may be the subject of an action, or the parties to any contract may in
such contract agree to settle by arbitration a controversy thereafter arising between them. Such submission or
contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation
of any contract.

Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrator’s
decision. Necessarily, a contract is required for arbitration to take place and to be binding. The provision to
submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract.
As a rule, contracts are respected as the law between the contracting parties and produce effect as between
them, their assigns and heirs. Succinctly put, only those parties who have agreed to submit a controversy to
arbitration who, as against each other, may be compelled to submit to arbitration.

The three parties to the Agreement and necessarily to the arbitration agreement embodied therein
are: (a) ASC, (b) CAGLI, and (c) WLI/WG&A/ATSC. Contracts, like the subject arbitration agreement, take
effect only between the parties, their assigns and heirs. Respondent Chiongbian, having merely physically
signed the Agreement as a representative of WLI, is not a party thereto and to the arbitration agreement
contained therein. Neither is he an assignee or an heir of any of the parties to the arbitration agreement.
Hence, respondent Chiongbian cannot be included in the arbitration proceedings.
 SUMMARY FORMAT

Q: ASC, CAGLI, and William Lines, Inc. (WLI), agreed that WLI would run their merged shipping
business and be renamed "WG&A, Inc. In the said agreement, arbitration was stipulated as means
for settling disputes. Sometime in 2002, the Chiongbian and Gothong families decided to sell their
respective interests in WLI/WG&A to the Aboitiz family. Thereafter, the corporate name of
WLI/WG&A was changed to Aboitiz Transport System Company (ATSC). CAGLI sent a letter to
ATSC demanding that the latter pay the excess inventory it delivered to WLI amounting to
158,399,700.00. CAGLI likewise demanded Aboitiz Equity Ventures (AEV) and respondent
Chiongbian that they refer their dispute to arbitration. In response, AEV countered that the excess
inventory had already been returned to CAGLI and that it should not be included in the dispute,
considering that it is an entity separate and distinct from ATSC. Thus, CAGLI was constrained to
file a complaint before the RTC against Chiongbian, ATSC, ASC, and AEV to compel them to
submit to arbitration. Should Chiongban be excluded from the arbitration proceedings?

A: Yes. Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrator’s
decision. Necessarily, a contract is required for arbitration to take place and to be binding. The provision to
submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract.
As a rule, contracts are respected as the law between the contracting parties and produce effect as between
them, their assigns and heirs. Succinctly put, only those parties who have agreed to submit a controversy to
arbitration who, as against each other, may be compelled to submit to arbitration. Respondent Chiongbian,
having merely physically signed the Agreement as a representative of WLI, is not a party thereto and to the
arbitration agreement contained therein. Neither is he an assignee or an heir of any of the parties to the
arbitration agreement. Hence, respondent Chiongbian cannot be included in the arbitration proceedings.
 RURAL BANK OF CABADBARAN, INC. v. JORGITA A. MELECIO-YAP et. al
G.R. No. 178451 | July 30, 2014

DOCTRINE OF THE CASE

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

PERLAS-BERNABE, J.:

FACTS: The Melecio Heirs inherited a residential lot, ancestral house and two other structures erected
thereon, the administration and management of which 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)
authorizing Erna to apply for a loan with RBCI and mortgage the subject properties. Erna applied for and
was granted a commercial loan, secured by a Real Estate Mortgage over the subject properties, by RBCI
amounting to 200,000.00 with 27% interest rate per annum.

Erna defaulted in the loan payment when it fell due, causing RBCI to extrajudicially foreclose the
mortgaged properties. RBCI emerged as the highest bidder in the public auction sale. Erna failed to redeem
the subject properties within the redemption period despite notice. RBCI informed Erna of its intent to take
physical possession of the subject properties, while the actual occupant thereof was directed to pay rentals to
RBCI.

The Melecio Heirs demanded RBCI to release the subject properties from the coverage of Erna's
loan obligation to the extent of their shares and refused to vacate the premises. RBCI applied for and was
issued a writ of possession.

The Melecio Heirs filed a complaint in court alleging that the SPA submitted by Erna was spurious
and their signatures appearing thereon were falsified. RBCI invoked the defense of a mortgagee in good faith
whose subsequent ownership and possession of the subject properties must be respected. RBCI maintained
the validity of the SPA and its right to rely on it being a notarized document.

ISSUE
1. Whether or not the entire property was validly mortgaged?

RULING
No. Erna did not validly mortgage the entire property. 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.

The settled rule is that persons constituting a mortgage must be legally authorized for the purpose. In
the present case, while Erna appears to be a co-owner of the mortgaged properties, she made it appear that
she was duly authorized to sell the entire properties by virtue of the notarized SPA.

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 co-owners whose consent
thereto was not actually procured by Erna. Accordingly, the validity of the subject real estate mortgage and
the subsequent foreclosure proceedings therefore conducted in favor of RBCI, as the successor-in-interest of
Erna, should be limited only to the portion which may be allotted to it in the event of partition. Hence, Erna
did not validly mortgage the entire property.
 SUMMARY FORMAT

Q: Melecio Heirs inherited a residential lot, ancestral house and two other structures erected
thereon, the administration and management of which 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) authorizing Erna to apply for a loan with RBCI and mortgage the subject
properties. Erna defaulted in the loan payment causing RBCI to extrajudicially foreclose the
mortgaged properties. demanded RBCI to release the subject properties from the coverage of Erna's
loan obligation to the extent of their shares and refused to vacate the premises. RBCI applied for and
was issued a writ of possession. The Melecio Heirs filed a complaint in court alleging that the SPA
submitted by Erna was spurious and their signatures appearing thereon were falsified. Is the
mortgage of the entire property valid?

A: No. Erna did not validly mortgage the entire property. 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. The settled rule is that persons constituting a mortgage must be legally
authorized for the purpose. In the present case, while Erna appears to be a co-owner of the mortgaged
properties, she made it appear that she was duly authorized to sell the entire properties by virtue of the
notarized SPA
 HEIRS OF FRANCISCO I. NARVASA, SR. et. al v. EMILIANA IMBORNAL et. al
G.R. No. 182908 | August 6, 2014

DOCTRINE OF THE CASE

Alluvial deposits along the banks of a creek or a river do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added. The only restriction provided for by law is that
the owner of the adjoining property must register the same under the Torrens system; otherwise, the alluvial property may be
subject to acquisition through prescription by third persons.

PERLAS-BERNABE, J.:

FACTS: Basilia owned a parcel of land situated at Sabangan, Pangasinan which she conveyed to her three (3)
daughters Balbina, Alejandra, and Catalina (Imbornal sisters) sometime in 1920. Meanwhile, Catalina’s
husband, Ciriaco Abrio (Ciriaco), applied for and was granted a homestead patent over a 31,367-sq. m.
riparian land (Motherland) adjacent to the Cayanga River in San Fabian, Pangasinan. He was eventually
awarded Homestead Patent No. 2499115 therefor, and, on December 5, 1933, OCT No. 1462 was issued in
his name. Later, or on May 10, 1973, OCT No. 1462 was cancelled, and Transfer Certificate of Title (TCT)
No. 101495 was issued in the name of Ciriaco’s heirs, namely: Margarita Mejia; Rodrigo Abrio, marriedto
Rosita Corpuz; Antonio Abrio, married to Crisenta Corpuz; Remedios Abrio, married to Leopoldo Corpuz;
Pepito Abrio; Dominador Abrio; Francisca Abrio; Violeta Abrio; and Perla Abrio (Heirs of Ciriaco). Ciriaco
and his heirs had since occupied the northern portion of the Motherland, while respondents occupied the
southern portion.

Sometime in 1949, the First Accretion, approximately 59,772 sq. m. in area, adjoined the southern
portion of the Motherland. On August 15, 1952, OCT No. P-318 was issued in the name of respondent
Victoriano, married to Esperanza Narvarte, covering the First Accretion. Decades later, or in 1971, the
Second Accretion, which had an area of 32,307 sq. m., more or less, abutted the First Accretion on its
southern portion. On November 10, 1978, OCT No. 21481 was issued in the names of all the respondents
covering the Second Accretion. Claiming rights over the entire Motherland, Francisco, et al., as the children
of Alejandra and Balbina, filed on February 27,1984 an Amended Complaint20 for reconveyance, partition,
and/or damages against respondents, docketed as Civil Case No. D-6978. 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.

Likewise, Francisco, et al. alleged that through deceit, fraud, falsehood, and misrepresentation,
respondent Victoriano, with respect to the First Accretion, and the respondents collectively, with regard to
the Second Accretion, had illegally registered the said accretions in their names, notwithstanding the fact that
they were not the riparian owners (as they did not own the Motherland to which the accretions merely
formed adjacent to). In this relation, Francisco, et al. explained that they did not assert their inheritance claims
over the Motherland and the two (2) accretions because they respected respondents’ rights, until they
discovered in 1983 that respondents have repudiated their (Francisco, et al.’s) shares thereon. 22 Thus,
bewailing that respondents have refused them their rights not only with respect to the Motherland, but also to
the subsequent accretions, Francisco, et al. prayed for the reconveyance of said properties, or, in the
alternative, the payment of their value, as well as the award of moral damages in the amount of P100,000.00,
actual damages in the amount of P150,000.00, including attorney’s fees and other costs.23 On August 20,
1996, the RTC rendered a Decision 26 in favor of Francisco, et al. and thereby directed respondents to: (a)
reconvey to Francisco, et al. their respective portions in the Motherland and in the accretions thereon, or
their pecuniary equivalent; and (b) pay actual damages in the amount of P100,000.00, moral damages in the
amount ofP100,000.00, and attorney’s fees in the sum of P10,000.00, as well as costs of suit. On November
28, 2006, the CA rendered a Decision 29 reversing and setting aside the RTC Decision and entering a new
one declaring: (a) the descendants of Ciriaco as the exclusive owners of the Motherland; (b) the descendants
of respondent Victoriano as the exclusive owners of the First Accretion; and (c) the descendants of Pablo
(i.e., respondents collectively) as the exclusive owners of the Second Accretion. At odds with the CA’s
disposition, Francisco et al. filed a motion for reconsideration which was, however denied by the CA in a
Resolution dated May 7, 2008, hence, this petition taken by the latter’s heirs as their successors-in-interest.

ISSUE
1. Whether or not descendants of respondent Victoriano are the exclusive owners of the First and
Second Accretion?

RULING
No. The main thrust of Francisco, et al.’s Amended Complaint is that an implied trust had arisen
between the Imbornal sisters, on the one hand, and Ciriaco, on the other, with respect to the Motherland.
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 Motherland had been acquired and registered by mistake or through fraud as would
create an implied trust between the Imbornal sisters and Ciriaco. Hence, when OCT No. 1462 covering the
Motherland was issued in his name pursuant to Homestead Patent No. 24991 on December 15, 1933,
Ciriaco’s 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
Ciriaco’s name are presumptively regular and proper, which presumption has not been overcome by the
evidence presented by Francisco, et al. Consequently, as Francisco, et al. failed to prove their ownership rights
over the Motherland, their cause of action with respect to the First Accretion and, necessarily, the Second
Accretion, must likewise fail.

Being the owner of the land adjoining the foreshore area, respondent is the riparian or littoral owner
who has preferential right to lease the foreshore area. Accordingly, therefore, alluvial deposits along the banks
of a creek or a river do not form part of the public domain as the alluvial property automatically belongs to
the owner of the estate to which it may have been added. The only restriction provided for by law is that the
owner of the adjoining property must register the same under the Torrens system; otherwise, the alluvial
property may be subject to acquisition through prescription by third persons.

In this case, Francisco, et al. and, now, their heirs, i.e., herein petitioners are not the riparian owners
of the Motherland to which the First Accretion had attached, hence, they cannot assert ownership over the
First Accretion. Consequently, as the Second Accretion had merely attached to the First Accretion, they also
have no right over the Second Accretion. Neither were they able to show that they acquired these properties
through prescription as it was ·not established that they were in possession of any of them.

Therefore, whether through accretion or, independently, through prescription, the discernible
conclusion is that Francisco et al. and/or petitioners' claim of title over the First and Second Accretions had
not been substantiated, and, as a result, said properties cannot be reconveyed in their favor. This is especially
so since on the other end of the fray lie respondents armed with a certificate of title in their names covering
the First and Second Accretions coupled with their possession thereof, both of which give rise to the superior
credibility of their own claim.

Hence, petitioners' action for reconveyance with respect to both accretions must altogether fail
 SUMMARY FORMAT

Q: The First Accretion adjoined the southern portion of the Motherland. Decades later, the Second
Accretion abutted the First Accretion on its southern portion. OCT was issued in the names of all
the respondents covering the Second Accretion. Petitioners alleged that through deceit, fraud,
falsehood, and misrepresentation, respondent Victoriano, with respect to the First Accretion, and the
respondents collectively, with regard to the Second Accretion, had illegally registered the said
accretions in their names, notwithstanding the fact that they were not the riparian owners. Are the
petitioners the exclusive owners of the First and Second Accretion?

A: No. Petitioners are not the riparian owners of the Motherland to which the First Accretion had attached,
hence, they cannot assert ownership over the First Accretion. Consequently, as the Second Accretion had
merely attached to the First Accretion, they also have no right over the Second Accretion. Neither were they
able to show that they acquired these properties through prescription as it was ·not established that they were
in possession of any of them. Being the owner of the land adjoining the foreshore area, respondent is the
riparian or littoral owner who has preferential right to lease the foreshore area. Accordingly, therefore, alluvial
deposits along the banks of a creek or a river do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added. The only restriction
provided for by law is that the owner of the adjoining property must register the same under the Torrens
system; otherwise, the alluvial property may be subject to acquisition through prescription by third persons.
 SPOUSES FRANCISCO SIERRA et. al v. PAIC SAVINGS AND MORTGAGE BANK,
INC. et. al
G.R. No. 197857 | September 10, 2014

DOCTRINE OF THE CASE

Laches 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

PERLAS-BERNABE, J.:

FACTS: 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 ₱1,500,000.00 as evidenced by a Loan Agreement. As security therefor,
GCI executed in favor of PSMB six (6) promissory notes in the aggregate amount of ₱1,500,000.00 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) manager’s checks with an
aggregate amount of ₱200,000.00, which werelater 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
held on June 27, 1984 for a total bid price of ₱2,467,272.66. Since petitioners failed to redeem the subject
properties within the redemption period, their certificates of title were cancelled and new ones were issued in
PSMB’s name.

On September 16, 1991, petitioners filed a complaint for the declaration of nullity ofthe real estate
mortgage and its extrajudicial foreclosure, and damages against PSMB and Summa Bank before the RTC,
docketed as Civil Case No. 91-2153. 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."

RTC declared the subject deed and the extrajudicial foreclosure proceedings null and void. The CA
further held that petitioners were barred by laches from asserting any claim on the subject properties
considering they failed to attend the sale or file an adverse claim, or to thereafter redeem the subject
properties.

ISSUE
1. Whether or not laches applies?

RULING
 Yes. The Court holds that laches applies. As the records disclose, despite notice 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.

.
 SUMMARY FORMAT

Q: Goldstar Conglomerates, Inc. (GCI), represented by Zaldaga obtained from Paic Savings and
Mortgage Bank, Inc. (PSMB) a loan. As security therefor, GCI executed in favor of PSMB six (6)
promissory notes as well as a Deed of Real Estate Mortgage over a parcel of land covered by
Transfer Certificate of Title (TCT). As additional security, petitioners Francisco Sierra, Rosario
Sierra, and Spouses Felix Gatlabayan and Salome Sierra mortgaged four (4) parcels of land in
Antipolo City and respectively registered in their names. GCI defaulted in the payment of its loan to
PSMB, thereby prompting the latter to extrajudicially foreclose the mortgage on the subject
properties. Petitioners filed a complaint for the declaration of nullity of the real estate mortgage and
its extrajudicial foreclosure, and damages against PSMB before the RTC. RTC declared the subject
deed and the extrajudicial foreclosure proceedings null and void. The CA further held that
petitioners were barred by laches from asserting any claim on the subject properties considering they
failed to attend the sale or file an adverse claim, or to thereafter redeem the subject properties.
Does laches apply in this case?

A: Yes. The Court holds that laches applies. As the records disclose, despite notice 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.
 ZUNIGA-SANTOS v. SANTOS-GRAN
G.R. No. 197380 | October 8, 2014

DOCTRINE OF THE CASE

Reconveyance; An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its
rightful and legal owner. Prescription; To determine when the prescriptive period commenced in an action for reconveyance, the
plaintiff ’s possession of the disputed property is material.

PERLAS-BERNABE, J.:

FACTS: Eliza Zuñiga-Santos (petitioner), through her authorized representative, Nympha Z. Sales, filed a
Complaint or annulment of sale and revocation of title against respondents Maria Divina Gracia Santos-Gran
(Gran) and the Register of Deeds of Marikina City before the RTC.
The said complaint was later amended. petitioner alleged, among others, 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 Lamberto’s
alleged daughter, Gran, whose birth certificate was forged to make it appear that the latter was petitioner’s
daughter; (d) pursuant to void and voidable documents 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. Accordingly, petitioner
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, inter alia, that (a) the action filed by petitioner 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.

RTC granted Gran’s 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 (petitioner’s)
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.

The CA sustained the dismissal of petitioner’s Amended Complaint but on the ground of insufficiency of
factual basis.

ISSUE: Whether or not the action for the reconveyance of the title had already prescribed?
HELD: Yes. The Court finds the Amended Complaint’s dismissal to be in order considering that petitioner’s
cause of action had already prescribed.
It is evident that petitioner 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 plaintiff ’s
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.
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 petitioner
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 petitioner
that the property covered by TCT No. 224174 was being used by Gran’s mother-in-law. In fact, petitioner’s
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 petitioner’s complaint before the RTC on
January 9, 2006 was obviously beyond the ten-year prescriptive period, warranting the Amended Complaint’s
dismissal all the same.
 SUMMARY FORMAT
Q. Eliza Zuñiga-Santos, through her authorized representative, Nympha Z. Sales, filed a Complaint or
annulment of sale and revocation of title against respondents Maria Divina Gracia Santos-Gran and the
Register of Deeds of Marikina City before the RTC. The said complaint was later amended. Petitioner
alleged, among others, 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, with whom she did not have any children;
(c) she was forced to take care of Lamberto’s alleged daughter, Gran, whose birth certificate was forged to
make it appear that the latter was petitioner’s daughter; (d) pursuant to void and voidable documents 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. Accordingly, petitioner 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, inter alia,
that (a) the action filed by petitioner 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. Has the action for the reconveyance of title already prescribed?

A. Yes. It is evident that petitioner 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 plaintiff ’s 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.
 CENTENNIAL GUARANTY CORPORATION V. UNIVERSAL MOTORS
CORPORATION
G.R. 189358 | October 8, 2014

DOCTRINE OF THE CASE:

Suretyship; In a contract of suretyship, one lends his credit by joining in the principal debtor’s obligation so as to render himself
directly and primarily responsible with him, and without reference to the solvency of the principal.

PERLAS-BERNABE, J.:
FACTS: The instant petition originated from a Complaint for Breach of Contract with Damages and Prayer
for Preliminary Injunction and Temporary Restraining Order filed by Nissan Specialist Sales Corporation
(NSSC) and its President and General Manager, Reynaldo A. Orimaco (Orimaco), against herein respondents
Universal Motors Corporation (UMC), Rodrigo T. Janeo, Jr. (Janeo, Jr.), Gerardo Gelle (Gelle), Nissan
Cagayan de Oro Distributors, Inc. (NCOD), Jefferson U. Rolida (Rolida), and Peter Yap (Yap). The case was
raffled to the RTC and docketed as Civil Case No. 2002-058.6
The temporary restraining order (TRO) prayed for was eventually issued by the RTC upon the posting
by NSSC and Orimaco of a P1,000,000.00 injunction bond issued by their surety, CGAC. The TRO enjoined
respondents UMC, Rolida, Gelle, Janeo, Jr., NCOD, and Yap (respondents) from selling, dealing, and
marketing all models of motor vehicles and spare parts of Nissan, and from terminating the dealer agreement
between UMC and NSSC and restrained UMC from supplying and doing trading transactions with NCOD,
which, in turn, was enjoined from entering and doing business on Nissan Products within the dealership
territory of NSSC as defined in the Dealer Agreement. The TRO was eventually converted into a writ of
preliminary injunction.
Respondents filed a petition for certiorari and prohibition before the CA, docketed as CA-G.R. SP No.
70236, to assail the issuance of the aforesaid injunctive writ. The CA rendered a Decision holding that the
RTC committed grave abuse of discretion in issuing the writ absent a clear legal right thereto on the part of
NSSC and Orimaco. Consequently, the Writ of Preliminary Injunction issued by the RTC was ordered
dissolved. Respondents filed an application for damages against the injunction bond issued by CGAC in the
amount of P1,000,000.00.
The RTC rendered a Decision dismissing the complaint for breach of contract with damages for lack of
merit. Upon respondents' motion, the RTC granted Execution Pending Appeal. It ruled that there exists good
reasons to justify the immediate execution of the Decision, namely: (a) that NSSC is in imminent danger of
insolvency being admittedly in a state of rehabilitation under the supervision of the Regional Trial Court of
Misamis Oriental, Branch 40 through Special Proceeding No. 2002-095; (b) that it has ceased its business
operation as the authorized dealer of Nissan Motor Philippines, Inc.; (c) that Orimaco, NSSC's President and
General Manager, has migrated abroad with his family; and (d) that NSSC failed to file the necessary
supersedeas bond to forestall the immediate execution of the Decision pending appeal. The RTC thereupon
issued the corresponding writ.
The CA affirmed in part the assailed order by allowing the execution pending appeal of the RTC's
October 31, 2007 Decision but limiting the amount of CGAC's liability to only P1,000,000.00.
ISSUES: (a) whether or not good reasons exist to justify execution pending appeal against CGAC which is a
mere surety; and (b) whether or not CGAC’s liability on the bond should be limited to P500,000.00.

HELD: (a) Yes. That CGAC’s financial standing differs from that of NSSC does not negate the order of
execution pending appeal. As the latter’s 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 debtor’s 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 CGAC’s other principal,
Orimaco, who was determined to have permanently left the country with his family to evade execution of any
judgment against him.
(b) No. The Court resolves that CGAC’s lability should as the CA correctly ruled be confined to the
amount of P1,000,000.00, and not P500,000.00 as the latter purports.
Section 4(b), Rule 58 of the Rules provides that the injunction bond is answerable for all damages that may be
occasioned by the improper issuance of a writ of preliminary injunction.
 SUMMARY FORMAT
Q. The instant petition originated from a Complaint for Breach of Contract with Damages and Prayer for
Preliminary Injunction and Temporary Restraining Order filed by Nissan Specialist Sales Corporation and its
President and General Manager, Reynaldo A. Orimaco, against herein respondents Universal Motors
Corporation (UMC), Rodrigo T. Janeo, Jr., Gerardo Gelle, Nissan Cagayan de Oro Distributors, Inc.,
Jefferson U. Rolida, and Peter Yap. The temporary restraining order (TRO) prayed for was eventually issued
by the RTC upon the posting by NSSC and Orimaco of a P1,000,000.00 injunction bond issued by their
surety, CGAC. The TRO enjoined respondents from selling, dealing, and marketing all models of motor
vehicles and spare parts of Nissan, and from terminating the dealer agreement between UMC and NSSC and
restrained UMC from supplying and doing trading transactions with NCOD, which, in turn, was enjoined
from entering and doing business on Nissan Products within the dealership territory of NSSC as defined in
the Dealer Agreement. The TRO was eventually converted into a writ of preliminary injunction. Respondents
filed a petition for certiorari and prohibition before the CA and assail the issuance of the aforesaid injunctive
writ. The CA rendered a Decision holding that the RTC committed grave abuse of discretion in issuing the
writ absent a clear legal right thereto on the part of NSSC and Orimaco. Consequently, the Writ of
Preliminary Injunction issued by the RTC was ordered dissolved. Respondents filed an application for
damages against the injunction bond issued by CGAC in the amount of P1,000,000.00. Is CGAC liable?

A. Yes. That CGAC’s financial standing differs from that of NSSC does not negate the order of execution
pending appeal. As the latter’s 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 debtor’s
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 CGAC’s other principal, Orimaco,
who was determined to have permanently left the country with his family to evade execution of any judgment
against him.
 METRO MANILA SHOPPING MECCA CORP. V. MS. LIBERTY TOLEDO
GR. 190818 | November 10, 2014

DOCTRINE OF THE CASE:

Compromise Agreements; A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced.
___________________________________________________________________________
PERLAS-BERNABE, J.:
FACTS: The Court hereby resolves the Manifestation and Motion dated August 2, 2013 filed by petitioners
Metro Manila Shopping Mecca Corp., Shoemart, Inc., SM Prime Holdings, Inc., Star Appliances Center,
Super Value, Inc., Ace Hardware Philippines, Inc., Health and Beauty, Inc., Jollimart Phils. Corp., and Surplus
Marketing Corporation (petitioners), seeking the approval of the terms and conditions of the parties’
Universal Compromise Agreement (UCA) in lieu of the Court’s Decision which denied petitioner’s claim for
tax refund/credit of their local business taxes paid to respondent City of Manila.
In their Manifestation and Motion, petitioners alleged that pursuant to the UCA, the parties agreed to
amicably settle all cases between them involving claims for tax refund/credit, including the instant case. The
pertinent portions of the UCA provides:
2.b. It is further agreed that there shall be no refunds/tax credit certificates to be given or issued by the City
of Manila in the following cases:
2.b.1. SC G.R. 190818 (CTA EB No. 480) entitled “Supervalue, Inc., Ace Hardware Philippines, Inc., H and
B, Inc., Metro Manila Shopping Mecca Corp., SM Land, Inc. (formerly Shoemart, Inc.), SM Prime Holdings,
Inc., Star Appliance Center, Inc., Surplus Marketing Corp. versus The City of Manila and the City Treasurer
[of] Manila,” which emanated from an Order in favour of the SM Group issued by Branch 47 of the Regional
Trial Court of Manila in Civil Case No. 03-108175 entitled “Ace Hardware Phils., Inc., SM Prime Holdings,
Inc., Star Appliance Center, Inc., Supervalue, Inc., Watsons Personal Care Stores (Phils.), Inc. versus The City
of Manila and the City Treasurer of Manila,” and is currently pending before the Supreme Court.
Respondent City of Manila and Liberty Toledo, in her capacity as Treasurer of the City of Manila
(respondents), confirmed the authenticity and due execution of the UCA. They, however, submitted that the
UCA had no effect on the subject Decision since the taxes paid subject of the instant case was not included
in the agreement.

ISSUE: Whether or not the instant case is included in the Universal Compromise Agreement (UCA) between
the parties?

HELD: Yes. The Court adopts the terms and conditions of the UCA pertinent to this case.
A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. It contemplates mutual concessions and mutual gains to
avoid the expenses of litigation; or when litigation has already begun, to end it because of the uncertainty of
the result. Its validity is dependent upon the fulfillment of the requisites and principles of contracts dictated
by law; and its terms and conditions must not be contrary to law, morals, good customs, public policy, and
public order. When given judicial approval, a compromise agreement becomes more than a contract binding
upon the parties. Having been sanctioned by the court, it is entered as a determination of a controversy and
has the force and effect of a judgment. It is immediately executory and not appealable, except for vices of
consent or forgery. The nonfulfillment of its terms and conditions justifies the issuance of a writ of
execution; in such an instance, execution becomes a ministerial duty of the court review of the whereas
clauses of the UCA reveals the various court cases filed by petitioners, including this case, for the refund
and/or issuance of tax credit covering the local business taxes payments they paid to respondent City of
Manila pursuant to Section 21 of the latter’s Revenue Code. Thus, contrary to the submission of respondents,
the local business taxes subject of the instant case is clearly covered by the UCA since they were also paid in
accordance with the same provision of the Revenue Code of Manila.
 SUMMARY FORMAT
Q. The Court resolved the Manifestation and Motion filed by petitioners Metro Manila Shopping Mecca
Corp., Shoemart, Inc., SM Prime Holdings, Inc., Star Appliances Center, Super Value, Inc., Ace Hardware
Philippines, Inc., Health and Beauty, Inc., Jollimart Phils. Corp., and Surplus Marketing Corporation and
seeking the approval of the terms and conditions of the parties’ Universal Compromise Agreement (UCA) in
lieu of the Court’s Decision which denied petitioner’s claim for tax refund/credit of their local business taxes
paid to respondent City of Manila. In their Manifestation and Motion, petitioners alleged that pursuant to the
UCA, the parties agreed to amicably settle all cases between them involving claims for tax refund/credit,
including the instant case. The pertinent portions of the UCA provides: 2.b. It is further agreed that there
shall be no refunds/tax credit certificates to be given or issued by the City of Manila in the following cases:
2.b.1. SC G.R. 190818 (CTA EB No. 480) entitled “Supervalue, Inc., Ace Hardware Philippines, Inc., H and
B, Inc., Metro Manila Shopping Mecca Corp., SM Land, Inc. (formerly Shoemart, Inc.), SM Prime Holdings,
Inc., Star Appliance Center, Inc., Surplus Marketing Corp. versus The City of Manila and the City Treasurer
[of] Manila,” which emanated from an Order in favour of the SM Group issued by Branch 47 of the Regional
Trial Court of Manila in Civil Case No. 03-108175 entitled “Ace Hardware Phils., Inc., SM Prime Holdings,
Inc., Star Appliance Center, Inc., Supervalue, Inc., Watsons Personal Care Stores (Phils.), Inc. versus The City
of Manila and the City Treasurer of Manila,” and is currently pending before the Supreme Court.
Respondents confirmed the authenticity and due execution of the UCA. They, however, submitted that the
UCA had no effect on the subject Decision since the taxes paid subject of the instant case was not included
in the agreement. Is the instant case included in the UCA?

A. Yes. A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. It contemplates mutual concessions and mutual gains to
avoid the expenses of litigation; or when litigation has already begun, to end it because of the uncertainty of
the result. Its validity is dependent upon the fulfillment of the requisites and principles of contracts dictated
by law; and its terms and conditions must not be contrary to law, morals, good customs, public policy, and
public order. When given judicial approval, a compromise agreement becomes more than a contract binding
upon the parties. Having been sanctioned by the court, it is entered as a determination of a controversy and
has the force and effect of a judgment. It is immediately executory and not appealable, except for vices of
consent or forgery. The nonfulfillment of its terms and conditions justifies the issuance of a writ of
execution; in such an instance, execution becomes a ministerial duty of the court review of the whereas
clauses of the UCA reveals the various court cases filed by petitioners, including this case, for the refund
and/or issuance of tax credit covering the local business taxes payments they paid to respondent City of
Manila pursuant to Section 21 of the latter’s Revenue Code. Thus, contrary to the submission of respondents,
the local business taxes subject of the instant case is clearly covered by the UCA since they were also paid in
accordance with the same provision of the Revenue Code of Manila.
 ROBERT AND NENITA DE LEON v. GILBERT AND ANALYN DELA LLANA

G.R. No. 212277 | February 11, 2015

DOCTRINE OF THE CASE:

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. The fact of executing the contract to comply with the requirement to put up a
lottery stall makes the contract absolutely simulated as there was no intention between the parties to enter into the contract of
lease.

PERLAS-BERNABE, J.

FACTS: This case stemmed from an unlawful detainer complaint (first ejectment complaint) filed by
respondent Gilbert dela Llana (Gilbert) against petitioner Robert de Leon (Robert) and a certain Gil de Leon
(Gil) before the MCTC-Nabunturan-Mawab. In the said complaint, Gilbert averred that sometime in 1999,
he, through an undated contract of lease, leased a portion of a 541 square-meter property situated in
Poblacion, Nabunturan, Compostela Valley Province, registered in his name, to Robert, which the latter
intended to use as a lottery outlet. The lease contract had a term of five (5) years and contained a stipulation
that any case arising from the same shall be filed in the courts of Davao City only. Gilbert claimed that
Robert and Gil failed to pay their rental arrears to him and refused to vacate the subject property, despite
repeated demands, thus, the first ejectment complaint.

In their defense, Robert and Gil posited that the aforementioned lease contract was simulated and, hence, not
binding on the parties as there was no demand to pay the rentals on the part of the complainants and that
such contract was only executed as a requirement to be able to put up a lottery stall. The MCTC-Nabunturan-
Mawab dismissed the first ejectment complaint, holding that the undated lease contract was a relatively
simulated contract and, as such, non-binding.

Gilbert, together with his spouse Analyn dela Llana (respondents), filed a second complaint for unlawful
detainer. The MTCC-Davao City found that the undated lease contract was not a simulated contract for the
reason that the requisites for simulation have not been shown in the case at bar. The RTC reversed and set
aside the MTCC-Davao City ruling, and ordered the dismissal of the second ejectment complaint since the
venue was improperly laid. The CA reversed and set aside the RTC issuances.

ISSUE: Whether or not the contract is simulated

RULING:

Yes. 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. It is quite apparent
that the MCTC-Nabunturan-Mawab actually intended to mean that the undated lease contract subject of this
case was absolutely simulated. Its pronouncement that the parties did not intend to be bound by their
agreement is simply inconsistent with relative simulation. With the undated lease contract definitely settled as
absolutely simulated, and hence, void, there can be no invocation of the exclusive venue stipulation on the
part of either party; thus, the general rule on the filing of real actions in the court where the property is
situated – as in the filing of the first ejectment complaint before the MCTC-Nabunturan-Mawab located in
Compostela Valley same as the subject property of this case – prevails.

SUMMARY FORMAT

Q: Gilbert averred that sometime in 1999, he, through an undated contract of lease, leased a portion
of a 541 square-meter property situated in Poblacion, Nabunturan, Compostela Valley Province,
registered in his name, to Robert, which the latter intended to use as a lottery outlet. Gilbert claimed
that Robert and Gil failed to pay their rental arrears to him and refused to vacate the subject
property, despite repeated demands, thus, he filed an ejectment complaint. In their defense, Robert
and Gil posited that the aforementioned lease contract was simulated and, hence, not binding on the
parties as there was no demand to pay the rentals on the part of the complainants and that such
contract was only executed as a requirement to be able to put up a lottery stall. Is the contract
involved absolutely simulated?

A: Yes. 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. The fact of executing the
contract to comply with the requirement to put up a lottery stall makes the contract absolutely simulated as
there was no intention between the parties to enter into the contract of lease.
 SPOUSES RODOLFO AND MARCELINA GUEVARRA v. THE COMMONER
LENDING CORPORATION, INC.

G.R. No. 204672 | February 18, 2015

DOCTRINE OF THE CASE:

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 aforementioned redemption period.

PERLAS-BERNABE, J.

FACTS: Sps. Guevarra obtained a loan from TCLC, which was secured by a real estate mortgage over a
parcel of land emanating from a free patent granted to Sps. Guevarra. Sps. Guevarra, however, 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. In the process, TCLC emerged as the highest bidder at the
public auction sale. the certificate of sale was registered with the Registry of Deeds of Iloilo. Eventually, Sps.
Guevarra failed to redeem the subject property within the one-year reglementary period, which led to the
cancellation of Title of the spouses in favor 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. It recognized Sps. Guevarra’s 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. The CA affirmed the RTC. It ruled that after the
expiration of the redemption period, the present owner, i.e., TCLC, has the discretion to set a higher price.
Hence, this petition.

ISSUE:

1. Whether or not Sps. Guevarra has a right to repurchase the lot

2. 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:

1. Yes. 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 aforementioned redemption period.

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 aforestated redemption period, TCLC was entitled, as a matter of right, to
consolidate its ownership and to possess the same. Nonetheless, such right should not negate Sps. Guevarra’s
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.

2. Sps. Guevarrainsist 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.

TCLC’s argument is partly correct. Redemptions from lending or credit institutions, like TCLC, are governed by
Section 78 of the General Banking Act. 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 TCLC’s claim.
 SUMMARY FORMAT

Q: Sps. Guevarra obtained a loan from TCLC, which was secured by a real estate mortgage over a parcel of
land emanating from a free patent granted to Sps. Guevarra. Sps. Guevarra, however, 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. In the process, TCLC emerged as the highest bidder at the public
auction sale. the certificate of sale was registered with the Registry of Deeds of Iloilo. Eventually, Sps.
Guevarra failed to redeem the subject property within the one-year reglementary period, which led to the
cancellation of Title of the spouses in favor of TCLC. Thereafter, TCLC demanded that Sps. Guevarra vacate
the property, but to no avail. Does Sps. Guevarra still has the right to repurchase? If so, who should fix the
repurchase price?

A: Yes. 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 aforementioned redemption period.

It is TLCL who has the right to fix the price. But such price must be limited to the amount mentioned in the
mortgage.
 DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) vs.
UNITED PLANNERS CONSULTANTS, INC. (UPCI)

G.R. No. 212081| February 23, 2015

DOCTRINE OF THE CASE:

Under Section 17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may be sought, but any of the
parties may file a motion for correction of the final award, which shall interrupt the running of the period for appeal. Special
ADR rules apply not only to confirmation of the decision, but as well s its execution.

PERLAS-BERNABE, J.

FACTS: Petitioner, through the Land Management Bureau (LMB), entered into an Agreement for
Consultancy Services with respondent United Planners Consultants, Inc. (respondent) in connection with the
LMB's Land Resource Management Master Plan Project (LRMMP). Under the Consultancy Agreement,
petitioner committed to pay a total contract price based on a predetermined percentage corresponding to the
particular stage of work accomplished.

Respondent completed the work required, which petitioner formally accepted. However, petitioner
was able to pay only 47% of the total contract price. at the soonest possible time. For failure to pay its
obligation under the Consultancy Agreement despite repeated demands, respondent instituted a Complaint
against petitioner before the RTC.

Upon motion of respondent, the case was subsequently referred to arbitration pursuant to the
arbitration clause of the Consultancy Agreement, which petitioner did not oppose. During the preliminary
conference, the parties agreed to adopt the CIAC Revised Rules Governing Construction Arbitration (CIAC
Rules) to govern the arbitration proceedings. The Arbitral Tribunal rendered its Award (Arbitral Award) in
favor of respondent. Petitioner moved to quash the writ of execution, positing that respondent was not
entitled to its monetary claims. It also claimed that the issuance of said writ was premature since the RTC
should have first resolved its Motion for Reconsideration and Manifestation and Motion, and not merely
noted them, thereby violating its right to due process. the RTC denied petitioner’s motion to quash. Said
decision was affirmed by CA.

ISSUE: Whether or not the CA erred in applying the provisions of the Special ADR Rules, resulting in the
dismissal of petitioner’s special civil action for certiorari.

RULING:

No. Under Section 17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may be
sought, but any of the parties may file a motion for correction of the final award, which shall interrupt the
running of the period for appeal. In this case, records do not show that any of the foregoing remedies were
availed of by petitioner. Instead, it filed the Motion for Reconsideration of the Arbitral Award, which was a
prohibited pleading under the Section 17.2, Rule 17 of the CIAC Rules, thus rendering the same final and
executory.

Accordingly, the case was remanded to the RTC for confirmation proceedings pursuant to Rule 11 of the
Special ADR Rules which requires confirmation by the court of the final arbitral award. During the
confirmation proceedings, petitioners did not oppose the RTC’s confirmation by filing a petition to vacate
the Arbitral Award under Rule 11.2 (D) of the Special ADR Rules. Neither did it seek reconsideration of the
confirmation order in accordance with Rule 19.1 (h) thereof. Thus, for failing to avail of the foregoing
remedies before resorting to certiorari, the CA correctly dismissed its petition.

In this case, petitioner asserts that its petition is not covered by the Special ADR Rules (particularly, Rule
19.28 on the 15-day reglementary period to file a petition for certiorari) but by Rule 65 of the Rules of Court
(particularly, Section 4 thereof on the 60-day reglementary period to file a petition for certiorari), which it
claimed to have suppletory application in arbitration proceedings since the Special ADR Rules do not
explicitly provide for a procedure on execution. The position is untenable. it is the Court’s considered view
that the Rules’ procedural mechanisms cover not only aspects of confirmation but necessarily extend to a
confirmed award’s execution in light of the doctrine of necessary implication which states that every statutory
grant of power, right or privilege is deemed to include all incidental power, right or privilege. Thus, the Court
so concludes that the Special ADR Rules, as far as practicable, should be made to apply not only to the
proceedings on confirmation but also to the confirmed award’s execution.
 SUMMARY FORMAT

Q: Parties entered into a consultancy agreement. Such agreement has an arbitration clause. A dispute arose
and an Arbitral award was subsequently rendered in favor of the respondent. Can the petitioner stop the
execution of the award through a special civil action for certiorari? Does Special ADR rules apply to the
execution of judgment despite the law’s silence on such matter?

A: No. Under Section 17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may be
sought, but any of the parties may file a motion for correction of the final award, which shall interrupt the
running of the period for appeal.

Yes. Special ADR rules applies not only to confirmation but also to execution of such judgment in view of
the doctrine of necessary implication.
 FORT BONIFACIO DEVELOPMENT CORPORATION vs. VALENTIN L. FONG

G.R. No. 209370| March 25, 2015

DOCTRINE OF THE CASE:

Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
Assignment of obligation cannot be done without the written consent of the debtor if such is agreed upon by the parties.

PERLAS-BERNABE, J.

FACTS: FBDC entered into a Trade Contract with MS Maxco Company, Inc. (MS Maxco) for the execution
of the structural and partial architectural works of one of its condominium projects.

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. Pursuant to the Trade Contract, FBDC deducted the said amount from
MS Maxco’s retention money.

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.
FBDC received a letter from the counsel of Fong informing it that MS Maxco had already assigned its
receivables from FBDC to him. Despite Fong’s repeated requests, FBDC refused to deliver to Fong the
amount assigned by MS Maxco.

FBDC averred that it was not bound by the Deed of Assignment between Fong and MS Maxco, not
being a party thereto. However, Fong, being a mere substitute or assignee of MS Maxco, was bound to
observe the terms and conditions of the Trade Contract. FBDC also stressed that it paid the creditors of MS
Maxco in compliance with valid court orders. The RTC found FBDC liable to pay Fong. It was affirmed by
CA.

ISSUES:

Whether or not the CA erred in ruling that FBDC was bound by the Deed of Assignment between MS
Maxco and Fong

RULING:

No. Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith. 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. Fong, as mere assignee of MS Maxco’s 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 FBDC’s
consent.
 SUMMARY FORMAT

Q: FBDC entered into a Trade Contract with MS Maxco Company, Inc. (MS Maxco) for the execution of the
structural and partial architectural works of one of its condominium projects. 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. FBDC received a letter from the counsel of
Fong informing it that MS Maxco had already assigned its receivables from FBDC to him. Despite Fong’s
repeated requests, FBDC refused to deliver to Fong the amount assigned by MS Maxco. Is FBDC bound by
the assignment between MS Maxco and Fong?

A: No. Obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith. 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.
 SPS. FERNANDO VERGARA and HERMINIA VERGARA vs. ERLINDA
TORRECAMPO SONKIN

G.R. No. 193659| June 15, 2015

DOCTRINE OF THE CASE:

When the complainant is guilty of contributory negligence, the award of damages shall be mitigated. Contributory. Attorney's fees
may not be awarded where no sufficient showing of bad faith could be reflected in a party's persistence in a case other than an
erroneous conviction of the righteousness of his cause.

PERLAS-BERNABE, J.

FACTS: Petitioners-spouses Fernando Vergara and Herminia Vergara (Sps. Vergara) and Spouses Ronald
Mark Sonkin and Erlinda Torrecampo Sonkin (Sps. Sonkin) are adjoining landowners. In view of the
geographical configuration of the adjoining properties, the property owned by Sps. Sonkin (Sonkin Property)
is slightly lower in elevation than that owned by Sps. Vergara (Vergara Property).

When Sps. Sonkin bought the Sonkin Property sometime, they raised the height of the partition wall
and caused the construction of their house thereon. The house itself was attached to the partition wall such
that a portion thereof became part of the wall of the master’s bedroom and bathroom.

Sps. Vergara levelled the uneven portion of the Vergara Property by filling it with gravel, earth, and
soil. As a result, the level of the Vergara Property became even higher than that of the Sonkin Property by a
third of a meter. Eventually, Sps. Sonkin began to complain that water coming from the Vergara Property
was leaking into their bedroom through the partition wall, causing cracks, as well as damage, to the paint and
the wooden parquet floor. Sps. Sonkin repeatedly demanded that Sps. Vergara build a retaining wall on their
property in order to contain the landfill that they had dumped thereon, but the same went unheeded. Hence,
Sps. Sonkin filed the instant complaint for damages and injunction with prayer for preliminary mandatory
injunction and issuance of a temporary restraining order against Sps. Vergara.

The RTC found Sps. Vergara civilly liable to Sps. Sonkin for damages. The CA reversed and set aside
the assailed RTC Decision. Hence, this petition.

ISSUES:

1. Whether or not the CA erred in upholding the award of moral damages and attorney’s fees

2. Whether or not it should have ordered the demolition of the portion of the Sps. Sonkin’s house that
adjoins the partition wall

RULING:

1. No. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the
harm he has suffered, which falls below the standard to which he is required to conform for his own
protection.

It is undisputed that the Sonkin property is lower in elevation than the Vergara property, and thus, it
is legally obliged to receive the waters that flow from the latter, pursuant to Article 637 of the Civil Code. The
CA correctly held that while the proximate cause of the damage sustained by the house of Sps. Sonkin was
the act of Sps. Vergara in dumping gravel and soil onto their property, thus, pushing the perimeter wall back
and causing cracks thereon, as well as water seepage, the former is nevertheless guilty of contributory
negligence for not only failing to observe the two (2)-meter setback rule under the National Building Code,
but also for disregarding the legal easement constituted over their property. As such, Sps. Sonkin must
necessarily and equally bear their own loss. In view of Sps. Sonkin’s contributory negligence, the Court deems
it appropriate to delete the award of moral damages in their favor.

Attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than an erroneous conviction of the righteousness of his cause. In this case,
the Court observes that neither Sps. Sonkin nor Sps. Vergara (thru their compulsory counterclaim) were
shown to have acted in bad faith in pursuing their respective claims against each other. The existence of bad
faith is negated by the fact that both parties have valid contentions against each other. Thus, absent cogent
reason to hold otherwise, the Court deems it inappropriate to award attorney's fees in favor of either party.

2. Yes. In view of Sps. Sonkin's undisputed failure to observe the two (2)-meter setback rule under the
National Building Code, and in light of the order of the courts a quo directing Sps. Vergara to provide an
adequate drainage system within their property, the Court likewise deems it proper, equitable, and necessary
to order Erlinda, who is solely impleaded as respondent before the Court, to comply with the aforesaid rule
by the removal of the portion of her house directly abutting the partition wall. The underlying precept on
contributory negligence is that a plaintiff who is partly responsible for his own injury should not be entitled to
recover damages in full but must bear the consequences of his own negligence.
 SUMMARY FORMAT

Q: Petitioners-spouses Fernando Vergara and Herminia Vergara (Sps. Vergara) and Spouses Ronald
Mark Sonkin and Erlinda Torrecampo Sonkin (Sps. Sonkin) are adjoining landowners. Sps. Vergara
levelled the uneven portion of the Vergara Property by filling it with gravel, earth, and soil. As a
result, the level of the Vergara Property became even higher than that of the Sonkin Property by a
third of a meter. Eventually, Sps. Sonkin began to complain that water coming from the Vergara
Property was leaking into their bedroom through the partition wall, causing cracks, as well as
damage, to the paint and the wooden parquet floor. Sps. Sonkin repeatedly demanded that Sps.
Vergara build a retaining wall on their property in order to contain the landfill that they had dumped
thereon, but the same went unheeded. Should moral damages and attorney’s fees be awarded?

A: No. It is undisputed that the Sonkin property is lower in elevation than the Vergara property, and thus, it
is legally obliged to receive the waters that flow from the latter, pursuant to Article 637 of the Civil Code. The
proximate cause of the damage sustained by the house of Sps. Sonkin was the act of Sps. Vergara in dumping
gravel and soil onto their property, thus, pushing the perimeter wall back and causing cracks thereon, as well
as water seepage, the former is nevertheless guilty of contributory negligence for not only failing to observe
the two (2)-meter setback rule under the National Building Code, but also for disregarding the legal easement
constituted over their property. As such, Sps. Sonkin must necessarily and equally bear their own loss. In view
of Sps. Sonkin’s contributory negligence, the Court deems it appropriate to delete the award of moral
damages in their favor. No attorney’s fees shall also be awarded because there is no bad faith involved herein.
 LEONCIO ALANGDEO, ARTHUR VERCELES, and DANNY VERGARA vs. The City
Mayor of Baguio, HON. BRAULIO D. YARANON (to be substituted by incumbent City
Mayor, HON. MAURICIO DO MOGAN), JEOFREY MORTELA, Head Demolition
Team, CITY ENGINEER'S OFFICE, and ERNESTO LARDIZABAL

G.R. No. 206423| July 1, 2015

DOCTRINE OF THE CASE:

Summary eviction has been defined as "the immediate dismantling of new illegal structures by the local government units or
government agency authorized to demolish in coordination with the affected urban poor organizations without providing the
structure owner(s) any benefits of the Urban Development and Housing Program.

PERLAS-BERNABE, J.

FACTS: Respondent Ernesto Lardizabal (Ernesto) filed a complaint for demolition, before the City
Engineer's Office of Baguio City (City Engineer's Office), questioning the ongoing construction of a
residential structure and garage extension by petitioners on a parcel of land. Upon investigation, the City
Engineer's Office found out that the construction had no building permit. Consequently, the City Mayor
issued Demolition Order No. 5. Aggrieved, petitioners moved for a reconsideration of DO No. 05, but was
denied by the City Mayor. Thus, they were prompted to file a complaint for injunction and prohibition with
the RTC.

During trial, Verceles testified, among others, that he has a Tax Declaration and a pending
application for Ancestral Land Claim over the subject property filed before the National Commission on
Indigenous Peoples (NCIP), and that he has been paying taxes therefore and occupying the same since 1977.
The DENR-CAR dismissed the case in his favor, but Ernesto appealed to the Office of the DENR Secretary.
At the time the appeal was pending, Ernesto filed the complaint for demolition before the City Engineer's
Office. Verceles further testified that Barangay Atok Trail is covered by Proclamation No. 414, series of 1957
(Proclamation 414), which declared the same as mineral reservation for Baguio City, for which reason he was
unable to get a title over the subject property despite his possession thereof.

On the other hand, respondents' witnesses, Antonio 0. Visperas, Robert Albas Awingan, and George
Addawe, Jr., all testified that the structures of petitioners on the subject property were not covered by any
building permit. Additionally, Ernesto testified that the issue of possession over the said property was the
subject of an appeal pending before the Office of the DENR Secretary.

The RTC enjoined the City Government of Baguio and its agents from implementing DO No. 5.
The CA reversed the ruling of the RTC. Hence, this petition.

ISSUES:

Whether the issuance of a writ of injunction is warranted.

RULING:

Yes. Under the Summary Eviction IRR, the term "summary eviction" has been defined as "the
immediate dismantling of new illegal structures by the local government units or government agency
authorized to demolish in coordination with the affected urban poor organizations without providing the
structure owner(s) any benefits of the Urban Development and Housing Program. "

SECTION 2. Coverage - The following shall be subject for summary Eviction:

1.0 New squatter families whose structures were built after the affectivity of RA 7279; and

2.0 Squatter families identified by the LGU in cooperation with the Presidential Commission of the
Urban Poor (PCUP), Philippine National Police (PNP) and accredited Urban Poor Organization
(UPO) as professional squatters or members of squatting syndicates as defined in the Act.

In this case, petitioners cannot be considered as new squatters, since, although their structures were built after
March 28, 1992, they or their predecessors-in-interest had occupied, and were claimants of the subject
property long before the said date. Neither have they been identified by the LGU as professional squatters
nor members of a squatting syndicate. Thus, since petitioners do not fall under the coverage of the said IRR,
the issuance of DO No. 05 had no legal basis at the onset.
 SUMMARY FORMAT

Q: Respondent Ernesto Lardizabal (Ernesto) filed a complaint for demolition, before the City
Engineer's Office of Baguio City (City Engineer's Office), questioning the ongoing construction of a
residential structure and garage extension by petitioners on a parcel of land. Upon investigation, the
City Engineer's Office found out that the construction had no building permit. Consequently, the
City Mayor issued Demolition Order No. 5. Aggrieved, petitioners moved for a reconsideration of
DO No. 05, but was denied by the City Mayor. Thus, they were prompted to file a complaint for
injunction and prohibition with the RTC. Shall DO No. 5 be enjoined?

A: Yes. The following shall be subject for summary Eviction:

1.0 New squatter families whose structures were built after the affectivity of RA 7279; and

2.0 Squatter families identified by the LGU in cooperation with the Presidential Commission of the
Urban Poor (PCUP), Philippine National Police (PNP) and accredited Urban Poor Organization
(UPO) as professional squatters or members of squatting syndicates as defined in the Act.

In this case, petitioners cannot be considered as new squatters, since, although their structures were built after
March 28, 1992, they or their predecessors-in-interest had occupied, and were claimants of the subject
property long before the said date. Neither have they been identified by the LGU as professional squatters
nor members of a squatting syndicate. Thus, since petitioners do not fall under the coverage of the said IRR,
the issuance of DO No. 05 had no legal basis at the onset.
 WILSON GO and PETER GO vs. THE ESTATE OF THE LATE FELISA TAMIO DE BUENA
VENTURA

G.R. No. 211972 | July 22, 2015

DOCTRINE OF THE CASE:

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship
that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between parties may either be
express or implied. An express trust is created by the intention of the trustor or of the parties, while an implied trust comes into
being by operation of law. Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or
by words either expressly or impliedly evincing an intention to create a trust.

PERLAS-BERNABE, J.:

FACTS: In 1960, Felisa, as owner of the subject property, transferred the same to her daughter Bella, married
to Delfin, Sr., and Felimon, Sr. to assist them in procuring a loan from the GSIS. In view thereof, her title
over the property, TCT No. 45951/T-233, was cancelled and a new one, TCT No. 49869, was issued in the
names of Bella, married to Delfin, Sr., and Felimon, Sr. After it was lost, TCT No. 49869 was reconstituted
and TCT No. RT-74910 (49869) was issued in their names.

Upon Felisa's death in 1994, the Bihis Family, Felisa's other heirs who have long been occupying the subject
property, caused the annotation of their adverse claim over the same on TCT No. RT-74910 (49869).
Subsequently, however, or on January 22, 1997, the said annotation was cancelled, and the next day, the Heirs
of Felimon, Sr. executed an Extrajudicial Settlement of his estate and caused its annotation on said title. TCT
No. RT-74910 (49869) was then cancelled and TCT No. N-170416 was issued in the names of Bella, et al.
Finally, by virtue of a Deed of Sale dated January 23, 1997, the subject property was sold to Wilson and Peter,
in whose names TCT No. 170475 currently exists. Months later, or on October 17, 1997, the complaint for
reconveyance and damages was instituted.

ISSUES:

1. Whether or not a trust was established between Felisa and Bella, Delfin,Sr., and Felimon, Sr.

2. Whether or not the action for reconveyance has prescribed.

3. Whether or not Wilson and Peter are purchasers in good faith.

RULING:

1. An express trust was created.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a
fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust
relations between parties may either be express or implied. An express trust is created by the intention of the
trustor or of the parties, while an implied trust comes into being by operation of law.
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by
words either expressly or impliedly evincing an intention to create a trust.

From the letter executed by Felisa, it unequivocally and absolutely declared her intention of transferring the
title over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in
securing a loan from the GSIS. She likewise stated clearly that she was retaining her ownership over the
subject property and articulated her wish to have her heirs share equally therein. Hence, while in the
beginning, an implied trust was merely created between Felisa, as trustor, and Bella, Delfin, Sr., and Felimon,
Sr., as both trustees and beneficiaries, the execution of the September 21, 1970 letter settled, once and for
all, the nature of the trust established between them as an express one, their true intention irrefutably extant
thereon.

2. Anent the issue of prescription, the Court finds that the action for reconveyance instituted by respondents
has not yet prescribed, following the jurisprudential rule that express trusts prescribe in ten (10) years from
the time the trust is repudiated.

In this case, there was a repudiation of the express trust when Bella, as the remaining trustee, sold the subject
property to Wilson and Peter on January 23, 1997. As the complaint for reconveyance and damages was filed
by respondents on October 17, 1997, or only a few months after the sale of the subject property to Wilson
and Peter, it cannot be said that the same has prescribed.

3. Wilson and Peter are not purchasers in good faith.

A purchaser in good faith is one who buys the property of another without notice that some other person
has a right to, or an interest in, such property and pays a full and fair price for the same at the time of
such purchase, or before he has notice of some other person 's claim or interest in the property. Corollary
thereto, when a piece of land is in the actual possession of persons other than the seller, the buyer must be
wary and should investigate the rights of those in possession. Without making such inquiry, one cannot claim
that he is a buyer in good faith.

The existence of an annotation on the title covering the subject property and of the occupation thereof by
individuals other than the sellers negates any presumption of good faith on the part of Wilson and Peter
when they purchased the subject property. A person who deliberately ignores a significant fact which would
create suspicion in an otherwise reasonable man is not an innocent purchaser for value.
 SUMMARY FORMAT

Q: Felisa Buenaventura, the mother of the Petitioner Bella and respondents Resurreccion, Rhea and
Regina, owned a parcel of land with a three-storey building. In 1960, Felisa transferred the same to
her daughter Bella, married to Delfin, Sr., and Felimon, Sr., the common-law husband of Felisa,
to assist them in procuring a loan from the GSIS. In view thereof, her title over the property
was cancelled and a new one was issued in the names of Bella, married to Delfin, Sr., and
Felimon, Sr. Upon Felisa's death in 1994, the Bihis Fami ly, Felisa's other heirs who have long
been occupyi ng the subject property, caused the annotation of their adverse claim over the
property. However, the annotation was cancelled, and thereafter a new TCT over the property was
issued in the names of Bella, et al. Finally, by virtue of a Deed of Sale dated January 23, 1997, the
subject property was sold to Wilson and Peter, in whose names TCT No. 170475 currently exists. A
complaint for reconveyance was then filed. Was there a trust established between Felisa and Bella,
Delfin,Sr., and Felimon, Sr.?

A: Yes. An express trust was created.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a
fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust
relations between parties may either be express or implied. An express trust is created by the intention of the
trustor or of the parties, while an implied trust comes into being by operation of law. Express trusts are
created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly
or impliedly evincing an intention to create a trust.

From the letter executed by Felisa, it unequivocally and absolutely declared her intention of transferring the
title over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in
securing a loan from the GSIS. She likewise stated clearly that she was retaining her ownership over the
subject property and articulated her wish to have her heirs share equally therein. Hence, while in the
beginning, an implied trust was merely created between Felisa, as trustor, and Bella, Delfin, Sr., and Felimon,
Sr., as both trustees and beneficiaries, the execution of the September 21, 1970 letter settled, once and for
all, the nature of the trust established between them as an express one, their true intention irrefutably extant
thereon.
 DOMINADOR M. APIQUE, v. EVANGELINE APIQUE FAHNENSTICH

G.R. No. 205705 | August 05, 2015

DOCTRINE OF THE CASE:

A joint account is one that is held jointly by two or more natural persons, or by two or more juridical persons or entities. Under
such setup, the depositors are joint owners or co-owners of the said account, and their share in the deposits shall be presumed
equal, unless the contrary is proved.

PERLAS-BERNABE, J.

FACTS: Dominador and Evangeline are siblings. Evangeline left for Germany to work sometime in 1979.
Evangeline executed General and Special Powers of Attorney constituting Dominador as her attorney-in-fact
to purchase real property for her, and to manage or supervise her business affairs in the Philippines.

As Evangeline was always in Germany, she opened a joint savings account with Dominador at the Claveria
Branch of the Philippine Commercial International Bank (PCI Bank) in Davao City, which later became
Equitable PCI Bank (EPCIB), and now Banco de Oro. Dominador withdrew the amount of P980,000.00
from the subject account and, thereafter, deposited the money to his own savings account with the same
bank. It was only on February 23, 2003 that Evangeline learned of such withdrawal from the manager of
EPCIB. Evangeline then had the passbook updated, which reflected the said withdrawal. She likewise
discovered that Dominador had deposited the amount withdrawn to his own account with the same bank and
that he had withdrawn various amounts from the said account.

Evangeline demanded the return of the amount withdrawn from the joint account, but to no avail. Hence,
she filed a complaint for sum of money, damages, and attorney's fees, with prayer for preliminary mandatory
and prohibitory injunction and temporary restraining order (TRO) against Dominador before the RTC,
docketed as Civil Case No. 29,122-02, impleading EPCIB as a party defendant.

In his answer, Dominador asserted, among others, that he was authorized to withdraw funds from the subject
account to answer for the expenses of Evangeline's projects, considering: (a) that it was a joint account, and
(b) the general and special powers of attorney executed by Evangeline in his favor. By way of counterclaim, he
sought payment of moral and exemplary damages, attorney's fees, litigation expenses, and costs of suit.
EPCIB, for its part, denied having violated its own banking rules and regulations, contending that the account
in question was an "OR" account such that any of the account holders may transact without the signature of
the other. It also pointed out that "no passbook" transactions were allowed if the following could be verified,
namely: (a) technicalities of documents, (b) identity of payee, (c) authenticity of signature/s, and (d) sufficiency
of funds.

RTC ruled in favor of Dominador, however, CA reversed. Hence, this petition.

ISSUE:

Whether or not Evangeline is entitled to the return of the amount of P980,000.00 Dominador withdrew from
their joint savings account with EPCIB, plus legal interest thereon.
RULING:

Yes.

A joint account is one that is held jointly by two or more natural persons, or by two or more juridical persons
or entities. Under such setup, the depositors are joint owners or co-owners of the said account, and their
share in the deposits shall be presumed equal, unless the contrary is proved, pursuant to Article 485 of the
Civil Code, which provides:

Art. 485. The share of the co-owners, in the benefits as well as in the charges, shall be proportional to their
respective interests. Any stipulation in a contract to the contrary shall be void.

The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless the contrary is
proved. (Emphasis supplied)

The common banking practice is that regardless of who puts the money into the account, each of the named
account holder has an undivided right to the entire balance, and any of them may deposit and/or withdraw,
partially or wholly, the funds without the need or consent of the other, during their lifetime. Nevertheless, as
between the account holders, their right against each other may depend on what they have agreed upon, and
the purpose for which the account was opened and how it will be operated.

In this case, there is no dispute that the account opened by Evangeline and Dominador under Savings
Account No. 1189-02819-5 with EPCIB was a joint "OR" account. It is also admitted that: (a) the account
was opened for a specific purpose, i.e., to facilitate the transfer of needed funds for Evangeline's business
projects;37 and (b) Dominador may withdraw funds therefrom "if"38 there is a need to meet Evangeline's
financial obligations arising from said projects.39 Hence, while Dominador is a co-owner of the subject
account as far as the bank is concerned — and may, thus, validly deposit and/or withdraw funds without the
consent of his co-depositor, Evangeline — as between him and Evangeline, his authority to withdraw, as well
as the amount to be withdrawn, is circumscribed by the purpose for which the subject account was opened.

Under the foregoing circumstances, Dominador's right to obtain funds from the subject account was, thus,
conditioned on the necessity of funds for Evangeline's projects. Admittedly, at the time he withdrew the
amount of P980,000.00 from the subject account, there was no project being undertaken for Evangeline.
Moreover, his claim that the said amount belonged to him, as part of the compensation promised by Holgar
for his services as administrator of the business affairs of Evangeline, was correctly rejected by the CA,
considering the dearth of competent evidence showing that Holgar: (a) undertook to pay Dominador the
amount of P1,000,000.00 for his services as administrator of Evangeline's various projects; and (b) remitted
such amount to the subject account for the benefit of Dominador. Having failed to justify his right over the
amount withdrawn, Dominador is liable for its return, as correctly adjudged by the CA.
 SUMMARY FORMAT

Q: Dominador and Evangeline are siblings. Respondent Evangeline then left the country to work
abroad. Evangeline executed General and Special Powers of Attorney constituting Dominador as her
attorney-in-fact to purchase real property for her, and to manage or supervise her business affairs in
the Philippines. Because of such, they opened a joint account at EPCIB. Dominador then withdrew
the amount of ₱980,000.00 from the subject account and, thereafter, deposited the money to his own
savings account with the same bank. This prompted Evangeline to demand for the return of the
amount, but to no avail. Evangeline then filed a case against Dominador impleading EPCIB as a
party defendant. In his answer, Dominador asserted, among others, that he was authorized to
withdraw funds from the subject account to answer for the expenses of Evangeline’s projects,
considering: (a) that it was a joint account, and (b) the general and special powers of attorney
executed by Evangeline in his favor. Can Dominador validly withdraw from the joint account
without Evangeline’s consent?

A: Yes. A joint account is one that is held jointly by two or more natural persons, or by two or more
juridical persons or entities. Under such setup, the depositors are joint owners or co-owners of the said
account, and their share in the deposits shall be presumed equal, unless the contrary is proved, pursuant to
Article 485 of the Civil Code.

The common banking practice is that regardless of who puts the money into the account, each of
the named account holder has an undivided right to the entire balance, and any of them may deposit
and/or withdraw, partially or wholly, the funds without the need or consent of the other, during their
lifetime. Nevertheless, as between the account holders, their right against each other may depend on what
they have agreed upon, and the purpose for which the account was opened and how it will be operated.

Since Evangeline and Dominador entered into a joint account, Dominador is a co-owner of the subject
account as far as the bank is concerned – and may, thus, validly deposit and/or withdraw funds without the
consent of his co-depositor, Evangeline – as between him and Evangeline, his authority to withdraw, as well as
the amount to be withdrawn, is circumscribed by the purpose for which the subject account was opened.

However, Dominador’s right to obtain funds from the subject account was conditioned on the necessity of
funds for Evangeline’s projects. Admittedly, at the time he withdrew the amount of ₱980,000.00 from
the subject account, there was no project being undertaken for Evangeline. Therefore, Dominador
must return the same to Evangeline.
 LAND BANK OF THE PHILIPPINES v. ALFREDO HABABAG, SR., SUBSTITUTED BY HIS
WIFE, CONSOLACION, AND CHILDREN, NAMELY: MANUEL, SALVADOR, WILSON,
JIMMY, ALFREDO, JR., AND JUDITH, ALL SURNAMED HABABAG

G.R. No. 172352 | September 16, 2015

DOCTRINE OF THE CASE:

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been
repeatedly -stressed by this Court that the measure is not the taker's gain but the owner's loss. The word "just" is used to
intensify the meaning of the word "compensation" to convey the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full [and] ample.

PERLAS-BERNABE, J.

FACTS: Alfredo Hababag, Sr. (Alfredo) was the owner of several parcels of agricultural land situated in the
Municipality of Gubat, Sorsogon. The aforesaid landholdings were voluntarily offered for sale (VOS) to the
government under Republic Act No. (RA) 6657, otherwise known as the "Comprehensive Agrarian Reform
Law of 1988," but only 69.3857 has. thereof (subject lands) were acquired in 1990.

The Land Bank of the Philippines (LBP) initially valued the subject lands at P1,237,850.00, but Alfredo
rejected the valuation. After summary administrative proceedings for the determination of the amount of just
compensation, the Office of the Provincial Agrarian Reform Adjudicator (PARAD) of the Department of
Agrarian Reform (DAR) Adjudication Board (DARAB) fixed the value of the subject lands at
P1,292,553.20. Dissatisfied, Alfredo filed a Complaint for the determination of the amount of just
compensation before the RTC.

RTC appointed two commissioners designated by each party to conduct an evaluation and appraisal of the
subject lands. Subsequently, the LBP-appointed commissioner, Francisco M. Corcuera (Commissioner
Corcuera), submitted his Commissioner's Report, fixing the amount of just compensation for the subject
lands at P2,358,385.48 based on (DAR) Administrative Order (AO) No. 6, series of 1992 (DAR AO 6-92), as
amended by DAR AO No. 11, series of 1994 (DAR AO 11-94). On the other hand, the commissioner
designated by Alfredo, Margarito Cuba (Commissioner Cuba) of Banco Sorsogon, valued the lands at
P5,420,600.00. On December 20, 1999, the RTC rendered a Decision (December 20, 1999 Decision) fixing
the amount of just compensation of the subject lands at P5,653,940.00.

In reaching the above-stated total amount, the RTC applied the Income Productivity Approach. It also
considered the Inspection and Appraisal Report submitted by Commissioner Cuba, finding the same to be
"the more realistic appraisal considering the economic condition of the country as well as the acquisition of
the property and the present assessed value and also the proximity of the property to the commercial center."

Alfredo appealed to the CA, which was docketed as CA-G.R. CV No. 66824, averring that the RTC
committed a mathematical error in computing the amount of just compensation for the subject lands, as well
as in fixing the remaining productive life of the coconut trees to only 20 years instead of 40 to 45 years.

On January 16, 2004, the CA rendered a Decision (January 16, 2004 CA Decision) in the aforesaid case,
indeed finding a mathematical error in the computation of the reasonable income from the coconut trees,
which if corrected would have been P23,335,200.00. Accordingly, adding to the same the total land appraised
value of P3,465,500.00, the CA came up with a total of P26,800,700.00. It, however, rejected Alfredo's claim
for the adjustment of the productive life of the coconut trees to anywhere between 40 to 45 years, as it gave
credence to the Inspection and Appraisal Report submitted by Commissioner Cuba which stated that the
remaining productive iife of the coconut trees would only be 20 years. While expressing misgivings to the
resultant amount which far exceeded the computations made by the parties' commissioners, it nonetheless
remanded the case for the re-computation of the accurate amount of just compensation, applying thereto the
Income Productivity Approach. In this light, it ratiocinated that the "court a quo, with the aid of its duly-
appointed commissioner, x x x is in the best position to appreciate the technical elements involved in the
formula used to determine the just compensation for [Alfredo's] property."

Pursuant to the January 16, 2004 CA Decision, the RTC ordered Commissioner Cuba to re-compute the
accurate amount of just compensation applying the Income Productivity Approach.

Commissioner Cuba, however, retained the total appraised values for the subject lands and the plants/trees at
P3,465,500.00 and P1,955,100.00, respectively, as similarly indicated in the December 20, 1999 RTC
Decision.

On March 22, 2004, the RTC rendered an Amended Decision, fixing the amount of the just compensation for
the subject lands at P40,423,400.00. With their motions for reconsideration having been denied in an
Order dated August 10, 2004, the LBP and the DAR filed separate petitions for review with the CA, docketed
as CA-G.R. SP Nos. 86066 and 86167, respectively. For its part, the LBP averred that the RTC gravely erred
in disregarding the factors under Section 17 of RA 6657 and DAR AO 6-92, as amended by DAR AO 11-94,
as ordained by the Court in the case of LBP v. Banal. On the other hand, the DAR contended that the RTC
erred in including in its computation the estimated income of the coconut trees for their remaining economic
life (computed at 20 years) and in adjudging a just compensation award which is higher than the offered
valuation of the landowner. Pending appeal, Alfredo passed away and was substituted by his heirs, i.e., the
Hababag Heirs.

In the assailed Decision dated November 15, 2005, the CA set aside the RTC's valuation for failure to give
due consideration to the factors enumerated in Section 17 of RA 6657 and the formula under DAR AO 6-92,
as amended by DAR AO 11-94. Moreover, contrary to the limitation imposed by DAR AO 6-92 - i.e., that
the computed value using the applicable formula shall not exceed the landowner's offer to sell - the CA found
that the amount as recomputed by the RTC was way beyond the landowner's offer of P1,750,000.00 as stated
in the Claims Valuation and Processing Form. Consequently, it gave more credence to the report submitted
by Commissioner Corcuera which made use of the DAR formula derived from the factors enumerated under
Section 17 of RA 6657.

Based on the foregoing, the average value per hectare of the 69.3857 hectare lands would therefore be
P34,567.4576.

The CA likewise considered the government's obligation to pay just compensation to be in the nature of a
forbearance of money and, as such, additionally imposed interests on the just compensation award at 12%
p.a., to be reckoned from the time of the taking or the filing of the complaint, whichever is earlier. 38

The LBP and the Hababag Heirs filed their respective motions for partial reconsideration which were both
denied in a Resolution dated April 19, 2006; hence, the instant petitions for review on certiorari.

ISSUE:
1. Whether or not CA erred in setting aside the just compensation fixed by the RTC which was in accordance
with the provisions of Section 17 of RA 6657 and the final decision of the CA in CA-G.R. CV No. 66824
directing its re-computation.

2. Whether or not LBP is still liable to pay interest even if the Hababag Heirs were already paid the
provisional compensation.
RULING:

1. No.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. It has been repeatedly -stressed by this Court that the measure is not the taker's gain but the
owner's loss. The word "just" is used to intensify the meaning of the word "compensation" to convey the idea
that the equivalent to be rendered for the property to be taken shall be real, substantial, full [and] ample.

In this relation, the RTC, sitting as a Special Agrarian Court, has been conferred with the original and
exclusive power to determine just compensation for parcels of land acquired by the State pursuant to the
agrarian reform program. To guide the RTC in this function, Section 17 of RA 6657 enumerates the factors
which must be taken into consideration to accurately determine the amount of just compensation to be
awarded in a particular case. They are: (a) the acquisition cost of the land; (b) the current value of like
properties; (c) the nature and actual use of the property, and the income therefrom; (d) the owner's sworn
valuation; (e) the tax declarations; (f) the assessment made by government assessors; (g) the social and
economic benefits contributed by the farmers and the farmworkers, and by the government to the property;
and (h) the nonpayment of taxes or loans secured from any government financing institution on the said land,
if any. Corollarily, pursuant to its rule-making power under Section 49 of the same law, the DAR translated
these factors into a basic formula, which courts have often referred to and applied, as the CA did in this case.
It, however, bears stressing that courts are not constrained to adopt the said formula in every case since the
determination of the amount of just compensation essentially partakes the nature of a judicial function. In
this accord, courts may either adopt the DAR formula or proceed with its own application for as long as the
factors listed in Section 17 of RA 6657 have been duly considered.

In keeping with these considerations, the Court finds the CA's valuation - which made use of the DAR
formula - as reflective of the factors set forth in Section 17 of RA 6657. Records disclose that the CA's
computation, as adopted from the LBP's own computation, is based on: (a) actual production data; (b) the
appropriate industry selling prices of the products from the Philippine Coconut Authority and the Bureau of
Agricultural Statistics of Sorsogon; and (c) the actual uses of the property. Likewise, the (a) income from the
coconut fruit-bearing trees, as well as the unirrigated riceland, (b) cumulative cost of the non-fruit-bearing
trees; and (c) market value of the cogonal land have been duly considered. The Court observes that the
holistic data gathered therefrom adequately consider the factors set forth in Section 17 of RA 6657, as well as
the DAR formula. As such, the CA's computation, which was derived from the same, must be sustained. Lest
it be misunderstood, the ascertainment of just compensation on the basis of the landholdings' nature,
location, and market value, as well as the volume and value of the produce is valid and accords with Section
17 of RA 6657 and the DAR formula, as in this case.

On the contrary, the Court finds the RTC's valuation to be improper, as it contradicts the definition of
"market value" as crafted by established jurisprudence on expropriation.

To elucidate, in determining the amount of just compensation for the subject lands, the RTC applied the
Income Productivity Approach which approximated the income for the remaining productive life of the
crops therein, without considering the fortuitous events and plant diseases, and with the expectation that they
would be compensated by developments which could be made by the property owner. The Court has
repeatedly ruled that the constitutional limitation of just compensation is considered to be the sum equivalent
of the market value of the property, which is, in turn, defined as the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition, or the fair value of the property as between
one who receives and one who desires to sell it, fixed at the time of the actual taking by the government. In this
accord, therefore, the Court cannot sustain the formula used by the RTC which was "based on the principle
of anticipation which implies that the value of a property is dependent on the potential net benefit that may
be derived from its ownership." Clearly, this approach, which is largely characterized by the element of
futurity, is inconsistent with the idea of valuing the expropriated property at the time of the taking.

2. On the issue of interests, suffice it to state that the just compensation due to the landowners for their
expropriated property is treated as an effective forbearance on the part of the State. The rationale therefor, as
enunciated in the case of Apo Fruits Corporation v. LBP, is to compensate the landowners for the income
they would have made had they been properly compensated for their properties at the time of the taking. In
other words, the award of 12% interests is imposed in the nature of damages for the delay in the payment of
the full just compensation award.

In the present case, the LBP had already made the corresponding deposit of their offered valuation in the
amount of P1,237,850.00 in cash and in bonds prior to the DAR's possession of the property. This amount is
lower than the just compensation awarded and, hence, in view of the above-stated principle, the payment of
interests remains in order insofar as the unpaid balance is concerned.

Anent the time of accrual, the interests should be computed from the time of the taking of the subject lands.
This is based on the principle that interest "runs as a matter of law and follows from the right of the
landowner to be placed in as good position as money can accomplish, as of the date of the taking."

With respect to the rate of interests, the Court observes that from the time of the taking up until June 30,
2013, the interest must be pegged at the rate of 12% p.a. pursuant to Section 261 of Central Bank Circular
No. 905, series of 1982, which was the prevailing rule on interest rates during such period. From July 1, 2013
onwards and until full payment, the interest rate should then be pegged at the rate of 6% p.a. pursuant to
Bangko Sentral ng Pilipinas Circular No. 799, series of 2013,62 which accordingly amended the old 12% p.a.
interest rate.
 SUMMARY FORMAT

Q: Alfredo Hababag, Sr. (Alfredo) was the owner of several parcels of agricultural land situated in
the Municipality of Gubat, Sorsogon. The aforesaid landholdings were voluntarily offered for sale
(VOS) to the government under Republic Act No. (RA) 6657, otherwise known as the
"Comprehensive Agrarian Reform Law of 1988,". The Land Bank of the Philippines (LBP) initially
valued the subject lands at P1,237,850.00, but Alfredo rejected the valuation. After summary
administrative proceedings for the determination of the amount of just compensation, the Office of
the Provincial Agrarian Reform Adjudicator (PARAD) of the Department of Agrarian Reform (DAR)
Adjudication Board (DARAB) fixed the value of the subject lands at P1,292,553.20. Dissatisfied,
Alfredo filed a Complaint for the determination of the amount of just compensation before the RTC.
RTC rendered a Decision fixing the amount of just compensation of the subject lands at
P5,653,940.00. RTC applied the Income Productivity Approach. CA set aside the RTC's valuation for
failure to give due consideration to the factors enumerated in Section 17 of RA 6657 and the formula
under DAR AO 6-92, as amended by DAR AO 11-94. Moreover, contrary to the limitation imposed by
DAR AO 6-92 - i.e., that the computed value using the applicable formula shall not exceed the
landowner's offer to sell - the CA found that the amount as recomputed by the RTC was way beyond
the landowner's offer of P1,750,000.00 as stated in the Claims Valuation and Processing Form. Is the
CA correct in setting aside the computation of RTC?

A: Yes. Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. It has been repeatedly -stressed by this Court that the measure is not the taker's gain but the
owner's loss. The word "just" is used to intensify the meaning of the word "compensation" to convey the idea
that the equivalent to be rendered for the property to be taken shall be real, substantial, full [and] ample.

In this relation, the RTC, sitting as a Special Agrarian Court, has been conferred with the original and
exclusive power to determine just compensation for parcels of land acquired by the State pursuant to the
agrarian reform program. To guide the RTC in this function, Section 17 of RA 6657 enumerates the factors
which must be taken into consideration to accurately determine the amount of just compensation to be
awarded in a particular case. They are: (a) the acquisition cost of the land; (b) the current value of like
properties; (c) the nature and actual use of the property, and the income therefrom; (d) the owner's sworn
valuation; (e) the tax declarations; (f) the assessment made by government assessors; (g) the social and
economic benefits contributed by the farmers and the farmworkers, and by the government to the property;
and (h) the nonpayment of taxes or loans secured from any government financing institution on the said land,
if any. Corollarily, pursuant to its rule-making power under Section 49 of the same law, the DAR translated
these factors into a basic formula, which courts have often referred to and applied, as the CA did in this case.
It, however, bears stressing that courts are not constrained to adopt the said formula in every case since the
determination of the amount of just compensation essentially partakes the nature of a judicial function. In
this accord, courts may either adopt the DAR formula or proceed with its own application for as long as the
factors listed in Section 17 of RA 6657 have been duly considered.

In keeping with these considerations, the Court finds the CA's valuation - which made use of the DAR
formula - as reflective of the factors set forth in Section 17 of RA 6657. Records disclose that the CA's
computation, as adopted from the LBP's own computation, is based on: (a) actual production data; (b) the
appropriate industry selling prices of the products from the Philippine Coconut Authority and the Bureau of
Agricultural Statistics of Sorsogon; and (c) the actual uses of the property. Likewise, the (a) income from the
coconut fruit-bearing trees, as well as the unirrigated riceland, (b) cumulative cost of the non-fruit-bearing
trees; and (c) market value of the cogonal land have been duly considered. The Court observes that the
holistic data gathered therefrom adequately consider the factors set forth in Section 17 of RA 6657, as well as
the DAR formula. As such, the CA's computation, which was derived from the same, must be sustained. Lest
it be misunderstood, the ascertainment of just compensation on the basis of the landholdings' nature,
location, and market value, as well as the volume and value of the produce is valid and accords with Section
17 of RA 6657 and the DAR formula, as in this case.

On the contrary, the Court finds the RTC's valuation to be improper, as it contradicts the definition of
"market value" as crafted by established jurisprudence on expropriation.
 WT CONSTRUCTION, INC. v. THE PROVINCE OF CEBU
G.R. No. 208984 | September 16, 2015

DOCTRINE OF THE CASE:

The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to
refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable.

PERLAS-BERNABE, J.

FACTS:

Province of Cebu was chosen by former President Gloria Macapagal-Arroyo to host the 12th Association of
Southeast Asian Nations (ASEAN) Summit. To cater to the event, it decided to construct the Cebu
International Convention Center (CICC or the project) at the New Mandaue Reclamation Area, Mandaue
City, Cebu, which would serve as venue for the ASEAN Summit.

Province of Cebu conducted a public bidding for the project and WTCI emerged as the winning bidder for
the construction of Phase I. After completing Phase I and receiving payment therefor, WTCI again won the
bidding for Phase II of the project involving the adjacent works on CICC.

As Phase II neared completion, the Province of Cebu caused WTCI to perform additional works on the
project which included site development, and additional structural, architectural, electric, and plumbing works
(additional works). Cognizant of the need to complete the project in time for the ASEAN Summit, and with
the repeated assurances that it would be promptly paid, WTCI agreed to perform the additional works
notwithstanding the lack of public bidding. Weeks before the scheduled ASEAN Summit, WTCI completed
the project, including the additional works and, accordingly, demanded payment therefor.

In a letter dated February 8, 2007, WTCI billed the Province of Cebu the amount of P175,951,478.69
corresponding to the added cost for the site development and extended structural and architectural works. In
a separate letter dated February 12, 2007, WTCI billed the Province of Cebu the amount of P85,266,407.97
representing the cost for the additional electrical and plumbing works. The Province of Cebu, however,
refused to pay, thereby prompting WTCI to send a Final Billing dated February 21, 2007 where it demanded
payment of the aggregate sum of P261,217,886.66.

In the letters dated March 20, 2007 and September 11, 2007, WTCI again reiterated its demand for payment
but the Province of Cebu still refused to pay. Thus, on January 22, 2008, WTCI filed a complaint for
collection of sum of money before the RTC.

For its defense, the Province of Cebu admitted the existence of the additional works but maintained that
there was no contract between it and WTCI therefor. It also claimed that the additional works did not
undergo public bidding as required by Republic Act No. (RA) 9184, otherwise known as the "Government
Procurement Reform Act." Upon joint verification by the parties, the value of the additional works was
pegged at P263,263,261.41. RTC ruled in favor of WTCI. CA affirmed the RTC's Order but reduced the
interest rate to 6% per annum.

ISSUES:

1. Whether or not the liability of the Province of Cebu is in the nature of a loan or forbearance of money.
2. Whether or not the interest due should be computed from the date of the filing of the complaint or from
the time extrajudicial demand was made.

RULING:

1. No. There is no question that the present case does not involve an obligation arising from a loan; what is at
issue is whether the liability of the Province of Cebu involves a forbearance of money, based on WTCI's
claim that it merely advanced the cost of the additional works. In Sunga-Chan v. CA, the Court characterized a
transaction involving forbearance of money as follows:

The term "forbearance," within the context of usury law, has been described as a contractual obligation of a
lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay
the loan or debt then due and payable.
In Estores v. Supangan, the Court explained that forbearance of money, goods, or credit 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 fulfilment of certain conditions such that if these conditions are
breached, the said person is entitled not only to the return of the principal amount given, but also to
compensation for the use of his money equivalent to the legal interest since the use or deprivation of funds is
akin to a loan.

Applying the standards to the case at hand, the Court finds that the liability of the Province of Cebu to WTCI
is not in the nature of a forbearance of money as it does not involve an acquiescence to the temporary use of
WTCI's money, goods or credits. Rather, this case involves WTCI's performance of a particular service, i.e.,
the performance of additional works on CICC, consisting of site development, additional structural,
architectural, plumbing, and electrical works thereon.

Verily, the Court has repeatedly recognized that liabilities arising from construction contracts do not partake
of loans or forbearance of money but are in the nature of contracts of service. In Federal Builders, Inc. v.
Foundation Specialists, Inc., the Court ruled that the liability arising from the non-payment for the construction
works, specifically the construction of a diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza
in Makati City, do not partake of a loan or forbearance of money but is more in the nature of a contract of
service. The Court, therefore, sustains the CA's ruling that the rate of legal interest imposable on the liability
of the Province of Cebu to WTCI is 6% per annum, in accordance with the guidelines laid down in Eastern
Shipping Lines, Inc. v. Court of Appeals.

The foregoing guidelines have been updated in Nacar v. Gallery Frames (Nacar), pursuant to Bangko Sentral ng
Pilipinas (BSP) Circular No. 799, series of 2013, which reduced the rate of legal interest for loans or
transactions involving forbearance of money, goods, or credit from 12% to 6% per annum. Nevertheless, the
rate of legal interest for obligations not constituting loans or forbearance such as the one subject of this case
remains unchanged at 6% per annum.

2. Court finds merit in WTCI's argument that the same should be reckoned from the time WTCI made the
extrajudicial demand for the payment of the principal, i.e., upon receipt of the Province of Cebu of WTCI's
February 8, 2007 and February 12, 2007 letters demanding payment for the additional structural and
architectural works, and additional electrical and plumbing works, respectively.

The Court observes, however, that WTCI neither appealed from nor sought a reconsideration of the
May 20, 2009 Judgment of the RTC which awarded interest to it computed from the time of the filing of the
complaint on January 22, 2008. Accordingly, the RTC's determination of the interest's reckoning point had
already become final as against WTCI since it was not one of the assigned errors considered on appeal. It is
settled that a decision becomes final as against a party who does not appeal the same. Consequently, the
present petition of WTCI questioning the RTC's determination on the reckoning point of the legal interest
awarded can no longer be given due course. The Court is, therefore, constrained to uphold the rulings of the
RTC and the CA that the legal interest shall be computed from the time of the filing of the complaint.
 SUMMARY FORMAT

Q: Province of Cebu was chosen by former President Gloria Macapagal-Arroyo to host the
12th ASEAN Summit. To cater to the event, it decided to construct the Cebu International
Convention Center (CICC or the project) which would serve as venue for the ASEAN Summit.
Province of Cebu conducted a public bidding for the project and WTCI emerged as the winning
bidder for the construction of Phase I. After completing Phase I, WTCI again won the bidding for
Phase II of the project involving the adjacent works on CICC. As Phase II neared completion, the
Province of Cebu caused WTCI to perform additional works on the project, WTCI agreed to perform
the additional works notwithstanding the lack of public bidding. Weeks before the scheduled
ASEAN Summit, WTCI completed the project, including the additional works and, accordingly,
demanded payment therefor. WTCI demanded for payment but the Province of Cebu still refused to
pay. Thus, it filed a complaint for collection of sum of money before the RTC. RTC ruled in favor of
WTCI. CA affirmed the RTC's Order but reduced the interest rate to 6% per annum. What is the
nature of Province of Cebu’s liability?

A: The liability of the Province of Cebu to WTCI is not in the nature of a forbearance of money as it does
not involve an acquiescence to the temporary use of WTCI's money, goods or credits. Rather, this case
involves WTCI's performance of a particular service, i.e., the performance of additional works on CICC,
consisting of site development, additional structural, architectural, plumbing, and electrical works thereon.

Verily, the Court has repeatedly recognized that liabilities arising from construction contracts do not partake
of loans or forbearance of money but are in the nature of contracts of service. In Federal Builders, Inc. v.
Foundation Specialists, Inc., the Court ruled that the liability arising from the non-payment for the construction
works, specifically the construction of a diaphragm wall, capping beam, and guide walls of the Trafalgar Plaza
in Makati City, do not partake of a loan or forbearance of money but is more in the nature of a contract of
service. The Court, therefore, sustains the CA's ruling that the rate of legal interest imposable on the liability
of the Province of Cebu to WTCI is 6% per annum.
 MAYBANK PHILIPPINES, INC. (FORMERLY PNB-REPUBLIC BANK) v. SPOUSES
OSCAR AND NENITA TARROSA

G.R. No. 213014 | October 14, 2015

DOCTRINE OF THE CASE:

An action to enforce a right arising from a mortgage should be enforced within ten (10) years from the time the right of action
accrues, i.e., when the mortgagor defaults in the payment of his obligation to the mortgagee; otherwise, it will be barred by
prescription and the mortgagee will lose his rights under the mortgage. However, mere delinquency in payment does not necessarily
mean delay in the legal concept.

PERLAS-BERNABE, J.

FACTS:

Respondents-spouses Oscar and Nenita Tarrosa (Sps. Tarrosa) obtained from then PNB-Republic Bank, now
petitioner Maybank Philippines, Inc. (Maybank), a loan in the amount of P91,000.00. The loan was secured by
a Real Estate Mortgage over a 500-square meter parcel of land situated in San Carlos City, Negros Occidental
and the improvements thereon.

After payment of said loan, the respondents again obtained another loan from Maybank in the amount of
P60,000.00 payable on March 11, 1984. Respondents failed to pay upon maturity. Sometime in April 1998, a
Final Demand Letter was sent by petitioner bank to respondents requiring the latter to settle their loan
obligation which already amounted to P564,679.91 inclusive of principal, interest, and penalty charges.

The spouses offered to settle it in a lesser amount to which the bank refused. On June 25, 1998, Maybank
instituted an extrajudicial foreclosure proceeding and the subject property was eventually sold in a public
auction to Philmay Property Inc. (PPI). The spouses then filed a complaint for declaration of nullity and
invalidity of the foreclosure sale averring among others that the second loan is an unsecured loan and that,
Maybank’s right to foreclose had already prescribed.

On the other hand, Maybank and PPI countered that: (a) the second loan was secured by the same real estate
mortgage under a continuing security provision therein; (b) when the loan became past due, Sps. Tarrosa
promised to pay and negotiated for a restructuring of their loan, but failed to pay despite demands; and (c)
Sps. Tarrosa's positive acknowledgment and admission of their indebtedness controverts the defense of
prescription.

RTC held that the second loan was subject to the continuing security provision in the real estate
mortgage. However, it ruled that Maybank's right to foreclose, reckoned from the time the mortgage
indebtedness became due and payable on March 11, 1984, had already prescribed, considering the lack of any
timely judicial action, written extrajudicial demand or written acknowledgment by the debtor of his debt that
could interrupt the prescriptive period. Accordingly, it declared the extrajudicial foreclosure proceedings
affecting the subject property as null and void, and ordered Maybank to pay Sps. Tarrosa moral and
exemplary damages, as well as attorney's fees and litigation expenses. CA affirmed.

ISSUE:
Whether or not the CA committed reversible error in finding that Maybank's right to foreclose the real estate
mortgage over the subject property was barred by prescription.

RULING:

Yes. An action to enforce a right arising from a mortgage should be enforced within ten (10) years from the
time the right of action accrues, i.e., when the mortgagor defaults in the payment of his obligation to the
mortgagee; otherwise, it will be barred by prescription and the mortgagee will lose his rights under the
mortgage. However, mere delinquency in payment does not necessarily mean delay in the legal concept.

In order that the debtor may be in default, it is necessary that: (a) the obligation be demandable and already
liquidated; (b) the debtor delays performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary. – i.e., when there is an express stipulation to that effect; where
the law so provides; when the period is the controlling motive or the principal inducement for the creation of
the obligation; and where demand would be useless. Moreover, 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. Thus, it is only when demand to pay is unnecessary in case of the aforementioned circumstances,
or when required, such demand is made and subsequently refused that the mortgagor can be considered in
default and the mortgagee obtains the right to file an action to collect the debt or foreclose the mortgage.

In this case, the provision in the Real Estate Mortgage between the parties merely articulated Maybank's right
to elect foreclosure upon Sps. Tarrosa's failure or refusal to comply with the obligation secured, which is one
of the rights duly accorded to mortgagees in a similar situation. In no way did it affect the general parameters
of default, particularly the need of prior demand under Article 116941 of the Civil Code, considering that it
did not expressly declare: (a) that demand shall not be necessary in order that the mortgagor may be in
default; or (b) that default shall commence upon mere failure to pay on the maturity date of the loan.

Hence, the CA erred in construing the above provision as one through which the parties had dispensed with
demand as a condition sine qua non for the accrual of Maybank's right to foreclose the real estate mortgage
over the subject property, and thereby, mistakenly reckoned such right from the maturity date of the loan on
March 11, 1984. In the absence of showing that demand is unnecessary for the loan obligation to become due
and demandable, Maybank's right to foreclose the real estate mortgage accrued only after the lapse of the
period indicated in its final demand letter for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days from
receipt of the final demand letter dated March 4, 1998. Consequently, both the CA and the RTC committed
reversible error in declaring that Maybank's right to foreclose the real estate mortgage had already prescribed.

Considering that the existence of the loan had been admitted, the default on the part of the debtors-
mortgagors had been duly established, and the foreclosure proceedings had been initiated within the
prescriptive period as afore-discussed, the Court finds no reason to nullify the extrajudicial foreclosure sale of
the subject property.
 SUMMARY FORMAT

Q: On December 15, 1980, respondent Spouses Tarrosa obtained a loan from PNB-Republic Bank,
now Maybank Philippines, in the amount of P91,000.00 secured by a real estate mortgage over a
parcel of land situated in San Carlos, Negros Occidental. After payment of said loan, the
respondents again obtained another loan from Maybank in the amount of P60,000.00 payable on
March 11, 1984. Respondents failed to pay upon maturity. Sometime in April 1998, a Final Demand
Letter was sent by petitioner bank to respondents requiring the latter to settle their loan obligation
which already amounted to P564,679.91 inclusive of principal, interest, and penalty charges. The
spouses offered to settle it in a lesser amount to which the bank refused. On June 25, 1998, Maybank
instituted an extrajudicial foreclosure proceeding and the subject property was eventually sold in a
public auction to Philmay Property Inc. (PPI). The spouses then filed a complaint for declaration of
nullity and invalidity of the foreclosure sale averring among others that the second loan is an
unsecured loan and that, Maybank’s right to foreclose had already prescribed. Does the right of
Maybank to foreclose the real estate mortgage over the subject property already barred by
prescription?

A: No. An action to enforce a right arising from a mortgage should be enforced within ten (10) years from
the time the right of action accrues, i.e., when the mortgagor defaults in the payment of his obligation to the
mortgagee; otherwise, it will be barred by prescription and the mortgagee will lose his rights under the
mortgage. However, mere delinquency in payment does not necessarily mean delay in the legal concept.

In this case, the provision in the Real Estate Mortgage between the parties merely articulated Maybank's right
to elect foreclosure upon Sps. Tarrosa's failure or refusal to comply with the obligation secured, which is one
of the rights duly accorded to mortgagees in a similar situation. In no way did it affect the general parameters
of default, particularly the need of prior demand under Article 1169 of the Civil Code, considering that it did
not expressly declare: (a) that demand shall not be necessary in order that the mortgagor may be in defaul; or
(b) that default shall commence upon mere failure to pay on the maturity date of the loan.

In the absence of showing that demand is unnecessary for the loan obligation to become due and
demandable, Maybank's right to foreclose the real estate mortgage accrued only after the lapse of the period
indicated in its final demand letter for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days from receipt of
the final demand letter dated March 4, 1998.
 G.V. FLORIDA TRANSPORT, INC. v. HEIRS OF ROMEO L. BATTUNG, JR.,
REPRESENTED BY ROMEO BATTUNG, SR.

G.R. No. 208802 | October 14, 2015

DOCTRINE OF THE CASE:

In case where the victim’s death was caused by a co-passenger, the applicable provision is Article 1763 of the Civil Code,
which states that "a common carrier is responsible for injuries suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act or omission." Notably, for this obligation,
the law provides a lesser degree of diligence, i.e., diligence of a good father of a family, in assessing the existence of any culpability
on the common carrier's part.

PERLAS-BERNABE, J.

FACTS:

Romeo L. Battung, Jr. (Battung) boarded petitioner's bus in Delfin Albano, Isabela, bound for
Manila. Battung was seated at the first row behind the driver and slept during the ride. When the bus reached
the Philippine Carabao Center in Muñoz, Nueva Ecija, the bus driver, Duplio, stopped the bus and alighted
to check the tires. At this point, a man who was seated at the fourth row of the bus stood up, shot Battung at
his head, and then left with a companion. The bus conductor, Daraoay, notified Duplio of the incident and
thereafter, brought Romeo to the hospital, but the latter was pronounced dead on arrival. Hence, respondents
filed a complaint on July 15, 2008 for damages in the aggregate amount of P1,826,000.00 based on a breach of
contract of carriage against petitioner, Duplio, and Baraoay (petitioner, et al.) before the RTC. Respondents
contended that as a common carrier, petitioner and its employees are bound to observe extraordinary
diligence in ensuring the safety of passengers; and in case of injuries and/or death on the part of a passenger,
they are presumed to be at fault and, thus, responsible therefor. As such, petitioner, et al. should be held
civilly liable for Battung's death.

In their defense, petitioner, et al. maintained that they had exercised the extraordinary diligence required by
law from common carriers. In this relation, they claimed that a common carrier is not an absolute insurer of
its passengers and that Battung's death should be properly deemed a fortuitous event. Thus, they prayed for
the dismissal of the complaint, as well as the payment of their counterclaims for damages and attorney's fees.
RTC ruled in respondents' favor. CA affirmed the ruling of the RTC.

ISSUE:

Whether or not the CA correctly affirmed the ruling of the RTC finding petitioner liable for damages to
respondent arising from culpa contractual.

RULING:

No. The law exacts from common carriers (i.e., those persons, corporations, firms, or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public) the highest degree of diligence (i.e., extraordinary diligence) in ensuring
the safety of its passengers. Articles 1733 and 1755 of the Civil Code state:

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.

Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

In this relation, Article 1756 of the Civil Code provides that "[i]n case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in Articles 1733 and 1755." This disputable presumption may
also be overcome by a showing that the accident was caused by a fortuitous event.21

The foregoing provisions notwithstanding, it should be pointed out that the law does not make the common
carrier an insurer of the absolute safety of its passengers.

In this case, Battung's death was neither caused by any defect in the means of transport or in the method of
transporting, or to the negligent or willful acts of petitioner's employees, namely, that of Duplio and Daraoay,
in their capacities as driver and conductor, respectively. Instead, the case involves the death of Battung wholly
caused by the surreptitious act of a co-passenger who, after consummating such crime, hurriedly alighted
from the vehicle. Thus, there is no proper issue on petitioner's duty to observe extraordinary diligence in
ensuring the safety of the passengers transported by it, and the presumption of fault/negligence against
petitioner under Article 1756 in relation to Articles 1733 and 1755 of the Civil Code should not apply.

On the other hand, since Battung's death was caused by a co-passenger, the applicable provision is Article
1763 of the Civil Code, which states that "a common carrier is responsible for injuries suffered by a passenger
on account of the willful acts or negligence of other passengers or of strangers, if the common carrier's
employees through the exercise of the diligence of a good father of a family could have prevented or stopped
the act or omission." Notably, for this obligation, the law provides a lesser degree of diligence, i.e., diligence
of a good father of a family, in assessing the existence of any culpability on the common carrier's part.

In this case, records reveal that when the bus stopped at San Jose City to let four (4) men ride petitioner's bus
(two [2] of which turned out to be Battung's murderers), the bus driver, Duplio, saw them get on the bus and
even took note of what they were wearing. Moreover, Duplio made the bus conductor, Daraoay, approach
these men and have them pay the corresponding fare, which Daraoay did. During the foregoing, both Duplio
and Daraoay observed nothing which would rouse their suspicion that the men were armed or were to carry
out an unlawful activity. With no such indication, there was no need for them to conduct a more stringent
search (i.e., bodily search) on the aforesaid men. By all accounts, therefore, it cannot be concluded that
petitioner or any of its employees failed to employ the diligence of a good father of a family in relation to its
responsibility under Article 1763 of the Civil Code. As such, petitioner cannot altogether be held civilly liable.
 SUMMARY FORMAT

Q: Romeo L. Battung, Jr. (Battung) boarded petitioner's (G.V. Florida Transport, Inc.) bus. Battung
was seated at the first row behind the driver and slept during the ride. When the bus reached the
Philippine Carabao Center in Muñoz, Nueva Ecija, the bus driver, Duplio, stopped the bus and
alighted to check the tires. At this point, a man who was seated at the fourth row of the bus stood up,
shot Battung at his head, and then left with a companion. The bus conductor, Daraoay, notified
Duplio of the incident and thereafter, brought Romeo to the hospital, but the latter was pronounced
dead on arrival. Hence, respondents filed a complaint for damages in the aggregate amount of
P1,826,000.00 based on a breach of contract of carriage against petitioner, Duplio, and Baraoay
(petitioner, et al.) before the RTC. Respondents contended that as a common carrier, petitioner and
its employees are bound to observe extraordinary diligence in ensuring the safety of passengers; and
in case of injuries and/or death on the part of a passenger, they are presumed to be at fault and,
thus, responsible therefor. RTC ruled in respondents' favor. CA affirmed the ruling of the RTC. Can
the petitioner be held civilly liable?

A: No. Since Battung's death was caused by a co-passenger, the applicable provision is Article 1763 of the
Civil Code, which states that "a common carrier is responsible for injuries suffered by a passenger on
account of the willful acts or negligence of other passengers or of strangers, if the common carrier's
employees through the exercise of the diligence of a good father of a family could have prevented or
stopped the act or omission." Notably, for this obligation, the law provides a lesser degree of diligence, i.e.,
diligence of a good father of a family, in assessing the existence of any culpability on the common carrier's
part.

In this case, records reveal that when the bus stopped at San Jose City to let four (4) men ride petitioner's bus
(two [2] of which turned out to be Battung's murderers), the bus driver, Duplio, saw them get on the bus and
even took note of what they were wearing. Moreover, Duplio made the bus conductor, Daraoay, approach
these men and have them pay the corresponding fare, which Daraoay did. During the foregoing, both Duplio
and Daraoay observed nothing which would rouse their suspicion that the men were armed or were to carry
out an unlawful activity. With no such indication, there was no need for them to conduct a more stringent
search (i.e., bodily search) on the aforesaid men. By all accounts, therefore, it cannot be concluded that
petitioner or any of its employees failed to employ the diligence of a good father of a family in relation to its
responsibility under Article 1763 of the Civil Code. As such, petitioner cannot altogether be held civilly liable.
 RENEE B. TANCHULING v. SOTERO C. CANTELA
GR No. 209284 | November 10, 2015

DOCTRINE OF THE CASE

Simulation takes place when the parties do not really want the contract they have executed to produce the legal effects
expressed by its wordings.

PERLAS-BERNABE, J.:

FACTS: Sps. Tanchuling and Cantela executed the subject deed covering two (2) parcels of land. On the face
of the subject deed, the sum of F400,000.00 appears as the consideration for Cantela's purported
purchase. After the subject deed's execution, Vicente delivered the owner's copies of the TCTs to Cantela,
although it is undisputed that none of the parties are in actual physical possession of the properties.

When Sps. Tanchuling tried to recover the TCTs from Cantela, the latter refused, prompting them to file on a
Complaint for Annulment of Deed of Sale and Delivery of the [Owner's] Duplicate Copy of the [TCTs] with
Preliminary Prohibitory and Mandatory Injunction before the RTC. They alleged that the subject deed was
absolutely simulated, hence, null and void, given that: (a) there was no actual consideration paid by Cantela to
them; (b) the subject deed was executed to merely show to their neighbors that they are the true owners of
the properties, considering that there are portions thereof being illegally sold by a certain John Mercado to
unsuspecting and ignorant buyers; and (c) Cantela simultaneously executed an undated Deed of Absolute Sale
(undated deed) reconveying the properties in their favor.

In his Answer with Compulsory Counterclaim, Cantela insisted that the sale of the properties to him was
valid as he bought the same for the price of P400,000.00. He further averred that the undated deed was
surreptitiously inserted by Sps. Tanchuling in the copies of the subject deed presented to him for signing.

The RTC granted the complaint and consequently, nullified the subject deed for being absolutely simulated.
However, the CA reversed the RTC ruling, finding that the contemporaneous and subsequent acts of the
parties, particularly Cantela, who tried to assert his dominion over the properties, negate absolute simulation.

ISSUE
Whether or not the subject deed is simulated, hence, null and void

RULING
Yes. Simulation takes place when the parties do not really want the contract they have executed to
produce the legal effects expressed by its wordings. Simulation or vices of declaration may be either absolute
or relative. Article 1345 of the Civil Code distinguishes an absolute simulation from a relative one; while
Article 1346 discusses their effects.

In this case, the Court agrees with the RTC that the subject deed was absolutely simulated. The parties never
intended to be bound by any sale agreement. Instead, the subject deed was executed merely as a front to show
the public that Sps. Tanchuling were the owners of the properties in order to deter the group of John
Mercado from illegally selling the same.

Although the subject deed between Sps. Tanchuling and Cantela stipulated a consideration of P400,000.00,
there was actually no exchange of money between them as revealed in the testimonies of the witnesses.

In view of the foregoing, the Court thus concludes that Sps. Tanchuling never intended to transfer the
properties to Cantela; hence, the subject deed was absolutely simulated and in consequence, null and void.
 SUMMARY FORMAT

Q: Sps. Tanchuling and Cantela executed the subject deed covering two (2) parcels of land. On the
face of the subject deed, the sum of F400,000.00 appears as the consideration for Cantela's purported
purchase. After the subject deed's execution, Vicente delivered the owner's copies of the TCTs to
Cantela, although it is undisputed that none of the parties are in actual physical possession of the
properties. When Sps. Tanchuling tried to recover the TCTs from Cantela, the latter refused,
prompting them to file on a Complaint for Annulment of Deed of Sale and Delivery of the [Owner's]
Duplicate Copy of the [TCTs] with Preliminary Prohibitory and Mandatory Injunction before the
RTC. They alleged that the subject deed was absolutely simulated, hence, null and void, given that:
there was no actual consideration paid by Cantela to them; and the subject deed was executed to
merely show to their neighbors that they are the true owners of the properties. However, Cantela
insisted that the sale of the properties to him was valid as he bought the same for the price of
P400,000.00. He further averred that the undated deed was surreptitiously inserted by Sps.
Tanchuling in the copies of the subject deed presented to him for signing. Is the subject deed
simulated?

A: Yes. In this case, the subject deed was absolutely simulated. The parties never intended to be bound by
any sale agreement. Instead, the subject deed was executed merely as a front to show the public that Sps.
Tanchuling were the owners of the properties in order to deter the group of John Mercado from illegally
selling the same. Moreover, there was actually no exchange of money between the parties.
 DOLORES DIAZ v. PEOPLE
GR No. 208113 | December 2, 2015

DOCTRINE OF THE CASE

With the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799,
series of 2013, there is a need to partially modify the same in that the interest accruing from the time of the finality of this
Decision should be imposed at the lower rate of six percent (6%) p.a., and not twelve percent (12%) p.a. as imposed by the CA.

PERLAS-BERNABE, J.:

FACTS: An Information for estafa was filed against petitioner before the RTC of Manila, for her alleged
failure to return or remit the proceeds from various merchandise valued at P32,000.00 received by her in trust

The prosecution anchored its case on the testimony of respondent who claimed to be engaged in the business
of selling goods/merchandise through agents (one of whom is petitioner) under the condition that the latter
shall turn over the proceeds or return the unsold items to her a month after they were entrusted. Respondent
averred that on February 20, 1996, she entrusted merchandise worth P35,300.00 to petitioner as evidenced by
an acknowledgment receipt. However, petitioner was only able to remit the amount of P3,300.00 and
thereafter, failed to make further remittances and ignored respondent's demands to remit the proceeds or
return the goods. As a defense, petitioner admitted having previous business dealings with respondent not as
an agent but as a a client who used to buy purchase order cards (POCs) and gift checks (GCs) from
respondent on installment basis.

The RTC acquitted petitioner of the charge of estafa but held her civilly liable to pay respondent the amount
of P32,000.00, with interest from the filing of the Information on March 11, 1999 until fully paid, and to pay
the costs. The RTC adjudged petitioner civilly liable "having admitted that she received the [GCs] in the
amount of P32,000.00." In this relation, it further considered the relationship of respondent and petitioner as
in the nature of a principal-agent which renders the agent civilly liable only for damages which the principal
may suffer due to the non-performance of his duty under the agency. CA upheld petitioner's civil liability

ISSUE
Whether or not the CA committed reversible error in finding petitioner civilly liable to respondent.

RULING
No. The extinction of the penal action does not carry with it the extinction of the civil liability
where the acquittal is based on reasonable doubt as only preponderance of evidence, or "greater weight of the
credible evidence," is required. Thus, an accused acquitted of estafa may still be held civilly liable where the
facts established by the evidence so warrant, as in this case.

Respondent was able to prove by preponderance of evidence the fact of the transaction, as well as
petitioner's failure to remit the proceeds of the sale of the merchandise worth P32,000.00, or to return the
same to respondent in case such merchandise were not sold. This was established through the presentation of
the acknowledgment receipt which, as the document's name connotes, shows that petitioner acknowledged
receipt from respondent of the listed items with their corresponding values, and assumed the obligation to
return the same on March 20, 1996 if not sold

In fine, the CA's ruling on petitioner's civil liability is hereby sustained. In line, however, with the
amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799,
series of 2013, there is a need to partially modify the same in that the interest accruing from the time of the
finality of this Decision should be imposed at the lower rate of six percent (6%) p.a., and not twelve percent
(12%) p.a. as imposed by the CA.
 SUMMARY FORMAT

Q: Petitioner was charged with estafa. Respondent averred that on February 20, 1996, she entrusted
merchandise worth P35,300.00 to petitioner as evidenced by an acknowledgment receipt. However,
petitioner was only able to remit the amount of P3,300.00 and thereafter, failed to make further
remittances and ignored respondent's demands to remit the proceeds or return the goods. As a
defense, petitioner admitted having previous business dealings with respondent not as an agent but
as a client who used to buy purchase order cards (POCs) and gift checks (GCs) from respondent on
installment basis. The RTC acquitted petitioner of the charge of estafa but held her civilly liable to
pay respondent the amount of P32,000.00, with interest from the filing of the Information on March
11, 1999 until fully paid, and to pay the costs. The RTC adjudged petitioner civilly liable "having
admitted that she received the [GCs] in the amount of P32,000.00." In this relation, it further
considered the relationship of respondent and petitioner as in the nature of a principal-agent which
renders the agent civilly liable only for damages which the principal may suffer due to the non-
performance of his duty under the agency. CA upheld petitioner's civil liability. Should the
petitioner be held civilly liable? If yes, what is the rate of interest?

A: Yes. Respondent was able to prove by preponderance of evidence the fact of the transaction, as well as
petitioner's failure to remit the proceeds of the sale of the merchandise worth P32,000.00, or to return the
same to respondent in case such merchandise were not sold. This was established through the presentation of
the acknowledgment receipt which, as the document's name connotes, shows that petitioner acknowledged
receipt from respondent of the listed items with their corresponding values, and assumed the obligation to
return the same on March 20, 1996 if not sold

With the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No.
799, series of 2013, there is a need to partially modify the same in that the interest accruing from the time of
the finality of this Decision should be imposed at the lower rate of six percent (6%) p.a., and not twelve
percent (12%) p.a. as imposed by the CA.
 ROGELIO S. NOLASCO v. CELERINO S. CUERPO
GR No. 210215 | December 9, 2015

DOCTRINE OF THE CASE

The rescission (or resolution) 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..

PERLAS-BERNABE, J.:

FACTS: Petitioners and respondents entered into a Contract to Sell (subject contract) over the subject
land. The subject contract provides, inter alia, that: (a) the consideration for the sale is P33,155,000.00 payable
as follows: down payment in the amount of P11,604,250.00 inclusive of the amount of P2,000,000.00
previously paid by respondents as earnest money/reservation fee, and the remaining balance of
P21,550,750.00 payable in 36 monthly installments, each in the amount of P598,632.00 through post-dated
checks; (b) in case any of the checks is dishonored, the amounts already paid shall be forfeited in petitioners'
favor, and the latter shall be entitled to cancel the subject contract without judicial recourse in addition to
other appropriate legal action; (c) respondents are not entitled to possess the subject land until full payment of
the purchase price; (d) petitioners shall transfer the title over the subject land from a certain Edilberta N.
Santos to petitioners' names, and, should they fail to do so, respondents may cause the said transfer and
charge the costs incurred against the monthly amortizations; and (e) upon full payment of the purchase price,
petitioners shall transfer title over the subject land to respondents. However, respondents sent petitioners a
letter seeking to rescind the subject contract on the ground of financial difficulties. They also sought the
return of the amount they had paid. As their letter went unheeded, respondents filed complaint for rescission

Petitioners countered that respondents' act is a unilateral cancellation of the subject contract as the former
did not consent to it. Moreover, the ground of financial difficulties is not a ground to effect a valid rescission.
The RTC ruled in favor of respondents and, accordingly, ordered the rescission of the subject contract; and
the return of the amounts already paid as well as the remaining post-dated checks issued by respondent
Celerino S. Cuerpo representing the remaining monthly amortizations. The CA affirmed.

ISSUE
Whether or not the CA correctly affirmed the ruling of the RTC

RULING
No. Under Article 1191, the rescission (or resolution) 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.

Here, it cannot be said that petitioners' failure to undertake their obligation under paragraph 7 (to
cause the transfer of the property to their names from one Edilberta N. Santos within 90 days from the
execution of said contract) defeats the object of the parties in entering into the subject contract, considering
that the same paragraph provides respondents contractual recourse in the event of petitioners' non-
performance of the aforesaid obligation, that is, to cause such transfer themselves in behalf and at the
expense of petitioners. Indubitably, there is no substantial breach of paragraph 7 on the part of petitioners
that would necessitate a rescission (or resolution) of the subject contract.

The foregoing notwithstanding, the Court cannot grant petitioners' prayer to order the cancellation
of the subject contract and the forfeiture of the amounts already paid by respondents on account of the
latter's failure to pay its monthly amortizations, simply because petitioners neither prayed for this specific
relief nor argued that they were entitled to the same. Worse, petitioners were declared "as in default" for
failure to file the required pre-trial brief and, thus, failed to present any evidence in support of their defense.
 SUMMARY FORMAT

Q: Petitioners and respondents entered into a Contract to Sell (subject contract) over the subject
land. The subject contract provides, inter alia, that: (a) the consideration for the sale is
P33,155,000.00 payable as follows: down payment in the amount of P11,604,250.00 inclusive of the
amount of P2,000,000.00 previously paid by respondents as earnest money/reservation fee, and the
remaining balance of P21,550,750.00 payable in 36 monthly installments, each in the amount of
P598,632.00 through post-dated checks; (b) in case any of the checks is dishonored, the amounts
already paid shall be forfeited in petitioners' favor, and the latter shall be entitled to cancel the
subject contract without judicial recourse in addition to other appropriate legal action; (c)
respondents are not entitled to possess the subject land until full payment of the purchase price; ( d)
petitioners shall transfer the title over the subject land from a certain Edilberta N. Santos to
petitioners' names, and, should they fail to do so, respondents may cause the said transfer and
charge the costs incurred against the monthly amortizations; and (e) upon full payment of the
purchase price, petitioners shall transfer title over the subject land to respondents. However,
respondents sent petitioners a letter seeking to rescind the subject contract on the ground of
financial difficulties. They also sought the return of the amount they had paid. As their letter went
unheeded, respondents filed complaint for rescission. Petitioners countered that respondents' act is
a unilateral cancellation of the subject contract as the former did not consent to it. Moreover, the
ground of financial difficulties is not a ground to effect a valid rescission. The RTC ruled in favor of
respondents and, accordingly, ordered the rescission of the subject contract; and the return of the
amounts already paid as well as the remaining post-dated checks issued by respondent Celerino S.
Cuerpo representing the remaining monthly amortizations. The CA affirmed. Is the CA correct?

A: No. It cannot be said that petitioners' failure to undertake their obligation under paragraph 7 (to cause the
transfer of the property to their names from one Edilberta N. Santos within 90 days from the execution of
said contract) defeats the object of the parties in entering into the subject contract, considering that the same
paragraph provides respondents contractual recourse in the event of petitioners' non-performance of the
aforesaid obligation, that is, to cause such transfer themselves in behalf and at the expense of petitioners.
Indubitably, there is no substantial breach of paragraph 7 on the part of petitioners that would necessitate a
rescission (or resolution) of the subject contract.

The foregoing notwithstanding, the Court cannot grant petitioners' prayer to order the cancellation of the
subject contract and the forfeiture of the amounts already paid by respondents on account of the latter's
failure to pay its monthly amortizations, simply because petitioners neither prayed for this specific relief nor
argued that they were entitled to the same. Worse, petitioners were declared "as in default" for failure to file
the required pre-trial brief and, thus, failed to present any evidence in support of their defense.
 FILINVEST ALABANG v. CENTURY IRON WORKS
GR No. 213229 | December 9, 2015

DOCTRINE OF THE CASE

Article 1724 of the Civil Code does not preclude the parties from stipulating on additional works to the project covered
by said fixed lump sum contract which would entail added liabilities on the part of the project owner provided that there exists:
(a) a written authority from the developer or project owner ordering or allowing the written changes in work; and (b) written
agreement of the parties with regard to the increase in price or cost due to the change in work or design modification.

PERLAS-BERNABE, J.:

FACTS: Petitioner awarded various contracts to respondent, including a contract for the completion of the
metal works requirement of Filinvest Festival Supermall as evidenced by the Agreement for Construction
executed by both parties (subject contract), as well as the General Conditions of Contract (General
Conditions) which supplements the subject contract. After the completion of said project, respondent tried to
fully settle its credit with petitioner, but the latter, despite demands, allegedly withheld without any reasonable
ground the payment of the: (a) balance of the retention fee amounting to P40,880.00; (b) additional deduction
of P227,500.00 from the latter's total payments; and (c) the cost of an additional scenic elevator enclosure.
Respondent then filed a case for sum of money with damages against petitioner

In defense, petitioner maintained that: (a) it had the right to retain the amounts of P40,880.00 and
P227,500.00 as they represented damages arising from respondent's substandard workmanship; and (b) the
subject contract is lump sum in nature, hence, it cannot be liable for the amount representing the additional
scenic elevator enclosure absent any instruction authorizing the construction of the same.

RTC granted respondent's claim for the amount of P227,500.00 plus legal interest, but denied the rest of the
latter's claims. The CA affirmed the RTC decision with modification.

ISSUE
Whether or not the CA correctly ordered petitioner to pay the following amounts to respondent: (a)
balance of the retention fee; (b) additional deduction of P227,500.00 due to purported substandard work of
the latter; and (c) the cost of an additional scenic elevator enclosure

RULING
Yes. It was found that petitioner had issued a Certificate of Completion and Acceptance signifying
that it had already accepted respondent's work as up to par. This estops petitioner from withholding the
amounts due to respondent's purported substandard workmanship. Therefore, it is but proper that petitioner
remit to respondent the amounts of P40,880.00 and P227,500.00 it withheld from the latter.

In a fixed lump sum contract, the project owner agrees to pay the contractor a specified amount for
completing a scope of work involving a variety of unspecified items of work without requiring a cost
breakdown. The project owner's liability to the contractor is generally limited to what is stipulated therein.
However, it must be clarified that Article 1724 of the Civil Code does not preclude the parties from
stipulating on additional works to the project covered by said fixed lump sum contract which would entail
added liabilities on the part of the project owner provided that there exists: (a) a written authority from the
developer or project owner ordering or allowing the written changes in work; and (b) written agreement of the
parties with regard to the increase in price or cost due to the change in work or design modification.
These requisites are present in this case. As the construction of an additional scenic elevator
enclosure was covered by a valid extra work order to the subject contract, respondent is entitled to recover
from petitioner the cost of the same. On a final note, all the amounts due to respondent should be subject to
legal interest at the rate of twelve percent (12%) per annum from extrajudicial demand until June 30, 2013
and six percent (6%) per annum thereafter until full payment, in accordance with recent jurisprudence.
 SUMMARY FORMAT

Q: Petitioner awarded various contracts to respondent, including a contract for the completion of
the metal works requirement of Filinvest Festival Supermall as evidenced by the Agreement for
Construction executed by both parties (subject contract), as well as the General Conditions of
Contract (General Conditions) which supplements the subject contract. After the completion of said
project, respondent tried to fully settle its credit with petitioner, but the latter, despite demands,
allegedly withheld without any reasonable ground the payment of the: (a) balance of the retention
fee amounting to P40,880.00; (b) additional deduction of P227,500.00 from the latter's total
payments; and (c) the cost of an additional scenic elevator enclosure. Respondent then filed a case
for sum of money with damages against petitioner. Should the petitioner be held liable for the cost of
an additional scenic elevator enclosure?

A: Yes. It must be clarified that Article 1724 of the Civil Code does not preclude the parties from stipulating
on additional works to the project covered by said fixed lump sum contract which would entail added
liabilities on the part of the project owner provided that there exists: (a) a written authority from the
developer or project owner ordering or allowing the written changes in work; and (b) written agreement of the
parties with regard to the increase in price or cost due to the change in work or design modification. These
requisites are present in this case. As the construction of an additional scenic elevator enclosure was covered
by a valid extra work order to the subject contract, respondent is entitled to recover from petitioner the cost
of the same.
 LAND BANK OF PHILIPPINES v. EDGARDO L. SANTOS
GR No. 213863 | January 27, 2016

DOCTRINE OF THE CASE

In expropriation cases, interest is imposed if there is delay in the payment of just compensation to the landowner since
the obligation is deemed to be an effective forbearance on the part of the State..

PERLAS-BERNABE, J.:

FACTS: Santos owned three (3) parcels of agricultural land devoted to corn. In 1984, the subject lands were
placed under the government's Operation Land Transfer Program pursuant to Presidential Decree (PD) No.
27, and distributed to the farmer-beneficiaries who were issued the corresponding Emancipation Patents. The
Department of Agrarian Reform (DAR) fixed the just compensation using the formula provided under
Executive Order No. (EO) 228. The LBP allowed Santos to collect the initial valuation for Land 3. It
withheld the release of the valuation for Lands 1 and 2 until the submission of the certificates of title.

Santos was then issued Agrarian Reform (AR) Bonds representing the initial valuation of Land 3 and the six
percent (6%) increment. Finding the valuation unreasonable, Santos filed three (3) petitions for summary
administrative proceedings for the determination of just compensation of the subject lands before the Office
of the Provincial Adjudicator (PARAD). Dissatisfied with the PARAD's valuation, the LBP instituted two (2)
separate complaints f the determination of just compensation before the RTC.

The RTC adopted the LBP’s uncontested valuation for Land 3 and also awarded 12% interest reckoned from
January 1, 2010 until full payment since the revaluation of Land 3 already included the required six percent
(6%) annual incremental interest from the time of taking until December 31, 2009. The CA affirmed.

ISSUE
Whether or not the CA erred in reckoning the award of twelve percent (12%) interest from January
1, 2010 until full payment of the just compensation

RULING
Yes. It is doctrinal that the concept of just compensation contemplates of just and timely payment.
It embraces not only the correct determination of the amount to be paid to the landowner, but also the
payment of the land within a reasonable time from its taking, as otherwise, compensation cannot be
considered "just," for the owner is made to suffer the consequence of being immediately deprived of his land
while being made to wait for years before actually receiving the amount necessary to cope with his loss

In expropriation cases, interest is imposed if there is delay in the payment of just compensation to the
landowner since the obligation is deemed to be an effective forbearance on the part of the State. Such interest
shall be pegged at the rate of 12% per annum on the unpaid balance of the just compensation, reckoned from
the time of taking or the time when the landowner was deprived of the use and benefit of his property such as
when title is transferred to the Republic, or emancipation patents are issued by the government, until full payment

Accordingly, the award of twelve percent (12%) annual interest on the unpaid balance of the just
compensation for Land 3 should be computed from the time of taking and not from January 1, 2010 as ruled
by the RTC and the CA, until full payment on October 12, 2011.
 SUMMARY FORMAT

Q: Santos owned three (3) parcels of agricultural land devoted to corn. In 1984, the subject lands
were placed under the government's Operation Land Transfer Program pursuant to Presidential
Decree (PD) No. 27, and distributed to the farmer-beneficiaries who were issued the corresponding
Emancipation Patents. The Department of Agrarian Reform (DAR) fixed the just compensation
using the formula provided under Executive Order No. (EO) 228. The LBP allowed Santos to collect
the initial valuation for Land 3. It withheld the release of the valuation for Lands 1 and 2 until the
submission of the certificates of title. Santos was then issued Agrarian Reform (AR) Bonds
representing the initial valuation of Land 3 and the six percent (6%) increment. Finding the
valuation unreasonable, Santos filed three (3) petitions for summary administrative proceedings for
the determination of just compensation of the subject lands before the Office of the Provincial
Adjudicator (PARAD). The LBP also instituted two (2) separate complaints f the determination of
just compensation before the RTC. The RTC adopted the LBP’s uncontested valuation for Land 3
and also awarded 12% interest reckoned from January 1, 2010 until full payment since the revaluation
of Land 3 already included the required six percent (6%) annual incremental interest from the time
of taking until December 31, 2009. The CA affirmed. Is the reckoning point of interest correct?

A: No. In expropriation cases, interest is imposed if there is delay in the payment of just compensation to the
landowner since the obligation is deemed to be an effective forbearance on the part of the State. Such interest
shall be pegged at the rate of 12% per annum on the unpaid balance of the just compensation, reckoned from
the time of taking or the time when the landowner was deprived of the use and benefit of his property such as
when title is transferred to the Republic, or emancipation patents are issued by the government, until full payment
Accordingly, the award of twelve percent (12%) annual interest on the unpaid balance of the just
compensation for Land 3 should be computed from the time of taking and not from January 1, 2010 as ruled
by the RTC and the CA, until full payment on October 12, 2011.
 REPUBLIC OF PHILIPPINES v. REGHIS M. ROMERO II
GR No. 209180 | February 24, 2016

DOCTRINE OF THE CASE

Article 36 of the Family Code must not be confused with a divorce law that cuts the marital bond at the time the
grounds for divorce manifest themselves; rather, it must be limited to cases where there is a downright incapacity or inability to
assume and fulfill the basic marital obligations, not a mere refusal, neglect or difficulty, much less, ill will, on the part of the
errant spouse.

PERLAS-BERNABE, J.:

FACTS: Reghis and Olivia were married and were blessed with two (2) children. However, the couple
experienced a turbulent and tumultuous marriage, often having violent fights and jealous fits. Reghis could
not forgive Olivia for dragging him into marriage and resented her condescending attitude towards him. They
became even more estranged when Reghis secured a job as a medical representative and became engrossed in
his career and focused on supporting his parents and siblings. As a result, he spent little time with his family,
causing Olivia to complain that Reghis failed to be a real husband to her. In 1986, the couple parted ways.

Reghis then filed a petition for declaration of nullity of marriage citing his psychological incapacity to comply
with his essential marital obligations. The clinical psychologist submitted a report and testified that Reghis
suffered from Obsessive Compulsive Personality Disorder (OCPD). This gave him a strong obsession for
whatever endeavour he chooses, such as his work, to the exclusion of other responsibilities and duties such as
those pertaining to his roles as father and husband. Dr. Basilio surmised that Reghis’ OCPD was the root of
the couple’s disagreements and that the same is incurable. The Office of the Solicitor General (OSG),
representing the Republic, opposed the petition.

ISSUE
Whether or not the marriage should be declared null and void on the ground of psychological
incapacity

RULING
No. It has consistently been held that psychological incapacity, as a ground to nullify a marriage
under Article 36 of the Family Code, should refer to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage.

The requirements for psychological incapacity do not concur. Reghis’ testimony shows that he was able to
comply with his marital obligations which, therefore, negates the existence of a grave and serious
psychological incapacity on his part. Reghis admitted that he and Olivia lived together as husband and wife
under one roof for fourteen (14) years and both of them contributed in purchasing their own house. Reghis
also fulfilled his duty to support and take care of his family. Moreover, the OCPD which Reghis allegedly
suffered from was not shown to have juridical antecedence. No specific behavior or habits during his
adolescent years were shown which would explain his behavior during his marriage with Olivia. Dr. Basilio
simply concluded that Reghis’ disorder is incurable but failed to explain how she came to such conclusion.
Based on the appreciation of the RTC, Dr. Basilio did not discuss the concept of OCPD, its classification,
cause, symptoms, and cure, and failed to show how and to what extent the respondent exhibited this disorder
in order to create a necessary inference that Reghis’ condition had no definite treatment or is incurable.

Article 36 of the Family Code must not be confused with a divorce law that cuts the marital bond at the time
the grounds for divorce manifest themselves; rather, it must be limited to cases where there is a downright
incapacity or inability to assume and fulfill the basic marital obligations, not a mere refusal, neglect or
difficulty, much less, ill will, on the part of the errant spouse.
 SUMMARY FORMAT

Q: Reghis and Olivia were married and were blessed with two (2) children. However, the couple
experienced a turbulent and tumultuous marriage, often having violent fights and jealous fits.
Reghis could not forgive Olivia for dragging him into marriage and resented her condescending
attitude towards him. They became even more estranged when Reghis secured a job as a medical
representative and became engrossed in his career and focused on supporting his parents and
siblings. As a result, he spent little time with his family, causing Olivia to complain that Reghis
failed to be a real husband to her. In 1986, the couple parted ways. Reghis then filed a petition for
declaration of nullity of marriage citing his psychological incapacity to comply with his essential
marital obligations. The clinical psychologist submitted a report and testified that Reghis suffered
from Obsessive Compulsive Personality Disorder (OCPD). This gave him a strong obsession for
whatever endeavour he chooses, such as his work, to the exclusion of other responsibilities and
duties such as those pertaining to his roles as father and husband. Dr. Basilio surmised that Reghis’
OCPD was the root of the couple’s disagreements and that the same is incurable. The Office of the
Solicitor General (OSG), representing the Republic, opposed the petition. Should the marriage be
declared null and void?

A: No. The requirements for psychological incapacity do not concur. Reghis’ testimony shows that he was
able to comply with his marital obligations which, therefore, negates the existence of a grave and serious
psychological incapacity on his part. Reghis admitted that he and Olivia lived together as husband and wife
under one roof for fourteen (14) years and both of them contributed in purchasing their own house. Reghis
also fulfilled his duty to support and take care of his family. Moreover, the OCPD which Reghis allegedly
suffered from was not shown to have juridical antecedence. No specific behavior or habits during his
adolescent years were shown which would explain his behavior during his marriage with Olivia. Dr. Basilio
simply concluded that Reghis’ disorder is incurable but failed to explain how she came to such conclusion.
Based on the appreciation of the RTC, Dr. Basilio did not discuss the concept of OCPD, its classification,
cause, symptoms, and cure, and failed to show how and to what extent the respondent exhibited this disorder
in order to create a necessary inference that Reghis’ condition had no definite treatment or is incurable.

Article 36 of the Family Code must not be confused with a divorce law that cuts the marital bond at the time
the grounds for divorce manifest themselves; rather, it must be limited to cases where there is a downright
incapacity or inability to assume and fulfill the basic marital obligations, not a mere refusal, neglect or
difficulty, much less, ill will, on the part of the errant spouse.
 EQUITABLE SAVINGS BANK v. ROSALINDA C. PALCES
GR No. 214752 | March 09, 2016

DOCTRINE OF THE CASE

Article 1484 of the New Civil Code does not apply to loan contracts with an accessory chattel mortgage contract. Thus,
the mortgagee can conduct foreclosure proceedings over the mortgaged vehicle; or in the event that the subject vehicle cannot be
recovered, to compel respondent to pay the outstanding balance of her loan.

PERLAS-BERNABE, J.:

FACTS: Palces purchased a Hyundai Starex through a loan granted by Equitable Savings Bank (ESB). In
connection therewith, Palces executed a Promissory' Note with Chattel Mortgage in favor of the ESB
containing a monthly installment payment method beginning September 18, 2005.

Eventually, Palces failed to pay the monthly installments in January and February 2007 thereby
triggering the acceleration clause. This prompted ESB to demand for the payment of the entire balance which
remained unheeded. Thus, ESB filed a case for Recovery of Possession with Replevin with Alternative Prayer
for Sum of Money and Damages

In order to update her installment payments, Palces paid ESB P70,000 on March 8, 2007 and
P33,000 on March 20, 2007 (March 2007 payments). Despite the aforesaid payments, ESB filed the instant
complaint, resulting in the sheriff taking possession of the subject vehicle.

The RTC ruled in favor of ESB finding that Palces indeed defaulted thereby rendering the entire
balance due and demandable. The CA affirmed the RTC ruling; however, it ordered ESB to return the
amounts paid on March 2007 by Palces. It ruled that, under Article 1484 of the Civil Code, ESB had already
waived its right to recover any unpaid installments when it sought a writ of replevin to regain possession of
the subject vehicle. As such, petitioner is no longer entitled to receive respondent's late partial payments.

ISSUE
2. Whether or not the CA correctly applied Art. 1484 by ordered petitioner to return to Palces the
March 2007 payments (i.e. amount representing the latter's late installment payments).

RULING
No. In this case, there was no vendor-vendee relationship between Palces and ESB. A judicious
perusal of the records would reveal that Palces never bought the subject vehicle from ESB but from a third
party, and merely sought financing from ESB for its full purchase price. Indubitably, a loan contract with the
accessory chattel mortgage contract - and not a contract of sale of personal property in installments - was
entered into by the parties with Palces standing as the debtor-mortgagor and ESB as the creditor-mortgagee.

Thus, ESB is justified in filing his Complaint before the RTC seeking for either the recovery of
possession of the subject vehicle so that it can exercise its rights as a mortgagee, i.e., to conduct foreclosure
proceedings over said vehicle; or in the event that the subject vehicle cannot be recovered, to compel
respondent to pay the outstanding balance of her loan. Since it is undisputed that ESB had regained
possession of the subject vehicle, it is only appropriate that foreclosure proceedings be commenced in
accordance with the provisions of "The Chattel Mortgage Law," as intended. Otherwise, Palces will be placed
in an unjust position where she is deprived of possession of the subject vehicle while her outstanding debt
remains unpaid, either in full or in part, all to the undue advantage of petitioner - a situation which law and
equity will never permit.
 SUMMARY FORMAT

Q: Palces purchased a Hyundai Starex through a loan granted by Equitable Savings Bank (ESB). In
connection therewith, Palces executed a Promissory' Note with Chattel Mortgage in favor of the
ESB. Eventually, Palces failed to pay the monthly installments prompting ESB to demand for the
payment of the entire balance which remained unheeded. Thus, ESB filed a case for Recovery of
Possession with Replevin with Alternative Prayer for Sum of Money. In order to update her
installment payments, Palces paid ESB P70,000 on March 8, 2007 and P33,000 on March 20, 2007
(March 2007 payments). Despite the aforesaid payments, ESB filed the instant complaint, resulting
in the sheriff taking possession of the subject vehicle. The RTC ruled in favor of ESB. The CA
affirmed the RTC ruling; however, it ordered ESB to return the amounts paid on March 2007 by
Palces. It ruled that, under Article 1484 of the Civil Code, ESB had already waived its right to recover
any unpaid installments when it sought a writ of replevin in order to regain possession of the subject
vehicle. As such, petitioner is no longer entitled to receive respondent's late partial payments. Is the
CA’s ruling correct?

A: No. In this case, there was no vendor-vendee relationship between respondent and petitioner. A judicious
perusal of the records would reveal that respondent never bought the subject vehicle from petitioner but
from a third party, and merely sought financing from petitioner for its full purchase price. Indubitably, a loan
contract with the accessory chattel mortgage contract - and not a contract of sale of personal property in
installments - was entered into by the parties with respondent standing as the debtor-mortgagor and
petitioner as the creditor-mortgagee.

Thus, ESB is justified in filing his Complaint before the RTC seeking for either the recovery of possession of
the subject vehicle so that it can exercise its rights as a mortgagee, i.e., to conduct foreclosure proceedings
over said vehicle; or in the event that the subject vehicle cannot be recovered, to compel respondent to pay
the outstanding balance of her loan. Since it is undisputed that ESB had regained possession of the subject
vehicle, it is only appropriate that foreclosure proceedings be commenced in accordance with the provisions
of "The Chattel Mortgage Law," as intended. Otherwise, Palces will be placed in an unjust position where she
is deprived of possession of the subject vehicle while her outstanding debt remains unpaid, either in full or in
part, all to the undue advantage of petitioner - a situation which law and equity will never permit.
 REPUBLIC OF PHILIPPINES v. NILDA B. TAMPUS
GR No. 214243 | March 16, 2016

DOCTRINE OF THE CASE

The "well-founded belief in the absentee's death requires the present spouse to prove that his/her belief was the result of
diligent and reasonable efforts to locate the absent spouse and that based on these efforts and inquiries, he/she believes that under
the circumstances, the absent spouse is already dead. It necessitates exertion of active effort, not a passive one. As such, the mere
absence of the spouse for such periods prescribed under the law, lack of any news that such absentee spouse is still alive, failure to
communicate, or general presumption of absence under the Civil Code would not suffice.

PERLAS-BERNABE, J.:

FACTS: Nilda B. Tampus (Nilda) was married to Dante L. Del Mundo (Dante) on November 29, 1975. On
December 2, 1975, Dante, a member of the Armed Forces of the Philippines, left Nilda, and went to Jolo,
Sulu where he was assigned.

Since then, Nilda heard no news from Dante and has tried everything to locate him by making
inquiries with his parents, relatives, and neighbors as to his whereabouts. Thus, on April 14, 2009, she filed
before the RTC a petition to declare Dante as presumptively dead for the purpose of remarriage, alleging that
after the lapse of thirty-three (33) years without any kind of communication from him, she firmly believes that
he is already dead.

Both RTC and CA ruled in favor of Nilda.

ISSUE
1. Whether or not the CA erred in upholding the RTC Decision declaring Dante as presumptively dead.

RULING
Yes. Before a judicial declaration of presumptive death can be obtained, it must be shown that the
prior spouse had been absent for four consecutive years and the present spouse had a well-founded belief
that the prior spouse was already dead.

The "well-founded belief in the absentee's death requires the present spouse to prove that his/her
belief was the result of diligent and reasonable efforts to locate the absent spouse and that based on these
efforts and inquiries, he/she believes that under the circumstances, the absent spouse is already dead. It
necessitates exertion of active effort, not a passive one. As such, the mere absence of the spouse for such
periods prescribed under the law, lack of any news that such absentee spouse is still alive, failure to
communicate, or general presumption of absence under the Civil Code would not suffice.

In this case, Nilda testified that after Dante's disappearance, she tried to locate him by making
inquiries with his parents, relatives, and neighbors as to his whereabouts, but unfortunately, they also did not
know where to find him. Other than making said inquiries, however, Nilda made no further efforts to find
her husband. She could have called or proceeded to the AFP headquarters to request information about her
husband, but failed to do so. She did not even seek the help of the authorities or the AFP itself in finding
him.
 SUMMARY FORMAT

Q: Nilda was married to Dante on November 29, 1975. On December 2, 1975, Dante, a member of
the Armed Forces of the Philippines, left Nilda, and went to Jolo, Sulu where he was assigned. Since
then, Nilda heard no news from Dante and has tried everything to locate him by making inquiries
with his parents, relatives, and neighbors as to his whereabouts, but unfortunately, they also did not
know where to find him. Thus, on April 14, 2009, she filed before the RTC a petition to declare Dante
as presumptively dead for the purpose of remarriage, alleging that after the lapse of thirty-three (33)
years without any kind of communication from him, she firmly believes that he is already dead. Both
RTC and CA ruled in favor of Nilda. Is the ruling of the courts correct?

A: No. Before a judicial declaration of presumptive death can be obtained, it must be shown that the prior
spouse had been absent for four consecutive years and the present spouse had a well-founded belief that the
prior spouse was already dead.

The "well-founded belief in the absentee's death requires the present spouse to prove that his/her belief was
the result of diligent and reasonable efforts to locate the absent spouse and that based on these efforts and
inquiries, he/she believes that under the circumstances, the absent spouse is already dead. It necessitates
exertion of active effort, not a passive one. As such, the mere absence of the spouse for such periods
prescribed under the law, lack of any news that such absentee spouse is still alive, failure to communicate, or
general presumption of absence under the Civil Code would not suffice.

In this case, Nilda testified that after Dante's disappearance, she tried to locate him by making inquiries with
his parents, relatives, and neighbors as to his whereabouts, but unfortunately, they also did not know where
to find him. Other than making said inquiries, however, Nilda made no further efforts to find her husband.
She could have called or proceeded to the AFP headquarters to request information about her husband, but
failed to do so. She did not even seek the help of the authorities or the AFP itself in finding him.
 REPUBLIC OF THE PHILIPPINES v. HOMER AND MA. SUSANA DAGONDON
GR No. 210540 | April 19, 2016

DOCTRINE OF THE CASE

The purpose of the reconstitution of 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. RA 26 presupposes that the property whose title is
sought to be reconstituted has already been brought under the provisions of the Torrens System.

PERLAS-BERNABE, J.:

FACTS: Homer and Ma. Susana Dagondon, as attorneys-in-fact of Jover P. Dagondon, prayed for the
reconstitution of the Original Certificate of Title (OCT) of Lot No. 84. In their petition, they alleged that the
subject property had no existing OCT and that it was probably destroyed or dilapidated during the eruption
of Hiboc-Hiboc Volcano or World War II.

The petitioner prayed for the dismissal of the petition for insufficiency in form and substance,
considering that respondents failed to establish the existence of the very Torrens Title (OCT) which they
sought to reconstitute. The RTC granted the petition for reconstitution.

ISSUE
1. Whether or not the RTC correctly ordered the reconstitution of the OCT of Lot 84.

RULING
No. Verily, case law provides 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 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. RA 26
presupposes that the property whose title is sought to be reconstituted has already been brought under the
provisions of the Torrens System.

In the case at bar, respondents miserably failed to adduce clear and convincing proof that an OCT
covering Lot 84 had previously been issued. Accordingly, there is no title pertaining to Lot 84 which could be
reconstituted, re-issued, or restored. Guided by the foregoing, judicial reconstitution of title under Section 2
of RA 26 is clearly improper in this case; and hence, the RTC erred in ordering the same.
 SUMMARY FORMAT

Q: Homer and Ma. Susana Dagondon, as attorneys-in-fact of Jover P. Dagondon, prayed for the
reconstitution of the Original Certificate of Title (OCT) of Lot No. 84. In their petition, they alleged
that the subject property had no existing OCT and that it was probably destroyed or dilapidated
during the eruption of Hiboc-Hiboc Volcano or World War II. The Republic prayed for the
dismissal of the petition for insufficiency in form and substance, considering that respondents failed
to establish the existence of the very Torrens Title (OCT) which they sought to reconstitute. Is the
Republic correct?

A: Yes. 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 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. RA 26 presupposes that the property
whose title is sought to be reconstituted has already been brought under the provisions of the Torrens
System.

In the case at bar, respondents miserably failed to adduce clear and convincing proof that an OCT covering
Lot 84 had previously been issued. Accordingly, there is no title pertaining to Lot 84 which could be
reconstituted, re-issued, or restored. Guided by the foregoing, judicial reconstitution of title under Section 2
of RA 26 is clearly improper in this case.
 DR. RESTITUTO C. BUENVIAJE v. SPOUSES JOVITO R. & LYDIA B. SALONGA
GR No. 216023 | October 05, 2016

DOCTRINE OF THE CASE

Mutual restitution is the proper consequence of the remedy of resolution under Art. 1911. It cannot arise - as it is, in
fact, theoretically incompatible - with the remedy of specific performance.

The joint or solidary nature of an obligation is an aspect of demandability; it pertains to the extent of a creditor's
entitlement to demand fulfillment against any or all of his debtors under one particular obligation. 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.

Contracts in fraud of creditors are those executed with the intention to prejudice the rights of creditors. In determining
whether or not a certain conveying contract is fraudulent, what comes to mind first is the question of whether the conveyance was a
bona fide transaction or a trick and contrivance to defeat creditors

PERLAS-BERNABE, J.:

FACTS: Jebson, a juridical entity, entered into a Joint Venture Agreement (JVA) with Sps. Salonga. Under
the JVA Jebson was to construct ten (10) residential units on Sps. Salonga’s three parcels of land. Jebson
undertook to construct the units at its own expense and secure the necessary documents and permits while
Sps. Salonga undertook to consolidate the parcels of land and subdivide it.

Out of the ten (10) units, seven (7) units will belong to Jebson. It was also allowed to sell its allocated
units under such terms as it may deem fit, subject to the condition that the price agreed upon was with the
conformity of Sps. Salonga.

Thereafter, Jebson entered into a Contract to Sell with Buenviaje over one of its units without the
conformity of Sps. Salonga. Buenviaje was able to fully pay for Jebson’s unit through a swapping arrangement
which allows the vendee to convey certain properties as consideration for the sale. Despite this full payment,
Jebson was unable to complete said unit. This prompted Buenviaje to demand the unit’s immediate
completion and delivery.

Jebson having failed to comply with the demand, Buenviaje filed an action before the HLURB
against Jebson and Sps. Salonga for specific performance praying for the unit’s completion and delivery and
rescission in the alternative.

Jebson, in its defense, claimed that they were not able to secure the necessary permits because Sps.
Salonga stubbornly refused to cause the consolidation and partition of the parcels of land. Sps. Salonga
averred that they were not liable to the complainants since there was no privity of contract between them,
adding that the contracts to sell were unenforceable against them as they were entered into by Jebson without
their conformity, in violation of the JVA.

HLURB rescinded the Contract to Sell and held Sps. Salonga Solidarily liable with Jebson. HLURB-
BOC reversed the former ruling and instead rescinded the swapping arrangement and maintaining the validity
of the Contract to Sell, thereby granting specific performance instead.

ISSUE(s):
1. Whether or not the grant of the remedy of specific performance in Buenviaje's favor was proper.
2. Whether or not Sps. Salonga are not solidarily liable with Jebson to Buenviaje for the completion of
the construction and delivery of the unit.
3. Whether or not the "swapping arrangement" was invalid entitling it to be rescinded.
RULING
1. Yes. As between the two remedies made available to him, Buenviaje, had, in fact, chosen the
remedy of specific performance and therefore, ought to be bound by the choice he had made. To add, the
fundamental rule is that reliefs granted a litigant are limited to those specifically prayed for in the complaint.
Buenviaje's alternative prayer for resolution is textually consistent with that portion of Article 1191 of the
Civil Code which states that an injured party "may also seek rescission, even after he has chosen fulfillment, if
the latter should become impossible." Nevertheless, the impossibility of fulfillment was not sufficiently
demonstrated in the proceedings conducted in this case.

Besides, mutual restitution is the proper consequence of the remedy of resolution. It cannot arise - as
it is, in fact, theoretically incompatible - with the remedy of specific performance, which is the relief prayed
for and consequently, granted to the injured party herein.

2. Yes, Sps. Salonga were not parties to the above-mentioned contract. Under Article 1311 of the
Civil Code, it is a basic principle in civil law on relativity of contracts, that contracts can only bind the parties
who had entered into it and it cannot favor or prejudice third persons.

The joint or solidary nature of an obligation is an aspect of demandability; it pertains to the extent of
a creditor's entitlement to demand fulfillment against any or all of his debtors under one particular obligation.
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.

3. No, there is no basis to rescind the aforesaid swapping arrangement. In Union Bank Philippines v.
Sps. Ong, Article 1381 of the Civil Code which lists as among the rescissible contracts: “those undertaken in
fraud of creditors when the latter cannot in any other manner collect the claim due them”. Contracts in fraud
of creditors are those executed with the intention to prejudice the rights of creditors. In determining whether
or not a certain conveying contract is fraudulent, what comes to mind first is the question of whether the
conveyance was a bona fide transaction or a trick and contrivance to defeat creditors. To creditors seeking
contract rescission on the ground of fraudulent conveyance rest the onus of proving by competent evidence
the existence of such fraudulent intent on the part of the debtor

Here, the onus of proving that the "swapping arrangement" was a fraudulent conveyance, or a trick
and contrivance to defeat creditor rights, was not sufficiently discharged by Sps. Salonga. Thus, absent such
proof of fraud, the Court concludes that the "swapping arrangement" was a bona fide transaction freely
entered into between Jebson and Buenviaje.
 SUMMARY FORMAT

Q: Jebson entered into a Joint Venture Agreement (JVA) with Sps. Salonga which obligated the
former to construct ten (10) residential units on the latter’s three parcels of land. Out of the ten (10)
units, seven (7) units will belong to Jebson. It was also allowed to sell its allocated units under such
terms as it may deem fit, subject to the condition that the price agreed upon was with the conformity
of Sps. Salonga. Thereafter, Jebson entered into a Contract to Sell with Buenviaje over one of its
units without the conformity of Sps. Salonga. Buenviaje was able to fully pay for Jebson’s unit
through a swapping arrangement which allows the vendee to convey certain properties as
consideration for the sale. Despite this full payment, Jebson was unable to complete said unit. This
prompted Buenviaje to demand the unit’s immediate completion and delivery. Jebson having failed
to comply with the demand, Buenviaje filed an action before the HLURB against Jebson and Sps.
Salonga for specific performance praying for the unit’s completion and delivery and rescission in the
alternative. Jebson, in its defense, claimed that they were not able to secure the necessary permits
because Sps. Salonga stubbornly refused to cause the consolidation and partition of the parcels of
land. Sps. Salonga averred that they were not liable to the complainants since there was no privity of
contract between them, adding that the contracts to sell were unenforceable against them as they
were entered into by Jebson without their conformity, in violation of the JVA. HLURB rescinded the
Contract to Sell and held Sps. Salonga Solidarily liable with Jebson. HLURB-BOC reversed the
former ruling and instead rescinded the swapping arrangement and maintaining the validity of the
Contract to Sell, thereby granting specific performance instead.

1. Is the grant of the remedy of specific performance in Buenviaje's favor proper?

2. Are Sps. Salonga not solidarily liable with Jebson to Buenviaje for the completion of the
construction and delivery of the unit?
3. Is "swapping arrangement" invalid entitling it to be rescinded?

A: 1. Yes. As between the two remedies made available to him, Buenviaje, had, in fact, chosen the remedy of
specific performance and therefore, ought to be bound by the choice he had made. To add, the fundamental
rule is that reliefs granted a litigant are limited to those specifically prayed for in the complaint. Buenviaje's
alternative prayer for resolution is textually consistent with that portion of Article 1191 of the Civil Code
which states that an injured party "may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible." Nevertheless, the impossibility of fulfillment was not sufficiently demonstrated
in the proceedings conducted in this case.

Besides, mutual restitution is the proper consequence of the remedy of resolution. It cannot arise - as
it is, in fact, theoretically incompatible - with the remedy of specific performance, which is the relief prayed
for and consequently, granted to the injured party herein.

2. Yes, Sps. Salonga were not parties to the above-mentioned contract. Under Article 1311 of the
Civil Code, it is a basic principle in civil law on relativity of contracts, that contracts can only bind the parties
who had entered into it and it cannot favor or prejudice third persons.

The joint or solidary nature of an obligation is an aspect of demandability; it pertains to the extent of
a creditor's entitlement to demand fulfillment against any or all of his debtors under one particular obligation.
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.
 3. No, there is no basis to rescind the aforesaid swapping arrangement. In Union Bank Philippines v.
Sps. Ong, Article 1381 of the Civil Code which lists as among the rescissible contracts: “those undertaken in
fraud of creditors when the latter cannot in any other manner collect the claim due them”. Contracts in fraud
of creditors are those executed with the intention to prejudice the rights of creditors. In determining whether
or not a certain conveying contract is fraudulent, what comes to mind first is the question of whether the
conveyance was a bona fide transaction or a trick and contrivance to defeat creditors. To creditors seeking
contract rescission on the ground of fraudulent conveyance rest the onus of proving by competent evidence
the existence of such fraudulent intent on the part of the debtor

Here, the onus of proving that the "swapping arrangement" was a fraudulent conveyance, or a trick
and contrivance to defeat creditor rights, was not sufficiently discharged by Sps. Salonga. Thus, absent such
proof of fraud, the Court concludes that the "swapping arrangement" was a bona fide transaction freely
entered into between Jebson and Buenviaje.
 PEOPLE v. ARIEL LAYAG
GR No. 214875 | October 17, 2016

DOCTRINE OF THE CASE

The claim for civil liability survives notwithstanding the death of accused, if the same may also be predicated on a source
of obligation other than delict.

PERLAS-BERNABE, J.:

FACTS: Ariel Layag was found guilty beyond reasonable doubt of Qualified Rape by Sexual Intercourse, two
counts of Qualified Rape by Sexual Assault, and Acts of Lasciviousness. Subsequently, the judgment became
final and executory on October 14, 2015. However, on July 18, 2016, the Court received a Letter informing it
that Layag died on July 30, 2015.

ISSUE
1. Whether or not Layag’s death prior to the finality of judgment in a criminal case against him
extinguishes all his liabilities arising from the acts constituting the crimes.

RULING
No. The claim for civil liability survives notwithstanding the death of accused, if the same may also
be predicated on a source of obligation other than delict.

Thus, upon Layag's death pending appeal of his conviction, the criminal action is extinguished
inasmuch as there is no longer a defendant to stand as the accused; the civil action instituted therein for the
recovery of the civil liability ex delicto is ipso facto extinguished, grounded as it is on the criminal action.

However, Layag's civil liability in connection with his acts against the victim may be based on sources
other than delicts; in which case, the victim may file a separate civil action against the estate of Layag, as may
be warranted by law and procedural rules.
 SUMMARY FORMAT

Q: Ariel was found guilty beyond reasonable doubt in a criminal case. Subsequently, the judgment
thereon became final and executory on October 14, 2015. However, on July 18, 2016, the Court
received a Letter informing it that Layag died on July 30, 2015. Did Ariel’s death extinguish all of his
liabilities in connection to the acts constituting the crime?

A: No. The claim for civil liability survives notwithstanding the death of accused, if the same may also be
predicated on a source of obligation other than delict. Thus, upon Layag's death pending appeal of his
conviction, the criminal action is extinguished inasmuch as there is no longer a defendant to stand as the
accused; the civil action instituted therein for the recovery of the civil liability ex delicto is ipso facto
extinguished, grounded as it is on the criminal action. However, Layag's civil liability in connection with his
acts against the victim may be based on sources other than delicts; in which case, the victim may file a
separate civil action against the estate of Layag, as may be warranted by law and procedural rules.
 NORMA C. MAGSANO, et. al. v. PANGASINAN SAVINGS & LOAN BANK
GR No. 215038 | October 17, 2016

DOCTRINE OF THE CASE

While a co-owner has the right to mortgage or even sell their undivided interest in the subject property, they could not
mortgage or otherwise dispose of the same in its entirety without the consent of the other co-owners.

While the rule is that every person dealing with registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property, where
the land sold is in the possession of a person other than the vendor, as in this case, the purchaser must go beyond the certificate of
title and make inquiries concerning the actual possessor.

PERLAS-BERNABE, J.:

FACTS: Spouses Roque Magsano and Susana Capelo (Sps. Magsano), the parents of petitioners, executed in
favor of Pangasinan Savings & Loan Bank (PSLB) a Real Estate Mortgage over their parcel of land as security
for their loan. Sps. Magsano defaulted in their loan obligation, causing the extra-judicial foreclose of the
mortgaged property in which PSLB emerged as the highest bidder. It subsequently sold the same to Sps.
Manuel. Thereafter, Sps. Magsano refused to vacate the premises despite PSLB’s demands; hence, the latter
applied for and was granted a writ of possession and demolition.

The petitioners sought to annul the Real Estate Mortgage. They averred that Roque Magsano passed
away prior to the execution of the Real Estate Mortgage; hence, the mortgage was void, and could not have
conferred any right to PSLB which it could pass to Sps. Manuel. Defendants denied knowledge of the death
of Roque, and averred that petitioners have no cause of action to seek the annulment of the Real Estate
Mortgage since they were not parties thereto.

ISSUE
1. Whether or not the Real Estate Mortgage was void.
2. Whether or not Sps. Manuel were purchasers in good faith.

RULING
1. No. The validity of the Mortgage in favor of PSLD should be limited only to the Susana’s
portion. At the time the Mortgage was constituted, Roque was already deceased. Upon Roque’s death, the
conjugal partnership between him and Susana was dissolved. Thus, an implied co-ownership arose among
Susana and the other heirs of Roque with respect to his share in the assets of the conjugal partnership
pending liquidation.

While she herself as co-owner had the right to mortgage or even sell her undivided interest in the
subject property, she could not mortgage or otherwise dispose of the same in its entirety without the consent
of the other co-owners.

2. No. While the rule is that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property, where the land sold is in the possession of a person
other than the vendor, as in this case, the purchaser must go beyond the certificate of title and make inquiries
concerning the actual possessor.

Here, petitioners were in possession of the subject property when Sps. Manuel bought the same.
There is no showing that Sps. Manuel inspected the property and inquired into the nature of petitioners'
possession and/or the extent of their possessory rights as a measure of precaution.
 SUMMARY FORMAT

Q: Spouses Roque Magsano and Susana Capelo (Sps. Magsano), the parents of Norma, et. al.,
executed in favor of PSLB a Real Estate Mortgage over their parcel of land as security for their loan.
Sps. Magsano defaulted in their obligation, causing the extra-judicial foreclose of the mortgaged
property in which PSLB emerged as the highest bidder. It subsequently sold the subject land to Sps.
Manuel. Thereafter, Sps. Magsano refused to vacate the premises despite PSLB’s demands; hence,
the latter applied for and was granted a writ of possession and demolition. Norma et. al. sought to
annul the Real Estate Mortgage. They averred that Roque Magsano passed away prior to the
execution of the Real Estate Mortgage; hence, the mortgage was void, and could not have conferred
any right to PSLB which it could pass to Sps. Manuel. PSLB and the heirs of Sps. Manuel denied
knowledge of the death of Roque, and averred that petitioners have no cause of action to seek the
annulment of the Real Estate Mortgage since they were not parties thereto.

1. Is the Real Estate Mortgage void?

2. Are Sps. Manuel purchasers in good faith?

A: 1. No. The validity of the Mortgage in favor of PSLD should be limited only to the Susana’s portion. At
the time the Mortgage was constituted, Roque was already deceased. Upon Roque’s death, the conjugal
partnership between him and Susana was dissolved. Thus, an implied co-ownership arose among Susana and
the other heirs of Roque with respect to his share in the assets of the conjugal partnership pending
liquidation.

While she herself as co-owner had the right to mortgage or even sell her undivided interest in the
subject property, she could not mortgage or otherwise dispose of the same in its entirety without the consent
of the other co-owners.

2. No. While the rule is that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property, where the land sold is in the possession of a person
other than the vendor, as in this case, the purchaser must go beyond the certificate of title and make inquiries
concerning the actual possessor.

Here, Norma, et. al. were in possession of the subject property when Sps. Manuel bought the same.
There is no showing that Sps. Manuel inspected the property and inquired into the nature of petitioners'
possession and/or the extent of their possessory rights as a measure of precaution.
 NANITO EVANGELISTA v. SPOUSES NERO ANDOLONG III AND ERLINDA
ANDOLONG et.al.
G.R. No. 221770 | November 16, 2016

DOCTRINE OF THE CASE

Under Article 2224 of the Civil Code, 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.

PERLAS-BERNABE, J.:

FACTS: Nanito Evangelista and Andolong entered into a memorandum of agreement it was agreed upon
that they would equally share from the net profits derived from their business. However, the latter failed to
give the former's share. This prompted Evangelista to file a complaint for sum of money and damages against
Andolong. These were evidenced solely by the documentary exhibits which disclosed the gross monthly
revenue and not the actual profit earned. During the course of the proceedings, Andolong was declared in
default. Consequently, it was no longer possible for Evangelista to prove the actual profit earned since such
documents were in possession of Andolong.

ISSUE
3. Is Evangelista entitled to recover damages?

RULING
Yes. Since the Andolong waived their right to present evidence, the Court is left with no other
option but to rule that Andolong's failure to present the documents in possession raises the presumption that
the evidenced willfully suppressed would be adverse if produced.
Under the foregoing circumstances, the Court is convinced that Evangelista can recover damages
although the exact amount of the net profits remained unproven. This comes in the form of temperate or
moderate damages. This kind 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. Consequently, in
computing the amount of temperate or moderate damages, it is usually left to the discretion of the courts, but
the amount must be reasonable, bearing in mind that temperate damages should be more than nominal but
less than compensatory.
 SUMMARY FORMAT

Q: Nanito Evangelista filed a complaint for damages against Andolong over the latter's failure to
give the former's share in the net profits derived from their business. However, this was evidenced
solely by the documentary exhibits which disclosed the gross monthly revenue and not the actual
profit earned. During the course of the proceedings, Andolong was declared in default.
Consequently, it was no longer possible for Evangelista to prove the actual profit earned since such
documents were in possession of Andolong. Can Evangelista recover damages if the net profits can
no longer be ascertained?

A: Yes. Evangelista can recover damages although the exact amount of the net profits remained unproven.
This comes in the form of temperate or moderate damages. Temperate 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. Consequently, in computing the amount of temperate or moderate damages, it is
usually left to the discretion of the courts, but the amount must be reasonable, bearing in mind that temperate
damages should be more than nominal but less than compensatory.
 ROSALIE SY AYSON v. FIL-ESTATE PROPERTIES, INC. et.al.
G.R. No. 223254 | December 1, 2016

DOCTRINE OF THE CASE

It must be stressed that moral damages are not meant to be punitive but are designed to compensate and alleviate the
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar harm unjustly caused to a person. Similarly, exemplary damages are imposed by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages and are awarded only if
the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

PERLAS-BERNABE, J.:

FACTS: Rosalie Sy Ayson filed a complaint for damages against Fil-Estate and Fairways. She discovered that
the latter illegally entered into her property when it constructed its golf course. Despite receipt of a notice to
vacate said property, the latter still continued to encroach the subject land. On the other hand, Fil-Estate and
Fairways contend that it was in good faith in constructing the golf course. It contended that a certain
Villanueva, the former owner of the subject land, gave assurances that Ayson will agree to a land swap which
will be mutually beneficial for the parties.

ISSUE:
1. Is Ayson entitled to damages?

RULING
Yes. Ayson is entitled to recover moral and exemplary damages.
Moral damages are designed to compensate and alleviate the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
harm unjustly caused to a person. Exemplary damages may be imposed by way of example or correction for
public good if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
Ayson can recover moral damages as she was made to suffer sleepless nights and mental anguish
because her right as the owner of the subject lot was violated by Fil-Estate in constructing its golf course in
the latter's property. She is also entitled to exemplary damages since despite the notice to vacate, the latter still
proceeded to construct its golf course.
 SUMMARY FORMAT

Q: Rosalie Sy Ayson discovered that the Fil-Estate and Fairways illegally entered into her property
when it constructed its golf course. Despite receipt of a notice to vacate said property, the latter still
continued to encroach the subject land. On the other hand, Fil-Estate and Fairways contend that it
was in good faith in constructing the golf course. It contended that a certain Villanueva, the former
owner of the subject land, gave assurances that Ayson will agree to a land swap which will be
mutually beneficial for the parties. Ayson thereafter filed a complaint for damages. Assuming that
the case will prosper, what kind of damages is she entitled to?

A: Ayson is entitled to recover moral and exemplary damages. Moral damages are designed to compensate
and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar harm unjustly caused to a person. Exemplary damages
may be imposed by way of example or correction for public good if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.
Here, Ayson can recover moral damages as she was made to suffer sleepless nights and mental
anguish because her right as the owner of the subject lot was violated by Fil-Estate in constructing its golf
course in the latter's property. She is also entitled to exemplary damages since despite the notice to vacate, the
latter still proceeded to construct its golf course.
 REPUBLIC v. GERTRUDES V. SUSI
G.R. No. 213209 | January 16, 2017

DOCTRINE OF THE CASE

In numerous cases, the Court has held that non-compliance with the prescribed procedure and requirements deprives the
trial court of jurisdiction over the subject matter or nature of the case and, consequently, all its proceedings are null and void.

PERLAS-BERNABE, J.:

FACTS: Alleging that the original copy of a 240,269 square meter property was destroyed by the fire,
Gertrudes Susi filed a petition for reconstitution of title to cover the property on basis of his owner's copy. In
opposing the petition, the LRA filed a Manifestation questioning the reconstitution considering that the claim
was anchored on the owner's duplicate certificate which bore a different serial number. Having duly complied
with the publication and posting requirement, the trial court set the case for hearing and granted the same.

ISSUE
1. Should the petition for reconstitution be granted?

RULING
No. It is well to point out that the trial courts hearing reconstitution petitions under RA 26 are duty-
bound to take into account the LRA's report. Notably, since the serial number of the owner's duplicate did
not bear a similar serial number from the subject lot, the same should have been denied by the trial court for
failure to comply with the requirements of law. Since the petition for reconstitution failed to comply with the
applicable procedures and requirements, it follows that the RTC never acquired jurisdiction over the case, and
all proceedings held thereon are null and void.
 SUMMARY FORMAT

Q: Alleging that the original copy of a 240,269 square meter property was destroyed by the fire,
Gertrudes Susi filed a petition for reconstitution of title to cover the property on basis of his owner's
copy. In opposing the petition, the LRA filed a Manifestation questioning the reconstitution
considering that the claim was anchored on the owner's duplicate certificate which bore a different
serial number. Having duly complied with the publication and posting requirement, the trial court
set the case for hearing and granted the same. Should the petition for reconstitution be granted?

A: No. It is well to point out that the trial courts hearing reconstitution petitions under RA 26 are duty-
bound to take into account the LRA's report. Notably, since the serial number of the owner's duplicate did
not bear a similar serial number from the subject lot, the same should have been denied by the trial court for
failure to comply with the requirements of law. Since the petition for reconstitution failed to comply with the
applicable procedures and requirements, it follows that the RTC never acquired jurisdiction over the case, and
all proceedings held thereon are null and void.
 REPUBLIC v. CARMEN SANTORIO GALENO
G.R. No. 215009 | January 23, 2017

DOCTRINE OF THE CASE

The certifications issued by the Regional Technical Director are not the certified copies nor authenticated reproductions
of original records in the legal custody of government service. The certifications are not even records of public documents.

PERLAS-BERNABE, J.:

FACTS: Carmen Galeno, a co-owner of the subject property applied for a petition for correction of the land
area. She alleged that there was a discrepancy as the title reflects only 20,498 square meters while the
certification issued by the DENR Office of the Regional Technical Director shows an area of 21,298 square
meters.
The trial court, in allowing the evidence to be presented ex parte, granted the petition on the basis of
the Certification. It was only after the decision of the trial court that the Office of the Solicitor General filed a
motion for reconsideration opposing the petition for correction on the ground that the no competent
evidence was given to warrant a correction.

ISSUE
1. Can the Office of the Solicitor General still question the propriety of the petition even after
judgment?
2. Should the petition for correction be granted?

RULING
1. Yes. The Republic cannot be barred from assailing the petition granting the correction of title, if
on the basis of the law and evidence of record, such petition has no merit. Thus, the court can admit motion
for reconsideration even after judgment of the trial court.
2. No. The certifications issued by the Regional Technical Director cannot be considered prima facie
evidence for a petition for correction of title. At best, they may be considered only as prima facie evidence of
their due execution and date of issuance but not the former. The certifications issued by the Regional
Technical Director are not the certified copies nor authenticated reproductions of original records in the legal
custody of government service. Considering this, the documentary evidence are not sufficient to warrant the
correction prayed for.
 SUMMARY FORMAT

Q: Carmen Galeno, a co-owner of the subject property applied for a petition for correction of the
land area. She alleged that there was a discrepancy as the title reflects only 20,498 square meters
while the certification issued by the DENR Office of the Regional Technical Director shows an area
of 21,298 square meters. The trial court, in allowing the evidence to be presented ex parte, granted
the petition on the basis of the Certification. It was only after the decision of the trial court that the
Office of the Solicitor General filed a motion for reconsideration opposing the petition for correction
on the ground that the no competent evidence was given to warrant a correction.
(a) Can the Office of the Solicitor General still question the propriety of the petition even after
judgment?
(b) Should the petition for correction be granted?

A:
(a) Yes. The Republic cannot be barred from assailing the petition granting the correction of title, if on the
basis of the law and evidence of record, such petition has no merit. Thus, the court can admit motion for
reconsideration even after judgment of the trial court.
(b). No. The certifications issued by the Regional Technical Director cannot be considered prima facie
evidence for a petition for correction of title. At best, they may be considered only as prima facie evidence of
their due execution and date of issuance but not the former. The certifications issued by the Regional
Technical Director are not the certified copies nor authenticated reproductions of original records in the legal
custody of government service. Considering this, the documentary evidence are not sufficient to warrant the
correction prayed for
 RACHEL A. DEL ROSARIO v. JOSE O. DEL ROSARIO and COURT OF APPEALS
G.R. No. 222541 | February 15, 2017

DOCTRINE OF THE CASE

Psychological incapacity under Article 36 of the Family Code must be a malady that is so grave and permanent as to
deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to assume.

PERLAS-BERNABE, J.:

FACTS: Rachel worked as a domestic helper in Hong Kong to provide for the needs of Juan, the love of her
life. Eventually, the couple got married and settled in a house they acquired. The married life ran smoothly up
until Rachel filed a petition for declaration of nullity of marriage.
Her petition anchored on the ground that Jose was psychologically incapacitated to fulfill his essential
marital obligations. She alleged that Jose was a violent man who used to physically abuse her. She added that
Jose was a drunkard and always had sexual relations with different women aside from Rachel. On his part,
Jose simply denied all the allegations in the petition.
ISSUE
1. Is Jose psychologically incapacitated?

RULING
No. For phycological incapacity to exist, it should refer to no less than a mental and not merely
physical incapacity that causes a party to be truly incognitive of the basic marital covenants as provided for
under Article 68 of the Family Code. In other words, it must be a malady that is so grave and permanent as to
deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to assume.
Also, following the case of Republic vs Molina, the totality of evidence must show that psychological
incapacity exists and its gravity, juridical antecedence, and incurability must be duly established.
Here, there is no sufficient evidence to prove that psychological incapacity exists. Absent sufficient
evidence, Courts are compelled to uphold the indissolubility of the marital tie.
 SUMMARY FORMAT

Q: Rachel worked as a domestic helper in Hong Kong to provide for the needs of Juan, the love of
her life. Eventually, the couple got married and settled in a house they acquired. The married life ran
smoothly up until Rachel filed a petition for declaration of nullity of marriage. Her petition anchored
on the ground that Jose was psychologically incapacitated to fulfill his essential marital obligations.
She alleged that Jose was a violent man who used to physically abuse her. She added that Jose was a
drunkard and always had sexual relations with different women aside from Rachel. On his part, Jose
simply denied all the allegations in the petition. Is Jose psychologically incapacitated?

A: No. For phycological incapacity to exist, it should refer to no less than a mental and not merely physical
incapacity that causes a party to be truly incognitive of the basic marital covenants as provided for under
Article 68 of the Family Code. In other words, it must be a malady that is so grave and permanent as to
deprive one of awareness of the duties and responsibilities of the matrimonial bond one is about to assume.
Also, following the case of Republic vs Molina, the totality of evidence must show that psychological incapacity
exists and its gravity, juridical antecedence, and incurability must be duly established. Here, there is no
sufficient evidence to prove that psychological incapacity exists. Absent sufficient evidence, Courts are
compelled to uphold the indissolubility of the marital tie.
 JOY VANESSA M. SEBASTIAN v. SPOUSES NELSON CRUZ AND CRISTINA CRUZ
et.al.
G.R. No. 220940 | March 20, 2016
DOCTRINE OF THE CASE
In reconstitution proceedings, the Court has repeatedly ruled that before jurisdiction over the case can be validly
acquired, it is a condition sine qua 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.

PERLAS-BERNABE, J.:

FACTS: Spouses Cruz are the registered owners of a parcel of land. Nelson Cruz, through his father,
Lamberto, sold the subject lot in favor of Joy Sebastian. After Sebastian paid all the corresponding tax and
capital gains, the Register of Deeds required her to present a Special Power of Attorney executed by Nelson
which authorized the agent, Lamberto, to sell the property to former.
When Sebastian requested for the document, Nelson did not comply. It was only upon the latter's
inquiry with the Register of Deeds that Nelson had in fact executed an Affidavit of Loss which subsequently
resulted to an issuance of a second owner's copy covering the subject lot. Sebastian filed a petition for
annulment of judgment to nullify the decision issuing a new owner's duplicate copy.

ISSUE
1. Should the petition for annulment be granted?

RULING
Yes. It has been consistently ruled that when the owner's duplicate certificate of title was not actually
lost or destroyed, but is in fact in the possession of another person, the reconstituted title is void because the
court that rendered the order of reconstitution had no jurisdiction over the subject matter of the case.
In this case, the owner's duplicate copy was in truth and in fact in the possession of Spouses Cruz,
contrary to their claim in the lower court. Consequently, the judgment of the lower court should be annulled
on the ground of lack of jurisdiction.
 SUMMARY FORMAT

Q: Spouses Cruz are the registered owners of a parcel of land. Nelson Cruz, through his father,
Lamberto, sold the subject lot in favor of Joy Sebastian. After Sebastian paid all the corresponding
tax and capital gains, the Register of Deeds required her to present a Special Power of Attorney
executed by Nelson which authorized the agent, Lamberto, to sell the property to former. When
Sebastian requested for the document, Nelson did not comply. It was only upon the latter's inquiry
with the Register of Deeds that Nelson had in fact executed an Affidavit of Loss which subsequently
resulted to an issuance of a second owner's copy covering the subject lot. Sebastian filed a petition
for annulment of judgment to nullify the decision issuing a new owner's duplicate copy. Should the
petition for annulment of judgment be granted?

A: Yes. It has been consistently ruled that when the owner's duplicate certificate of title was not actually lost
or destroyed, but is in fact in the possession of another person, the reconstituted title is void because the
court that rendered the order of reconstitution had no jurisdiction over the subject matter of the case. In this
case, the owner's duplicate copy was in truth and in fact in the possession of Spouses Cruz, contrary to their
claim in the lower court. Consequently, the judgment of the lower court should be annulled on the ground of
lack of jurisdiction.
 ERLINDA DINGLASAN DELOS SANTOS et al. vs. ALBERTO ABEJON and the estate of
TERESITA DINGLASAN ABEJON
G.R. No. 215820| March 20, 2017

DOCTRINE OF THE CASE

PERLAS-BERNABE, J.:

FACTS: The instant case arose from a Complaint for Cancellation of Title with collection of sum of
money5 filed by respondents against petitioners before the RTC. The complaint alleged that Erlinda and her
late husband Pedro Delos Santos (Pedro) borrowed the amount of ₱l00,000.00 from the former's sister,
Teresita, as evidenced by a Promissory Note dated April 8, 1998. As security for the loan, Erlinda and Pedro
mortgaged their property covered by Transfer Certificate of Title (TCT) No. 131753 (subject land) which
mortgage was annotated on the title. After Pedro died, Erlinda ended up being unable to pay the loan, and as
such, agreed to sell the subject land to Teresita for ₱l50,000.00, or for the amount of the loan plus an
additional ₱50,000.00. On July 8, 1992, they executed a Deed of Sale and a Release of Mortgage, and
eventually, TCT No. 131753 was cancelled and TCT No. 180286 was issued in the name of "Teresita,
Abejon[,] married to Alberto S. Abejon." Thereafter, respondents constructed a three (3)-storey building
worth ₱2,000,000.00 on the subject land. Despite the foregoing, petitioners refused to acknowledge the sale,
pointing out that since Pedro died in 1989, his signature in the Deed of Sale executed in 1992 was definitely
forged. As such, respondents demanded from petitioners the amounts of ₱l50,000.00 representing the
consideration for the sale of the subject land and ₱2,000,000.00 representing the construction cost of the
three (3)-storey building, but to no avail. Thus, respondents filed the instant case.

During the pre-trial proceedings, the parties admitted and/or stipulated that: (a) the subject land was
previously covered by TCT No. 131753 in the name of Erlinda and Pedro, but such title was cancelled and
replaced by TCT No. 180286 in the name of Teresita; (b) the Deed of Sale and Release of Mortgage executed
on July 8, 1992 were forged, and thus, should be cancelled; (c) in view of said cancellations, TCT No. 180286
should likewise be cancelled and TCT No. 131753 should be reinstated; (d) from the time when the spurious
Deed of Sale was executed until the present, petitioners have been the actual occupants of the subject land as
well as all improvements therein, including the three (3)-storey building constructed by respondents;
and (e) the ₱l00,000.00 loan still subsists and that respondents paid for the improvements being currently
occupied by petitioners, i.e., the three (3)-storey building. In view of the foregoing stipulations and
admissions, the RTC limited the issue as to who among the parties should be held liable for damages and
attorney's fees.

The RTC ruled in favor of of the respondent’s. The Petitioners appealed to CA which affirmed with
modifications the decision of the RTC.

ISSUE

whether or not the CA correctly held that petitioners should be held liable to respondents in the aggregate
amount of ₱2,200,000.00, consisting of the loan obligation of ₱l00,000.00, the construction cost of the three
(3)-storey building in the amount of ₱2,000,000.00, and attorney's fees and costs of suit amounting to
₱l00,000.00.

RULING
 No. Thus, in view of the foregoing admissions and/or stipulations, there is now a need to properly
determine to whom the following liabilities should devolve: (a) the ₱l00,000.00 loan obligation; (b) the
₱50,000.00 extra consideration Teresita paid for the sale of the subject land, which was already declared void -
a matter which the R TC and the CA completely failed to resolve; and (c) the ₱2,000,000.00 construction cost
of the three (3)-storey building that was built on the subject land.

(a) . It must be pointed out that such loan was contracted by Erlinda, who is only one (1) out of the
four (4) herein petitioners, and her deceased husband, Pedro, during the latter's lifetime and while their
marriage was still subsisting.23 As they were married before the effectivity of the Family Code of the
Philippines24 and absent any showing of any pre-nuptial agreement between Erlinda and Pedro, it is safe to
conclude that their property relations were governed by the system of conjugal partnership of gains. Hence,
pursuant to Article 12125 of the Family Code, the ₱l00,000.00 loan obligation, including interest, if any, is
chargeable to Erlinda and Pedro's conjugal partnership as it was a debt contracted by the both of them during
their marriage; and should the conjugal partnership be insufficient to cover the same, then Erlinda and Pedro
(more particularly, his estate as he is already deceased) shall be solidarily liable for the unpaid balance with
their separate properties.

(b) It is settled that "the declaration of nullity of a contract which is void ab initio operates to restore
things to the state and condition in which they were found before the execution thereof."28 Pursuant to this
rule, since the Deed of Sale involving the subject land stands to be nullified in view of the parties' stipulation
to this effect, it is incumbent upon the parties to return what they have received from said sale. Teresita's
successors-in-interest, are entitled to the refund of the additional PS0,000.00 consideration she paid for such
sale. It should be clarified that the liability for the said amount will not fall on all petitioners, but only on
Erlinda, as she was the only one among the petitioners who was involved in the said sale.

(C) In this case, it bears stressing that the execution of the Deed of Sale involving the subject land
was done in 1992. However, and as keenly pointed out by Justice Alfredo Benjamin S. Caguioa during the
deliberations of this case, Teresita was apprised of Pedro's death as early as 1990 when she went on a vacation
in the Philippines.35 As such, she knew all along that the aforesaid Deed of Sale - which contained a signature
purportedly belonging to Pedro, who died in 1989, or three (3) years prior to its execution - was void and
would not have operated to transfer any rights over the subject land to her name. Despite such awareness of
the defect in their title to the subject land, respondents still proceeded in constructing a three (3)-storey
building thereon. Indubitably, they should be deemed as builders in bad faith.

On the other hand, petitioners knew of the defect in the execution of the Deed of Sale from the
start, but nonetheless, still acquiesced to the construction of the three (3)-storey building thereon. Hence, they
should likewise be considered as landowners in bad faith.

Whenever both the landowner and the builder/planter/sower are in good faith (or in bad faith,
pursuant to the afore-cited provision), the landowner is given two (2) options under Article 44836 of the Civil
Code, namely: (a) he may appropriate the improvements for himself after reimbursing the buyer (the builder
in good faith) the necessary and useful expenses under Articles 54637 and 54838 of the Civil Code; or (b) he
may sell the land to the buyer, unless its value is considerably more than that of the improvements, in which
case, the buyer shall pay reasonable rent.

The instant case is remanded to the court a quo for the purpose of determining matters necessary for
the proper application of Articles 448 and 453, in relation to Articles 546 and 548 of the Civil Code.
 SUMMARY FORMAT

Q: Erlinda and Pedro borrowed the amount of ₱l00,000.00 from Teresita. They mortgaged their
property to secure the loan. After Pedro died, Erlinda ended up being unable to pay the loan. She
sold the mortgaged property to Teresita for ₱150,000.00. Teresita built a three-storey building
amounting to ₱2,000,000.00. Thereafter, the heirs of Pedro contested the validity of the Deed of Sale,
alleging that the deed was executed three years after Pedro died, as such his signature was forged.
For that reason, the deed of sale was cancelled and Teresita asked for the payment of ₱2,000,000.00
for the building and ₱150,000.00 for the consideration of the deed. Who should pay for the amount
asked for?

A: With respect to ₱150,000.00; a) As they were married before the effectivity of the Family Code of
the Philippines24 and absent any showing of any pre-nuptial agreement between Erlinda and Pedro,
it is safe to conclude that their property relations were governed by the system of conjugal
partnership of gains. Hence, pursuant to Article 12125 of the Family Code, the ₱l00,000.00 loan
obligation, including interest, if any, is chargeable to Erlinda and Pedro's conjugal partnership as it
was a debt contracted by the both of them during their marriage; and b) the liability for the said
₱50,000.00 will not fall on all petitioners, but only on Erlinda, as she was the only one among the
petitioners who was involved in the said sale. However, with respect to ₱2,000,000.00, both Teresita
and Erlinda are in bad faith. Whenever both the landowner and the builder/planter/sower are in good
faith (or in bad faith, pursuant to the afore-cited provision), the landowner is given two (2) options under
Article 44836 of the Civil Code, namely: (a) he may appropriate the improvements for himself after
reimbursing the buyer (the builder in good faith) the necessary and useful expenses under Articles 54637 and
54838 of the Civil Code; or (b) he may sell the land to the buyer, unless its value is considerably more than that
of the improvements, in which case, the buyer shall pay reasonable rent. Payment of ₱2,000,000.00 for the
building is subject at the option of the landowner.
 ESTATE OF HONORIO POBLADOR, JR., represented by RAFAEL A. POBLADOR v. ROSARIO L. MANZANO
G.R. No. 192391| June 19, 2017

DOCTRINE OF THE CASE

In this kind of estafa, the fraud which the law considers as criminal is the act of misappropriation or conversion. When
the element of misappropriation or conversion is missing, there can be no estafa. In such case, applying the foregoing discussions on
civil liability ex delicto, there can be no civil liability as there is no act or omission from which any civil liability may be sourced.

PERLAS-BERNABE,J..:

FACTS: the Probate Court authorized petitioner's administratrix, Elsa A. Poblador (Elsa), to negotiate the
sale of certain properties of petitioner, including the Wack-Wack Share. Upon Elsa's instruction, Rafael (one
of the heirs of the deceased Honorio Poblador, Jr.) looked for interested buyers. Subsequently, he engaged
the services of Manzano, a broker of Metroland Holdings Incorporated (Metroland) 6 who, on September 9,
1996, faxed a computation for the sale of the Wack-Wack Share to petitioner, 7 showing a final net amount of
₱l5,200,000.00.

Manzano later introduced Rafael to Moreland Realty, Inc. (Moreland), and the parties entered into a
Deed of Absolute Sale 9 with Elsa covering the Wack-Wack Share for the gross amount of ₱l8,000,000.00.
Out of the ₱l8,000,000.00 purchase price, Moreland directly paid Elsa the amount of ₱l5,200,000.00. 10 The
balance of ₱2,800,000.00 was allegedly given to Manzano for the payment of the capital gains tax,
documentary stamp tax, and other pertinent fees, as well as for her service fee. 11

In October 1996, however, the Probate Court annulled the sale of the Wack-Wack Share. Thus, Elsa
returned to Moreland the amount of ₱l8,000,000.00 which the latter paid for the Wack-Wack Share.
Petitioner likewise asked Manzano to return the broker's service fee. Upon Rafael’s request, Manzano faxed,
among others, the Capital Gains Tax Return dated September 23, 1996 indicating the payment of
Pl,480,000.00 as capital gains tax and BIR Certification dated September 23, 1996 indicating the payment of
Pl ,480,000.00 as capital gains tax. Examining these documents, Rafael and Torres allegedly noticed a
discrepancy in the faxed Capital Gains Tax Return: while the typewritten portion of the Return indicated
Pl,480,000.00 as the capital gains tax paid, the machine validation imprint reflected only P80,000.00 as the
amount paid. To clarify the discrepancy, petitioner secured a certified true copy of the Capital Gains Tax
Return from the BIR that reflected only P80,000.00 as the capital gains tax paid for the sale of the Wack-
Wack Share.

As a result, petitioner demanded 19 Manzano to properly account for the P2,800,000.00 allegedly
18

given to her for the payment of taxes and broker's fees, but to no avail. 20 This led to the filing, on December
8, 1999, of an Information 21 for the crime of Estafa under Article 315, paragraph (1) (b) of the Revised Penal
Code (RPC) against Manzano before the RTC.

In an Order 25 dated January 13, 2003, the RTC granted Manzano's Demurrer to Evidence and
dismissed the complaint for Estafa for failure of the prosecution to "prove all the elements of estafa through
misappropriation as defined in and penalized under paragraph 1 (b )[Article 315] of the Revised Penal Code, x
x x. "

In a Decision 30 dated September 30, 2009, the CA denied petitioner's appeal, declaring that the
prosecution did not only fail to prove all the elements of Estafa through misappropriation; 31 it also failed to
prove the alleged civil liability of Manzano in the amount of ₱2,800,000.00.
ISSUE
Whether or not the CA erred in denying petitioner's appeal on the civil liability ex delicto of Manzano.

RULING
No. In the fairly recent case of Dy v. People, the Court discussed the concept of civil liability ex
delicto in Estafa cases under paragraph 1 (b ), Article 315 of the RPC (with which Manzano was likewise
charged), stating that when the element of misappropriation or conversion is absent, there can be
no Estafa and concomitantly, the civil liability ex delicto does not exist.

The essence of the crime is the unlawful abuse of confidence or deceit in order to cause damage. As
this Court previously held, "the element of fraud or bad faith is indispensable." Our law abhors the act of
defrauding another person by abusing his trust or deceiving him, such that, it criminalizes this kind of fraud.

The Court further clarified that "whenever the elements of estafa are not established, and that the
delivery of any personal property was made pursuant to a contract, any civil liability arising from
the estafa cannot be awarded in the criminal case. This is because the civil liability arising from the contract is
not civil liability ex delicto, which arises from the same act or omission constituting the crime. Civil liability ex
delicto is the liability sought to be recovered in a civil action deemed instituted with the criminal case."45 In this
case, the Court agrees with the findings of both the R TC and the CA that the prosecution failed to prove all
the elements of estafa through misappropriation as defined in, and penalized under, paragraph 1 (b ), [Article
315] of the [RPC].

As the RTC aptly noted, Rafael, as the representative of herein petitioner, very well knew of and
concurred with the entire arrangement, including those which had to be made with the BIR. In fact,
petitioner itself admitted that it received the full amount of ₱15,200,000.00 - the full amount to which it was
entitled to under the terms of the sale of the Wack-Wack Share. For these reasons, petitioner could not claim
that it was deceived. Thus, absent the element of fraud, there could be no misappropriation or conversion to
speak of that would justify the charge of Estafa and, with it, the alleged civil liability ex delicto.

More significantly, the CA correctly observed that petitioner's evidence utterly failed to show that
Manzano personally received the ₱2,800,000.00 from petitioner with the duty to hold it in trust for or to
make delivery to the latter.
 SUMMARY FORMAT

Q: Rafael Poblador engaged the service of Manzano to look for the buyers of the Wack-Wack share
amounting to ₱18,000,00.00. Manzano showed a a computation for the sale of the Wack-Wack Share to
petitioner, 7 showing a final net amount of ₱l5,200,000.00. Manzano introduced Moreland Realty Inc. who
agreed to buy the Wack-Wack share. The ₱l5,200,000.00 was received by the party of Rafael and the
remaining ₱2,800,000.00 was given to Manzano for the payment of the capital gains tax, documentary stamp
tax, and other pertinent fees, as well as for her service fee. However, the sale of Wack-Wack share was
annulled by the Probate Court. As such, the party of Rafael Poblador returned the ₱18,000,00.00 which
Moreland paid to for the Wack-Wack share. Rafael demanded Manzano to return the ₱2,800,000.00, but to
no avail. Rafael requested for the accounting of the ₱2,800,000.00 which was responded by Manzano by
sending the Capital Gains Tax Return dated September 23, 1996 indicating the payment of Pl,480,000.00 as
capital gains tax. Examining these documents, Rafael and Torres allegedly noticed a discrepancy in the faxed
Capital Gains Tax Return: while the typewritten portion of the Return indicated Pl,480,000.00 as the capital
gains tax paid, the machine validation imprint reflected only P80,000.00 as the amount paid. Rafael filed a
case for Estafa against Manzano. However, the RTC dismissed the complaint for Estafa for failure of the
prosecution to "prove all the elements of estafa through misappropriation. Rafael appealed the civil aspect of
the case. Will the civil aspect based on ex delicto will prosper?

A: No. In the fairly recent case of Dy v. People, the Court discussed the concept of civil liability ex
delicto in Estafa cases under paragraph 1 (b ), Article 315 of the RPC (with which Manzano was likewise
charged), stating that when the element of misappropriation or conversion is absent, there can be
no Estafa and concomitantly, the civil liability ex delicto does not exist. Whenever the elements
of estafa are not established, and that the delivery of any personal property was made pursuant to a contract,
any civil liability arising from the estafa cannot be awarded in the criminal case. This is because the civil
liability arising from the contract is not civil liability ex delicto, which arises from the same act or omission
constituting the crime. Civil liability ex delicto is the liability sought to be recovered in a civil action deemed
instituted with the criminal case."45 In this case, the Court agrees with the findings of both the R TC and the
CA that the prosecution failed to prove all the elements of estafa through misappropriation as defined in, and
penalized under, paragraph 1 (b ), [Article 315] of the [RPC].
 REMEDIOS V. GEÑORGA v. HEIRS OF JULIAN MELITON

G.R. No. 224515 | July 03, 2017

DOCTRINE OF THE CASE

If a deed or conveyance is for a part only of the land described in a certificate of title, the Register of Deeds shall not
enter any transfer certificate to the grantee until a plan of such land showing all the portions or lots into which it
has been subdivided and the corresponding technical descriptions shall have been verified and
approved.

PERLAS-BERNABE, J.:

FACTS: Julian Meliton (Julian), Isabel Meliton, and respondents Irene, Henry, Roberto, Haide, all surnamed
Meliton, and Ma. Fe Meliton Espinosa (Ma. Fe; respondents) are the registered owners of a 227,270-square
meter parcel of land, covered by TCT No. 8027[5] (subject land).[6] Julian owns 8/14 portion of the
land..[7] During his lifetime, Julian sold portions of the subject land to various persons, among others, to
petitioner Remedios V. Geñorga's husband,[8] Gaspar Geñorga, who took possession and introduced
improvements on the portions respectively sold to them.[9]

However, Julian failed to surrender the owner's duplicate copy of TCT No. 8027 to enable the buyers
to register their respective deeds of sale, which eventually led to the filing of a Petition[10] for the surrender of
the owner's duplicate copy of TCT No. 8027 and/or annulment thereof, and the issuance of new titles.

In a Decision[12] dated July 17, 1998, the RTC of Naga City decided in favor of the buyers.
Accordingly, it ordered, among others, to surrender possession of TCT No. 8027 to the RD-Naga.13] It
further held that should the holder fail or refuse to comply with the court's directive: (a) TCT No. 8027 shall
be declared null and void; and (b) the RD-Naga shall issue a new certificate of title in lieu thereof, enter the
deeds of sale, and issue certificates of title in favor of the buyers.[14]

The said decision became final and executory but remained unexecuted. Thus, in an Order, the RTC
declared TCT No. 8027 null and void, resulting in the issuance of a new one, bearing annotations of the
buyers' adverse claims. The new owner's duplicate copy of TCT No. 8027 (subject owner's duplicate title) was
given to petitioner in 2009.

On April 22, 2013, respondents filed a Complaint[18] against petitioner before the court a quo, seeking
the surrender of the subject owner's duplicate title with damages. They claimed that they are entitled to the
possession thereof as registered owners, and suffered damages as a consequence of its unlawful withholding,
compelling them to secure the services of counsel to protect their interests.

In her Answer,[20] petitioner averred that their possession of the subject owner's duplicate title was by
virtue of a court decision, and for the legitimate purpose of registering the sales in their favor and the
issuance of titles in their names, they should be allowed to retain possession until the completion of the
requirements therefor.[21] The said title was eventually submitted to the RD-Naga on September 13, 2013.

The RTC granted respondents' petition, and ordered petitioner and/or the RD-Naga to deliver or
surrender possession of the subject owner's duplicate title to respondents. The petitioner appealed to the CA.
However, the CA affirmed the RTC ruling. . It noted the long length of time that had lapsed for the
annotation of the buyers' deeds of sale and the issuance of the corresponding certificates of title, and found
no valid and plausible reason to further withhold custody and possession of the subject owner's duplicate title
from respondents.

ISSUE
 Whether or not the CA correctly affirmed the court a quo's Decision directing the surrender and
delivery of possession of the subject owner's duplicate title to respondents.

RULING
Yes. Notably, from the time petitioner received possession of the subject owner's duplicate title in
2009, a considerable amount of time had passed until she submitted the same to the RD-Naga on September
13, 2013. But even up to the time she filed the instant petition before the Court on May 6, 2016,[40] she failed
to show any sufficient justification for the continued failure of the concerned buyers to comply with the
requirements for the registration of their respective deeds of sale and the issuance of certificates of title in
their names to warrant a preferential right to the possession of the subject owner's duplicate title as against
respondents who undisputedly own the bigger portion of the subject land. Consequently, the Court finds no
reversible error on the part of the CA in affirming the RTC Decision directing petitioner or the RD-Naga to
deliver or surrender the subject owner's duplicate title to respondents.

Moreover, it bears to stress that the function of a Register of Deeds with reference to the registration
of deeds is only ministerial in nature.[41] Thus, the RD-Naga cannot be expected to retain possession of the
subject owner's duplicate title longer than what is reasonable to perform its duty. In the absence of a verified
and approved subdivision plan and technical description duly submitted for registration on TCT No. 8027, it
must return the same to the presenter, in this case, petitioner who, as aforesaid, failed to establish a better
right to the possession of the said owner's duplicate title as against respondents.
 SUMMARY FORMAT

Q: Julian and respondens own a 227,270-square meter parcel of land, covered by TCT No.
8027[5] (subject land). Julian who owns 8/14 of the subject land sold some portions to various buyers,
including Gaspar Genorga, the husband of petitioner. However, buyers cannot register their
respective sale because Julian failed to surrender the TCT NO. 8027 to them. This prompts them to
file a case for the surrender of the owner’s duplicate copy of the TCT Mo. 8027 which the court
granted. The said decision became final and executory but remained unexecuted. Thus, in an Order,
the RTC declared TCT No. 8027 null and void, resulting in the issuance of a new one, bearing
annotations of the buyers' adverse claims. The new owner's duplicate copy of TCT No. 8027
(subject owner's duplicate title) was given to petitioner in 2009. On April 22, 2013, respondents filed
a Complaint against petitioner before the court a quo, seeking the surrender of the subject owner's
duplicate title with damages. Petitioner averred that their possession of the subject owner's
duplicate title was by virtue of a court decision, and for the legitimate purpose of registering the
sales in their favor and the issuance of titles in their names, they should be allowed to retain
possession until the completion of the requirements therefor. Is the petitioner correct?

A: No. Notably, from the time petitioner received possession of the subject owner's duplicate title in 2009, a
considerable amount of time had passed until she submitted the same to the RD-Naga on September 13,
2013. But even up to the time she filed the instant petition before the Court on May 6, 2016,[40] she failed to
show any sufficient justification for the continued failure of the concerned buyers to comply with the
requirements for the registration of their respective deeds of sale and the issuance of certificates of title in
their names to warrant a preferential right to the possession of the subject owner's duplicate title as against
respondents who undisputedly own the bigger portion of the subject land.
 BERNADETTE S. BILAG v. ESTELA AY-AY
G.R. No. 189950 | APRIL 24, 2017

DOCTRINE OF THE CASE

Under Articles 476 and 477 of the Civil Code, the two indispensable requisites in an action to quiet title are: (1) that
the plaintiff has a legal or equitable title to or interest in the real property subject of the action; and (2) that there is a cloud on his
title by reason of any instrument, record, deed, claim, encumbrance or proceeding, which must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity.

PERLAS-BERNABE, J.:

FACTS: The instant case stemmed from a Complaint[5] dated August 12, 2004 for Quieting of Title with
Prayer for Preliminary Injunction filed by respondents Estela Ay-Ay, Andres Acop, Jr., Felicitas Ap-Ap,
Sergio Ap-Ap, John Napoleon A. Ramirez, Jr., and Ma. Teresa A. Ramirez (respondents) against petitioners
Bernadette S. Bilag, Erlinda Bilag-Santillan, Dixon Bilag, Reynaldo B. Suello, Heirs of Lourdes S. Bilag, Heirs
of Leticia Bilag-Hanaoka, and Heirs of Nellie Bilag before the RTC Br. 61, docketed as Civil Case No. 5881-
R. Essentially, respondents alleged that Iloc Bilag, petitioners' predecessor-in-interest, sold to them separately
various portions of a 159,496-square meter parcel of land designated by the Bureau of Lands as Approved
Plan No. 544367, Psu 189147 situated at Sitio Benin, Baguio City (subject lands), and that they registered
the corresponding Deeds of Sale[6] with the Register of Deeds of Baguio City. Respondents further alleged
that they have been in continuous possession of the said lands since 1976 when they were delivered to them
and that they have already introduced various improvements thereon. Despite the foregoing, petitioners
refused to honor the foregoing, continued to harass respondents, and even threatened to demolish their
improvements and dispossess them thereof. Hence, they filed the instant complaint to quiet their respective
titles over the subject lands and remove the cloud cast upon their ownership as a result of petitioners' refusal
to recognize the sales.

Petitioners filed a Motion to Dismiss[8] dated November 4, 2004 on the grounds of lack of
jurisdiction, prescription/laches/estoppel, and res judicata. Anent the first ground, petitioners averred that the
subject lands are untitled, unregistered, and form part of the Baguio Townsite Reservation which were long
classified as lands of the public domain. As such, the RTC has no jurisdiction over the case as it is the Land
Management Bureau (formerly the Bureau of Lands) which is vested with the authority to determine issues of
ownership over unregistered public lands.

In an Order[15] dated October 10, 2005, the RTC Br. 61 ruled in petitioners' favor, and consequently,
ordered the dismissal of Civil Case No. 5881-R on the ground, among others, that it had no authority to do
so. Aggrieved, respondents appeal to the CA. In a Decision[18] dated March 19, 2009, the CA set aside the
dismissal of Civil Case No. 5881-R, and accordingly, remanded the case to the court a quo for trial. The CA
only tackled the issues with respect to the prescription/laches/estoppel and res judicata.

ISSUE
Whether or not the CA correctly set aside the dismissal of Civil Case No. 5881-R, and accordingly,
remanded the case to the court a quo for trial.

RULING
No. the CA notably omitted from its discussion the first ground relied upon by petitioners, which is
lack of jurisdiction. A review of the records shows that the subject lands form part of a 159,496-square meter
parcel of land designated by the Bureau of Lands as Approved Plan No. 544367, Psu 189147 situated at Sitio
Benin, Baguio City. Such parcel of land forms part of the Baguio Townsite Reservation, a portion of which,
or 146, 428 square meters, was awarded to Iloc Bilag due to the reopening of Civil Reservation Case No. 1,
GLRO Record No. 211.

In a catena of cases,[27] and more importantly, in Presidential Decree No. (PD) 1271,[28] it was
expressly declared that all orders and decisions issued by the Court of First Instance of Baguio and Benguet in
connection with the proceedings for the reopening of Civil Reservation Case No. 1, GLRO Record 211,
covering lands within the Baguio Townsite Reservation are null and void and without force and effect. While
PD 1271 provides for a means to validate ownership over lands forming part of the Baguio Townsite
Reservation, it requires, among others, that a Certificate of Title be issued on such lands on or before July 31,
1973.[29] In this case, records reveal that the subject lands are unregistered and untitled, as petitioners'
assertion to that effect was not seriously disputed by respondents.

. In view of the foregoing, it is only reasonable to conclude that the subject lands should be properly
classified as lands of the public domain as well. Therefore, since the subject lands are untitled and
unregistered public lands, then petitioners correctly argued that it is the Director of Lands who has the
authority to award their ownership.[30] Thus, the RTC Br. 61 correctly recognized its lack of power or
authority to hear and resolve respondents' action for quieting of title.
 SUMMARY FORMAT

Q: Iloc Bilag sold a sold to respondents separately various portions of a 159,496-square meter parcel
of land designated by the Bureau of Lands as Approved Plan No. 544367, Psu 189147 situated at Sitio
Benin, Baguio City (subject lands), and that they registered the corresponding Deeds of Sale[6] with
the Register of Deeds of Baguio City. This land is forms part of the Baguio Townsite Reservation
which is a public land. Respondents, alleged to have been harassed and threatened by petitioners,
filed a petition for Quieting of title with prayer of Preliminary Injunction before the RTC Br. 61 .
Petitioners countered, among others, that RTC has no jurisdiction. Should the petition be granted?

A: No. since the subject lands are untitled and unregistered public lands, then petitioners correctly argued
that it is the Director of Lands who has the authority to award their ownership.[30] Thus, the RTC Br. 61
correctly recognized its lack of power or authority to hear and resolve respondents' action for quieting of title.
 TEODORICO A. ZARAGOZA v. . ILOILO SANTOS TRUCKERS, INC.
G.R. No. 224022| June 28, 2017

DOCTRINE OF THE CASE

For the purpose of bringing an unlawful detainer suit, two requisites must concur: (1) there must be failure to pay rent
or comply with the conditions of the lease, and (2) there must be demand both to pay or to comply and vacate.

PERLAS-BERNABE, J.:

FACTS: On June 26, 2003, petitioner Teodorico A. Zaragoza (petitioner) bought a 3,058-square meter (sq.
m.) parcel of land located at Cabatuan, Iloilo. Petitioner claimed that unknown to him, his father leased [7] a
1,000-sq. m. portion of Lot 937-A (subject land) to respondent Iloilo Santos Truckers, Inc. (respondent), for
a period of eight (8) years commencing on December 5, 2003 and renewable for another eight (8) years at the
sole option of respondent.[8] This notwithstanding, petitioner allowed the lease to subsist and respondent had
been diligent in paying its monthly rent amounting to P10,000.00 per month.

Petitioner claimed that when his father died, respondent stopped paying rent. On the other hand,
respondent maintained that it was willing to pay rent, but was uncertain as to whom payment should be
made. Respondent filed an interpleader case before the Regional Trial Court of Iloilo City, Branch 24 (RTC-
Br. 24). RTC Br. 24 issued an order dismissing the action for interpleader, but at the same time, stating that
respondent may avail of the remedy of consignation. Pursuant thereto, respondent informed petitioner that it
had consigned the aggregate amount of P521,396.89[17] before RTC-Br. 24.

Petitioner sent respondent a letter[19] dated May 24, 2011, stating the consignation did not extinguish
the latter's obligation to pay rent because the amount consigned was insufficient to cover the unpaid rentals
plus interests from February 2007 to May 2011 in the amount of P752,878.72. In this regard, petitioner
demanded that respondent pay said amount and at the same time, vacate the subject land within fifteen (15)
days from receipt of the letter.

In its reply,[20] respondent reiterated that it had already paid rent by consigning the amount of
P521,396.89 with RTC-Br. 24 representing monthly rentals from February 2007 to March 2011. petitioner
clarified that the aforesaid amount consigned by respondent was insufficient to cover monthly rentals from
February 2007 to March 2011 and reiterated that his earlier demand to pay was for the period of February
2007 to May 2011. Thus, petitioner posited that respondent had continuously failed and refused to comply
with the terms and conditions of the lease contract concerning the payment of monthly rental, with or
without consignation.

Petitioner filed a suit for unlawful detainer against respondent before the Municipal Trial Court in
Cities, Iloilo City. The MTCC ruled in favor of petitioner. However, the RTC dismissed the complaint on the
ground that the consignation effectively released respondent from its obligation to pay rent, and hence,
petitioner's complaint for unlawful detainer must necessarily fail. Aggrieved, petitioner appealed to the CA
which, however, affirmed the decision of the RTC.

ISSUE
Whether or not the CA correctly ruled that petitioner could not eject respondent from the subject
land as the latter fully complied with its obligation to pay monthly rent thru consignation.
RULING
No. For an unlawful detainer suit to prosper, the plaintiff-lessor must show that: first, initially, the
defendant-lessee legally possessed the leased premises by virtue of a subsisting lease contract; second, such
possession eventually became illegal, either due to the latter's violation of the provisions of the said lease
contract or the termination thereof; third, the defendant-lessee remained in possession of the leased
premises, thus, effectively depriving the plaintiff-lessor enjoyment thereof; and fourth, there must be a
demand both to pay or to comply and vacate and that the suit is brought within one (1) year from the last
demand.[45]
In this case, the first, third, and fourth requisites have been indubitably complied with, considering that at the
time the suit was instituted on June 21, 2011: (a) there was a subsisting lease contract[46] between petitioner
and respondent; (b) respondent was still in possession of the subject land; and (c) the case was filed within
one (1) year from petitioner's letter[47] dated May 24, 2011 demanding that respondent pay monthly rentals
and at the same time, vacate the subject land. Thus, the crux of the controversy is whether or not the second
requisite has been satisfied.

To recapitulate, in its letter[48] dated May 24, 2011, petitioner demanded payment for, among others,
monthly rentals for the period of February 2007 to May 2011. However, a closer reading the respondent’s
letter-reply and Manifestation and Notice reveals that the amount consigned with RTC-Br. 24 represents
monthly rentals only for the period of February 2007 to March 2011, which is two (2) whole months short
of what was being demanded by petitioner.

It is apparent that at the time petitioner filed the unlawful detainer suit on June 21, 2011, respondent
was not updated in its monthly rental payments, as there is no evidence of such payment for the months of
April, May, and even June 2011. Irrefragably, said omission constitutes a violation of the lease contract on the
part of respondent.

Considering that all the requisites of a suit for unlawful detainer have been complied with, petitioner
is justified in ejecting respondent from the subject land.
 SUMMARY FORMAT

Q: On June 26, 2003, petitioner Teodorico A. Zaragoza (petitioner) bought a 3,058-square meter (sq.
m.) parcel of land. His father leased[7] a 1,000-sq. m. portion of Lot 937-A (subject land) to
respondent Iloilo Santos Truckers, Inc. (respondent.[8] This notwithstanding, petitioner allowed the
lease to subsist and respondent had been diligent in paying its monthly rent amounting to P10,000.00
per month. Petitioner claimed that when his father died, respondent stopped paying rent. On the
other hand, respondent maintained that it was willing to pay rent, but was uncertain as to whom
payment should be made. Respondent made a consignation on the RTC br. 24 for the amount of
P521,396.89 equivalent for the rent of February 2007 to March 2011. Petitioner averred that the
amount was insufficient to cover the unpaid rentals plus interests from February 2007 to May 2011.
Petitioner clarified that his earlier demand to pay was for the period of February 2007 to May 2011.
Thus, petitioner posited that respondent had continuously failed and refused to comply with the
terms and conditions of the lease contract concerning the payment of monthly rental. May petitioner
eject respondent from the subject land?

A: Yes. For an unlawful detainer suit to prosper, the plaintiff-lessor must show that: first, initially, the
defendant-lessee legally possessed the leased premises by virtue of a subsisting lease contract; second, such
possession eventually became illegal, either due to the latter's violation of the provisions of the said lease
contract or the termination thereof; third, the defendant-lessee remained in possession of the leased
premises, thus, effectively depriving the plaintiff-lessor enjoyment thereof; and fourth, there must be a
demand both to pay or to comply and vacate and that the suit is brought within one (1) year from the last
demand.[45]
In this case, all requisites have been indubitably complied with, considering that at the time the suit was
instituted on June 21, 2011: (a) there was a subsisting lease contract[46] between petitioner and respondent; (b)
, respondent was not updated in its monthly rental payments, as there is no evidence of such payment for the
months of April, May, and even June 2011-- said omission constitutes a violation of the lease contract on the
part of respondent; (c) respondent was still in possession of the subject land; and (d) the case was filed within
one (1) year from petitioner's letter[47] dated May 24, 2011 demanding that respondent pay monthly rentals
and at the same time, vacate the subject land.
 JANET URI FAHRENBACH AND DIRK FAHRENBACH vs JOSEFINA R. PANGILINAN
G.R. No. 224549 | August 07, 2017

DOCTRINE OF THE CASE

the law does not require a person to have his feet on every square meter of the ground before it can
be said that he is in possession thereof. the law allows a present possessor to tack his possession to that of his
predecessor-in-interest to be deemed in possession of the property for the period required by
law. Possession in this regard, however, pertains to possession de jure and the tacking is made for
the purpose of completing the time required for acquiring or losing ownership through prescription.

PERLAS-BERNABE, J.:

FACTS: On September 6, 1995, respondent acquired a parcel of unregistered land (subject lot) from her
aunt, Felomina Abid (Abid), through a Waiver of Rights.[5] The said lot measured 5.78 hectares and was
covered by Tax Declaration No. 0056.[6] However, unknown to respondent, Abid also executed a Deed of
Sale[7] on July 15, 1995 in favor of Columbino Alvarez (Alvarez) covering the same piece of land.

On August 2, 2005, after purportedly learning that the description of the property he bought under the Deed
of Sale was erroneous, Alvarez executed a handwritten letter stating that the subject lot, with an area of 5.78
hectares and covered by Tax Declaration No. 0056, belonged to respondent. He also executed a Sinumpaang
salaysay stating that the said land is not the property he had intended to buy from Abid but the one with an
area of eight (8) hectares under Tax Declaration No. 019-0233-A.

September 2005, respondent learned that petitioners were occupying the 5.78-hectare subject lot she acquired
from Abid and built structures thereon without respondent's consent.[12] Despite demands, petitioners refused
to vacate the premises. Respondent filed a complaint[14] for forcible entry against petitioners.

According to petitioners, the area they were occupying is the eight (8)-hectare property covered by Tax
Declaration No. 0052, which they allegedly acquired from Alvarez in 2005 by virtue of a Deed of Sale.
Petitioners further averred that Alvarez had been in possession of the same parcel of land since 1974 after
Abid allowed him to cultivate it. On the other hand, respondent neither physically possessed the said property
nor introduced improvements thereon.[18]

In a Decision[19] dated November 6, 2012, the MCTC dismissed respondent's complaint and upheld
petitioners' possession.

Anent the casual visits to the property respondent allegedly made, the MCTC ruled that the same was not
sufficient to constitute actual possession contemplated by law in ejectment cases. Thus, respondent's action
for forcible entry cannot prevail over petitioners whose possession can be traced to their predecessor-in-
interest.

the RTC reversed the ruling of the MCTC and ordered petitioners to vacate the subject lot. the RTC
observed that based on the Deed of Sale, it would appear that petitioners purchased an eight (8)-hectare lot
bounded by the seashore on the east; however, the relevant tax declaration, i.e., Tax Declaration No. 0052,
did not include "seashore" as a boundary. Thus, since the word "seashore" was somehow inserted in the
Deed of Sale, it would appear that what the property petitioners bought and were occupying was the lot that
was previously occupied by Alvarez and covered by Tax Declaration No. 019-0233-A. However, in truth, the
RTC found out that petitioners were actually occupying respondent's property covered by Tax Declaration
No. 0056.[34] Notably, the lot covered by Tax Declaration No. 0056[35] was also bounded by the seashore. the
CA affirmed the RTCs findings insofar as it held that respondent was the prior possessor of the subject lot. It
ruled that respondent's prior possession de facto thereof has been proven as she occasionally visited the same,
paid realty taxes, and even requested for a survey authority thereon.
ISSUE
Whether or not the CA erred in holding that respondent was in prior possession of the subject lot.

RULING
Yes. It is well-settled that the only question that the courts must resolve in forcible entry or unlawful
detainer cases is who between the parties is entitled to the physical or material possession of the property in
dispute. In forcible entry, the plaintiff must prove that it was in prior physical possession of the premises
until it was deprived thereof by the defendant.

In this case, respondent had sufficiently proven her prior possession de facto of the subject lot. Records
disclose that respondent occasionally visited the subject lot since she acquired the same from Abid in
September 1995. She even paid the lot's realty taxes, as well as requested for a survey authority thereon. [62] In
fact, she submitted old photographs[63] showing herself on the subject lot, the identity of which petitioners did
not contend. Notably, jurisprudence states that the law does not require a person to have his feet on every
square meter of the ground before it can be said that he is in possession thereof.[64] In Bunyi v. Factor,[65] the
Court held that "visiting the property on weekends and holidays is evidence of actual or physical possession.
The fact of her residence somewhere else, by itself, does not result in loss of possession of the subject
property."[66] In contrast, petitioners themselves claim that they began occupying the subject lot only in
August 2005, after Alvarez executed the corresponding Deed of Sale in their favor.[67] Hence, in light of the
foregoing, there is no doubt that respondent had prior de facto possession.

At this juncture, the Court finds it proper to dispel petitioners' mistaken notion that their possession should
be tacked onto that of Alvarez who allegedly occupied the property since 1974. In Nenita Quality Foods
Corporation v. Galabo,[68] the Court clarified that tacking of possession only applies to possession de jure, or that
possession which has for its purpose the claim of ownership.

Possession de jure is irrelevant because the only question in forcible entry - as it is here - is prior physical
possession or possession de facto.
 SUMMARY FORMAT

Q: On 1995, Josefina (respondent) acquired a parcel of unregistered land (subject lot) from her aunt,
Abid, through a Waiver of Rights.[5] The said lot measured 5.78 hectares and was covered by Tax
Declaration No. 0056.[6] However, unknown Josefina, Abid also executed a Deed of Sale[7] on July 15,
1995 in favor of Columbino Alvarez (Alvarez) covering the same piece of land. Alvarez executed a
sinumpaang salaysay, stating that the said land is not the property he had intended to buy from Abid
but the one with an area of eight (8) hectares under Tax Declaration No. 019-0233-A. September
2005, respondent learned that Sps. Fahrenbach (petitioners) were occupying the 5.78-hectare subject
lot she acquired from Abid and built structures thereon without respondent's consent.[12] Despite
demands, petitioners refused to vacate the premises. Respondent filed a complaint [14] for forcible
entry against petitioners. According to petitioners, the area they were occupying is the eight (8)-
hectare property covered by Tax Declaration No. 0052, which they allegedly acquired from Alvarez
in 2005 by virtue of a Deed of Sale. Petitioners further averred that Alvarez had been in possession of
the same parcel of land since 1974 after Abid allowed him to cultivate it. On the other hand,
respondent neither physically possessed the said property nor introduced improvements thereon.
Will the complaint for forcible entry prosper?

A: Yes. It is well-settled that the only question that the courts must resolve in forcible entry or unlawful
detainer cases is who between the parties is entitled to the physical or material possession of the property in
dispute. In forcible entry, the plaintiff must prove that it was in prior physical possession of the premises
until it was deprived thereof by the defendant. In this case, respondent had sufficiently proven her prior
possession de facto of the subject lot. Records disclose that respondent occasionally visited the subject lot since
she acquired the same from Abid in September 1995. She even paid the lot's realty taxes, as well as requested
for a survey authority thereon.[62] In fact, she submitted old photographs[63] showing herself on the subject lot,
the identity of which petitioners did not contend. In Bunyi v. Factor,[65] the Court held that "visiting the
property on weekends and holidays is evidence of actual or physical possession.
 HEIRS OF PEÑAFLOR v. DELA CRUZ+
G.R. No. 197797 | August 8, 2017

DOCTRINE OF THE CASE

It is well-settled that the purchaser in an extrajudicial foreclosure of real property becomes the absolute owner of the
property if no redemption is made within one [(1)] year from the registration of the certificate of sale by those entitled to redeem.

PERLAS-BERNABE, J.:

FACTS:
Respondents are the successors-in-interest of the late Artemio dela Cruz (Artemio), who is the son of
Nicolasa dela Cruz, the original owner of a parcel of land situated at No. 11, Ifugao St., Brgy. Barretto,
Olongapo City, including a two-storey building erected thereon (subject property).
On April 15, 1991, Nicolasa authorized her daughter, Carmelita C. Guanga (Carmelita), Artemio's
sister, to mortgage the subject property to Jose R. Peñaor (Peñaor), the predecessor-in-interest of herein
petitioners, Jose Peñaor, Jr. and Virginia P. Agatep (represented by Jessica P. Agatep; collectively, petitioners)
in order to secure a loan in the amount of P112,000.00. As Nicolasa failed to settle her loan obligation when
it fell due, Peñaor led an application for extra-judicial foreclosure of mortgage before the Regional Trial Court
of Olongapo City, Branch 72 (RTC), docketed as Case No. 07-0-91. After the requirements of posting,
notices, and publication were complied with, the subject property was sold at a public auction, where Peñaor
emerged as the highest bidder. A Certificate of Sale was thus issued in his favor. The period of redemption
expired without the subject property being redeemed; hence, a Final Bill of Sale was issued and registered in
Peñaor's name. Thereafter, the latter executed an Affidavit of Consolidation of Ownership. This
notwithstanding, Nicolasa persisted in her occupancy of the subject property and refused to deliver
possession to Peñaflor.

ISSUE
Whether or not the Writ of Possession and Notice to Vacate issued by the RTC is valid?

RULING
Yes. "It is well-settled that the purchaser in an extrajudicial foreclosure of real property becomes the
absolute owner of the property if no redemption is made within one [(1)] year from the registration of the
certificate of sale by those entitled to redeem. As absolute owner, he is entitled to all the rights of ownership
over a property recognized in Article 428 of the New Civil Code, not least of which is possession, or jus
possidendi[.]"
In Acap v. CA (Acap) it was ruled that "[u]nder Article 712 of the Civil Code, the modes of acquiring
ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation,
acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis
causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum).
By its terms, the May 3, 1989 Waiver cannot be classified as any of these kinds of contracts from
which Artemio could derive ownership of the subject property. It cannot be classified as a sale (because there
is no price certain in money or its equivalent); as a barter (because of the lack of any other thing given as
consideration); a donation (because of the lack of animus donandi and even a formal acceptance); an
assignment (because of the lack of price); and/or a mutuum (because it is not a loan). Neither can it be
considered as an assignment either by onerous or gratuitous title so as to conclude that Nicolasa had already
lost her right to possess the subject property to Artemio prior to its mortgage
Taken together, these events would show that: (a) Artemio's claim over the subject property is
riddled with material inconsistencies; and (b) Nicolasa's children (among others, Artemio) appear to have
been taking several steps to prevent Peñaor from taking possession of the subject property and defeating his
consolidated ownership rights thereto, thus further casting doubt on Artemio's claim of ownership. In fact, it
deserves mentioning that Artemio led the ejectment suit in Civil Case No. 4065 only in April 1998, or seven
(7) long years after the property had already been mortgaged to Peñaor in April 1991; thus, it is equally
doubtful that he even had possession of the subject property at the time it was mortgaged to Peñaor. In
addition, the RTC had already granted the petition for the issuance of writ of possession in favor of Peñaor
on November 19, 1993, or almost five (5) years prior to the ling of the ejectment suit in April 1998, which
decision therein respondents
Nicolasa and Carmelita did not appeal.
Hence, for all these reasons, Artemio cannot be considered as a "third party who is actually holding
the property adversely to the judgment obligor," i.e., Nicolasa, so as to defeat Peñaor's right to possess the
subject property, which is but an incident to the consolidation of his ownership over the same.
As a final word, it should be clarified that the purpose of a petition for the issuance of a writ of
possession under Act No. 3135, as amended by Act No. 4118, is to expeditiously accord the mortgagee who
has already shown a prima facie right of ownership over the subject property (based on his consolidated title
over the same) his incidental right to possess the foreclosed property. To reiterate, " [p]ossession being an
essential right of the owner with which he is able to exercise the other attendant rights of ownership, after
consolidation of title[,] the purchaser in a foreclosure sale may demand possession as a matter of right."
Thus, it is only upon a credible showing by a third party claimant of his independent right over the foreclosed
property that the law's prima facie deference to the mortgagee's consolidated title should not prevail . Verily, a
mere claim of ownership would not suffice. As jurisprudence prescribes, the demonstration by the third
party-claimant should be made within the context of an adversarial hearing, where the basic principles of
Evidence and Civil Procedure ought to be followed, such as: (1) it is the claimant who has the burden of
proving his claim; (2) the claim must be established through a preponderance of evidence; and (3) evidence
not presented or formally offered cannot be admitted against the opposing party. In this case, none of these
principles were followed for the CA considered evidence that were not only submitted in a totally different
case against an entirely different party, but are also innately inadequate to — at least — prima facie show the
source of the third party claimant's independent title, all to the detriment of the mortgagee who had already
consolidated his title to the contested property.
 SUMMARY FORMAT

Q: On April 15, 1991, Nicolasa authorized her daughter, Carmelita, Artemio's sister, to mortgage the
subject property to Jose, the predecessor-in-interest of Jose, Jose Jr. and Virginia in order to secure a
loan in the amount of P112,000.00. As Nicolasa failed to settle her loan obligation when it fell due,
Jose, led an application for extra-judicial foreclosure of mortgage before the Regional Trial Court of
Olongapo City, Branch 72 (RTC), docketed as Case No. 07-0-91. After the requirements of posting,
notices, and publication were complied with, the subject property was sold at a public auction,
where Jose emerged as the highest bidder. A Certificate of Sale was thus issued in his favor. The
period of redemption expired without the subject property being redeemed; hence, a Final Bill of
Sale was issued and registered in Jose's name. Thereafter, the latter executed an Affidavit of
Consolidation of Ownership. This notwithstanding, Nicolasa persisted in her occupancy of the
subject property and refused to deliver possession to Jose. Is the Writ of Possession and Notice to
Vacate issued by the RTC is valid?

A: Yes. "It is well-settled that the purchaser in an extrajudicial foreclosure of real property becomes the
absolute owner of the property if no redemption is made within one [(1)] year from the registration of the
certificate of sale by those entitled to redeem. As absolute owner, he is entitled to all the rights of ownership
over a property recognized in Article 428 of the New Civil Code, not least of which is possession, or jus
possidendi[.]"

It should be clarified that the purpose of a petition for the issuance of a writ of possession under Act No.
3135, as amended by Act No. 4118, is to expeditiously accord the mortgagee who has already shown a prima
facie right of ownership over the subject property (based on his consolidated title over the same) his
incidental right to possess the foreclosed property. To reiterate, " [p]ossession being an essential right of the
owner with which he is able to exercise the other attendant rights of ownership, after consolidation of title[,]
the purchaser in a foreclosure sale may demand possession as a matter of right."

Thus, it is only upon a credible showing by a third party claimant of his independent right over the foreclosed
property that the law's prima facie deference to the mortgagee's consolidated title should not prevail. Verily, a
mere claim of ownership would not suffice. As jurisprudence prescribes, the demonstration by the third
party-claimant should be made within the context of an adversarial hearing, where the basic principles of
Evidence and Civil Procedure ought to be followed, such as: (1) it is the claimant who has the burden of
proving his claim; (2) the claim must be established through a preponderance of evidence; and (3) evidence
not presented or formally offered cannot be admitted against the opposing party. In this case, none of these
principles were followed for the CA considered evidence that were not only submitted in a totally different
case against an entirely different party, but are also innately inadequate to — at least — prima facie show the
source of the third party claimant's independent title, all to the detriment of the mortgagee who had already
consolidated his title to the contested property.
 ENCARNACION CONSTRUCTION & INDUSTRIAL CORPORATION v. PHOENIX
READY MIX CONCRETE DEVELOPMENT & CONSTRUCTION, INC.
G.R. No. 225402 | September 4, 2017

DOCTRINE OF THE CASE

By failing to make a claim on the quality of the delivered concrete at the stipulated time, the said claim is deemed to
have been waived.

PERLAS-BERNABE, J.:

FACTS:
On January 27 and March 25, 2009, Phoenix entered into two (2) separate Contract Proposals and
Agreements (Agreement) with ECIC for the delivery of various quantities of ready-mix concrete. The
Agreement was made in connection with the construction of the Valenzuela National High School (VNHS)
Marulas Building. ECIC received the ready-mix concrete delivery in due course. However, despite written
demands from Phoenix, ECIC refused to pay. Hence, Phoenix led before the RTC the Complaint for Sum of
Money against ECIC for the payment of P982,240.35, plus interest and attorney's fees.
In its Answer with Counterclaim, ECIC claimed that it opted to suspend payment since Phoenix
delivered substandard ready-mix concrete, such that the City Engineer's Office of Valenzuela (City Engineer's
Office) required the demolition and reconstruction of the VNHS building's 3rd floor. It contended that since
the samples taken from the 3rd floor slab failed to reach the comprehensive strength of 6,015 psi in 100 days,
the City Engineer's Office ordered the dismantling of the VNHS building's 3rd floor, and thus, incurred
additional expenses amounting to P3,858,587.84 for the dismantling and reconstruction.

ISSUE
Whether or not ECIC is entitled to counterclaim for damages

RULING
No. In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing
with Phoenix. There were likewise no allegations and proof that its representative (and owner/proprietor)
Ramon Encarnacion (Encarnacion) was uneducated, or under duress or force when he signed the Agreement
on its behalf. In fact, Encarnacion is presumably an astute businessman who signed the Agreement with full
knowledge of its import. Case law states that the natural presumption is that one does not sign a document
without first informing himself of its contents and consequences. This presumption has not been debunked.
Further, the Court finds that the terms and conditions of the parties' Agreement are plain, clear, and
unambiguous and thus could not have caused any confusion.
Based on these terms, it is apparent that any claim that ECIC may have had as regards the quality or
strength of the delivered ready-mix concrete should have been made at the time of delivery. However, it
failed to make a claim on the quality of the delivered concrete at the stipulated time, and thus, said claim is
deemed to have been waived.
In this relation, the Court clarifies that the absence of the signature of Encarnacion on the second
page of the Agreement did not render these terms inoperative. This is because the first page of the
Agreement — on which the signature of Encarnacion appears — categorically provides that the terms and
conditions stipulated on the Agreement's reverse side form part of their contract and are equally binding on
them.
Thus, by having its representative ax his signature on the first page of the Agreement and thereby
accepting Phoenix's proposed contract, ECIC likewise signified its conformity to the entirety of the stipulated
terms and conditions, including the stipulations on the Agreement's reverse side. Verily, ECIC positively and
voluntarily bound itself to these terms and conditions and cannot now claim otherwise.
Finally, it should be noted that ECIC failed to raise the alleged defect in the delivered concrete well
within a reasonable time from its discovery of the hairline cracks, as it notified Phoenix thereof only 48 days
after the last delivery date on April 29, 2009, and days after it was already notified thereof by the City
Engineer's Office. The lack of justifiable explanation for this delay all the more bolsters the conclusion that
ECIC indeed waived its right to make its claim.
In any event, the evidence on record do not support ECIC's claim that the hairline cracks that
appeared on the 3rd floor slab of the VNHS building resulted from the substandard quality of the delivered
ready-mix concrete. While it was shown that the City Engineer's Office inspected the site and approved the
structural design before the delivered concrete for the 3rd floor slab was poured, and that the results of the
test conducted by the Philippine Geoanalytics Testing Center from the samples taken showed that the
hardened concrete failed to reach the required comprehensive strength days after the pouring, ECIC,
however, failed to account for the period that intervened from the time the delivered concrete was poured to
the time the hairline cracks were observed. As the claiming party, it was incumbent upon ECIC to prove that
the hairline cracks were truly caused by the inferior quality of the delivered concrete.
Besides, Phoenix offered a more plausible explanation, i.e., that ECIC failed to observe the proper
procedure for applying and curing the delivered concrete during the intervening period. This resulted in what
Phoenix's witness described as "plastic (cement) shrinkage caused by the rapid evaporation of the water
component and other factors."
All told, ECIC failed to convincingly prove its counterclaim against Phoenix.
 SUMMARY FORMAT

Q: Phoenix entered into two (2) separate Contract Proposals and Agreements (Agreement) with
ECIC for the delivery of various quantities of ready-mix concrete. The Agreement was made in
connection with the construction of the Valenzuela National High School (VNHS) Marulas
Building. ECIC received the ready-mix concrete delivery in due course. However, despite written
demands from Phoenix, ECIC refused to pay. Hence, Phoenix led before the RTC the Complaint for
Sum of Money against ECIC for the payment of P982,240.35, plus interest and attorney's fees. In its
Answer with Counterclaim, ECIC claimed that it opted to suspend payment since Phoenix delivered
substandard ready-mix concrete, such that the City Engineer's Office of Valenzuela (City Engineer's
Office) required the demolition and reconstruction of the VNHS building's 3rd floor. It contended
that since the samples taken from the 3rd floor slab failed to reach the comprehensive strength of
6,015 psi in 100 days, the City Engineer's Office ordered the dismantling of the VNHS building's 3rd
floor, and thus, incurred additional expenses amounting to P3,858,587.84 for the dismantling and
reconstruction. Is ECIC entitled to counterclaim for damages?

A: No. In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing with
Phoenix. There were likewise no allegations and proof that its representative (and owner/proprietor) Ramon
Encarnacion (Encarnacion) was uneducated, or under duress or force when he signed the Agreement on its
behalf. In fact, Encarnacion is presumably an astute businessman who signed the Agreement with full
knowledge of its import. Case law states that the natural presumption is that one does not sign a document
without first informing himself of its contents and consequences. This presumption has not been debunked.

Finally, it should be noted that ECIC failed to raise the alleged defect in the delivered concrete well within a
reasonable time from its discovery of the hairline cracks, as it notified Phoenix thereof only 48 days after the
last delivery date on April 29, 2009, and days after it was already notified thereof by the City Engineer's
Office. The lack of justifiable explanation for this delay all the more bolsters the conclusion that ECIC indeed
waived its right to make its claim.

Besides, Phoenix offered a more plausible explanation, i.e., that ECIC failed to observe the proper procedure
for applying and curing the delivered concrete during the intervening period. This resulted in what Phoenix's
witness described as "plastic (cement) shrinkage caused by the rapid evaporation of the water component and
other factors."
 SPOUSES AGUINALDO v. TORRES, JR.
G.R. No. 225808| September 11, 2017

DOCTRINE OF THE CASE

Since notarization is essential to the registrability of deeds and conveyances

PERLAS-BERNABE, J.:

FACTS:
On March 3, 2003, petitioners led a complaint for annulment of sale, cancellation of title, and
damages against respondent before the RTC. They claimed that they are the registered owners of three (3)
lots covered by Transfer Certificates of Title (TCT) Nos. T-93596, T-87764, and T-87765 situated in Tanza,
Cavite (subject properties). Sometime in December 2000, they discovered that the titles to the subject
properties were transferred to respondent who, in bad faith, and through fraud, deceit, and stealth, caused the
execution of a Deed of Absolute Sale dated July 21, 1979 (1979 deed of sale), purportedly selling the subject
properties to him, for which he was issued TCT Nos. T-305318, T-305319, and T-305320 (subject certificates
of title).
Respondent led his Answer with Counterclaim, denying participation in the execution of the 1979
deed of sale, and averring that the subject properties were validly sold by petitioners to him through a Deed
of Absolute Sale dated March 10, 1991 (1991 deed of sale). He claimed that petitioners caused the registration
of the 1979 deed of sale with the Register of Deeds of Trece Martires City, and the transfer of title in his
name, hence, they are estopped from impugning the validity of his title. Moreover, the action has prescribed,
having been led beyond four (4) years from discovery of the averred fraud, reckoned from the registration of
the said deed on March 26, 1991. He further alleged that petitioners only led the instant baseless suit to harass
him in view of their acrimonious relationship, and thus, interposed a counterclaim for moral damages and
attorney's fees.

ISSUE
Whether or not there was a valid conveyance of the subject properties to respondent and directing
petitioners to execute a registrable deed of conveyance in his favor within thirty (30) days from the finality of
the decision.

RULING
Yes. Although the improper notarization of the 1991 deed of sale did not affect the validity of the
sale of the subject properties to respondent, the same, however, rendered the said deed unregistrable, since
notarization is essential to the registrability of deeds and conveyances. Bearing in mind that the legal
requirement that the sale of real property must appear in a public instrument is merely a coercive means
granted to the contracting parties to enable them to reciprocally compel the observance of the prescribed
form, and considering that the existence of the sale of the subject properties in respondent's favor had been
duly established, the Court upholds the CA's directive for petitioners to execute a registrable deed of
conveyance in respondent's favor within thirty (30) days from finality of the decision, in accordance with the
prescribed form under Articles 1357 and 1358 (1) of the Civil Code.
 SUMMARY FORMAT

Q: On March 3, 2003, Aguinaldo led a complaint for annulment of sale, cancellation of title, and
damages against Torres before the RTC. They claimed that they are the registered owners of three
(3) lots covered by Transfer Certificates of Title (TCT) Nos. T-93596, T-87764, and T-87765 situated
in Tanza, Cavite (subject properties). Sometime in December 2000, they discovered that the titles to
the subject properties were transferred to Torres who, in bad faith, and through fraud, deceit, and
stealth, caused the execution of a Deed of Absolute Sale dated July 21, 1979 (1979 deed of sale),
purportedly selling the subject properties to him, for which he was issued TCT Nos. T-305318, T-
305319, and T-305320 (subject certificates of title).

Torres led his Answer with Counterclaim, denying participation in the execution of the 1979 deed of
sale, and averring that the subject properties were validly sold by Aguinaldo to him through a Deed
of Absolute Sale dated March 10, 1991 (1991 deed of sale). He claimed that Aguinaldo caused the
registration of the 1979 deed of sale with the Register of Deeds of Trece Martires City, and the
transfer of title in his name, hence, they are estopped from impugning the validity of his title.
Moreover, the action has prescribed, having been led beyond four (4) years from discovery of the
averred fraud, reckoned from the registration of the said deed on March 26, 1991. He further alleged
that Aguinaldo only led the instant baseless suit to harass him in view of their acrimonious
relationship, and thus, interposed a counterclaim for moral damages and attorney's fees. Is there a
valid conveyance of the subject properties to Torres and directing Aguinaldo to execute a registrable
deed of conveyance in his favor within thirty (30) days from the finality of the decision.

A: Yes. Although the improper notarization of the 1991 deed of sale did not affect the validity of the sale of
the subject properties to respondent, the same, however, rendered the said deed unregistrable, since
notarization is essential to the registrability of deeds and conveyances. Bearing in mind that the legal
requirement that the sale of real property must appear in a public instrument is merely a coercive means
granted to the contracting parties to enable them to reciprocally compel the observance of the prescribed
form, and considering that the existence of the sale of the subject properties in respondent's favor had been
duly established, the Court upholds the CA's directive for petitioners to execute a registrable deed of
conveyance in respondent's favor within thirty (30) days from finality of the decision, in accordance with the
prescribed form under Articles 1357 and 1358 (1) of the Civil Code.
 REPUBLIC v. NG+
G.R. No. 229335 | November 29, 2017

DOCTRINE OF THE CASE

The property owner is entitled to compensation only for what he actually loses, and what he loses is only the actual value
of the property at the time of the taking.

PERLAS-BERNABE, J.:

FACTS:
On February 12, 2013, petitioner the Republic of the Philippines, represented by the Department of
Public Works and Highways (DPWH; petitioner), led before the RTC a complaint against respondent Belly
H. Ng (respondent), represented by Annabelle G. Wong, seeking to expropriate the lots registered in the
name of respondent under Transfer Certificate of Title (TCT) Nos. V-92188 8 and V-92191 9 with a total
area of 1,671 sq. m. (subject lots), together with the improvements thereon with an aggregate surface area of
2,121.7 sq. m. (collectively, subject properties), located in Kowloon Industrial Compound, Tatalon Street,
Brgy. Ugong, Valenzuela City, for the construction of the Mindanao Avenue Extension Project, Stage II-C
(Valenzuela City to Caloocan City). Petitioner manifested that it is able and ready to pay respondent the
amounts of P6,684,000.00 (i.e., at P4,000.00/sq. m.) and P11,138,362.74, representing the combined relevant
zonal value of the subject lots and the replacement cost of the improvements thereon, respectively.
In her answer, respondent contended that the offer price is unreasonably low, and that she should be
compensated the fair market value of her properties at the time of taking, estimated to be at P25,000.00/sq.
m. Moreover, the fair and just replacement cost of the improvements on the subject lots should be in the
amount of P22,276,724.00, pursuant to Section 10 of the Implementing Rules and Regulations of Republic
Act No. (RA) 8974. Petitioner was eventually granted a Writ of Possession, after respondent received the
amount of P17,822,362.74, representing 100% of the zonal value of the subject properties.
The RTC appointed a board of commissioners to determine the just compensation for the properties
which, thereafter, submitted its Commissioner's Report dated June 10, 2013, recommending the amounts of
P7,000.00/sq. m. and P12,000.00/sq. m. as the just compensation for the subject lots and the improvements
thereon, respectively, and the payment of six percent (6%) legal interest therefor, reckoned from the time of
taking.

ISSUE
Whether or not the replacement cost for the improvements fixed by the RTC is valid.

RULING
No. The construction of the Mindanao Avenue Extension Project, Stage II-C (Valenzuela City to
Caloocan City) involves the implementation of a national infrastructure project. Thus, for purposes of
determining the just compensation, RA 8974 and its implementing rules and regulations (IRR), which were
effective at the time of the filing of the complaint, shall govern
The replacement cost method is premised on the principle of substitution, which means that "all
things being equal, a rational, informed purchaser would pay no more for a property than the cost of building
an acceptable substitute with like utility."
The case of Republic v. Mupas (Mupas) instructs that in using the replacement cost method to
ascertain the value of improvements, the courts may also consider the relevant standards provided under
Section 5 of RA 8974, as well as equity consistent with the principle that eminent domain is a concept of
equity and fairness that attempts to make the landowner whole. Thus, it is not the amount of the owner's
investment, but the "value of the interest" in land taken by eminent domain, that is guaranteed to the owner.
While there are various methods of appraising a property using the cost approach, Mupas declared
that the use of the depreciated replacement cost method is consistent with the principle that the property
owner shall be compensated for his actual loss, bearing in mind that the concept of just compensation does
not imply fairness to the property owner alone, but must likewise be just to the public which ultimately bears
the cost of expropriation. The property owner is entitled to compensation only for what he actually loses, and
what he loses is only the actual value of the property at the time of the taking. Hence, even as undervaluation
would deprive the owner of his property without due process, so too would its overvaluation unduly favor
him to the prejudice of the public.
It must be emphasized that in determining just compensation, the courts must consider and apply the
parameters set by the law and its implementing rules and regulations in order to ensure that they do not
arbitrarily fix an amount as just compensation that is contradictory to the objectives of the law. Be that as it
may, when acting within the parameters set by the law itself, courts are not strictly bound to apply the
formula to its minutest detail, particularly when faced with situations that do not warrant the formula's strict
application. Thus, the courts may, in the exercise of their discretion, relax the formula's application, subject to
the jurisprudential limitation that the factual situation calls for it and the courts clearly explain the reason for
such deviation.
In this case, the RTC and the CA upheld the recommendation of the court-appointed
commissioners, fixing the just compensation for the improvements on the expropriated properties at
P12,000.00/sq. m., which merely considered their location, classification, value declared by the owner, and
the zonal valuation of the subject lots. However, there is no competent evidence showing that it took into
account the prevailing construction costs and all other attendant costs associated with the acquisition and
installation of an acceptable substitute in place of the affected improvements/structures as required by the
IRR. Consequently, the Court cannot uphold and must, perforce, set aside the said valuation as the just
compensation for the subject improvements.
In relation thereto, the Court deems it proper to correct the award of legal interest to be imposed on
the unpaid balance of the just compensation, which shall be computed at the rate of twelve percent (12%) p.a.
from the date of taking, i.e., from April 10, 2013 when the RTC issued a writ of possession in favor of
petitioner, until June 30, 2013. Thereafter, or beginning July 1, 2013, until fully paid, the just compensation
due respondent shall earn interest at the rate of six percent (6%) p.a., in line with the amendment introduced
by BSP-MB Circular No. 799, Series of 2013.
 SUMMARY FORMAT

Q: On February 12, 2013, DPWH, led before the RTC a complaint against respondent Belly, seeking
to expropriate the lots registered in the name of respondent under Transfer Certificate of Title
(TCT) Nos. V-92188 8 and V-92191 9 with a total area of 1,671 sq. m. (subject lots), together with the
improvements thereon with an aggregate surface area of 2,121.7 sq. m. (collectively, subject
properties), located in Kowloon Industrial Compound, Tatalon Street, Brgy. Ugong, Valenzuela
City, for the construction of the Mindanao Avenue Extension Project, Stage II-C (Valenzuela City to
Caloocan City). DPWH manifested that it is able and ready to pay Belly the amounts of
P6,684,000.00 (i.e., at P4,000.00/sq. m.) and P11,138,362.74, representing the combined relevant zonal
value of the subject lots and the replacement cost of the improvements thereon, respectively.

In her answer, Belly contended that the offer price is unreasonably low, and that she should be
compensated the fair market value of her properties at the time of taking, estimated to be at
P25,000.00/sq. m. Moreover, the fair and just replacement cost of the improvements on the subject
lots should be in the amount of P22,276,724.00, pursuant to Section 10 of the Implementing Rules
and Regulations of Republic Act No. (RA) 8974. DPWH was eventually granted a Writ of
Possession, after Belly received the amount of P17,822,362.74, representing 100% of the zonal value
of the subject properties.

The RTC appointed a board of commissioners to determine the just compensation for the properties
which, thereafter, submitted its Commissioner's Report dated June 10, 2013, recommending the
amounts of P7,000.00/sq. m. and P12,000.00/sq. m. as the just compensation for the subject lots and
the improvements thereon, respectively, and the payment of six percent (6%) legal interest therefor,
reckoned from the time of taking.

A: No. The construction of the Mindanao Avenue Extension Project, Stage II-C (Valenzuela City to
Caloocan City) involves the implementation of a national infrastructure project. Thus, for purposes of
determining the just compensation, RA 8974 and its implementing rules and regulations (IRR), which were
effective at the time of the filing of the complaint, shall govern

The replacement cost method is premised on the principle of substitution, which means that "all things being
equal, a rational, informed purchaser would pay no more for a property than the cost of building an
acceptable substitute with like utility."

The case of Republic v. Mupas (Mupas) instructs that in using the replacement cost method to ascertain the
value of improvements, the courts may also consider the relevant standards provided under Section 5 of RA
8974, as well as equity consistent with the principle that eminent domain is a concept of equity and fairness
that attempts to make the landowner whole. Thus, it is not the amount of the owner's investment, but the
"value of the interest" in land taken by eminent domain, that is guaranteed to the owner.

While there are various methods of appraising a property using the cost approach, Mupas declared that the
use of the depreciated replacement cost method is consistent with the principle that the property owner shall
be compensated for his actual loss, bearing in mind that the concept of just compensation does not imply
fairness to the property owner alone, but must likewise be just to the public which ultimately bears the cost of
expropriation. The property owner is entitled to compensation only for what he actually loses, and what he
loses is only the actual value of the property at the time of the taking. Hence, even as undervaluation would
deprive the owner of his property without due process, so too would its overvaluation unduly favor him to
the prejudice of the public.
It must be emphasized that in determining just compensation, the courts must consider and apply the
parameters set by the law and its implementing rules and regulations in order to ensure that they do not
arbitrarily fix an amount as just compensation that is contradictory to the objectives of the law. Be that as it
may, when acting within the parameters set by the law itself, courts are not strictly bound to apply the
formula to its minutest detail, particularly when faced with situations that do not warrant the formula's strict
application. Thus, the courts may, in the exercise of their discretion, relax the formula's application, subject to
the jurisprudential limitation that the factual situation calls for it and the courts clearly explain the reason for
such deviation.

In this case, the RTC and the CA upheld the recommendation of the court-appointed commissioners, fixing
the just compensation for the improvements on the expropriated properties at P12,000.00/sq. m., which
merely considered their location, classification, value declared by the owner, and the zonal valuation of the
subject lots. However, there is no competent evidence showing that it took into account the prevailing
construction costs and all other attendant costs associated with the acquisition and installation of an
acceptable substitute in place of the affected improvements/structures as required by the IRR. Consequently,
the Court cannot uphold and must, perforce, set aside the said valuation as the just compensation for the
subject improvements.

In relation thereto, the Court deems it proper to correct the award of legal interest to be imposed on the
unpaid balance of the just compensation, which shall be computed at the rate of twelve percent (12%) p.a.
from the date of taking, i.e., from April 10, 2013 when the RTC issued a writ of possession in favor of
petitioner, until June 30, 2013. Thereafter, or beginning July 1, 2013, until fully paid, the just compensation
due respondent shall earn interest at the rate of six percent (6%) p.a., in line with the amendment introduced
by BSP-MB Circular No. 799, Series of 2013.
 ST. MARTIN POLYCLINIC, INC. v. LWV CONSTRUCTION CORP.
G.R. No. 217426 | December 4, 2017

DOCTRINE OF THE CASE

Article 2176 covers situations where an injury happens through an act or omission of the defendant. When it involves a
positive act, the intention to commit the outcome is irrelevant. The act itself must not be a breach of an existing law or a pre-
existing contractual obligation. What will be considered is whether there is "fault or negligence" attending the commission of the
act which necessarily leads to the outcome considered as injurious by the plaintiff. The required degree of diligence will then be
assessed in relation to the circumstances of each and every case.

PERLAS-BERNABE, J.:

FACTS:
Respondent is engaged in the business of recruiting Filipino workers for deployment to Saudi Arabia.
On the other hand, petitioner is an accredited member of the Gulf Cooperative Council Approved Medical
Centers Association (GAMCA) and as such, authorized to conduct medical examinations of prospective
applicants for overseas employment. On January 10, 2008, respondent referred prospective applicant
Jonathan V. Raguindin (Raguindin) to petitioner for a pre-deployment medical examination in accordance
with the instructions from GAMCA. After undergoing the required examinations, petitioner cleared
Raguindin and found him "fit for employment," as evidenced by a Medical Report 8 dated January 11, 2008
(Medical Report).
Unfortunately, when Raguindin underwent another medical examination with the General Care
Dispensary of Saudi Arabia (General Care Dispensary) on March 24, 2008, he purportedly tested positive for
HCV or the hepatitis C virus. The Ministry of Health of the Kingdom of Saudi Arabia (Ministry of Health)
required a re-examination of Raguindin, which the General Care Dispensary conducted on April 28, 2008.
However, the results of the re-examination remained the same, i.e., Raguindin was positive for HCV, which
results were reflected in a Certification dated April 28, 2008 (Certication). An undated HCV Confirmatory
Test Report likewise conducted by the Ministry of Health affirmed such finding, thereby leading to
Raguindin's repatriation to the Philippines.

ISSUE
Whether or not petitioner was negligent in issuing the Medical Report declaring Raguindin "fit for
employment" and hence, should be held liable for damages.

RULING
Yes. An action for damages due to the negligence of another may be instituted on the
basis of Article 2176 of the Civil Code, which defines a quasi-delict: “Whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. The elements of a quasi-delict are: (1) an act or omission; (2) the
presence of fault or negligence in the performance or non-performance of the act; (3) injury; (4) a causal
connection between the negligent act and the injury; and (5) no pre-existing contractual relation.”
As a general rule, any act or omission coming under the purview of Article 2176 gives rise to a cause
of action under quasi-delict. This, in turn, gives the basis for a claim of damages.
Article 2176 covers situations where an injury happens through an act or omission of the defendant.
When it involves a positive act, the intention to commit the outcome is irrelevant. The act itself must not be a
breach of an existing law or a pre-existing contractual obligation. What will be considered is whether there is
"fault or negligence" attending the commission of the act which necessarily leads to the outcome considered
as injurious by the plaintiff. The required degree of diligence will then be assessed in relation to the
circumstances of each and every case.
In this case, the respondent did not proffer (nor have these courts mentioned) any law as basis for
which damages may be recovered due to petitioner's alleged negligent act. In its amended complaint,
respondent mainly avers that had petitioner not issue a "fit for employment" Medical Report to Raguindin,
respondent would not have processed his documents, deployed him to Saudi Arabia, and later on — in view
of the subsequent findings that Raguindin was positive for HCV and hence, unfit to work — suffered actual
damages in the amount of P84,373.41. Thus, as the claimed negligent act of petitioner was not premised on
the breach of any law, and not to mention the incontestable fact that no pre-existing contractual relation was
averred to exist between the parties, Article 2176 of the Civil Code should govern.
 SUMMARY FORMAT

Q: LWV Construction Corp. (LWV) is engaged in the business of recruiting Filipino workers for
deployment to Saudi Arabia. An accredited member of the Gulf Cooperative Council Approved
Medical Centers Association (GAMCA) is authorized to conduct medical examinations of
prospective applicants for overseas employment. On January 10, 2008, LWV referred prospective
applicant Jonathan V. Raguindin (Raguindin) to the accredited member of GAMCA for a pre-
deployment medical examination in accordance with the instructions from GAMCA. After
undergoing the required examinations, an accredited member of GAMCA cleared Raguindin and
found him "fit for employment," as evidenced by a Medical Report 8 dated January 11, 2008
(Medical Report).

Unfortunately, when Raguindin underwent another medical examination with the General Care
Dispensary of Saudi Arabia (General Care Dispensary) on March 24, 2008, he purportedly tested
positive for HCV or the hepatitis C virus. The Ministry of Health of the Kingdom of Saudi Arabia
(Ministry of Health) required a re-examination of Raguindin, which the General Care Dispensary
conducted on April 28, 2008. However, the results of the re-examination remained the same, i.e.,
Raguindin was positive for HCV, which results were reflected in a Certification dated April 28, 2008
(Certication). An undated HCV Confirmatory Test Report likewise conducted by the Ministry of
Health affirmed such finding, thereby leading to Raguindin's repatriation to the Philippines. Was
the accredited member of GAMCA negligent in issuing the Medical Report declaring Raguindin "fit
for employment" and hence, should be held liable for damages?

A: Yes. An action for damages due to the negligence of another may be instituted on the
basis of Article 2176 of the Civil Code, which defines a quasi-delict: “Whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. The elements of a quasi-delict are: (1) an act or omission; (2) the
presence of fault or negligence in the performance or non-performance of the act; (3) injury; (4) a causal
connection between the negligent act and the injury; and (5) no pre-existing contractual relation.”

As a general rule, any act or omission coming under the purview of Article 2176 gives rise to a cause of action
under quasi-delict. This, in turn, gives the basis for a claim of damages.

Article 2176 covers situations where an injury happens through an act or omission of the defendant. When it
involves a positive act, the intention to commit the outcome is irrelevant. The act itself must not be a breach
of an existing law or a pre-existing contractual obligation. What will be considered is whether there is "fault or
negligence" attending the commission of the act which necessarily leads to the outcome considered as
injurious by the plaintiff. The required degree of diligence will then be assessed in relation to the
circumstances of each and every case.

In this case, the respondent did not proffer (nor have these courts mentioned) any law as basis for which
damages may be recovered due to petitioner's alleged negligent act. In its amended complaint, respondent
mainly avers that had petitioner not issue a "fit for employment" Medical Report to Raguindin, respondent
would not have processed his documents, deployed him to Saudi Arabia, and later on — in view of the
subsequent findings that Raguindin was positive for HCV and hence, unfit to work — suffered actual
damages in the amount of P84,373.41. Thus, as the claimed negligent act of petitioner was not premised on
the breach of any law, and not to mention the incontestable fact that no pre-existing contractual relation was
averred to exist between the parties, Article 2176 of the Civil Code should govern.
 HEIRS OF AMISTOSO v. VALLECER+
G.R. No. 227124 | December 6, 2017

DOCTRINE OF THE CASE

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.
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

PERLAS-BERNABE, J.:

FACTS:
Sometime in March 1996, respondent Elmer T. Vallecer (respondent), through his brother Dr. Jose
Benjy T. Vallecer (Benjy), filed a Complaint for recovery of possession and damages against petitioners,
docketed as Civil Case No. S-606, involving a 2,265-square meter parcel of land, located in Labason,
Zamboanga del Norte, described as Lot C-7-A and covered by Transfer Certificate of Title No. T-44214
(TCT T-44214) and Tax Declaration No. 93-7329 under respondent's name. He claimed that he purchased
the property sometime in June 1990 after confirming with the Department of Agrarian Reform (DAR) that
the property was not tenanted. When he started making preparations for the construction of a commercial
building on the property, petitioners, with the aid of their workers, agents, representatives, and/or employees,
stopped or barred him by force, threats, and intimidation. Despite repeated demands and explanations made
by the Municipal Agrarian Reform Officer (MARO) of the DAR during a pre-litigation conference that no
landlord-tenancy relationship ever existed between them as regards the property, petitioners continued to
refuse him from entering and enjoying possession of his property. Thus, he prayed for the court to, among
others, order petitioners, with their representatives, agents, employees, and assigns, to vacate the property and
pay damages.
On January 8, 2001, the RTC declared respondent as the absolute owner of the subject property
under his name. On appeal, the CA rendered a Decision dated October 17, 2003 in CA-G.R. CV No. 70128
(October 17, 2003 CA Decision) reversing the RTC ruling. It found that Benjy failed to show proof of his
capacity to sue on respondent's behalf and that the CLT issued by the DAR acknowledges petitioners as
"deemed owner" of the land after full payment of its value. Having proven full compliance for the grant of
title, petitioners have a right to the land which must be respected. This CA Decision became final and
executory on November 4, 2003, and consequently, a Writ of Execution was issued on May 9, 2005
Thereafter, or on July 18, 2012, respondent filed a Complaint for quieting of title, ownership,
possession, and damages with preliminary injunction against petitioners, docketed as Civil Case No. L-298,
subject of the present case. Asserting ownership over the property under TCT No. T-44214 and tax
declarations, and citing petitioners' unlawful possession and occupation thereof despite repeated demands to
vacate, respondent claimed that: petitioners' CLT does not contain the technical description of the property
which it purportedly covers; the tenancy relationship from which petitioners anchor their possession pertains
to the portion of the adjacent land that belongs to Maria Kho Young with whom they admittedly have the
tenancy relationship; and the October 17, 2003 CA Decision involving Civil Case No. S-606, annotated on his
TCT No. T-44214, constitutes a cloud on his title.

ISSUE
Whether or not accion publiciana is same as action for quieting of title

RULING
No. In this case, a reading of the material allegations of respondent's complaint in Civil Case No. L-
298 and even petitioners' admissions readily reveals that there is neither a tenancy relationship between
petitioners and respondent, nor had petitioners been the tenant of respondent's predecessors-in-interest. In
fact, respondent did not even question the validity of petitioners' CLT nor sought for its cancellation. Rather,
what respondent sought was for a declaration that the property covered by his Torrens title is different from
the property covered by petitioners' CLT in order to quiet his title and remove all adverse claims against it.
Clearly, this is not an agrarian dispute that falls within the DARAB's jurisdiction.
In particular, in Civil Case No. S-606, respondent alleged that he purchased the property after
confirming with the DAR that it was not tenanted; that petitioners, with their workers and/or representatives,
stopped or barred him by force, threats, and intimidation from entering and occupying the property; and that
despite repeated demands and explanations made by the MARO that no landlord-tenant relationship ever
existed between them as regards the property, petitioners continued to prohibit him from entering and
enjoying possession of his property. He thus prayed for the court to order petitioners, with their
representatives, et al., to vacate the property and pay damages. 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.
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.
On the other hand, in Civil Case No. L-298, respondent asserted his ownership over the property by
virtue of his Torrens title, and alleged that petitioners' tenancy relationship actually pertains to the portion of
the adjacent land that belongs to Maria Kho Young with whom petitioners admittedly have the tenancy
relationship. Respondent also claimed that petitioners' CLT does not contain the technical description of the
property which it purportedly covers and therefore does not show that their alleged tenancy right falls on his
property. Thus, the October 17, 2003 CA Decision stemming from Civil Case No. S-606 and petitioners'
unlawful possession and claim of ownership constitute a cloud on his title over the property. Accordingly,
respondent prayed for the court to declare him as the absolute owner of the property, and restrain and
prohibit petitioners from performing and/or continuing to perform act/s that affect his possession and
enjoyment thereof as owner.
Clearly, the complaint in Civil Case No. L-298 is, as indicated herein, one for quieting of title
pursuant to Article 476 of the Civil Code. In Green Acres Holdings, Inc. v. Cabral, the Court discussed:
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, so that whoever has the right will see every cloud of
doubt over the property dissipated, and he can thereafter fearlessly introduce any desired improvements, as
well as use, and even abuse the property.
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.
Based on the foregoing, it is clear that the causes of action in Civil Case Nos. S-606 and L-298 are
different from each other.
Moreover, it should be pointed out that petitioners' attack on the validity of respondent's Torrens
title in Civil Case No. S-606 by claiming that their father Victor became the owner of the subject property by
virtue of the CLT issued to him in 1978 constitutes a collateral attack on said title. It is an attack incidental to
their quest to defend their possession of the property in an accion publiciana, not in a direct action aimed at
impugning the validity of the judgment granting the title. Time and again, it has been held that a certificate of
title shall not be subject to a collateral attack and that the issue of the validity of title can only be assailed in an
action expressly instituted for such purpose.
 SUMMARY FORMAT

Q: Sometime in March 1996, Elmer, through his brother Benjy, filed a Complaint for recovery of
possession and damages against petitioners, docketed as Civil Case No. S-606, involving a 2,265-
square meter parcel of land, located in Labason, Zamboanga del Norte, described as Lot C-7-A and
covered by Transfer Certificate of Title No. T-44214 (TCT T-44214) and Tax Declaration No. 93-
7329 under Elmer's name. He claimed that he purchased the property sometime in June 1990 after
confirming with the Department of Agrarian Reform (DAR) that the property was not tenanted.

When he started making preparations for the construction of a commercial building on the property,
petitioners, with the aid of their workers, agents, representatives, and/or employees, stopped or
barred him by force, threats, and intimidation. Despite repeated demands and explanations made by
the Municipal Agrarian Reform Officer (MARO) of the DAR during a pre-litigation conference that
no landlord-tenancy relationship ever existed between them as regards the property, Amistoso
continued to refuse him from entering and enjoying possession of his property. Thus, he prayed for
the court to, among others, order petitioners, with their representatives, agents, employees, and
assigns, to vacate the property and pay damages. On January 8, 2001, the RTC declared respondent
as the absolute owner of the subject property under his name. On appeal, the CA rendered a
Decision dated October 17, 2003 in CA-G.R. CV No. 70128 (October 17, 2003 CA Decision) reversing
the RTC ruling. It found that Benjy failed to show proof of his capacity to sue on respondent's
behalf and that the CLT issued by the DAR acknowledges petitioners as "deemed owner" of the
land after full payment of its value. Having proven full compliance for the grant of title, Amistoso
have a right to the land which must be respected. This CA Decision became final and executory on
November 4, 2003, and consequently, a Writ of Execution was issued on May 9, 2005
Thereafter, or on July 18, 2012, Elmer filed a Complaint for quieting of title, ownership, possession,
and damages with preliminary injunction against Amistoso, docketed as Civil Case No. L-298,
subject of the present case. Asserting ownership over the property under TCT No. T-44214 and tax
declarations, and citing petitioners' unlawful possession and occupation thereof despite repeated
demands to vacate, Elmer claimed that: Amistoso’s CLT does not contain the technical description
of the property which it purportedly covers; the tenancy relationship from which petitioners anchor
their possession pertains to the portion of the adjacent land that belongs to Maria Kho Young with
whom they admittedly have the tenancy relationship; and the October 17, 2003 CA Decision
involving Civil Case No. S-606, annotated on his TCT No. T-44214, constitutes a cloud on his title.

A: No. In this case, a reading of the material allegations of respondent's complaint in Civil Case No. L-298
and even petitioners' admissions readily reveals that there is neither a tenancy relationship between petitioners
and respondent, nor had petitioners been the tenant of respondent's predecessors-in-interest. In fact,
respondent did not even question the validity of petitioners' CLT nor sought for its cancellation. Rather, what
respondent sought was for a declaration that the property covered by his Torrens title is different from the
property covered by petitioners' CLT in order to quiet his title and remove all adverse claims against it.
Clearly, this is not an agrarian dispute that falls within the DARAB's jurisdiction.

In particular, in Civil Case No. S-606, respondent alleged that he purchased the property after confirming
with the DAR that it was not tenanted; that petitioners, with their workers and/or representatives, stopped or
barred him by force, threats, and intimidation from entering and occupying the property; and that despite
repeated demands and explanations made by the MARO that no landlord-tenant relationship ever existed
between them as regards the property, petitioners continued to prohibit him from entering and enjoying
possession of his property. He thus prayed for the court to order petitioners, with their representatives, et al.,
to vacate the property and pay damages. 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.

On the other hand, in Civil Case No. L-298, respondent asserted his ownership over the property by virtue of
his Torrens title, and alleged that petitioners' tenancy relationship actually pertains to the portion of the
adjacent land that belongs to Maria Kho Young with whom petitioners admittedly have the tenancy
relationship. Respondent also claimed that petitioners' CLT does not contain the technical description of the
property which it purportedly covers and therefore does not show that their alleged tenancy right falls on his
property. Thus, the October 17, 2003 CA Decision stemming from Civil Case No. S-606 and petitioners'
unlawful possession and claim of ownership constitute a cloud on his title over the property. Accordingly,
respondent prayed for the court to declare him as the absolute owner of the property, and restrain and
prohibit petitioners from performing and/or continuing to perform act/s that affect his possession and
enjoyment thereof as owner.

Based on the foregoing, it is clear that the causes of action in Civil Case Nos. S-606 and L-298 are different
from each other.

Moreover, it should be pointed out that petitioners' attack on the validity of respondent's Torrens title in Civil
Case No. S-606 by claiming that their father Victor became the owner of the subject property by virtue of the
CLT issued to him in 1978 constitutes a collateral attack on said title. It is an attack incidental to their quest to
defend their possession of the property in an accion publiciana, not in a direct action aimed at impugning the
validity of the judgment granting the title. Time and again, it has been held that a certificate of title shall not
be subject to a collateral attack and that the issue of the validity of title can only be assailed in an action
expressly instituted for such purpose.
 MACTAN ROCK INDUSTRIES v. BENFREI S. GERMO
G.R. No. 228799 | January 10, 2018

DOCTRINE OF THE CASE

As a general rule, directors, officers, or employees of a corporation cannot be held personally liable for the obligations
incurred by the corporation, unless it can be shown that such director/officer/employee is guilty of negligence or bad faith, and that
the same was clearly and convincingly proven.

Perlas-Bernabe, J.:

FACTS:
Mactan Rock Industries, through its President and Chief Executive Officer Tompar, entered into a
Technical Consultancy Agreement (TCA) with Germo, whereby the parties agreed, inter alia, that: (a) Germo
shall stand as MRII's marketing consultant who shall take charge of negotiating, perfecting sales, orders,
contracts, or services of MRII, but there shall be no employer-employee relationship between them;
and (b) Germo shall be paid on a purely commission basis, including a monthly allowance of P5,000.00.
During the effectivity of the TCA, Germo successfully negotiated and closed with International Container
Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic meters of purified water per day. Accordingly,
MRII commenced supplying water to ICTSI on February 22, 2007, and in tum, the latter religiously paid
MRII the corresponding monthly fees. Despite the foregoing, MRII allegedly never paid Germo his rightful
commissions amounting to P2,225,969.56 as of December 2009, inclusive of interest. Initially, Germo filed a
complaint before the National Labor Relations Commission (NLRC), but the same was dismissed for lack of
jurisdiction due to the absence of employer-employee relationship between him and MRII. Germo filed the
instant complaint praying that MRII and Tompar be made to pay him for unpaid commissions with legal
interest from the time they were due until fully paid, moral damages, exemplary damages, and the costs of
suit.

ISSUE
4. Are MRII, and Tompar, as the CEO and President, solidarily liable to pay Germo?

RULING
No. It is a basic rule that a corporation is a juridical entity which is vested with legal and personality
separate and distinct from those acting for and in behalf of, and from the people comprising it. As a general
rule, directors, officers, or employees of a corporation cannot be held personally liable for the obligations
incurred by the corporation, unless it can be shown that such director/officer/employee is guilty of
negligence or bad faith, and that the same was clearly and convincingly proven.

Before a director or officer of a corporation can be held personally liable for corporate obligations,
the following requisites must concur: (1) the complainant must allege in the complaint that the director or
officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence
or bad faith; and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or
bad faith. In this case, Tompar's assent to patently unlawful acts of the MRII or that his acts were tainted by
gross negligence or bad faith was not alleged in Germo's complaint, much less proven in the course of trial.
Therefore, the deletion of Tompar's solidary liability with MRII is in order.
 SUMMARY FORMAT

Q: Mactan Rock Industries, through its President and Chief Executive Officer Tompar, entered into
a Technical Consultancy Agreement (TCA) with Germo, whereby the parties agreed, inter
alia, that: (a) Germo shall stand as MRII's marketing consultant who shall take charge of
negotiating, perfecting sales, orders, contracts, or services of MRII, but there shall be no employer-
employee relationship between them; and (b) Germo shall be paid on a purely commission basis,
including a monthly allowance of P5,000.00. During the effectivity of the TCA, Germo successfully
negotiated and closed with International Container Terminal Services, Inc. (ICTSI) a supply
contract of 700 cubic meters of purified water per day. Accordingly, MRII commenced supplying
water to ICTSI on February 22, 2007, and in tum, the latter religiously paid MRII the corresponding
monthly fees. Despite the foregoing, MRII allegedly never paid Germo his rightful commissions
amounting to P2,225,969.56 as of December 2009, inclusive of interest. Initially, Germo filed a
complaint before the National Labor Relations Commission (NLRC), but the same was dismissed
for lack of jurisdiction due to the absence of employer-employee relationship between him and
MRII. Germo filed the instant complaint praying that MRII and Tompar be made to pay him for
unpaid commissions with legal interest from the time they were due until fully paid, moral damages,
exemplary damages, and the costs of suit.

MRII and Tompar averred, among others, that: (a) there was no employer-employee relationship
between MRII and Germo as the latter was hired as a mere consultant; (b) Germo failed to prove
that the ICTSI account materialized through his efforts as he did not submit the required periodic
reports of his negotiations with prospective clients; and (c) ICTSI became MRII's client through the
efforts of a certain Ed Fornes. Are MRII and Tompar, as the CEO and President, solidarily liable to
pay Germo?

A: No. It is a basic rule that a corporation is a juridical entity which is vested with legal and personality
separate and distinct from those acting for and in behalf of, and from the people comprising it. As a general
rule, directors, officers, or employees of a corporation cannot be held personally liable for the obligations
incurred by the corporation, unless it can be shown that such director/officer/employee is guilty of
negligence or bad faith, and that the same was clearly and convincingly proven.

Before a director or officer of a corporation can be held personally liable for corporate obligations, the
following requisites must concur: (1) the complainant must allege in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad
faith; and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad
faith. In this case, Tompar's assent to patently unlawful acts of the MRII or that his acts were tainted by gross
negligence or bad faith was not alleged in Germo's complaint, much less proven in the course of trial.
Therefore, the deletion of Tompar's solidary liability with MRII is in order.
 REPUBLIC v. LEONOR MACABAGDAL
G.R. No. 227215| January 10, 2018

DOCTRINE OF THE CASE

Legal interest shall run not from the date of the filing of the complaint but from the date of the issuance of the Writ of
Possession, since it is from this date that the fact of the deprivation of property can be established.

Perlas-Bernabe, J.:

FACTS:
Petitioner the Republic of the Philippines, represented by the Department of Public Works and
Highways, filed before the RTC a complaint against an unknown owner for the expropriation of a lot located
in Barangay Ugong, Valenzuela City for the construction of the C-5 Northern Link Road Project, otherwise
known as North Luzon Expressway (NLEX) Segment 8.1, traversing from Mindanao Avenue in Quezon City
to the NLEX in Valenzuela City. Petitioner applied for a writ of possession over the subject lot on May 5,
2008, which was granted, and was required to deposit with the court the amount of P550,000.00 (i.e., at
P2,750.00/sq. m.) as provisional deposit

However, respondent Leonor Macabagdal was substituted as party-defendant upon sufficient

showing that the subject lot is registered in her name under the Transfer Certificate Title of the lot.
Respondent did not oppose the expropriation, and received the provisional deposit. The RTC appointed a
board of commissioners to determine the just compensation for the subject lot, which thereafter submitted
report dated May 23, 2014, recommending a fair market value of P9,000.00/sq. m. as the just compensation
for the subject lot, taking into consideration its location, neighborhood and land classification, utilities,
amenities, physical characteristics, occupancy and usage, highest and best usage, current market value
offerings, as well as previously decided expropriation cases of the same RTC involving properties similarly
situated in the same barangay. The Court of Appeals affirmed this decision, which brought up the that the
CA did not rule on the issue of the applicable rate of interest which, in this case, should be at twelve percent
(12%) per annum. from the filing of the complaint until June 30, 2013, and thereafter, at six percent (6%) per
annum until full payment.

ISSUE
1. Is the 12% per annum interest on the unpaid balance, computed from the time of the taking of the
subject lot until full payment, valid?

RULING
No. The value of the landholdings should be equivalent to the principal sum of the just
compensation due, and interest is due and should be paid to compensate for the unpaid balance of this
principal sum after taking has been completed. From the date of the taking of the subject lot on May 5, 2008
when the RTC issued a writ of possession in favor of petitioner, until the just compensation therefor was
finally fixed at P9,000.00/sq. m., petitioner had only paid a provisional deposit in the amount of P550,000.00
(i.e., at P2,750.00/sq. m.). Thus, this left an unpaid balance of the "principal sum of the just compensation,"
warranting the imposition of interest. It is settled that the delay in the payment of just compensation amounts
to an effective forbearance of money, entitling the landowner to interest on the difference in the amount
between the final amount as adjudged by the court and the initial payment made by the government.

It bears to clarify that legal interest shall run not from the date of the filing of the complaint but from
the date of the issuance of the Writ of Possession on May 5, 2008, since it is from this date that the fact of
the deprivation of property can be established. As such, it is only proper that accrual of legal interest should
begin from this date.
 SUMMARY FORMAT

Q: The Republic of the Philippines filed before the RTC a complaint against an unknown owner for
the expropriation of a lot located in Barangay Ugong, Valenzuela City for the construction of the C-5
Northern Link Road Project, otherwise known as North Luzon Expressway (NLEX) Segment 8.1,
traversing from Mindanao Avenue in Quezon City to the NLEX in Valenzuela City. Petitioner
applied for a writ of possession over the subject lot on May 5, 2008, which was granted, and was
required to deposit with the court the amount of P550,000.00 (i.e., at P2,750.00/sq. m.) as provisional
deposit. However, respondent Macabagdal was substituted as party-defendant upon sufficient
showing that the subject lot is registered in her name under the Transfer Certificate Title of the lot.
Respondent did not oppose the expropriation, and received the provisional deposit. The RTC
appointed a board of commissioners to determine the just compensation for the subject lot, which
thereafter submitted report dated May 23, 2014, recommending a fair market value of P9,000.00/sq.
m. as the just compensation for the subject lot, taking into consideration its location, neighborhood
and land classification, utilities, amenities, physical characteristics, occupancy and usage, highest
and best usage, current market value offerings, as well as previously decided expropriation cases of
the same RTC involving properties similarly situated in the same barangay. The Court of Appeals
affirmed this decision, which brought up the that the CA did not rule on the issue of the applicable
rate of interest which, in this case, should be at twelve percent (12%) per annum. from the filing of
the complaint until June 30, 2013, and thereafter, at six percent (6%) per annum until full payment. Is
the 12% per annum interest on the unpaid balance, computed from the time of the taking of the
subject lot until full payment, valid?

A: No. The value of the landholdings should be equivalent to the principal sum of the just compensation due,
and interest is due and should be paid to compensate for the unpaid balance of this principal sum after taking
has been completed. From the date of the taking of the subject lot on May 5, 2008 when the RTC issued a
writ of possession in favor of petitioner, until the just compensation therefor was finally fixed at
P9,000.00/sq. m., petitioner had only paid a provisional deposit in the amount of P550,000.00 (i.e., at
P2,750.00/sq. m.). Thus, this left an unpaid balance of the "principal sum of the just compensation,"
warranting the imposition of interest. It is settled that the delay in the payment of just compensation amounts
to an effective forbearance of money, entitling the landowner to interest on the difference in the amount
between the final amount as adjudged by the court and the initial payment made by the government. It bears
to clarify that legal interest shall run not from the date of the filing of the complaint but from the date of the
issuance of the Writ of Possession on May 5, 2008, since it is from this date that the fact of the deprivation of
property can be established. As such, it is only proper that accrual of legal interest should begin from this
date.
 LUZVIMINDA DELA CRUZ MORISONO v. RYOJI MORISONO
G.R. No. 226013 | July 2, 2018

DOCTRINE OF THE CASE

Foreign divorce decrees obtained to nullify marriages between a Filipino and an alien citizen may already be recognized
in this jurisdiction, regardless of who between the spouses initiated the divorce; provided, of course, that the party petitioning for the
recognition of such foreign divorce decree – presumably the Filipino citizen – must prove the divorce as a fact and demonstrate its
conformity to the foreign law allowing it.

Perlas-Bernabe, J.:

FACTS: Luzviminda was married to Ryoji Morisono in Quezon City on December 8, 2009. Thereafter, they
lived together in Japan for 1 year and 3 months but were not blessed with a child. During their married life,
they would quarrel mainly due to Ryoji’s philandering ways, in addition to the fact that he was much older
than Luzviminda.

As such, the two of them submitted a “Divorce by Agreement” before the City Hall of Mizuho-ku in
Nagoya, Japan, which was approved and duly recorded. In view of this, Luzviminda filed a petition for
recognition of foreign divorce decree obtained by her and Ryoji before the RTC so that she could cancel the
surname of her husband and be able to marry again.

The RTC denied Luzviminda’s petition, holding that while a divorce decree held that while a divorce
obtained abroad by an alien spouse may be recognized in the Philippines – provided that such decree is valid
according to the national law of the alien – the same does not find application when it was the Filipino
spouse, i.e., petitioner, who procured the same. Invoking the nationality principle provided under Article 15
of the Civil Code, in relation to Article 26 (2) of the Family Code, the RTC opined that since petitioner is a
Filipino citizen whose national laws do not allow divorce, the foreign divorce decree she herself obtained in
Japan is not binding in the Philippines.

ISSUE
1. Did the RTC correctly deny Luzviminda’s petition for recognition of divorce decree she procured?

RULING
No. It had been ruled in Republic vs. Manalo that foreign divorce decrees obtained to nullify marriages
between a Filipino and an alien citizen may already be recognized in this jurisdiction, regardless of who
between the spouses initiated the divorce; provided, of course, that the party petitioning for the recognition
of such foreign divorce decree – presumably the Filipino citizen – must prove the divorce as a fact and
demonstrate its conformity to the foreign law allowing it.

In this case, a plain reading of the RTC ruling shows that the denial of Luzviminda's petition to have
her foreign divorce decree recognized in this jurisdiction was anchored on the sole ground that she admittedly
initiated the divorce proceedings which she, as a Filipino citizen, was not allowed to do. In light of the
doctrine laid down in Manalo, such ground relied upon by the RTC had been rendered nugatory. However,
the Court cannot just order the grant of Luzviminda's petition for recognition of the foreign divorce decree,
as Luzviminda has yet to prove the fact of her. "Divorce by Agreement" obtained in Nagoya City, Japan and
its conformity with prevailing Japanese laws on divorce. Notably, the RTC did not rule on such issues. Since
these are questions which require an examination of various factual matters, a remand to the court a quo is
warranted.
 SUMMARY FORMAT

Q: Luzviminda was married to Ryoji Morisono in Quezon City on December 8, 2009. Thereafter,
they lived together in Japan for 1 year and 3 months but were not blessed with a child. During their
married life, they would quarrel mainly due to Ryoji’s philandering ways, in addition to the fact that
he was much older than Luzviminda. As such, the two of them submitted a “Divorce by Agreement”
before the City Hall of Mizuho-ku in Nagoya, Japan, which was approved and duly recorded. In
view of this, Luzviminda filed a petition for recognition of foreign divorce decree obtained by her
and Ryoji before the RTC so that she could cancel the surname of her husband and be able to marry
again.

The RTC denied Luzviminda’s petition, holding that while a divorce decree held that while a
divorce obtained abroad by an alien spouse may be recognized in the Philippines – provided that
such decree is valid according to the national law of the alien – the same does not find application
when it was the Filipino spouse, i.e., petitioner, who procured the same. Invoking the nationality
principle provided under Article 15 of the Civil Code, in relation to Article 26 (2) of the Family Code,
the RTC opined that since petitioner is a Filipino citizen whose national laws do not allow divorce,
the foreign divorce decree she herself obtained in Japan is not binding in the Philippines. Did the
RTC correctly deny Luzviminda’s petition for recognition of divorce decree she procured?

A: No. It had been ruled in Republic vs. Manalo that foreign divorce decrees obtained to nullify marriages
between a Filipino and an alien citizen may already be recognized in this jurisdiction, regardless of who
between the spouses initiated the divorce; provided, of course, that the party petitioning for the recognition
of such foreign divorce decree – presumably the Filipino citizen – must prove the divorce as a fact and
demonstrate its conformity to the foreign law allowing it. a plain reading of the RTC ruling shows that the
denial of Luzviminda's petition to have her foreign divorce decree recognized in this jurisdiction was
anchored on the sole ground that she admittedly initiated the divorce proceedings which she, as a Filipino
citizen, was not allowed to do. In light of the doctrine laid down in Manalo, such ground relied upon by the
RTC had been rendered nugatory. However, the Court cannot just order the grant of Luzviminda's petition
for recognition of the foreign divorce decree, as Luzviminda has yet to prove the fact of her. "Divorce by
Agreement" obtained in Nagoya City, Japan and its conformity with prevailing Japanese laws on divorce.
Notably, the RTC did not rule on such issues. Since these are questions which require an examination of
various factual matters, a remand to the court a quo is warranted.
 CATALINA F. ISLA, ELIZABETH ISLA, and GILBERT F. ISLA v. GENEVIRA P.
ESTORGA
G.R. No. 233974 | July 2, 2018

DOCTRINE OF THE CASE

Anent monetary interest, the parties are free to stipulate their preferred rate. However, courts are allowed to equitably
temper interest rates that are found to be excessive, iniquitous, unconscionable, and/or exorbitant, such as stipulated interest rates
of three percent (3%) per month or higher.

Perlas-Bernabe, J.:

FACTS: Petitioners Isla obtained a loan in the amount of P100,000.00 from respondent, payable anytime
from six (6) months to one (1) year and subject to interest at the rate of ten percent (10%) per month, payable
on or before the end of each month. When petitioners failed to pay the said loan, respondent sought
assistance from the barangay, and consequently, a Kasulatan ng Pautang dated December 8, 2005 was executed.
Petitioners, however, failed to comply with its terms, prompting respondent to send a demand letter dated
November 16, 2006. Once more, petitioners failed to comply with the demand, causing respondent to file a
Petition for Judicial Foreclosure against them before the RTC.

For their part, petitioners maintained that the stipulated interest of ten percent (10%) per month was
exorbitant and grossly unconscionable. The RTC directed petitioners to pay respondent the amounts of
P100,000.00 with twelve percent (12%) interest per annum from December 2007 until fully paid and
P20,000.00 as attorney's fees, which the Court of Appeals affirmed with modification, ordering petitioners to
pay respondent the following sums: (a) P100,000.00 representing the principal of the loan obligation; (b) an
amount equivalent to twelve percent (12%) of P100,000.00 computed per year from November 16, 2006 until
full payment, representing interest on the loan; (c) an amount equivalent to six percent (6%) of the sums due
in (a) and (b) per annum computed from the finality of the CA Decision until full payment, representing legal
interest; and (d) P20,000.00 as attorney's fees. Hence, the petition.

ISSUE
1. Is the 12% per annum interest imposed by the Court valid?

RULING
Yes. Anent monetary interest, the parties are free to stipulate their preferred rate. However, courts
are allowed to equitably temper interest rates that are found to be excessive, iniquitous, unconscionable,
and/or exorbitant, such as stipulated interest rates of three percent (3%) per month or higher. In such
instances, it is well to clarify that only the unconscionable interest rate is nullified and deemed not written in
the contract; whereas the parties' agreement on the payment of interest on the principal loan obligation
subsists. It is as if the parties failed to specify the interest rate to be imposed on the principal amount, in
which case the legal rate of interest prevailing at the time the agreement was entered into is applied by the
Court. This is because, according to jurisprudence, the legal rate of interest is the presumptive reasonable
compensation for borrowed money.
In this case, petitioners and respondent entered into a loan obligation and clearly stipulated for the
payment of monetary interest. However, the stipulated interest of ten percent (10%) per month was found to
be unconscionable, and thus, the courts a quo struck down the same and pegged a new monetary interest of
twelve percent (12%) per annum, which was the prevailing legal rate of interest for loans and forbearances of
money at the time the loan was contracted on December 6, 2004.
 SUMMARY FORMAT

Q: Petitioners Isla obtained a loan in the amount of P100,000.00 from respondent, payable anytime
from six (6) months to one (1) year and subject to interest at the rate of ten percent (10%) per month,
payable on or before the end of each month. When petitioners failed to pay the said loan, respondent
sought assistance from the barangay, and consequently, a Kasulatan ng Pautang dated December 8,
2005 was executed. Petitioners, however, failed to comply with its terms, prompting respondent to
send a demand letter dated November 16, 2006. Once more, petitioners failed to comply with the
demand, causing respondent to file a Petition for Judicial Foreclosure against them before the RTC.
Petitioners maintained that the stipulated interest of ten percent (10%) per month was exorbitant
and grossly unconscionable. The RTC directed petitioners to pay respondent the amounts of
P100,000.00 with twelve percent (12%) interest per annum from December 2007 until fully paid and
P20,000.00 as attorney's fees. Is the 12% interest imposed by the Court valid?

A: Yes. Anent monetary interest, the parties are free to stipulate their preferred rate. However, courts are
allowed to equitably temper interest rates that are found to be excessive, iniquitous, unconscionable, and/or
exorbitant, such as stipulated interest rates of three percent (3%) per month or higher. In such instances, it is
well to clarify that only the unconscionable interest rate is nullified and deemed not written in the contract;
whereas the parties' agreement on the payment of interest on the principal loan obligation subsists. It is as if
the parties failed to specify the interest rate to be imposed on the principal amount, in which case the legal
rate of interest prevailing at the time the agreement was entered into is applied by the Court. This is because,
according to jurisprudence, the legal rate of interest is the presumptive reasonable compensation for
borrowed money.

In this case, petitioners and respondent entered into a loan obligation and clearly stipulated for the
payment of monetary interest. However, the stipulated interest of ten percent (10%) per month was found to
be unconscionable, and thus, the courts a quo struck down the same and pegged a new monetary interest of
twelve percent (12%) per annum, which was the prevailing legal rate of interest for loans and forbearances of
money at the time the loan was contracted on December 6, 2004.
 JOSE Z. MORENO, vs. RENE M. KAHN et. Al
G.R. No. 217744| JULY 30, 2018

DOCTRINE OF THE CASE: Non-compliance with the earnest effort requirement under Article
151 of the Family Code is not a jurisdictional defect which would authorize the courts to dismiss
suits filed before them motu proprio. Rather, it merely partakes of a condition precedent such
that the non-compliance therewith constitutes a ground for dismissal of a suit should the same
be invoked by the opposing party at the earliest opportunity, as in a motion to dismiss or in the
answer. Otherwise, such ground is deemed waived.

PERLAS-BERNABE, J.

FACTS: Jose alleged that since May 1998 and in their capacity as lessees, he and his family
have been occupying two (2) parcels of land co-owned by his full-blooded sister, respondent
Consuelo et al. Around April or May 2003, respondents offered to sell to Jose the subject lands
which Jose accepted. Over the next few years, Jose made partial payments to respondents
However, in July 2010, Consuelo decided to "cancel" their agreement, and thereafter, informed
Jose of her intent to convert the earlier partial payment as rental payments instead. In
response, Jose expressed his disapproval to Consuelo's plan and demanded that respondents
proceed with the sale, which the latter ignored. He then claimed without his consent, Consuelo
et al sold their shares over the subject lands to Rene. Upon learning of such sale, Jose sent a
demand letter to Rene asserting his right to the subject lands. As his demands went unheeded,
Jose brought the matter to the barangay upon for conciliation proceedings between him and
Rene.As no settlement was agreed upon, Jose was constrained to file the subject complaint for
specific performance and cancellation of titles with damages.

ISSUE: Whether or not the CA correctly affirmed the RTC's motu proprio dismissal of Jose's
complaint and if Article 151 of the Family Code is applicable to this case.
RULING: NO, Article 151. No suit between members of the same family shall prosper unless it
should appear from the verified complaint or petition that earnest efforts toward a compromise
have been made, but that the same have failed. If it is shown that no such efforts were in fact
made, the case must be dismissed.

Non-compliance with the earnest effort requirement under Article 151 of the Family Code is not
a jurisdictional defect which would authorize the courts to dismiss suits filed before them motu
proprio. Rather, it merely partakes of a condition precedent such that the non-compliance
therewith constitutes a ground for dismissal of a suit should the same be invoked by the
opposing party at the earliest opportunity, as in a motion to dismiss or in the answer.
Otherwise, such ground is deemed waived
The base issue is whether or not the appellate court may dismiss the order of dismissal of the
complaint for failure to allege therein that earnest efforts towards a compromise have been
made.
In the case at hand, no motion to dismiss the complaint based on the failure to comply with a
condition precedent was filed in the trial court; neither was such failure assigned as error in the
appeal that respondent brought before the Court of Appeals.
Therefore, the rule on deemed waiver of the non-jurisdictional defense or objection is wholly
applicable to respondent. If the respondents as parties-defendants could not, and did not, after
filing their answer-to-petitioner’s complainant, invoke the objection of absence of the required
allegation on earnest efforts at a compromise, the appellate court unquestionably did not have any
authority or basis to motu propio order the dismissal of petitioner’s complaint
 SUMMARY

Q: Jose alleged that he and his family have been occupying two (2) parcels of land. Which was
then offered to sell to Jose the subject lands which Jose accepted. However, Consuelo decided to
"cancel" their agreement. In response, Jose expressed his disapproval to Consuelo's plan and
demanded that respondents proceed with the sale, which the latter ignored. Upon learning of
such sale, Jose sent a demand letter to Rene asserting his right to the subject lands. As his
demands went unheeded, Jose brought the matter to the barangay upon for conciliation
proceedings between him and Rene. When it reached the CA such Court moto proprio dismissed
the case on the ground that they failed to apply article 151. Can the CA moto proprio dismiss
such case?

A: YES, Non-compliance with the earnest effort requirement under Article 151 of the Family
Code is not a jurisdictional defect which would authorize the courts to dismiss suits filed before
them motu proprio. Rather, it merely partakes of a condition precedent such that the non-
compliance therewith constitutes a ground for dismissal of a suit should the same be invoked by
the opposing party at the earliest opportunity, as in a motion to dismiss or in the answer.
Otherwise, such ground is deemed waived.

If the respondents as parties-defendants could not, and did not, after filing their answer-to-
petitioner’s complainant, invoke the objection of absence of the required allegation on earnest
efforts at a compromise, the appellate court unquestionably did not have any authority or basis
to motu propio order the dismissal of petitioner’s complaint
 RENALYN A. MASBATE v. RICKY JAMES RELUCIO
G.R. No. 235498| July 30, 2018

DOCTRINE OF THE CASE: General rule, the father and the mother shall jointly exercise
parental authority over the persons of their common children. However, insofar as illegitimate
children are concerned, Article 176 of the Family Code states that illegitimate children shall be
under the parental authority of their mother.

PERLAS-BERNABE,J.:

FACTS: Queenie was born on May 3, 2012 to Renalyn and Ricky James, who had been living
together with Renalyn's parents without the benefit of marriage. Three (3) years later, the
relationship ended. Renalyn went to Manila, supposedly leaving Queenie behind in the care and
custody of her father, Ricky James.

Ricky James alleged that on November 7, 2015, Spouses Renata and Marlyn Masbate
(Renalyn's parents) took Queenie from the school where he had enrolled her. When asked to
give Queenie back, Renalyn's parents refused and instead showed a copy of a Special Power of
Attorney (SPA) executed by Renalyn granting full parental rights, authority, and custody over
Queenie to them. Consequently, Ricky James filed a petition for habeas corpus and child
custody before the RTC (petition a quo). A hearing was conducted on December 3, 2015, where
Renalyn brought Queenie and expressed the desire for her daughter to remain in her custody.10

ISSUE: Whether or not the CA correctly remanded the case a quo for determination of who
should exercise custody over Queenie.

RULING: NO, As a general rule, the father and the mother shall jointly exercise parental
authority over the persons of their common children. However, insofar as illegitimate children
are concerned, Article 176 of the Family Code states that illegitimate children shall be under
the parental authority of their mother. Accordingly, mothers (such as Renalyn) are entitled to
the sole parental authority of their illegitimate children (such as Queenie), notwithstanding the
father's recognition of the child. In the exercise of that authority, mothers are consequently
entitled to keep their illegitimate children in their company, and the Court will not deprive
them of custody, absent any imperative cause showing the mother's unfitness to exercise such
authority and care.

Article 213 of the Family Code- No child under seven years of age shall be separated from the
mother unless the court finds compelling reasons to order otherwise.

However, the CA erroneously applied Section 6 of Rule 99 of the Rules of Court. This provision
contemplates a situation in which the parents of the minor are married to each other but are
separated either by virtue of a decree of legal separation or because they are living
separately de facto. In the present case, it has been established that petitioner and Respondent
Loreta were never married. Hence, that portion of the CA Decision allowing the child to choose
which parent to live with is deleted, but without disregarding the obligation of petitioner to
support the child.
 SUMMARY

Q: Queenie was born to Renalyn and Ricky James, who had been living together with Renalyn's
parents without the benefit of marriage. Three (3) years later, the relationship ended. Renalyn
went to Manila, supposedly leaving Queenie behind in the care and custody of her father, Ricky
James. Ricky James alleged that, the parents of Renalyn took Queenie from the school where he
had enrolled her. When asked to give Queenie back, Renalyn's parents refused. Consequently,
Ricky James filed a petition for habeas corpus and child custody before the RTC (petition a
quo). Upon reaching the CA it remanded the case a quo for determination of who should
exercise custody over Queenie. Was such action proper?

A: NO, CA erroneously applied Section 6 of Rule 99 of the Rules of Court. This provision
contemplates a situation in which the parents of the minor are married to each other but are
separated either by virtue of a decree of legal separation or because they are living
separately de facto. In the present case, it has been established that petitioner and Respondent
Loreta were never married. Hence, that portion of the CA Decision allowing the child to choose
which parent to live with is deleted, but without disregarding the obligation of petitioner to
support the child.

General rule, the father and the mother shall jointly exercise parental authority over the
persons of their common children. However, insofar as illegitimate children are concerned,
Article 176 of the Family Code states that illegitimate children shall be under the parental
authority of their mother. Accordingly, mothers (such as Renalyn) are entitled to the sole
parental authority of their illegitimate children (such as Queenie), notwithstanding the father's
recognition of the child. In the exercise of that authority, mothers are consequently entitled to
keep their illegitimate children in their company, and the Court will not deprive them of
custody, absent any imperative cause showing the mother's unfitness to exercise such authority
and care.
 ARIEL P. HORLADOR, v. PHILIPPINE TRANSMARINE CARRIERS,
INC.,MARINE*SHIPMANAGEMENT
G.R. No. 236576| September 05, 2018

DOCTRINE OF THE CASE: There are two (2) commonly accepted concepts of attorney's fees -
the ordinary and extraordinary. In its ordinary concept, an attorney's fee is the reasonable
compensation paid to a lawyer by his client for the legal services the former renders;
compensation is paid for the cost and/or results of legal services per agreement or as may be
assessed. In its extraordinary concept, attorney's fees are deemed indemnity for damages
ordered by the court to be paid by the losing party to the winning party.

PERLAS-BERNABE, J.

FACTS: Philippine Transmarine Carriers, Inc. for and on behalf of its foreign principal,
respondent Marine Shipmanagement Ltd. hired petitioner as a Chief Cook on board the vessel
PRAIA for a period of eight (8) months starting from his deployment on June 19, 2012. On
January 3, 2013 and while on board the vessel, petitioner, while carrying provisions, suddenly
felt a severe pain on his waist, abdomen, and down to his left scrotum. As the pain persisted for
a number of days, he was airlifted to a hospital in Belgium where he was diagnosed with
"infection with the need to rule out Epididymitis and Prostatitis" and advised to undergo
repatriation.8 Upon arrival in the Philippines, petitioner claimed that he immediately reported
to PTCI and asked for referral for further treatment, but was ignored. As such, he used his
health card in order to seek treatment at the Molino Doctors Hospital where he was diagnosed
with hernia. Thus, he filed a complaint11 for, inter alia, permanent and total disability benefits
against PTCI, Marine, and respondent Captain Marlon L. Malanao as the crewing manager
(respondents).

ISSUE: Whether or not the CA correctly deleted the award of attorney's fees in petitioner's
favor.

RULING: NO, There are two (2) commonly accepted concepts of attorney's fees - the ordinary
and extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation
paid to a lawyer by his client for the legal services the former renders; compensation is paid for
the cost and/or results of legal services per agreement or as may be assessed. In its
extraordinary concept, attorney's fees are deemed indemnity for damages ordered by the court
to be paid by the losing party to the winning party. The instances when these may be awarded
are enumerated in Article 2208 of the Civil Code and is payable not to the lawyer but to the
client, unless the client and his lawyer have agreed that the award shall accrue to the lawyer as
additional or part of compensation.28 Particularly, Article 2208 of the Civil Code reads:
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;;(8) In actions for indemnity under
workmen's compensation and employer's liability laws;

In this case, suffice it to say that the CA erred in deleting the award of attorney's fees,
considering that petitioner was found to be entitled to permanent and total disability benefits
and was forced to litigate to protect his valid claim. Thus, the reinstatement of such award is in
order.
 SUMMARY

Q: Philippine Transmarine Carriers, Inc. for and on behalf of its foreign principal, respondent
Marine Shipmanagement Ltd. hired petitioner as a Chief Cook while carrying provisions,
suddenly felt a severe pain on his waist, abdomen, and down to his left scrotum. As the pain
persisted for a number of days, he was airlifted to a hospital in Belgium where he was
diagnosed with "infection with the need to rule out Epididymitis and Prostatitis" and advised to
undergo repatriation.8 Upon arrival in the Philippines, petitioner claimed that he immediately
reported to PTCI and asked for referral for further treatment, but was ignored. Thus, he filed a
complaint for, inter alia, permanent and total disability benefits against PTCI, Marine, and
respondent Captain Marlon L. Malanao as the crewing manager (respondents). Was it proper
for the CA to delete the award of attoryney’s fees?

A: No, the instances when these may be awarded are enumerated in Article 2208 of the Civil
Code and is payable not to the lawyer but to the client, unless the client and his lawyer have
agreed that the award shall accrue to the lawyer as additional or part of
compensation.28 Particularly, Article 2208 of the Civil Code reads:
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;;(8) In actions for indemnity under
workmen's compensation and employer's liability laws;

In this case, suffice it to say that the CA erred in deleting the award of attorney's fees,
considering that petitioner was found to be entitled to permanent and total disability benefits
and was forced to litigate to protect his valid claim. Thus, the reinstatement of such award is in
order.
 NYMPHA S. ODIAMAR, v. LINDA ODIAMAR VALENCIA
G.R. No. 213582|September 12, 2018

DOCTRINE OF THE CASE: The rate of legal interest for loans or forbearance of any money,
goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per
annum but will now be six percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively and not retroactively.

PERLAS-BERNABE, J.:

FACTS: The court ordered petitioner Nympha S. Odiamar to pay respondent the amount of
P1,010,049.00 representing the remaining balance of petitioner's debt to the latter in the
original amount of P1,400,000.00. In said motion, respondent prays for the imposition of legal
interest on the monetary award due her. She likewise insists that petitioner's loan obligation to
her is not just P1,400,000.00 but P2,100,000.00 and, as such, she should be made to pay the
latter amount.

ISSUE: Whether or not the claim of the respondent is correct.

RULING: Court notes that there are two (2) types of interest, namely, monetary interest and
compensatory interest. Monetary interest is the compensation fixed by the parties for the use or
forbearance of money. On the other hand, compensatory interest is that imposed by law or by
the courts as penalty or indemnity for damages. In other words, the right to recover interest
arises only either by virtue of a contract (monetary interest) or as damages for the delay or
failure to pay the principal loan on which the interest is demanded (compensatory interest).7

Anent monetary interest, it is an elementary rule that no interest shall be due unless it has
been expressly stipulated in writing.8 In this case, no monetary interest may be imposed on the
loan obligation, considering that there was no written agreement expressly providing for such.9

This notwithstanding, such loan obligation may still be subjected to compensatory interest.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that
would govern the parties, the rate of legal interest for loans or forbearance of any money, goods
or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum
but will now be six percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless,
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.

Applying the foregoing parameters to this case, petitioner's loan obligation to respondent shall
be subjected to compensatory interest at the legal rate of twelve percent (12%) per annum from
the date of judicial demand, i.e., August 20, 2003, until June 30, 2013, and thereafter at the
legal rate of six percent (6%) per annum from July 1, 2013 until finality of this ruling. Moreover,
all monetary awards14due to respondent shall earn legal interest of six percent (6%) per annum
from finality of this ruling until fully paid.

However, as to respondent's other contentions, suffice it to say that the same are mere
reiterations of the grounds already evaluated and passed upon in the Assailed Decision.
Therefore, there is no cogent reason to warrant a modification or reversal of the same
 SUMMARY

Q: The court ordered petitioner Nympha S. Odiamar to pay respondent the amount of
P1,010,049.00 representing the remaining balance of petitioner's debt to the latter in the
original amount of P1,400,000.00. In said motion, respondent prays for the imposition of legal
interest on the monetary award due her. She likewise insists that petitioner's loan obligation to
her is not just P1,400,000.00 but P2,100,000.00 and, as such, she should be made to pay the
latter amount. Whether a prayer for the imposition of legal interest on the monetary award due
is proper?

A: YES, in the absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the
rate allowed in judgments shall no longer be twelve percent (12%) per annum but will now be six
percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, 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.

Applying the foregoing parameters to this case, petitioner's loan obligation to respondent shall
be subjected to compensatory interest at the legal rate of twelve percent (12%) per annum from
the date of judicial demand, i.e., August 20, 2003, until June 30, 2013, and thereafter at the
legal rate of six percent (6%) per annum from July 1, 2013 until finality of this ruling. Moreover,
all monetary awards14due to respondent shall earn legal interest of six percent (6%) per annum
from finality of this ruling until fully paid.
 REPUBLIC OF THE PHILIPPINES v. GINA P. TECAG
G.R. No. 229272| November 19, 2018

DOCTRINE OF THE CASE: psychological incapacity has a specific and peculiar denotation. It
ought to pertain to only the most serious cases of personality disorders that clearly demonstrate
the party's/parties' utter insensitivity or inability to give meaning and significance to the
marriage.It should refer to no less than a mental- not merely physical incapacity that causes a
party to be truly incognitive of the basic marital covenants that concomitantly must be assumed
and discharged by the parties to the marriage, which, as provided under Article of the Family
Code, among others, include their mutual obligations to live together, observe love, respect and
fidelity, and render help and support.

PERLAS-BERNABE, J.:

FACTS: After living together as husband and wife for two (2) years, Gina and Marjune
formalized their marital union through civil rites. As a means of livelihood, they engaged in
vegetable farming until Gina found employment in Macau, where she likewise searched for job
opportunities for Marjune.

As months passed, the communication between Gina and Marjune became less frequent until it
ceased altogether. During the rare times when Gina would call, they would only end up arguing,
as Marjune would be too drunk to talk. Thus, Gina filed a petition to declare her marriage with
Marjune null and void on the basis of the latter's psychological incapacity. Summons was served
upon Marjune, but the latter failed to answer. Thereafter, the attending prosecutor conducted
an investigation and declared that there was no collusion between the parties.11

During trial, Gina presented the findings of Professor Emma Astudillo-Sanchez (Prof. Sanchez),
the psychologist who conducted a psychological examination of the parties. She concluded that
Gina and Marjune's personality disorders "affected their behaviors even before they contracted
marriage and, in the presence of situational factors, became more evident during the time they
were together during the marriage.

ISSUE: Whether or not the CA erred in upholding the dissolution of the marriage between Gina
and Marjune based on psychological incapacity.

RULING: Under Article 3629 of the Family Code, as amended, psychological incapacity is a valid
ground to nullify a marriage. However, in deference to the State's policy on marriage,
psychological incapacity does not merely pertain to any psychological condition; otherwise, it
would be fairly easy to circumvent our laws on marriage so much so that we would be
practically condoning a legal subterfuge for divorce. As it may be readily observed, the courts'
conclusion was mainly grounded on the expert opinion of Prof. Sanchez whose findings are
embodied in a Case Analysis Report. This report, which was borne out of Prof. Sanchez's
interviews with Gina, the latter's sister, and brother-in-law, concludes that Gina is suffering
from Anxious and Fearful Personality Disorder with traces of Dependent Personality Disorder.
Specifically, Prof. Sanchez pointed out that Gina has many apprehensions, a tendency to be
depressive, fears of abandonment and rejection, and passivity.37

However, as petitioner aptly pointed out, the said report failed to show that these traits existed
prior to Gina's marriage and that her alleged personality disorder is incurable or that the cure
is beyond her means. There was simply no discernible explanation on the juridical antecedence
or incurability of Gina's supposed condition. More significantly, the relation of such condition to
Gina's inability to perform her essential marital obligations was not sufficiently shown. To
reiterate, the psychological condition ought to pertain to personality disorders that are grave
and serious such that the party would be incapable of carrying out the ordinary duties required
in a marriage. Unfortunately, the Case Analysis Report fails to demonstrate this crucial point.
In determining the existence of psychological incapacity, a clear and understandable causation
between the party's condition and the party's inability to perform the essential marital
covenants must be shown. A psychological report that is essentially comprised of mere
platitudes, however speckled with technical jargon, would not cut the marriage tie.
 SUMMARY FORMAT

Q: After living together as husband and wife for two (2) years, Gina and Marjune formalized
their marital union through civil rites. As months passed, the communication between Gina and
Marjune became less frequent until it ceased altogether. Thus, Gina filed a petition to declare
her marriage with Marjune null and void on the basis of the latter's psychological incapacity.

During trial, Gina presented the findings of Professor Emma Astudillo-Sanchez (Prof. Sanchez),
the psychologist who conducted a psychological examination of the parties. She concluded that
Gina and Marjune's personality disorders "affected their behaviors even before they contracted
marriage and, in the presence of situational factors, became more evident during the time they
were together during the marriage. Is upholding the annulment based on the expert opinion of
the psychologist sufficient proof of the presence of psychological incapacity?

A: NO, the said report failed to show that these traits existed prior to Gina's marriage and that
her alleged personality disorder is incurable or that the cure is beyond her means. There was
simply no discernible explanation on the juridical antecedence or incurability of Gina's supposed
condition. More significantly, the relation of such condition to Gina's inability to perform her
essential marital obligations was not sufficiently shown. To reiterate, the psychological
condition ought to pertain to personality disorders that are grave and serious such that the
party would be incapable of carrying out the ordinary duties required in a marriage.
Unfortunately, the Case Analysis Report fails to demonstrate this crucial point. In determining
the existence of psychological incapacity, a clear and understandable causation between the
party's condition and the party's inability to perform the essential marital covenants must be
shown. A psychological report that is essentially comprised of mere platitudes, however
speckled with technical jargon, would not cut the marriage tie.