CIVIL LAW

NAGKAKAISANG MARALITA NG SITIO MASIGASIG V. MILITARY SHRINE SERVICES

G.R. NO. 187587
JUNE 5, 2013

CJ. SERENO
REQUIREMENT OF PUBLICATION INDISPENSABLE
FACTS:
On 12 July 1957, by virtue of Proclamation No. 423, President Garcia reserved parcels of land in the Municipalities of
Pasig, Taguig, Paraaque, Province of Rizal and Pasay City for a military reservation. The military reservation, then
known as Fort William McKinley, was later on renamed Fort Bonifacio.
On 28 May 1967, President Marcos issued Proclamation No. 208, amending Proclamation No. 423, which excluded a
certain area of Fort Bonifacio and reserved it for a national shrine. The excluded area is now known as Libingan ng mga
Bayani, which is under the administration of herein respondent.
On 7 January 1986, President Marcos issued Proclamation No. 2476, further amending Proclamation No. 423, which
excluded barangays Lower Bicutan, Upper Bicutan and Signal Village from the operation of Proclamation No. 423 and
declared it open for disposition. At the bottom of Proclamation No. 2476, President Marcos made a handwritten
addendum, which reads:
P.S. This includes Western Bicutan
(SGD.) Ferdinand E. Marcos.
On 16 October 1987, President Aquino issued Proclamation No. 172 which substantially reiterated Proclamation No.
2476, as published, but this time excluded Lots 1 and 2 of Western Bicutan from the operation of Proclamation No. 423
and declared the said lots open for disposition under the provisions of R.A. 274 and 730.
Members of petitioner NMSMI filed a Petition with the Commission on Settlement of Land Problems (COSLAP),and
prayed for the following: (1) the reclassification of the areas they occupied, covering Lot 3 of SWO-13-000-298 of
Western Bicutan, from public land to alienable and disposable land pursuant to Proclamation No. 2476; (2) the
subdivision of the subject lot by the Director of Lands; and (3) the Land Management Bureaus facilitation of the
distribution and sale of the subject lot to its bona fide occupants. COSLAP granted the Petition and declared the portions
of land in question alienable and disposable.
The COSLAP ruled that the handwritten addendum of President Marcos was an integral part of Proclamation No. 2476,
and was therefore, controlling. Respondent filed a petition with the CA, seeking to reverse the COSLAP resolution. The
CA granted the petition.
ISSUE:
Whether the Court of Appeals erred in ruling that the subject lots were not alienable and disposable by virtue of
Proclamation No. 2476 on the ground that the handwritten addendum of President Marcos was not included in the
publication of the said law.
HELD:
No. ART. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette,
unless it is otherwise provided. This Code shall take effect one year after such publication. Publication is indispensable in
every case, but the legislature may in its discretion provide that the usual fifteen-day period shall be shortened or
extended.
1

All statutes, including those of local application and private laws, shall be published as a condition for their effectivity,
which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature. Covered by
this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers
whenever the same are validly delegated by the legislature or directly conferred by the Constitution.
Applying the foregoing ruling to the instant case, this Court cannot rely on a handwritten note that was not part of
Proclamation No. 2476 as published. Without publication, the note never had any legal force and effect.
LAVADIA V. HEIRS OF LUNA
G.R. NO. 171914
JULY 23, 2014

J. BERSAMIN
NATIONALITY PRINCIPLE; CO-OWNERSHIP
FACTS:
Atty. Luna was a name partner in a prestigious law firm. He was living with his first wife, Eugenia whom he initially
married in a civil ceremony on September 10, 1947 and later solemnized in a church ceremony on September 12, 1948. In
Atty. Lunas marriage to Eugenia, they begot 7 children. After almost 2 decades of marriage, they eventually agreed to
live apart from each other. They entered into a written agreement entitled AGREEMENT FOR SEPARATION AND
PROPERTY SETTLEMENT dated November 12, 1975, whereby they agreed to live separately and to dissolve and
liquidate their conjugal partnership of property.
On January 12, 1976, Atty. Luna obtained a divorce decree of his marriage with Eugenia from the Court of First Instance
of Sto. Domingo, Dominican Republic. Also in Sto. Domingo, Dominican Republic, on the same date, he contracted
another marriage with Soledad.
Sometime in 1977, Atty. Luna organized a new law firm named LUPSICON where Atty. Luna was the managing partner.
LUPSICON through Atty. Luna purchased a condominium unit to be used as law office of LUPSICON. Sometime in
1992, LUPSICON was dissolved and the condominium unit was partitioned by the partners. Atty. Luna thereafter
established and headed another law firm with Atty. Renato G. De la Cruz and used a portion of the office condominium
unit as their office. LUPSICON lasted until the death of Atty. Luna on July 12, 1997.
The 25/100 pro-indiviso share of Atty. Luna in the condominium unit as well as the law books, office furniture and
equipment became the subject of the complaint filed by Soledad against the heirs of Atty. Luna with the RTC. The
complaint alleged that the subject properties were acquired during the existence of the marriage between Atty. Luna and
Soledad through their joint efforts that since they had no children, Soledad became co-owner of the said properties upon
the death of Atty. Luna to the extent of pro-indiviso share consisting of her share in the said properties plus her
share in the net estate of ATTY. LUNA which was bequeathed to her in the latters last will and testament.
ISSUE:
(1) Whether the divorce between Atty. Luna and Eugenia Zaballero-Luna had validly dissolved the first marriage.
(2) Whether the agreement for separation and property settlement was valid.
(3) What rules govern the second marriage.
HELD:
(1) No. From the time of the celebration of the first marriage on September 10, 1947 until the present, absolute
divorce between Filipino spouses has not been recognized in the Philippines. The non-recognition of absolute
divorce between Filipinos has remained even under the Family Code, even if either or both of the spouses are
residing abroad.
2

It is true that on January 12, 1976, the Court of First Instance of Sto. Domingo in the Dominican Republic issued
the Divorce Decree dissolving the first marriage of Atty. Luna and Eugenia. Conformably with the nationality
rule, however, the divorce, even if voluntarily obtained abroad, did not dissolve the marriage between Atty. Luna
and Eugenia, which subsisted up to the time of his death on July 12, 1997. This finding conforms to the
Constitution, which characterizes marriage as an inviolable social institution, and regards it as a special contract
of permanent union between a man and a woman for the establishment of a conjugal and family life.
(2) No. The mere execution of the Agreement by Atty. Luna and Eugenia did not per se dissolve and liquidate their
conjugal partnership of gains. The approval of the Agreement by a competent court was still required under
Article 190 and Article 191 of the Civil Code, as follows:
Article 190. In the absence of an express declaration in the marriage settlements, the separation of property
between spouses during the marriage shall not take place save in virtue of a judicial order.
Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed when the
spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction, or has been
declared absent, or when legal separation has been granted. x x x x
The husband and the wife may agree upon the dissolution of the conjugal partnership during the marriage, subject
to judicial approval. x x x
The approval of the Agreement by the CFA of Sto. Domingo in the Dominican Republic was not sufficient. With
the divorce not being itself valid and enforceable under Philippine law for being contrary to Philippine public
policy and public law, the approval of the Agreement was not also legally valid and enforceable under Philippine
law. Consequently, the conjugal partnership of gains of Atty. Luna and Eugenia subsisted in the lifetime of their
marriage.
(3) Article 144. When a man and a woman live together as husband and wife, but they are not married, or their
marriage is void from the beginning, the property acquired by either or both of them through their work or
industry or their wages and salaries shall be governed by the rules on co-ownership.
Atty. Lunas subsequent marriage to Soledad on January 12, 1976 was void for being bigamous. Due to the
second marriage between Atty. Luna and the petitioner being void ab initio by virtue of its being bigamous, the
properties acquired during the bigamous marriage were governed by the rules on co-ownership, conformably with
Article 144 of the Civil Code.
CALIFORNIA CLOTHING V. SHIRLEY G. QUIONES
G.R. NO. 175822
OCTOBER 13, 2013

J. PERALTA
ABUSE OF RIGHTS
FACTS:
On July 25, 2001, Quiones, a Reservation Ticketing Agent of Cebu Pacific Air in Lapu Lapu City, went inside the Guess
at Robinsons Cebu. She fitted four items. While she was walking through the skywalk where she was heading next, a
Guess employee approached and informed her that she failed to pay the item she got. She insisted that she paid and
showed the employee the receipt. She then suggested that they talk about it at the Cebu Pacific Office located at the
basement of the mall.

When she arrived at the Office, the Guess employees allegedly subjected her to humiliation in front of the clients of Cebu
Pacific and repeatedly demanded payment for the black jeans. On the same day, the Guess employees allegedly gave a
letter to the Director of Cebu Pacific Air narrating the incident, but the latter refused to receive it. Another letter was
allegedly prepared and was supposed to be sent to the Cebu Pacific Office in Robinsons, but the latter again refused to
receive it. Respondent also claimed that the HR Department of Robinsons was furnished said letter and the latter in fact
conducted an investigation for purposes of canceling respondents Robinsons credit card. Respondent further claimed
that she was not given a copy of said damaging letter.
She thus filed the Complaint for Damages before the RTC against petitioners California Clothing, Villagonzalo, Hawayon
and Ybaez.
Petitioners and the other defendants admitted the issuance of the receipt of payment. They claimed, however, that instead
of the cashier (Hawayon) issuing the official receipt, it was the invoicer (Villagonzalo) who did it manually. They
explained that there was miscommunication between the employees at that time because prior to the issuance of the
receipt, Villagonzalo asked Hawayon Ok na?, and the latter replied Ok na, which the former believed to mean that the
item has already been paid. Realizing the mistake, Villagonzalo rushed outside to look for respondent and when he saw
the latter, he invited her to go back to the shop to make clarifications as to whether or not payment was indeed made. They
emphasized that they were gentle and polite in talking to respondent and it was the latter who was arrogant in answering
their questions.
The RTC rendered a Decision dismissing both the complaint and counterclaim of the parties. The CA reversed and set
aside the RTC decision.
ISSUE:
Whether or not the CA erred in finding that the letter sent to Cebu Pacific Office was made to subject respondent to
ridicule, humiliation and similar injury.
HELD:
No. The elements of abuse of rights are as follows: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3)
for the sole intent of prejudicing or injuring another.
Initially, there was nothing wrong with petitioners asking respondent whether she paid or not. The Guess employees were
able to talk to respondent at the Cebu Pacific Office. The confrontation started well, but it eventually turned sour when
voices were raised by both parties. As aptly held by both the RTC and the CA, such was the natural consequence of two
parties with conflicting views insisting on their respective beliefs. Considering, however, that respondent was in
possession of the item purchased from the shop, together with the official receipt of payment issued by petitioners, the
latter cannot insist that no such payment was made on the basis of a mere speculation. Their claim should have been
proven by substantial evidence in the proper forum. It can be inferred from the foregoing that in sending the demand letter
to respondents employer, petitioners intended not only to ask for assistance in collecting the disputed amount but to
tarnish respondents reputation in the eyes of her employer. The exercise of a right must be in accordance with the
purpose for which it was established and must not be excessive or unduly harsh. In this case, petitioners obviously abused
their rights.
VIVARES V. ST. THERESAS COLLEGE
G.R. NO. 202666
SEPTEMBER 29, 2014

J. VELASCO
RIGHT TO PRIVACY
FACTS:
4

Julia and Julienne, both minors, were, graduating high school students at STC Cebu City. Sometime in January 2012,
while changing into their swimsuits for a beach party they were about to attend, Julia and Julienne, along with several
others, took digital pictures of themselves clad only in their undergarments. These pictures were then uploaded by Angela
on her Facebook profile.
Back at the school, Escudero, a computer teacher at STCs high school department, learned from her students that some
seniors at STC posted the said pictures online. Her students readily identified Julia, Julienne, and Chloe, among others.
Using STCs computers, Escuderos students logged in to their respective personal Facebook accounts and showed her
photos of the identified students, which include: (a) Julia and Julienne drinking hard liquor and smoking cigarettes inside
a bar; and (b) Julia and Julienne along the streets of Cebu wearing articles of clothing that show virtually the entirety of
their black brassieres. What is more, Escuderos students claimed that there were times when access to or the availability
of the identified students photos was not confined to the girls Facebook friends, but were, in fact, viewable by any
Facebook user.
Despite the issuance of the TRO, STC, nevertheless, barred the sanctioned students from participating in the graduation
rites. To petitioners, the interplay of the foregoing constitutes an invasion of their childrens privacy.
ISSUE:
Whether STC violated the childrens right to privacy.
HELD:
No. There are three strands of the right to privacy, viz: (1) locational or situational privacy; (2) informational privacy; and
(3) decisional privacy. Of the three, what is relevant to the case at bar is the right to informational privacyusually
defined as the right of individuals to control information about themselves.
Before one can have an expectation of privacy in his or her Online Social Network (OSN) activity, it is first necessary that
said user, in this case the children of petitioners, manifest the intention to keep certain posts private, through the
employment of measures to prevent access thereto or to limit its visibility. And this intention can materialize in
cyberspace through the utilization of the OSNs privacy tools. In other words, utilization of these privacy tools is the
manifestation, in cyber world, of the users invocation of his or her right to informational privacy.
Considering that the default setting for Facebook posts is Public, it can be surmised that the photographs in question
were viewable to everyone on Facebook, absent any proof that petitioners children positively limited the disclosure of the
photograph. If such were the case, they cannot invoke the protection attached to the right to informational privacy. That
the photos are viewable by friends only does not necessarily bolster the petitioners contention. In this regard, the cyber
community is agreed that the digital images under this setting still remain to be outside the confines of the zones of
privacy.
SPOUSES HING V. CHOACHUY
G.R. NO. 179736
JUNE 26, 2013

J. DEL CASTILO
RIGHT TO PRIVACY
FACTS:
Petitioners are the registered owners of a parcel of land in Cebu. Respondents are the owners of Aldo Development
adjacent to the property of petitioners. Respondents constructed an auto-repair shop building (Aldo Goodyear Servitec).
Aldo filed a case against petitioners for Injunction and Damages with Writ of Preliminary Injunction/TRO and claimed
that petitioners were constructing a fence without a valid permit and that the said construction would destroy the wall of
its building, which is adjacent to petitioners property. In order to get evidence to support the said case, respondents
5

illegally set-up and installed on the building of Aldo Goodyear Servitec two video surveillance cameras facing petitioners
property. Respondents, through their employees and without the consent of petitioners, also took pictures of petitioners
on-going construction. Thus, petitioners prayed that respondents be ordered to remove the video surveillance cameras and
enjoined from conducting illegal surveillance.
The RTC granted the application for a TRO. Aggrieved, respondents filed with the CA a Petition for Certiorari with
application for a TRO and/or Writ of Preliminary Injunction. The CA explained that the right to privacy of residence
under Article 26(1) of the Civil Code was not violated since the property subject of the controversy is not used as a
residence.
ISSUE:
Whether there was a violation of petitioners right to privacy.
HELD:
Yes. Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other
persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of
action for damages, prevention and other relief: (1) Prying into the privacy of anothers residence.
This provision recognizes that a mans house is his castle, where his right to privacy cannot be denied or even restricted
by others. It includes any act of intrusion into, peeping or peering inquisitively into the residence of another without the
consent of the latter. The phrase prying into the privacy of anothers residence, however, does not mean that only the
residence is entitled to privacy. Thus, an individuals right to privacy under Article 26(1) of the Civil Code should not be
confined to his house or residence as it may extend to places where he has the right to exclude the public or deny them
access.
CONTINENTAL STEEL MANUFACTURING V. HON. ACCREDITED VOLUNTARY ARBITRATOR
MONTANO
G.R. NO. 182836
OCTOBER 13, 2009

J. CHICO-NAZARIO
CIVIL PERSONALITY
FACTS:
Hortillano, an employee of petitioner Continental Steel and a member of respondent Union filed a claim for Paternity
Leave, Bereavement Leave and Death and Accident Insurance for dependent, pursuant to the CBA concluded between
Continental and the Union.
Section 2. BEREAVEMENT LEAVE--The Company agrees to grant a bereavement leave with pay to
any employee in case of death of the employee's legitimate dependent (parents, spouse, children, brothers
and sisters) based on the following: x x x
Section 4. DEATH AND ACCIDENT INSURANCE--The Company shall grant death and accidental
insurance
to
the
employee
or
his
family
in
the
following
manner:
x

4.3 DEPENDENTS--Eleven Thousand Five Hundred Fifty Pesos (Php11,550.00) in case of death of the
employees legitimate dependents (parents, spouse, and children). In case the employee is single, this
benefit covers the legitimate parents, brothers and sisters only with proper legal document to be presented
(e.g. death certificate).
6

The claim was based on the death of Hortillano's unborn child. Hortillano's wife had a premature delivery while she was
in the 38th week of pregnancy.
Continental Steel immediately granted Hortillano's claim for paternity leave but denied his claims for bereavement leave
and other death benefits, consisting of the death and accident insurance.
Upon grievance, the VA ruled that Hortillano was entitled to bereavement leave with pay and death benefits. The VA
found that there was no dispute that the death of an employee's legitimate dependent occurred. The fetus had the right to
be supported by the parents from the very moment he/she was conceived. The fetus had to rely on another for support;
he/she could not have existed or sustained himself/herself without the power or aid of someone else, specifically, his/her
mother. Therefore, the fetus was already a dependent, although he/she died during the labor or delivery.
Continental Steel claimed that the death of a fetus, at whatever stage of pregnancy, was excluded from the coverage of the
CBA since what was contemplated by the CBA was the death of a legal person, and not that of a fetus, which did not
acquire any juridical personality.
ISSUE:
Whether Hortillano was entitled to bereavement leave and other death benefits.
HELD:
Yes. Life is not synonymous with civil personality. The reliance of Continental Steel on Articles 40, 41 and 42 of the
Civil Code for the legal definition of death is misplaced. The issue of civil personality is not relevant herein. Articles 40,
41 and 42 of the Civil Code on natural persons, must be applied in relation to Article 37 of the same Code.
Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every
natural person and is lost only through death. Capacity to act, which is the power to do acts with legal
effect, is acquired and may be lost.
We need not establish civil personality of the unborn child herein since his/her juridical capacity and capacity to act as a
person are not in issue. It is not a question before us whether the unborn child acquired any rights or incurred any
obligations prior to his/her death that were passed on to or assumed by the child's parents. The rights to bereavement leave
and other death benefits in the instant case pertain directly to the parents of the unborn child upon the latter's death.
Moreover, while the Civil Code expressly provides that civil personality may be extinguished by death, it does not
explicitly state that only those who have acquired juridical personality could die.
DE BELEN VDA. DE CABALU V. SPS. TALAVERA
G.R. NO. 188417
SEPTEMBER 24, 2012

J. MENDOZA
CONTRACT ENTERED INTO
CONTRACTUAL CAPACITY

UPON

FUTURE

INHERITANCE

IS

VOID;

DEATH

TERMINATES

FACTS:
On December 8, 1941, Faustina died without any children. She left a holographic will, dated July 27, 1939, assigning and
distributing her property to her nephews and nieces. The said holographic will, however, was not probated. One of the
heirs was the father of Domingo, Benjamin Laxamana, who died in 1960. On March 5, 1975, Domingo allegedly
executed a Deed of Sale of Undivided Parcel of Land disposing of his 9,000 square meter share of the land to
Laureano Cabalu.

On August 1, 1994, to give effect to the holographic will, the forced and legitimate heirs of Faustina executed a Deed of
Extra-Judicial Succession with Partition. The said deed imparted 9,000 square meters of the land to Domingo. On
December 14, 1995, Domingo sold 4,500 square meters to his nephew, Eleazar Tabamo. On May 7, 1996, the remaining
4,500 square meters of Domingos share in the partition was registered under his name (TCT No. 281353). On August 4,
1996, Domingo passed away.
On October 8, 1996, Domingo purportedly executed a Deed of Absolute Sale of TCT No. 281353 in favor of
respondent Tabu. Subsequently, Tabu and his wife, Dolores Laxamana subdivided the said lot into two which resulted
into TCT Nos. 291338 and 291339.
On January 15, 1999, the heirs of Domingo, filed an unlawful detainer action against petitioners and all persons claiming
rights under them. The case was ruled in favor of Domingos heirs. Petitioners the filed a case for Declaration of Nullity
of Deed of Absolute Sale, Joint Affidavit of Nullity of Transfer Certificate of Title Nos. 291338 and 291339, Quieting of
Title, Reconveyance, Application for Restraining Order, Injunction and Damages against respondent spouses before the
RTC. Petitioners claimied that they were the lawful owners of the subject property because it was sold to their father,
Laureano Cabalu, by Domingo, through a Deed of Absolute Sale, dated March 5, 1975. Hence, being the rightful owners
by way of succession, they could not be ejected from the subject property.
ISSUE:
Whether the Deed of Sale of Undivided Parcel of Land covering the 9,000 square meter property executed by Domingo in
favor of Laureano Cabalu on March 5, 1975, is valid.
HELD:
No. Under Article 1347 of the Civil Code, No contract may be entered into upon future inheritance except in cases
expressly authorized by law. Paragraph 2 of Article 1347, characterizes a contract entered into upon future inheritance as
void. The law applies when the following requisites concur: (1) the succession has not yet been opened; (2) the object of
the contract forms part of the inheritance; and (3) the promissor has, with respect to the object, an expectancy of a right
which is purely hereditary in nature.
In this case, at the time the deed was executed, Faustinas will was not yet probated; the object of the contract, the 9,000
square meter property, still formed part of the inheritance of his father from the estate of Faustina; and Domingo had a
mere inchoate hereditary right therein. Domingo became the owner of the said property only on August 1, 1994, the time
of execution of the Deed of Extrajudicial Succession with Partition by the heirs of Faustina, when the 9,000 square meter
lot was adjudicated to him.
ISSUE:
Whether the Deed of Sale, dated October 8, 1996, covering the 4,500 square meter portion of the 9,000 square meter
property, executed by Domingo in favor of Renato Tabu, is null and void.
HELD:
Yes. Contracting parties must be juristic entities at the time of the consummation of the contract. Stated otherwise, to form
a valid and legal agreement it is necessary that there be a party capable of contracting and a party capable of being
contracted with. Hence, if any one party to a supposed contract was already dead at the time of its execution, such contract
is undoubtedly simulated and false and, therefore, null and void by reason of its having been made after the death of the
party who appears as one of the contracting parties therein. The death of a person terminates contractual capacity.
The deed of sale covering the remaining 4,500 square meters of the subject property executed in favor of Renato Tabu, it
is evidently null and void. The document itself, the Deed of Absolute Sale, dated October 8, 1996, readily shows that it
was executed on August 4, 1996 more than two months after the death of Domingo. Consequently, TCT No. 286484
issued to Tabu by virtue of the October 8, 1996 Deed of Sale, as well as its derivative titles, TCT Nos. 291338 and
291339, both registered in the name of Renato Tabu, married to Dolores Laxamana, are likewise void.

LAZANAS V. PEOPLE
G.R. NO. 159031
JUNE 23, 2014

J. BERSAMIN
JUDICIAL DECLARATION OF NULLITY
FACTS:
On February 16, 1968, Judge Salazar solemnized the marriage of accused Noel Lasanas and Socorro Patingo without the
benefit of a marriage license. The records show that Lasanas and Patingo had not executed any affidavit of cohabitation to
excuse the lack of the marriage license. On August 27, 1980, Lasanas and Patingo reaffirmed their marriage vows in a
religious ceremony. They submitted no marriage license or affidavit of cohabitation for that purpose. Both ceremonies
were evidenced by the corresponding marriage certificates. In 1982, Lasanas and Patingo separated de facto because of
irreconcilable differences.
On December 27, 1993, the accused contracted marriage with Josefa Eslaban. Their marriage certificate reflected the civil
status of the accused as single. On July 26, 1996, the accused filed a complaint for annulment of marriage and damages
against Socorro. In October 1998, Socorro charged the accused with bigamy. The complaint for annulment of marriage
was dismissed. Accused was convicted of bigamy. The accused contended that because he had not been legally married to
Socorro, the first element of bigamy was not established.
ISSUE:
Whether the accused was wrongfully convicted of bigamy.
HELD:
No. The first and second elements of bigamy were present in view of the absence of a judicial declaration of nullity of
marriage between the accused and Socorro. The requirement of securing a judicial declaration of nullity of marriage prior
to contracting a subsequent marriage is found in Article 40 of the Family Code.
Article 40. The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a
final judgment declaring such previous marriage void.
The crime of bigamy was consummated from the moment he contracted the second marriage without his marriage to
Socorro being first judicially declared null and void, because at the time of the celebration of the second marriage, his
marriage to Socorro was still deemed valid and subsisting due to such marriage not being yet declared null and void by a
court of competent jurisdiction.
ROBERT MALLILIN V. LUZ JAMESOLAMIN
G.R. NO. 192718
FEBRUARY 18, 2015

J. MENDOZA
NULLITY OF MARRIAGE; PSYCHOLOGICAL INCAPACITY
FACTS:
Robert and Luz were married on September 6, 1972. They begot three children. Robert filed a complaint for declaration of
nullity of marriage before the RTC. Luz filed her Answer with Counterclaim contesting the complaint. She averred that it
was Robert who manifested psychological incapacity in their marriage.

When Robert testified, he disclosed that Luz was already living in California, USA, and had married an American. He
also revealed that when they were still engaged, Luz continued seeing and dating another boyfriend.. He also claimed that
Luz had been remiss in her duties both as a wife and as a mother as shown by the following circumstances: (1) it was he
who did the cleaning of the room because Luz did not know how to keep order; (2) it was her mother who prepared their
meal while her sister was the one who washed their clothes because she did not want her polished nails destroyed; (3) it
was also her sister who took care of their children while she spent her time sleeping and looking at the mirror; (4) when
she resumed her schooling, she dated different men; (5) he received anonymous letters reporting her loitering with male
students; (6) when he was not home, she would receive male visitors; (7) a certain Romy Padua slept in their house when
he was away; and (6) she would contract loans without his knowledge.
Robert argues that the series of sexual indiscretion of Luz were external manifestations of the psychological defect that
she was suffering within her person, which could be considered as nymphomania or excessive sex hunger.
In addition, Robert presented the testimony of Myrna Delos Reyes Villanueva, Guidance Psychologist II of Northern
Mindanao Medical Center. While the case was pending before the trial court, Robert filed a petition for marriage
annulment with the Metropolitan Tribunal of First Instance for the Archdiocese of Manila.
Metropolitan Tribunal handed down a decision declaring their marriage invalid ab initio on the ground of grave lack of
due discretion on the part of both parties as contemplated by the second paragraph of Canon1095. The RTC had rendered
a decision declaring the marriage null and void on the ground of psychological incapacity on the part of Luz. The CA
reversed the RTC decision.
ISSUE:
Whether the totality of the evidence adduced proves that Luz was psychologically incapacitated to comply with the
essential obligations of marriage warranting the annulment of their marriage under Article 36 of the Family Code.
HELD:
No. Psychological incapacity as required by Article 36 must be characterized by (a) gravity, (b) juridical antecedence and
(c) incurability. The incapacity must be grave or serious such that the party would be incapable of carrying out the
ordinary duties required in marriage. It must be rooted in the history of the party antedating the marriage, although the
overt manifestations may only emerge after the marriage. It must be incurable or, even if it were otherwise, the cure would
be beyond the means of the party involved.
First, the testimony of Robert failed to overcome the burden of proof to show the nullity of the marriage. He presented no
other witnesses to corroborate his allegations on her behavior. Thus, his testimony was self-serving and had no serious
value as evidence. Second, the root cause of the alleged psychological incapacity of Luz was not medically or clinically
identified, and sufficiently proven during the trial. Sexual infidelity or perversion and abandonment do not, by themselves,
constitute grounds for declaring a marriage void based on psychological incapacity. Third, the psychological report of the
Guidance Psychologist was insufficient to prove the psychological incapacity of Luz. There was nothing in the records
that would indicate that Luz had either been interviewed or was subjected to a psycholPogical examination. Fourth, the
decision of the Metropolitan Tribunal is insufficient to prove the psychological incapacity of Luz. Interpretations given by
the NAMT of the Catholic Church in the Philippines, while not controlling or decisive, should be given great respect by
our courts, still it is subject to the law on evidence.
Roberts reliance on the NAMT decision is misplaced. To repeat, the decision of the NAMT was based on the second
paragraph of Canon 1095 which refers to those who suffer from a grave lack of discretion of judgment concerning
essential matrimonial rights and obligations to be mutually given and accepted, a cause not of psychological nature
under Article 36 of the Family Code. A cause of psychological nature similar to Article 36 is covered by the third
paragraph of Canon 1095 of the Code of Canon Law which reads: those who, because of causes of a psychological
nature, are unable to assume the essential obligations of marriage.

10

To consider church annulments as additional grounds for annulment under Article 36 would be legislating from the bench.
To hold that annulment of marriages decreed by the NAMT under the second paragraph of Canon 1095 should also be
covered would be to expand what the lawmakers did not intend to include.

GLENN VINAS V. MARY GRACE PAREL VINAS

G.R. NO. 208790
JANUARY 21, 2015

J. REYES
NULLITY OF MARRIAGE; PSYCHOLOGICAL INCAPACITY
FACTS:
Glenn and Mary Grace were married on April 26, 1999 as the latter was already pregnant then. The infant, however, died
at birth due to weakness and malnourishment. Sometime in March 2006, Mary Grace left Glenn and went to work in
Dubai.
On February 18, 2009, Glenn filed a petition for the declaration of nullity of his marriage with Mary Grace. To ease their
marital problems, Glenn sought professional guidance and submitted himself to psychological evaluation by Dr. Nedy
Tayag. Dr. Tayag found him as amply aware of his marital roles and capable of maintaining a mature and healthy
heterosexual relationship. Based on the data gathered from Glenn and his cousin Rodelito, who knew Mary Grace back
in college, Dr. Tayag assessed Mary Graces personality. Mary Grace was diagnosed to be suffering from a Narcissistic
Personality Disorder with anti-social traits and concluded that their relationship was not founded on mutual love, trust,
respect, commitment and fidelity to each other. Dr. Tayag recommended the propriety of declaring the nullity of the
couples marriage.
Dr. Tayag explained that the root cause of Mary Graces personality aberration can be said to have emanated from the
various forms of unfavorable factors as early as her childhood years. She came from a dysfunctional family with lenient
and tolerating parents who never imposed any restrictions. She sees to it that she is the one always followed with regards
to making decisions and always mandates people to submit to her wishes. Moral values were not instilled in her young
mind.
During trial, the testimonies of Glenn, Dr. Tayag and Rodelito were offered as evidence. Glenn and Rodelito described
Mary Grace as outgoing carefree and irresponsible. The RTC declared the marriage null and void on account of the
latters psychological incapacity. From the testimony of Glenn, it was established that Mary Grace failed to comply with
the basic marital obligations. The RTC had no reason to doubt Dr. Tayags authority to speak on the subject of
psychological incapacity.
ISSUE:
Whether or not sufficient evidence exist justifying the RTCs declaration of nullity of his marriage with Mary Grace.
HELD:
No. Article 36 contemplates downright incapacity or inability to take cognizance of and to assume basic marital
obligations. Mere difficulty, refusal or neglect in the performance of marital obligations or ill will on the part of
the spouse is different from incapacity rooted on some debilitating psychological condition or illness. Indeed,
irreconcilable differences, sexual infidelity or perversion, emotional immaturity and irresponsibility, and the like, do not
by themselves warrant a finding of psychological incapacity under Article 36, as the same may only be due to a persons
refusal or unwillingness to assume the essential obligations of marriage and not due to some psychological illness that is
contemplated by said rule.

11

Here, the cumulative testimonies of Glenn, Dr. Tayag and Rodelito and the documentary evidence offered do not
sufficiently prove the root cause, gravity and incurability of Mary Graces condition. The evidence merely shows that
Mary Grace is outgoing, strong-willed and not inclined to perform household chores.
Dr. Tayags conclusions about the respondents psychological incapacity were based on the information fed to her by only
one side. She merely summarized the petitioners narrations and on this basis characterized respondent to be self-centered,
egocentric and unremorseful. Her testimony failed to establish the fact that at the time the parties were married,
respondent was already suffering from a psychological defect that deprived him of the ability to assume the essential
duties and responsibilities of marriage. Neither did she adequately explain how she came to the conclusion that
respondents condition was grave and incurable.

EDILBERTO VENTURA V. SPOUSS ABUDA

G.R. NO. 202932
OCTOBER 23, 2013

J. CARPIO
PROPERTY RELATIONS: ARTICLE 148
FACTS:
Socorro and Esteban were married on 9 June 1980. Although Socorro and Esteban never had common children, both of
them had children from prior marriages: Esteban had a daughter named Evangeline Abuda and Socorro had a son, who
was the father of petitioner Edilberto Ventura, Jr. (Edilberto).
Evidence shows that Socorro had a prior subsisting marriage to Crispin Roxas when she married Esteban. Socorro married
Crispin on 18 April 1952. This marriage was not annulled, and Crispin was alive at the time of Socorros marriage to
Esteban.
According to Edilberto, sometime in 1968, Esteban purchased a portion of the Vitas property. The remaining portion was
thereafter purchased by Evangeline on her fathers behalf sometime in 1970. The Vitas property was covered by Transfer
Certificate of Title No. 141782 issued to Esteban Abletes, of legal age, Filipino, married to Socorro Torres. Edilberto
also claimed that starting 1978, Evangeline and Esteban operated small business establishments known as the Delpan
property.
On 6 September 1997, Esteban sold the Vitas and Delpan properties to Evangeline and her husband, Paulino Abuda.
Esteban passed away on 11 September 1997, while Socorro passed away on 31 July 1999. Sometime in 2000, Leonora
Urquila, mother of Edilberto, discovered the sale. Thus, Edilberto, represented by Leonora, filed a Petition for Annulment
of Deeds of Sale before the RTC-Manila.
The RTC-Manila dismissed the petition for lack of merit. According to the RTC-Manila, the Vitas and Delpan properties
are not conjugal. The RTC-Manila concluded that Socorro did not contribute any funds for the acquisition of the
properties. Hence, she cannot be considered a co- owner, and her heirs cannot claim any rights over the Vitas and Delpan
properties. The CA sustained the decision of the RTC-Manila. The CA applied Article 148 and found that Edilberto failed
to prove that Socorro contributed to the purchase of the Vitas and Delpan properties.
ISSUE:
Whether or not the CA erred in sustaining the decision of the RTC.
HELD:
No. Art 148. In cases of cohabitation wherein the parties are incapacitated to marry each other, only the properties
acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by
them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions
12

and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money
and evidences of credit.
If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute
community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly
married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding Article.
The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.
Applying the foregoing provision, the Vitas and Delpan properties can be considered common property if: (1) these were
acquired during the cohabitation of Esteban and Socorro; and (2) there is evidence that the properties were acquired
through the parties actual joint contribution of money, property, or industry. The title itself shows that the Vitas property
is owned by Esteban alone. The phrase married to Socorro Torres is merely descriptive of his civil status, and does not
show that Socorro co-owned the property. Registration under the Torrens title system merely confirms, and does not vest
title.
We cannot sustain Edilberto's claim that Esteban and Socorro jointly contributed to the acquisition of the Delpan property.
Both the RTC-Manila and the CA found that the Delpan property was acquired prior to the marriage of Esteban and
Socorro. Furthermore, even if payment of the purchase price of the Delpan property was made by Evangeline, such
payment was made on behalf of her father.

PNB V. GARCIA
G.R. NO. 182839

JUNE 2, 2014

J. BRION
CONJUGAL PARTNERSHIP; CO-OWNERSHIP
FACTS:
The subject of the present case is a parcel of residential land with all its improvements in Isabela under the name of Jose
Garcia Sr. (Jose Sr.) who acquired the subject property during his marriage with Ligaya Garcia. Ligaya died on January
21, 1987. The marriage of Jose Sr. and Ligaya produced the following children: Nora, Jose Jr., Bobby and Jimmy, all
surnamed Garcia, who are the respondents in the present case.
Sometime in 1989, the spouses Rogelio and Celedonia Garcia obtained a loan facility from the petitioner PNB, initially
for P150,000.00. The loan was secured by a Real Estate Mortgage. The spouses Garcia increased their loan to
P220,000.00 and eventually to P600,000.00. As security for the increased loan, they offered their property covered by
TCT No. 75324 and the subject property covered by TCT No. T-44422.
Jose Sr. agreed to accommodate the spouses Garcia by offering the subject property as additional collateral security for
the latters increased loan. For this purpose, Jose Sr. executed SPAs expressly authorizing the Spouses Garcia to apply for,
borrow, or secure any loan from the petitioner bank, and to convey and transfer the subject property by way of mortgage.
Jose Sr. also executed an Amendment of Real Estate Mortgage in favor of the petitioner bank. All of these transactions,
however, were without the knowledge and consent of Jose Sr.s children. The spouses Garcia failed to pay their loan to
the petitioner bank despite repeated demands.
They claimed that the Amendment of Real Estate Mortgage was null and void as to respondents Nora, Jose Jr., Bobby and
Jimmy as they were not parties to the contract. The respondents alleged that the subject property was a conjugal property
of Jose Sr. and his deceased spouse, Ligaya, as they acquired the subject property during their marriage; that upon
Ligayas death, Jose Sr., together with his children became owners pro indiviso of the subject property. Respondents filed
before the RTC a Complaint for Nullity of the Amendment of Real Estate Mortgage, Damages with Preliminary
Injunction against the spouses Garcia and the petitioner bank.
ISSUE:
13

Whether Jose Sr. had the right to constitute the mortgage over the entire subject property after the death of Ligaya.
HELD:
No. Upon the death of Ligaya on January 21, 1987, the conjugal partnership was automatically dissolved and terminated.
Consequently, the conjugal partnership was converted into an implied ordinary co-ownership between the surviving
spouse, on the one hand, and the heirs of the deceased, on the other. This resulting ordinary co-ownership among the heirs
is governed by Article 493 of the Civil Code which reads:
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved. But the effect of the alienation of the mortgage,
with respect to the co-owners shall be limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership.
In the present case, Jose Sr. constituted the mortgage over the entire subject property after the death of Ligaya, but before
the liquidation of the conjugal partnership. While under Article 493 of the Civil Code, even if he had the right to freely
mortgage or even sell his undivided interest in the disputed property, he could not dispose of or mortgage the entire
property without his childrens consent. Jose Sr.s right in the subject property is limited only to his share in the
conjugal partnership as well as his share as an heir on the other half of the estate which is his deceased spouses
share. The mortgage contract is void insofar as it extends to the undivided shares of his children because they did not
give their consent to the transaction.
Accordingly, the Amendment of Real Estate Mortgage constituted by Jose Sr. over the entire property without his coowners consent is not necessarily void in its entirety. The right of the petitioner bank as mortgagee is limited though only
to the portion which may be allotted to Jose Sr. in the event of a division and liquidation of the subject property.
MARIETTA BARRIDO V. LERONARDO NONATO
G.R. NO. 176492
OCTOBER 20, 2014

J. PERALTA
EFFECT OF VOID MARRIAGES IN PROPERTY RELATIONS
FACTS:
In the course of the marriage of respondent Nonato and petitioner Barrido, they were able to acquire a property situated in
Bacolod City. On March 15, 1996, their marriage was declared void on the ground of psychological incapacity. Since
there was no more reason to maintain their co-ownership over the property, Nonato asked Barrido for partition, but the
latter refused. Thus, filed a Complaint for partition before the MTCC of Bacolod City.
Barrido claimed, by way of affirmative defense, that the subject property had already been sold to their children, Joseph
Raymund and Joseph Leo.
The MTCC rendered a Decision applying Article 129 of the Family Code Judgment was rendered adjudicating to Barrido,
the spouse with whom the majority of the common children choose to remain, the property. Nonato appealed before the
RTC. The RTC reversed the ruling of the MTCC. Upon appeal, the CA affirmed the RTC Decision. Also, although the
RTC erred in relying on Article 129 of the Family Code, instead of Article 147, the dispositive portion of its decision still
correctly ordered the equitable partition of the property.
ISSUE:
Whether or not the subject property should be divided in accordance with the rules on co-ownership.
HELD:
14

Yes. The records reveal that Nonato and Barridos marriage had been declared void for psychological incapacity under
Article 36. During their marriage, however, the conjugal partnership regime governed their property relations. Although
Article 129 provides for the procedure in case of dissolution of the conjugal partnership regime, Article 147 specifically
covers the effects of void marriages on the spouses property relations.
For Article 147 to operate, the man and the woman: (1) must be capacitated to marry each other; (2) live exclusively with
each other as husband and wife; and (3) their union is without the benefit of marriage or their marriage is void. Here, all
these elements are present. The term "capacitated" in the first paragraph of the provision pertains to the legal capacity of a
party to contract marriage. Any impediment to marry has not been shown to have existed on the part of either Nonato or
Barrido. They lived exclusively with each other as husband and wife. However, their marriage was found to be void on
the ground of psychological incapacity.
Under this property regime, property acquired by both spouses through their work and industry shall be governed by the
rules on equal co-ownership. Any property acquired during the union is prima facie presumed to have been obtained
through their joint efforts. A party who did not participate in the acquisition of the property shall be considered as having
contributed to the same jointly if said party's efforts consisted in the care and maintenance of the family
household. Efforts in the care and maintenance of the family and household are regarded as contributions to the
acquisition of common property by one who has no salary or income or work or industry. The subject property remains to
be owned in common by Nonato and Barrido, which should be divided in accordance with the rules on co-ownership.

VALINO V. ADRIANO
G.R. NO. 182894
APRIL 22, 2014

J. MENDOZA
QUASI-PROPERTY RIGHTS
FACTS:
Atty. Adriano married respondent Rosario on November 15, 1955. The couple had two (2) sons, Florante and Ruben
Adriano; three (3) daughters, Rosario, Victoria and Maria Teresa; and one (1) adopted daughter, Leah Antonette. The
marriage of Atty. Adriano and Rosario, turned sour and they were eventually separated-in-fact. Years later, Atty. Adriano
courted Valino, one of his clients, until they decided to live together as husband and wife. Despite such arrangement, he
continued to provide financial support to Rosario and their children (respondents).
In 1992, Atty. Adriano died. At that time, Rosario was in the United States spending Christmas with her children. As none
of the family members was around, Valino took it upon herself to shoulder the funeral and burial expenses for Atty.
Adriano. When Rosario learned about the death of her husband, she immediately called Valino and requested that she
delay the interment for a few days but her request was not heeded. The remains of Atty. Adriano were then interred at the
mausoleum of the family of Valino at the Manila Memorial Park. Respondents were not able to attend the interment.
Respondents commenced suit against Valino praying that they be indemnified for actual, moral and exemplary damages
and attorneys fees and that the remains of Atty. Adriano be exhumed and transferred to the family plot at the Holy Cross
Memorial Cemetery in Quezon City. Valino insists that the expressed wishes of the deceased should nevertheless prevail
pursuant to Article 307 of the Civil Code.
The RTC dismissed the complaint of respondents for lack of merit as well as the counterclaim of Valino after it found
them to have not been sufficiently proven. The RTC opined that because Valino lived with Atty. Adriano for a very long
time, she knew very well that it was his wish to be buried at the Manila Memorial Park. Taking into consideration the fact
that Rosario left for the United States at the time that he was fighting his illness, the trial court concluded that Rosario did
not show love and care for him. On appeal, the CA reversed and set aside the RTC decision and directed Valino to have
the remains of Atty. Adriano exhumed at the expense of respondents.
15

ISSUE:
Who between Rosario and Valino is entitled to the remains of Atty. Adriano.
HELD:
Rosario is entitled to the remains of Atty. Adriano. The law recognizes that a certain right of possession over the corpse
exists, for the purpose of a decent burial, and for the exclusion of the intrusion by third persons who have no legitimate
interest in it. This quasi-property right, arising out of the duty of those obligated by law to bury their dead, also authorizes
them to take possession of the dead body for purposes of burial to have it remain in its final resting place, or to even
transfer it to a proper place where the memory of the dead may receive the respect of the living. This is a family right.
There can be no doubt that persons having this right may recover the corpse from third persons.
Moreover, it cannot be surmised that just because Rosario was unavailable to bury her husband when she died, she had
already renounced her right to do so. Even assuming, ex gratia argumenti, that Atty. Adriano truly wished to be buried in
the Valino family plot at the Manila Memorial Park, the result remains the same. Article 307 of the Civil Code provides:
Art. 307. The funeral shall be in accordance with the expressed wishes of the deceased. In the absence of such
expression, his religious beliefs or affiliation shall determine the funeral rites. In case of doubt, the form of the funeral
shall be decided upon by the person obliged to make arrangements for the same, after consulting the other members of the
family. It is apparent that Article 307 simply seeks to prescribe the form of the funeral rites that should govern in the
burial of the deceased. The right and duty to make funeral arrangements reside in the persons specified in Article 305 in
relation to Article 199 of the Family Code.
Art. 305. The duty and the right to make arrangements for the funeral of a relative shall be in accordance with the order
established for support, under Article 199. In case of descendants of the same degree, or of brothers and sisters, the oldest
shall be preferred. In case of ascendants, the paternal shall have a better right.
Art. 199. Whenever two or more persons are obliged to give support, the liability shall devolve upon the following
persons in the order herein provided: (1) The spouse; (2) The descendants in the nearest degree; (3) The ascendants in the
nearest degree; and (4) The brothers and sisters.

GRANDE V. ANTONIO
G.R. NO. 206248
FEBRUARY 18, 2014

J. VELASCO
USE OF SURNAME
FACTS:
Grande and respondent Antonio for a period of time lived together as husband and wife, although Antonio was at that time
already married to someone else. Out of this illicit relationship, two sons were born: Andre Lewis and Jerard Patrick, The
children were not expressly recognized by respondent as his own in the Record of Births of the children in the Civil
Registry. The parties relationship turned sour, and Grande left for the United States with her two children. This prompted
respondent Antonio to file a Petition for Judicial Approval of Recognition with Prayer to take Parental Authority, Parental
Physical Custody, Correction/Change of Surname of Minors and for the Issuance of Writ of Preliminary Injunction before
the RTC appending a notarized Deed of Voluntary Recognition of Paternity of the children.
The Implementing Rules and Regulations (IRR) of RA 9255 states:
7.1.1 The illegitimate child shall use the surname of the father if a public document is executed by the
father, either at the back of the Certificate of Live Birth or in a separate document.
16

The RTC rendered a Decision in favor of Antonio. Aggrieved, petitioner Grande moved for reconsideration. However, her
motion was denied by the trial court. Grande then filed an appeal with the CA attributing grave error on the part of the
RTC for allegedly ruling contrary to the law and jurisprudence respecting the grant of sole custody to the mother over her
illegitimate children.
The appellate court maintained that the legal consequence of the recognition made by respondent Antonio that he is the
father of the minors, taken in conjunction with the universally protected "best-interest-of-the-child" clause, compels the
use by the children of the surname "ANTONIO.
ISSUE:
Is there a legal basis for the court a quo to order the change of the surname to that of respondent?
HELD:
None. Art. 176. Illegitimate children shall use the surname and shall be under the parental authority of their mother, and
shall be entitled to support in conformity with this Code. However, illegitimate children may use the surname of their
father if their filiation has been expressly recognized by their father through the record of birth appearing in the civil
register, or when an admission in a public document or private handwritten instrument is made by the father. Provided,
the father has the right to institute an action before the regular courts to prove non-filiation during his lifetime. The
legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate child.
The Supreme Court, pursuant to Section 5, Article VIII of the 1987 Constitution, declared void the above-quoted
provision of the IRR insofar as it provides the mandatory use by illegitimate children of their fathers surname upon the
latters recognition of his paternity.
Art. 176 gives illegitimate children the right to decide if they want to use the surname of their father or not. It is not the
father (herein respondent) or the mother (herein petitioner) who is granted by law the right to dictate the surname of their
illegitimate children.
On its face, Art. 176, as amended, is free from ambiguity. And where there is no ambiguity, one must abide by its words.
The use of the word may in the provision readily shows that an acknowledged illegitimate child is under no
compulsion to use the surname of his illegitimate father. The word may is permissive and operates to confer
discretion upon the illegitimate children.

REPUBLIC V. CANTOR
G.R. NO. 184621
DECEMBER 10, 2013

J. BRION
DECLARATION OF PRESUMPTIVE DEATH
FACTS:
Respondent and Jerry were married on September 20, 1997. They lived together as husband and wife in their conjugal
dwelling. Sometime in January 1998, the couple had a violent quarrel brought about by: (1) the respondents inability to
reach sexual climax whenever she and Jerry would have intimate moments; and (2) Jerrys expression of animosity
toward the respondents father.
After their quarrel, Jerry left their conjugal dwelling and this was the last time that the respondent ever saw him. Since
then, she had not seen, communicated nor heard anything from Jerry or about his whereabouts.
On May 21, 2002, or more than four years from the time of Jerrys disappearance, the respondent filed before the RTC a
petition for her husbands declaration of presumptive death. She claimed that she had a well-founded belief that Jerry was
17

already dead. She alleged that she had inquired from her mother-in-law, her brothers-in-law, her sisters-in-law, as well as
her neighbors and friends, but to no avail. In the hopes of finding Jerry, she also allegedly made it a point to check the
patients directory whenever she went to a hospital. All these earnest efforts, the respondent claimed, proved futile,
prompting her to file the petition in court.
The RTC issued an order granting the respondents petition and declaring Jerry presumptively dead.
ISSUE:
Whether or not petitioner had a well-founded belief to justify the declaration of her husbands presumptive death.
HELD:
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.
Under Article 41 of the Family Code, there are four (4) essential requisites for the declaration of presumptive death:
1. That the absent spouse has been missing for four consecutive years, or two consecutive years if the
disappearance occurred where there is danger of death under the circumstances laid down in Article 391,
Civil Code;
2. That the present spouse wishes to remarry;
3. That the present spouse has a well-founded belief that the absentee is dead; and
4. That the present spouse files a summary proceeding for the declaration of presumptive death of the absentee.
Respondents efforts fell short of the stringent standard and degree of diligence required by jurisprudence for the
following reasons: First, the respondent did not actively look for her missing husband. Second, she did not report Jerrys
absence to the police nor did she seek the aid of the authorities to look for him. Third, she did not present as witnesses
Jerrys relatives or their neighbors and friends, who can corroborate her efforts to locate Jerry. Lastly, there was no other
corroborative evidence to support the respondents claim that she conducted a diligent search.

BALTAZAR V. LAXA
G.R. NO. 174489
APRIL 7, 2012

J. DEL CASTILLO
FORMALITIES OF A WILL; TESTAMENTARY CAPACITY
FACTS:
Paciencia was a 78 year old spinster when she made her last will and testament entitled Tauli Nang Bilin o Testamento
Miss Paciencia Regala in the Pampango dialect on September 13, 1981. The Will, executed in the house of retired Judge
Limpin, was read to Paciencia twice. After which, Paciencia expressed in the presence of the instrumental witnesses that
the document is her last will and testament. She thereafter affixed her signature at the end of the said document on page 3
and then on the left margin of pages 1, 2 and 4 thereof.
The witnesses to the Will were Dra. Limpin, Francisco Garcia and Faustino R. Mercado. The three attested to the Wills
due execution by affixing their signatures below its attestation clause and on the left margin of pages 1, 2 and 4 thereof, in
the presence of Paciencia and of one another and of Judge Limpin who acted as notary public.
Childless and without any brothers or sisters, Paciencia bequeathed all her properties to respondent Lorenzo and his wife
Corazon Laxa and their children. More than four years after the death of Paciencia, Lorenzo filed a petition with the for
18

the probate of the Will of Paciencia and for the issuance of Letters of Administration in his favor. There being no
opposition to the petition after its due publication, the RTC allowed Lorenzo to present evidence on June 22, 2000. The
following day petitioner Antonio Baltazar filed an opposition to Lorenzos petition. Antonio averred that the properties
subject of Paciencias Will belong to Nicomeda Regala Mangalindan, his predecessor-in-interest; hence, Paciencia had no
right to bequeath them to Lorenzo.
For petitioners, Rosie testified that her mother and Paciencia were first cousins. She claimed to have helped in the
household chores in the house of Paciencia thereby allowing her to stay therein from morning until evening and that
during the period of her service in the said household, Lorenzos wife and his children were staying in the same house.
Rosie claimed that she saw Faustino bring something for Paciencia to sign at the latters house. Rosie admitted, though,
that she did not see what that something was as same was placed inside an envelope. However, she remembered
Paciencia instructing Faustino to first look for money before she signs them. On September 16, 1981, Paciencia went to
the house of Antonios mother and brought with her the said envelope. Upon going home, however, the envelope was no
longer with Paciencia. Rosie further testified that Paciencia was referred to as magulyan or forgetful because she
would sometimes leave her wallet in the kitchen then start looking for it moments later.
The trial court gave considerable weight to the testimony of Rosie and concluded that at the time Paciencia signed the
Will, she was no longer possessed of sufficient reason or strength of mind to have testamentary capacity.
On appeal, the CA reversed the RTC Decision and granted the probate of the Will of Paciencia. The appellate court did
not agree with the RTCs conclusion that Paciencia was of unsound mind when she executed the Will. It ratiocinated that
the state of being magulyan does not make a person mentally unsound so as to render Paciencia unfit for executing a
Will.
ISSUE:
Whether the authenticity and due execution of the notarial Will was sufficiently established to warrant its allowance for
probate.
HELD:
Yes. Courts are tasked to determine nothing more than the extrinsic validity of a Will in probate proceedings. Due
execution of the will or its extrinsic validity pertains to whether the testator, being of sound mind, freely executed the will
in accordance with the formalities prescribed by law. These formalities are enshrined in Articles 805 and 806 of the New
Civil Code.
Here, a careful examination of the face of the Will shows faithful compliance with the formalities laid down by law. The
signatures of the testatrix, Paciencia, her instrumental witnesses and the notary public, are all present and evident on the
Will. Further, the attestation clause explicitly states the critical requirement that the testatrix and her instrumental
witnesses signed the Will in the presence of one another and that the witnesses attested and subscribed to the Will in the
presence of the testator and of one another. In fact, even the petitioners acceded that the signature of Paciencia in the Will
may be authentic although they question her state of mind when she signed the same as well as the voluntary nature of
said act.
ISSUE:
Whether Paciencia is unfit to execute a will.
HELD:
No. Art. 799. To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties,
or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause. It shall be sufficient if
the testator was able at the time of making the will to know the nature of the estate to be disposed of, the proper objects of
his bounty, and the character of the testamentary act.
Art. 800. The law presumes that every person is of sound mind, in the absence of proof to the contrary. The burden of
proof that the testator was not of sound mind at the time of making his dispositions is on the person who opposes the
19

probate of the will; but if the testator, one month, or less, before making his will was publicly known to be insane, the
person who maintains the validity of the will must prove that the testator made it during a lucid interval.
The state of being forgetful does not necessarily make a person mentally unsound so as to render him unfit to execute a
Will. Forgetfulness is not equivalent to being of unsound mind.
In this case, apart from the testimony of Rosie pertaining to Paciencias forgetfulness, there is no substantial evidence,
medical or otherwise, that would show that Paciencia was of unsound mind at the time of the execution of the Will. Here,
there was no showing that Paciencia was publicly known to be insane one month or less before the making of the Will.
Clearly, thus, the burden to prove that Paciencia was of unsound mind lies upon the shoulders of petitioners. However
and as earlier mentioned, no substantial evidence was presented by them to prove the same, thereby warranting the CAs
finding that petitioners failed to discharge such burden.

MENDOZA V. POLICARPIO
G.R. NO. 176422
MARCH 20, 2013

J. REYES
RESERVA TRONCAL
FACTS:
The properties subject in the instant case are three parcels of land located in Bulacan: (1) Lot 1681-B, (2) Lot 1684, and
(3) Lot No. 1646-B.
Lot Nos. 1681-B and 1684 are presently in the name of respondent Julia Delos Santos. Lot No. 1646-B, on the other
hand, is also in the name of respondent but co-owned by Victoria Pantaleon, who bought one-half of the property from
petitioner Maria Mendoza and her siblings.
Petitioners are grandchildren of Placido Mendoza and Dominga Mendoza. Placido and Dominga had four children:
Antonio, Exequiel, married to Leonor, Apolonio and Valentin. Petitioners Maria, Deogracias, Dionisia, Adoracion,
Marcela and Ricardo are the children of Antonio. Petitioners Juliana, Fely, Mercedes, Elvira and Fortunato, on the other
hand, are Valentins children. Petitioners alleged that the properties were part of Placido and Domingas properties that
were subject of an oral partition and subsequently adjudicated to Exequiel. After Exequiels death, it passed on to his
spouse Leonor and only daughter, Gregoria. After Leonors death, her share went to Gregoria. In 1992, Gregoria died
intestate and without issue. They claimed that after Gregorias death, respondent, who is Leonors sister, adjudicated unto
herself all these properties as the sole surviving heir of Leonor and Gregoria. Hence, petitioners claim that the properties
should have been reserved by respondent in their behalf and must now revert back to them, applying Article 891 of the
Civil Code on reserva troncal.
Respondent, however, denies any obligation to reserve the properties as these did not originate from petitioners familial
line and were not originally owned by Placido and Dominga. According to respondent, the properties were bought by
Exequiel and Antonio from a certain Alfonso Ramos in 1931.
The RTC found merit in petitioners claim and granted their action for Recovery of Possession by Reserva Troncal,
Cancellation of TCT and Reconveyance. On appeal, the CA reversed and set aside the RTC decision and dismissed the
complaint filed by petitioners.
ISSUE:
Whether the CA erred in holding that the petitioners Mendozas do not have a right to the subject properties by virtue of
the law on reserva troncal.
HELD:
20

No. Following the order prescribed by law in legitimate succession, when there are relatives of the descendant within the
third degree, the right of the nearest relative, called reservatario, over the property which the reservista (person holding it
subject to reservation) should return to him, excludes that of the one more remote. The right of representation cannot be
alleged when the one claiming same as a reservatario of the reservable property is not among the relatives within the third
degree belong to the line from which such property came, inasmuch as the right granted by the Civil Code in Article 891
is in the highest degree personal and for the exclusive benefit of the designated persons who are the relatives, within the
third degree, of the person from whom the reservable property came. Therefore, relatives of the fourth and the succeeding
degrees can never be considered as reservatarios, since the law does not recognize them as such.
Petitioners cannot be considered reservees/reservatarios as they are not relatives within the third degree of Gregoria from
whom the properties came. The person from whom the degree should be reckoned is the descendant/prepositusthe one
at the end of the line from which the property came and upon whom the property last revolved by descent. It is Gregoria in
this case. Petitioners are Gregorias fourth degree relatives, being her first cousins. First cousins of the prepositus are
fourth degree relatives and are not reservees or reservatarios.
While it may appear that the properties are reservable in character, petitioners cannot benefit from reserva troncal. First,
because Julia, who now holds the properties in dispute, is not the other ascendant within the purview of Article 891 of the
Civil Code and second, because petitioners are not Gregorias relatives within the third degree.

HEIRS OF POLICRONIO URETA V. HEIRS OF LIBERATO URETA

G.R. NO. 165748
SEPTEMBER 14, 2011

J. MENDOZA
VOID CONTRACT; PARTITION IS NOT AN ACT OF STRICT DOMINION, NO SPA REQUIRED;
PRETERITION IS A CONCEPT OF TESTAMENTARY SUCCESSION
FACTS:
In his lifetime, Alfonso Ureta begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco,
Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of Policronio (Heirs of
Policronio), are opposed to the rest of Alfonso's children and their descendants (Heirs of Alfonso).
Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met
at the house of Liberato. Francisco suggested that in order to reduce the inheritance taxes, their father should make it
appear that he had sold some of his lands to his children. Accordingly, Alfonso executed four Deeds of Sale covering
several parcels of land in favor of Policronio, Liberato, Prudencia, and his common-law wife, Valeriana Dela Cruz. The
Deed of Sale executed on October 25, 1969, in favor of Policronio, covered six parcels of land, which are the properties in
dispute in this case. Since the sales were only made for taxation purposes and no monetary consideration was given,
Alfonso continued to own, possess and enjoy the lands and their produce.
On April 19, 1989, Alfonso's heirs executed a Deed of Extra-Judicial Partition, which included all the lands that were
covered by the four deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado, Policronio's
eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-heirs. After
their father's death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. They
obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio.
Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of Extra-Judicial
Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts proving
futile, the Heirs of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of
Documents, Partition, and Damages against the Heirs of Alfonso before the RTC.
The RTC dismissed the Complaint of the Heirs of Policronio and ruled in favor of the Heirs of Alfonso in a decision. The
Deed of Extra-Judicial Partition, on the other hand, was declared valid by the RTC. The CA annulled the Deed of Extra21

Judicial Partition under Article 1390 (1) of the Civil Code, holding that a special power of attorney was lacking as
required under Article 1878 (5) and (15) of the Civil Code.
ISSUE:
Whether or not the deed of sale dated October 25, 1969 is null and void.
HELD:
Yes. Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a
third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds
the parties to their real agreement.
Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable contract.
Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another,
he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham.
Similarly, in this case, Alfonso simulated a transfer to Policronio purely for taxation purposes, without intending to
transfer ownership over the subject lands.
Policronio's failure to take exclusive possession of the subject properties or, in the alternative, to collect rentals, is
contrary to the principle of ownership. Such failure is a clear badge of simulation that renders the whole transaction void.
Since the Deed of Sale is void, the subject properties were properly included in the Deed of Extra-Judicial Partition of the
estate of Alfonso.
ISSUE:
Whether the CA erred in annulling the deed of extra-judicial partition.
HELD:
Yes.
Art.
1878.Special
powers
of
attorney
are
necessary
in
the
following
cases:
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or
for a valuable consideration; (15) Any other act of strict dominion.
This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It has been held in several cases that
partition among heirs is not legally deemed a conveyance of real property resulting in change of ownership. It is not a
transfer of property from one to the other, but rather, it is a confirmation or ratification of title or right of property that an
heir is renouncing in favor of another heir who accepts and receives the inheritance. It is merely a designation and
segregation of that part which belongs to each heir. The Deed of Extra-Judicial Partition cannot, therefore, be considered
as an act of strict dominion. Hence, a special power of attorney is not necessary.
ISSUE:
Whether the absence of the Hiers of Policronio in the partition or the lack of authority of their representative results in
their preterition.
HELD:
No. Art. 854.The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at
the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the
devises and legacies shall be valid insofar as they are not inofficious. If the omitted compulsory heirs should die before
the testator, the institution shall be effectual, without prejudice to the right of representation.
Preterition has been defined as the total omission of a compulsory heir from the inheritance. It consists in the silence of
the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not
giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will
22

in the latter case. Preterition is thus a concept of testamentary succession and requires a will. In the case at bench, there is
no will involved. Therefore, preterition cannot apply.

SEANGIO V. HON. REYES

G.R. NO. 140371-72 NOVEMBER 27, 2006

J. AZCUNA
DISINHERITANCE OF A DESCENDANT; HOLOGRAPHIC WILL
FACTS:
The document that petitioners refer to as Segundo's holographic will is quoted, as follows:
Kasulatan sa pag-aalis ng mana Tantunin ng sinuman
Ako si Segundo Seangio Filipino may asawa naninirahan sa 465-A Flores St., Ermita, Manila at nagtatalay ng
maiwanag na pag-iisip at disposisyon ay tahasan at hayagang inaalisan ko ng lahat at anumang mana ang paganay
kong anak na si Alfredo Seangio dahil siya ay naging lapastangan sa akin at isan beses siya ng sasalita ng masama
harapan ko at mga kapatid niya na si Virginia Seangio labis kong kinasama ng loob ko at sasabe rin ni Alfredo sa
akin na ako nasa ibabaw gayon gunit daratin ang araw na ako nasa ilalim siya at siya nasa ibabaw.
Labis kong ikinasama ng loob ko ang gamit ni Alfredo ng akin pagalan para makapagutang na kuarta siya at kanya
asawa na si Merna de los Reyes sa China Bangking Corporation na millon pesos at hindi ng babayad at hindi ng
babayad ito ay nagdulot sa aking ng malaking kahihiya sa mga may-ari at stockholders ng China Banking.
At ikinagalit ko pa rin ang pagkuha ni Alfredo at ng kanyang asawa na mga customer ng Travel Center of the
Philippines na pinagasiwaan ko at ng anak ko si Virginia.
Dito ako nagalit din kaya gayon ayoko na bilanin si Alfredo ng anak ko at hayanan kong inaalisan ng lahat at
anoman mana na si Alfredo at si Alfredo Seangio ay hindi ko siya anak at hindi siya makoha mana.
Nilagdaan ko ngayon ika 20 ng Setyembre 1995 sa longsod ng Manila sa harap ng tatlong saksi.
(signed)
Segundo Seangio
Nilagdaan sa harap namin
(signed)
Dy Yieng Seangio (signed)
Unang Saksi ikalawang saksi
(signed)
ikatlong saksi

A petition for the probate of the holographic will of Segundo, docketed as SP. Proc. No. 99-93396, was filed by
petitioners before the RTC. Private respondents moved for the dismissal of the probate proceedings primarily on the
ground that the document purporting to be the holographic will of Segundo does not contain any disposition of the estate
of the deceased and thus does not meet the definition of a will under Article 783 of the Civil Code. According to private
respondents, the will only shows an alleged act of disinheritance by the decedent of his eldest son, Alfredo, and nothing
else; that all other compulsory heirs were not named nor instituted as heir, devisee or legatee, hence, there is preterition
which would result to intestacy.
The RTC dismissed SP. Proc. No. 99-93396 and reasoned that the document termed as "will" by oppositors/petitioners Dy
Yieng Seangio, et al., clearly shows that there is preterition, as the only heirs mentioned thereat are Alfredo and Virginia.
ISSUE:
23

Whether the Kasulatan ng Pag-Aalis ng Mana may be considered as a holographic will.

HELD:
Yes. A holographic will, as provided under Article 810 of the Civil Code, must be entirely written, dated, and signed by
the hand of the testator himself. It is subject to no other form, and may be made in or out of the Philippines, and need not
be witnessed.
Segundo's document, although it may initially come across as a mere disinheritance instrument, conforms to the
formalities of a holographic will prescribed by law. It is written, dated and signed by the hand of Segundo himself. An
intent to dispose mortis causa can be clearly deduced from the terms of the instrument, and while it does not make an
affirmative disposition of the latter's property, the disinheritance of Alfredo, nonetheless, is an act of disposition in itself.
In other words, the disinheritance results in the disposition of the property of the testator Segundo in favor of those who
would succeed in the absence of Alfredo.
ISSUE:
Whether the disinheritance can be given effect.
HELD:
No. For disinheritance to be valid, Article 916 of the Civil Code requires that the same must be effected through a will
wherein the legal cause therefor shall be specified. In this regard, the Court is convinced that the document, even if
captioned as Kasulatan ng Pag-Aalis ng Mana, was intended by Segundo to be his last testamentary act and was executed
by him in accordance with law in the form of a holographic will. With regard to the reasons for the disinheritance that
were stated by Segundo in his document, the Court believes that the incidents, taken as a whole, can be considered a form
of maltreatment of Segundo by his son, Alfredo, and that the matter presents a sufficient cause for the disinheritance of a
child or descendant under Article 919 of the Civil Code. However, unless the will is probated, the disinheritance cannot be
given effect.
RAMIREZ V. MANILA BANKING CORPORATION
G.R. NO. 198800
DECEMBER 11, 2013

J. VILLARAMA
CONTRACT IS THE LAW BETWEEN PARTIES
FACTS:
Petitioner Jose T. Ramirez mortgaged two parcels of land located at Bayanbayanan, Marikina City in favor of respondent
The Manila Banking Corporation to secure his P265,000 loan. The real estate mortgage provides that all correspondence
relative to the mortgage including notifications of extrajudicial actions shall be sent to petitioner Ramirez at his given
address, to wit:
N) All correspondence relative to this MORTGAGE, including demand letters, summons, subpoenas or
notifications of any judicial or extrajudicial actions shall be sent to the MORTGAGOR at the address
given above or at the address that may hereafter be given in writing by the MORTGAGOR to the
MORTGAGEE, and the mere act of sending any correspondence by mail or by personal delivery to the
said address shall be valid and effective notice to the MORTGAGOR for all legal purposes and the fact
that any communication is not actually received by the MORTGAGOR, or that it has been returned
unclaimed to the MORTGAGEE, or that no person was found at the address given, or that the address is
fictitious or cannot be located, shall not excuse or relieve the MORTGAGOR from the effects of such
notice.
24

Respondent filed a request for extrajudicial foreclosure of real estate mortgage the ground that Ramirez failed to pay his
loan despite demands. During the auction sale, respondent was the only bidder for the mortgaged properties. In 2000,
respondent demanded that Ramirez vacate the properties.
Ramirez sued respondent for annulment of sale and prayed that the certificate of sale be annulled on the ground, among
others, that paragraph N of the real estate mortgage was violated for he was not notified of the foreclosure and auction
sale. The trial court ruled that the extrajudicial foreclosure proceedings were null and void and the certificate of sale is
invalid. The CA reversed the trial courts decision and ruled that absence of personal notice of foreclosure to Ramirez as
required by paragraph N of the real estate mortgage is not a ground to set aside the foreclosure sale.
ISSUE:
What is the legal effect of violating paragraph N of the deed of mortgage which requires personal notice to the petitionermortgagor by the respondent-mortgagee bank?
HELD:
The banks violation of paragraph N of the real estate mortgage is sufficient to invalidate the extrajudicial foreclosure
sale. Section 3, Act No. 3135 reads:
Notice shall be given by posting notices of the sale for not less than twenty days in at least three public
places of the municipality or city where the property is situated, and if such property is worth more than
four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks
in a newspaper of general circulation in the municipality and city.
The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a
newspaper of general circulation. Personal notice to the mortgagor is not necessary.
Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In this case,
petitioner and respondent in entering into a contract of real estate mortgage, agreed inter alia: "all correspondence relative
to this mortgage, including demand letters, summonses, subpoenas, or notifications of any judicial or extra-judicial action
shall be sent to the MORTGAGOR.
When petitioner failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to
render the foreclosure sale on November 23, 1981 null and void.

SAN FERNANDO REGALA V. CARGILL PHILIPPINES

G.R. NO. 178042
OCTOBER 9, 2013

J. ABAD
BREACH OF CONTRACT
FACTS:
Cargill entered into Contract 5026 covering its sale to San Fernando of 4,000 metric tons of molasses. Cargill agreed to
deliver the molasses within the months of April to May 1997 at the wharf of Union Ajinomoto. Shortly after, Cargill
also entered into Contract 5047 covering another sale to San Fernando of 5,000 mt of molasses. The delivery period under
this contract was within October-November-December 1996, sooner than the delivery period under Contract 5026. San
Fernando had a deal with Ajinomoto for the supply of these molasses.
Cargill alleged that it offered to deliver the 4,000 mt of molasses as required by Contract 5026 within the months of April
and May 1997 but San Fernando accepted only 951 mt. Cargill further alleged that it earlier sought to deliver the molasses
25

covered by Contract 5047 at the Ajinomoto wharf in the months of October, November, and December 1996, but San
Fernando failed or refused for unjustified reasons to accept the delivery.
In its Answer with counterclaim, San Fernando pointed out that, except for the 951 mt of molasses that Cargill delivered
in March 1997, the latter made no further deliveries for Contract 5026. Cargill sent San Fernando a letter proposing a
change in the delivery period for that contract from April to May 1997 to May to June 1997. But San Fernando
rejected the change since it had a contract to sell the molasses to Ajinomoto.
As for Contract 5047, Cargill admitted its inability to deliver the goods when it wrote San Fernando a letter proposing to
move the delivery period from October-November-December 1996 to May-June-July 1997. But San Fernando also
rejected the change since it had already contracted to sell the subject molasses to Ajinomoto.
Cargills filed a complaint for sum of money and damages against San Fernando before the RTC. The RTC dismissed
Cargills complaint for lack of merit and granted San Fernandos counterclaims. The CA ruled on appeal, however, that
Cargill was not entirely in breach of Contract 5026. The CA, however, found Cargill guilty of breach of Contract 5047
which called for delivery of the molasses in October-November-December 1996. Since San Fernando did not accede to
Cargills request to move the delivery period back, Cargill violated the contract when it did not deliver the goods during
the previously agreed period.
ISSUE:
What are the liabilities of the parties under Contract 5026?
HELD:
It is not enough for a seller to show that he is capable of delivering the goods on the date he agreed to make the delivery.
He has to bring his goods and deliver them at the place their agreement called for.
Contract 5026 required Cargill to deliver 4,000 mt of molasses during the period April to May 1997. Thus, anything
less than that quantity constitutes breach of the agreement. And since Cargill only delivered a total of 2,125 mt of
molasses during the agreed period, Cargill should be regarded as having violated Contract 5026 with respect to the
undelivered balance of 1,875 mt of molasses.
Since Cargill failed, however, to deliver the balance of 1,875 mt of molasses under Contract 5026, it must pay San
Fernando the P2,531,250.00, representing the latters unrealized profits had it been able to sell that 1,875 mt of molasses
to Ajinomoto.
ISSUE:
What are the liabilities of the parties under Contract 5027?
HELD:
The CA correctly ruled that Cargill was in breach of Contract 5047 which provided for delivery of the molasses within the
months of October, November, and December 1996.
In failing to make any delivery under Contract 5047, Cargill should pay San Fernando the profit that it lost because of
such breach. Cargill of course points out that San Fernando never wrote a demand letter respecting its failure to make any
delivery under that contract. But demand was not necessary since Cargills obligation under the contract specified the date
and place of delivery, i.e., October-November-December 1996, at the Ajinomoto wharf in Pasig.

DE LA PAZ V. L& J DEVELOPMENT

G.R. NO. 183360
SEPTEMBER 8, 2014

J. DEL CASTILLO
26

WRITTEN STIPULATION TO PAY INTEREST

FACTS:
On December 27, 2000, Rolando lent P350,000.00 without any security to L&J, a property developer with Atty. Esteban
Salonga as its President and General Manager. The loan, with no specified maturity date, carried a 6% monthly interest,
i.e., P21,000.00. From December 2000 to August 2003, L&J paid Rolando a total of P576,000.00 representing interest
charges.
As L&J failed to pay despite repeated demands, Rolando filed a Complaint for Collection of Sum of Money with
Damages against L&J and Atty. Salonga in his personal capacity before the MeTc. Rolando alleged, that L&Js debt as of
January 2005, inclusive of the monthly interest, stood at P772,000.00; that the 6% monthly interest was upon Atty.
Salongas suggestion; and, that the latter tricked him into parting with his money without the loan transaction being
reduced into writing.
L&J and Atty. Salonga denied Rolandos allegations. While they acknowledged the loan as a corporate debt, they
claimed that the failure to pay the same was due to a fortuitous event, that is, the financial difficulties brought about by the
economic crisis. They further argued that Rolando cannot enforce the 6% monthly interest for being unconscionable and
shocking to the morals. Hence, the payments already made should be applied to the P350,000.00 principal loan.
The MeTC upheld the 6% monthly interest. It ratiocinated that since L&J agreed thereto and voluntarily paid the interest
at such rate from 2000 to 2003, it is already estopped from impugning the same. The RTC affirmed the MeTC Decision.
The CA reversed and set aside the RTC Decision. The CA stressed that the parties failed to stipulate in writing the
imposition of interest on the loan. Hence, no interest shall be due thereon pursuant to Article 1956 of the Civil Code.
ISSUE:
Whether or not the CA erred in holding that no interest is due.
HELD:
No. Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing.
Jurisprudence on the matter also holds that for interest to be due and payable, two conditions must concur: a) express
stipulation for the payment of interest; and b) the agreement to pay interest is reduced in writing.
Even if the payment of interest has been reduced in writing, it is unconscionable. Indeed at present, usury has been legally
non-existent in view of the suspension of the Usury Law by Central Bank Circular No. 905 s. 1982. Even so, not all
interest rates levied upon loans are permitted by the courts as they have the power to equitably reduce unreasonable
interest rates. Time and again, it has been ruled in a plethora of cases that stipulated interest rates of 3% per month and
higher, are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if
not against the law.
In the case at bench, there is no specified period as to the payment of the loan. Hence, levying 6% monthly or 72%
interest per annum is definitely outrageous and inordinate. No monetary interest is due Rolando pursuant to Article
1956. The CA thus correctly adjudged that the excess interest payments made by L&J should be applied to its principal
loan. As computed by the CA, Rolando is bound to return the excess payment of P226,000.00 to L&J following the
principle of solutio indebiti.

ECE REALTY V. RACHEL MANDAP

G.R. NO. 196182
SEPTEMBER 1, 2014

J. PERALTA
FRAUD IN VOIDABLE CONTRACTS; IMPLIED RATIFICATION
27

FACTS:
Petitioner started the construction of a condominium project called Central Park Condominium Building located along
Pasay City. However, printed advertisements were made indicating therein that the said project was to be built in Makati
City. In December 1995, respondent, agreed to buy a unit from the above project by paying a reservation fee and,
thereafter, down payment and monthly instalments. On June 18, 1996, respondent and the representatives of petitioner
executed a Contract to Sell. In the said Contract, it was indicated that the condominium project is located in Pasay City.
More than two years later, respondent demanded the return of the payments she made, on the ground that she
subsequently discovered that the condominium project was being built in Pasay City and not in Makati City. Instead of
answering respondent's letter, petitioner sent her a written communication informing her that her unit is ready for
inspection and occupancy should she decide to move in.
Treating the letter as a form of denial of her demand for the return of the sum she had paid to petitioner, respondent filed a
complaint with HLURB seeking the annulment of her contract with petitioner, the return of her payments, and damages.
ISSUE:
Whether petitioner was guilty of fraud and if so, whether such fraud is sufficient ground to nullify its contract with
respondent.
HELD:
No. Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfil two
conditions.
First, the fraud must be dolo causanteor it must be fraud in obtaining the consent of the party. This is referred to as causal
fraud. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent
person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each
case should be considered, taking into account the personal conditions of the victim. Second, the fraud must be proven by
clear and convincing evidence and not merely by a preponderance thereof.
The misrepresentation made by petitioner in its advertisements does not constitute causal fraud which would have been a
valid basis in annulling the Contract to Sell between petitioner and respondent. Respondent failed to show that "the
essential and/or moving factor that led the respondent to give her consent and agree to buy the unit was precisely the
project's advantageous or unique location in Makati to the exclusion of other places or city.
Even assuming that petitioners misrepresentation consists of fraud which could be a ground for annulling their Contract
to Sell, respondent's act of affixing her signature to the said Contract, after having acquired knowledge of the property's
actual location, can be construed as an implied ratification.

RIVERA V. SPOUSES CHUA

G.R. NO. 184458
JANUARY 14, 2015

J. PEREZ
WHEN DEMAND NOT NECESSARY; LEGAL INTEREST
FACTS:
Rivera and the Salvador Chua are kumpadres as the former is the godfather of the Spouses Chuas son. On February 24,
1995, Rivera obtained a loan from the Spouses Chua.
PROMISSORY NOTE
28

120,000.00
FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA and
VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine Currency (P120,000.00) on
December 31, 1995.
It is agreed and understood that failure on my part to pay the amount of (P120,000.00) One Hundred
Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent to FIVE
PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.
Should this note be referred to a lawyer for collection, I agree to pay the further sum equivalent to twenty
percent (20%) of the total amount due and payable as and for attorneys fees which in no case shall be
less than P5,000.00 and to pay in addition the cost of suit and other incidental litigation expense.
Any action which may arise in connection with this note shall be brought in the proper Court of the City
of Manila.
Manila, February 24, 1995[.]
(SGD.) RODRIGO RIVERA
Almost 3 years from the date of payment stipulated in the promissory note, Rivera issued two checks purportedly for
partial payment of Riveras loan. These checks however, were dishonoured for the reason account closed. As of May
31, 1999, the amount due was already P366,000.00 covering the principal plus interest from January 1, 1996 to May 31,
1999. Because of Riveras refusal to pay, the Spouses Chua were constrained to file a suit on June 11, 1999.
Rivera countered that he never executed the promissory note. The MeTC ruled in favor of the Spouses Chua. On appeal,
the RTC affirmed the decision of the MeTC but denied the award of attorneys fees. Both trial courts found the
promissory note as authentic and validly bore the signature of Rivera. Rivera points out that the Spouses Chua never
demanded payment for the loan nor interest thereof for almost 4 years at the time of the alleged default in payment after
December 31, 1995.
ISSUE:
Whether or not demand was still necessary in order to charge him liable.
HELD:
No. There are four instances when demand is not necessary to constitute the debtor in default: (1) when there is an express
stipulation to that effect; (2) where the law so provides; (3) when the period is the controlling motive or the principal
inducement for the creation of the obligation; and (4) where demand would be useless. In the first two paragraphs, it is not
sufficient that the law or obligation fixes a date for performance; it must further state expressly that after the period lapses,
default will commence.
The date of default under the Promissory Note is 1 January 1996, the day following 31 December 1995, the due date of
the obligation. On that date, Rivera became liable for the stipulated interest which the Promissory Note says is equivalent
to 5% a month. In sum, until 31 December 1995, demand was not necessary before Rivera could be held liable for the
principal amount of P120,000.00. Thereafter, on 1 January 1996, upon default, Rivera became liable to pay the Spouses
Chua damages, in the form of stipulated interest.
ISSUE:
How much is the legal interest accruing from the promissory note from the date of default.
HELD:
29

At the time interest accrued from 1 January 1996, the date of default under the Promissory Note, the then prevailing rate
of legal interest was 12% per annum under Central Bank (CB) Circular No. 416 in cases involving the loan or forbearance
of money. Thus, the legal interest accruing from the Promissory Note is 12% per annum from the date of default on 1
January 1996.
However, the 12% per annum rate of legal interest is only applicable until 30 June 2013, before the advent and effectivity
of BSP Circular No. 799, Series of 2013 reducing the rate of legal interest to 6% per annum. BSP Circular No. 799 is
prospectively applied from 1 July 2013.
In short, the applicable rate of legal interest from 1 January 1996, the date when Rivera defaulted, to date when this
Decision becomes final and executor is divided into two periods reflecting two rates of legal interest: (1) 12% per annum
from 1 January 1996 to 30 June 2013; and (2) 6% per annum FROM 1 July 2013 to date when this Decision becomes final
and executor.

ARCO PULP AND PAPER CO. V. LIM

G.R. NO. 206806
JUNE 25, 2014

J. LEONEN
ALTERNATIVE OBLIGATION; NOVATION
FACTS:
Dan T. Lim delivered scrap papers to Arco Pulp and Paper through its Chief Executive Officer and President, Candida A.
Santos. The parties allegedly agreed that Arco Pulp and Paper would either pay Dan T. Lim the value of the raw materials
or deliver to him their finished products of equivalent value.
Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a post-dated check as partial
payment, with the assurance that the check would not bounce. When he deposited the check, it was dishonored for being
drawn against a closed account.
On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of agreement where Arco Pulp and
Paper bound themselves to deliver their finished products to Megapack Container Corporation, owned by Eric Sy, for his
account. According to the memorandum, the raw materials would be supplied by Dan T. Lim, through his company,
Quality Paper and Plastic Products.
Dan T. Lim filed a complaint for collection of sum of money with prayer for attachment with the RTC. The trial court
rendered a judgment in favor of Arco Pulp and Paper and dismissed the complaint, holding that when Arco Pulp and
Paper and Eric Sy entered into the memorandum of agreement, novation took place, which extinguished Arco Pulp and
Papers obligation to Dan T. Lim. The CA reversed the RTC decision and ruled that the facts and circumstances in this
case clearly showed the existence of an alternative obligation.
ISSUE:
Whether the obligation between the parties was an alternative obligation
HELD:
Yes. In an alternative obligation, there is more than one object, and the fulfilment of one is sufficient, determined by the
choice of the debtor who generally has the right of election. The right of election is extinguished when the party who may
exercise that option categorically and unequivocally makes his or her choice known. The choice of the debtor must also be
communicated to the creditor who must receive notice of it.
According to the factual findings of the trial court and the appellate court, the original contract between the parties was for
respondent to deliver scrap papers to petitioner Arco Pulp and Paper. The payment for this delivery became petitioner
30

Arco Pulp and Papers obligation. By agreement, petitioner Arco Pulp and Paper, as the debtor, had the option to either
(1) pay the price or (2) deliver the finished products of equivalent value to respondent.
When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the scrap papers, they
exercised their option to pay the price. Respondents receipt of the check and his subsequent act of depositing it
constituted his notice of petitioner Arco Pulp and Papers option to pay.
ISSUE:
Whether the obligation between the parties was extinguished by novation
HELD:
No. Novation extinguishes an obligation between two parties when there is a substitution of objects or debtors or when
there is subrogation of the creditor. It occurs only when the new contract declares so in unequivocal terms or that the
old and the new obligations be on every point incompatible with each other.
There is nothing in the memorandum of agreement that states that with its execution, the obligation of petitioner Arco
Pulp and Paper to respondent would be extinguished. It also does not state that Eric Sy somehow substituted petitioner
Arco Pulp and Paper as respondents debtor. It merely shows that petitioner Arco Pulp and Paper opted to deliver the
finished products to a third person instead. The consent of the creditor must also be secured for the novation to be valid. In
this case, respondent was not privy to the memorandum of agreement, thus, his conformity to the contract need not be
secured.
The trial court erroneously ruled that the execution of the memorandum of agreement constituted a novation of the
contract between the parties. When petitioner Arco Pulp and Paper opted instead to deliver the finished products to a third
person, it did not novate the original obligation between the parties. Since there was no novation, petitioner Arco Pulp and
Papers obligation to respondent remains valid and existing.

BPI V. DOMINGO
G.R. NO. 169407

MARCH 25, 2015

J. DE CASTRO
NOVATION
FACTS:
On September 27, 1993, respondent Amador and Mercy Domingo executed a Promissory Note in favor of Makati Auto
Center, Inc. in the sum of P629,856.00, payable in 48 successive monthly installments in the amount of P13,122.00 each.
They simultaneously executed a Deed of Chattel Mortgage over a 1993 Mazda 323 to secure the payment of their
Promissory Note. Makati Auto Center then assigned, ceded and transferred all its rights and interests over the said
promissiory note and chattel mortgage to Far East Bank and Trust Company (FEBTC).
On April 7, 2000, BPI, the surviving corporation and FEBTC, the absorbed corporation, merged. Hence, all the assets and
liabilities of the latter were transferred and absorbed by the former.
Respondents failed to pay 21 monthly instalments, Thus, BPI filed a complaint for replevin and damages against
respondents. BPI included a John Doe as defendant as they were already aware that the subject vehicle was in possession
of a third person though they did not yet know the identity of said person.
In their answer, the Spouses Domingo averred that the subject vehicle was later sold to Carmelita Gonzales with the
banks conformity and said buyer subsequently assumed payment of the balance of the mortgaged loan.
31

The MeTC ruled in favor of BPI and held that Amadors bare testimony is insufficient to prove that they had been
expressly released from their obligations and that Carmelita assumed their place as the new debtor. The RTC reversed the
MeTC decision. To the RTC, the following circumstances demonstrated the implied consent of BPI to the novation: (1)
BPI had knowledge of the Deed of Sale and Assumption of Mortgage executed between Mercy and Carmelita, but did not
interpose any objection to the same; and (2) BPI (through FEBTC) returned the personal checks of the spouses Domingo
and accepted the payments made by Carmelita. The R TC also noted that BPI made a demand for payment upon the
spouses Domingo only after 30 months from the time Carmelita assumed payments for the installments due. The R TC
reasoned that if the spouses Domingo truly remained as debtors, BPI would not have wasted time m demanding payments
from them. The CA affirmed the RTC ruling with modification only as to the award of damages.
ISSUE:
Whether or not there had been a novation of the loan obligation with chattel mortgage of the spouses Domingo to BPI so
that the spouses Domingo were released from said obligation and Carmelita was substituted as debtor.
HELD:
No. Novation which consists in substituting a new debtor in the place of the original one, may be made even

without the knowledge or against the will of the latter, but not without the consent of the creditor. Under this
provision, there are two forms of novation by substituting the person of the debtor, and they are: (1)
expromision and (2) delegacion. In the former, the initiative for the change does not come from the debtor and
may even be made without his knowledge, since it consists in a third person assuming the obligation. As such, it
logically requires the consent of the third person and the creditor. In the latter, the debtor offers and the creditor
accepts a third person who consents to the substitution and assumes the obligation, so that the intervention and
the consent of these three persons are necessary. In these two modes of substitution, the consent of the creditor
is an indispensable requirement.
Since novation implies a waiver of the right the creditor had before the novation, such waiver must be express. The
burden of establishing a novation is on the party who asserts its existence. Contrary to the findings of the Court of
Appeals and the RTC, Amador failed to discharge such burden as he was unable to present proof of the clear and
unmistakable consent of BPI to the substitution of debtors.
First, that BPI (or FEB TC) had a copy of the Deed of Sale and Assumption of Mortgage executed between Mercy and
Carmelita in its file does not mean that it had consented to the same. Second, the consent of BPI to the substitution of
debtors cannot be deduced from its acceptance of payments from Carmelita, absent proof of its clear and unmistakable
consent to release the spouses Domingo from their obligation. Since the spouses Domingo remained as debtors of BPI,
together with Carmelita, the fact that BPI demanded payment from the spouses Domingo 30 months after accepting
payment from Carmelita is insignificant. The acceptance by a creditor of payments from a third person, who has assumed
the obligation, will result merely to the addition of debtors and not novation. And third, there is no sufficient or competent
evidence to establish the return of the checks to the spouses Domingo and the assurance made by FEBTC that the spouses
Domingo were already released from their obligation.

NATIONAL POWER CORPORATION V. IBRAHIM ET AL.

G.R. NO. 175863
FEBRUARY 18, 2015

J. PEREZ
WHEN OBLIGATION IS EXTINGUISHED; PAYMENT TO POSSESSOR OF CREDIT; SOLIDARY LIABILITY
AND BAD FAITH
FACTS:
32

NAPOCOR took possession of a parcel of land in Marawi for the purpose of building a hydroelectric power plant. A
portion of such land was registered under the name of Mangondato. Said property was occupied by NAPOCOR under the
mistaken belief that the same was reserved for its use by the government.
When Mangondato discovered NAPOCORs occupation of the subject land, he began demanding compensation from the
latter. Ultimately, both parties failed to agree upon the amount of compensation. Thus, Mangondato filed a complaint for
reconveyance against NAPOCOR. He asked for the recovery of the land and payment of monthly rental. This complaint
was docketed as Civil Case No. 605-92. For its part, NAPOCOR filed an expropriation complaint before the RTC,
docketed as Civil Case No. 610-92.
The two cases were consolidated. The RTC upheld NAPOCORs right to expropriate the land and denied Mangondatos
claim for reconveyance. Disagreeing upon the amount of compensation, NAPOCOR appealed before the CA.
During the pendency of such appeal, the Ibrahims and Maruhoms filed a complaint against Mangondato and NAPOCOR.
The complaint was docketed as Civil Case No. 967-93. They disputed Mangondatos ownership over the subject land and
claimed that they are the real owners thereof.
The CA denied NAPOCORs appeal. NAPOCOR filed a petition for review before the SC but to no avail. Hence, the
decision became final and executory. Mangondato filed a motion for execution of the decision in Civil Case no. 605-92
and Civil Case no. 610-92. The RTC then rendered a resolution ordering the issuance of a writ of execution in favor of
Mangondato. In the same resolution, the trial court ordered the issuance of a notice of garnishment against several of
NAPOCORs bank accounts. Consequently, the amount garnished was paid to Mangondato in full satisfaction of
NAPOCORs debt in Civil Case no. 605-92 and Civil Case No. 610-92.
On the other hand, the RTC decided Civil Case No. 967-93 and held that the Ibrahims and Maruhoms, not Mangondato,
are the true owners of the lands. The trial court then required payment of all rental fees and expropriation indemnity, to
the Ibrahims and Maruhoms. The RTC further held that Mangondato and NAPOCORs liability to the Ibrahims and
Maruhoms as solidary.
Both the RTC and the CA found NAPOCOR liable to the Ibrahims and Maruhoms because its previous payment to
Mangondato was tainted with bad faith.
ISSUE:
Whether or not NAPOCOR is liable in favor of the Ibrahims and Maruhoms for the rental fees and expropriation
indemnity adjudged due for the subject land.
HELD:
No. There was no bad faith on the part of NAPOCOR. A finding of bad faith, thus, usually assumes the presence of two
(2) elements: first, that the actor knew or should have known that a particular course of action is wrong or illegal, and
second, that despite such actual or imputable knowledge, the actor, voluntarily, consciously and out of his own free will,
proceeds with such course of action. Only with the concurrence of these two elements can we begin to consider that the
wrong committed had been done deliberately and, thus, in bad faith.
The RTC and the CA erred in their finding of bad faith because they have overlooked the utter significance of one
important fact: that petitioners payment to Mangondato of the rental fees and expropriation indemnity adjudged
due for the subject land in Civil Case No. 605-92 and Civil Case No. 610-92, was required by the final and executory
decision in the said two cases and was compelled thru a writ of garnishment issued by the court that rendered such
decision. In other words, the payment to Mangondato was not a product of a deliberate choice on the part of the
petitioner but was made only in compliance to the lawful orders of a court with jurisdiction.
Since petitioner was only acting under the lawful orders of a court in paying Mangondato, we find that no bad faith can be
taken against it, even assuming that petitioner may have had prior knowledge about the claims of the Ibrahims and
Maruhoms upon the subject land. Without the existence of bad faith, the ruling of the RTC and of the Court of Appeals
apropos petitioners remaining liability to the Ibrahims and Maruhoms becomes devoid of legal basis.
33

ISSUE:
What happens if Mangondato is the real owner? Is NAPOCOR liable?
HELD:
NO. If Mangondato is the real owner of the subject land, then the obligation by petitioner to pay for the rental fees and
expropriation indemnity due the subject land is already deemed extinguished by the latters previous payment under the
final judgment in Civil Case No. 605-92 and Civil Case No. 610-92. This would be a simple case of an obligation being
extinguished through payment by the debtor to its creditor. Under this scenario, the Ibrahims and Maruhoms would not
even be entitled to receive anything from anyone for the subject land. Hence, petitioner cannot be held liable to the
Ibrahims and Maruhoms.
ISSUE:
What happens if the Ibrahims and Maruhoms are the real owner? Is NAPOCOR liable?
HELD:
NO. Should the Ibrahims and Maruhoms turn out to be the real owners of the subject land, petitioners previous payment
to Mangondato pursuant to Civil Case No. 605-92 and Civil Case No. 610-92given the absence of bad faith on
petitioners part as previously discussedmay nonetheless be considered as akin to a payment made in good faith to
a person in possession of credit per Article 1242 of the Civil Code that, just the same, extinguishes its obligation to
pay for the rental fees and expropriation indemnity due for the subject land.
Article 1242 of the Civil Code reads: Payment made in good faith to any person in possession of the credit shall release
the debtor.
Borrowing the principles behind Article 1242 of the Civil Code, we find that Mangondatobeing the judgment creditor
in Civil Case No. 605-92 and Civil Case No. 610-92 as well as the registered owner of the subject land at the timemay
be considered as a possessor of credit with respect to the rental fees and expropriation indemnity adjudged due for the
subject land in the two cases, if the Ibrahims and Maruhoms turn out to be the real owners of the subject land. Hence,
petitioners payment to Mangondato of the fees and indemnity due for the subject land as a consequence of the execution
of Civil Case No. 605-92 and Civil Case No. 610-92 could still validly extinguish its obligation to pay for the same even
as against the Ibrahims and Maruhoms.

METRO CONCAST STEEL CORPORATION V. ALLIED BANK

G.R. NO. 177921
DECEMBER 4, 2013

J. PERLAS BERNABE
WHEN OBLIGATION IS EXTINGUISHED; FORTUITOUS EVENTS
FACTS:
On various dates and for different amounts, Metro Concast, through its officers, herein individual petitioners, obtained
several loans from Allied Bank. These loan transactions were covered by a promissory note and separate letters of
credit/trust receipts,
Petitioners failed to settle their obligations under the promissory note and trust receipts, hence, Allied Bank sent them
demand letters but to no avail. Thus, Allied Bank was prompted to file a complaint for collection of sum of money against
petitioners before the RTC.
34

Petitioners also alleged that the economic reverses suffered by the Philippine economy 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. 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 expressed interest in buying the scrap metal. During the negotiations with Peakstar,
petitioners claimed that Atty. Saw, a member of Allied Banks legal department, acted as the latters 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 under which Peakstar
obligated itself to purchase the scrap metal for a total consideration ofP34,000,000.00, Unfortunately, Peakstar reneged on
all its obligations under the MoA.
The RTC dismissed the subject complaint, holding that the causes of action sued upon had been paid or otherwise
extinguished since Allied Bank was duly represented by its agent, Atty. Saw, in all the negotiations and transactions with
Peakstar. The CA reversed and set aside the ruling of the RTC. Consequently, the CA granted the appeal and directed
petitioners to solidarily pay Allied Bank their corresponding obligations under the aforementioned promissory note and
trust receipts, plus interests, penalty charges and attorneys fees.
ISSUE:
Whether or not the loan obligations incurred by the petitioners under the subject promissory note and various trust receipts
have already been extinguished.
HELD:
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.
In the present case, petitioners essentially argue that their loan obligations to Allied Bank had already been extinguished
due to Peakstars failure to perform its own obligations to Metro Concast pursuant to the MoA. Petitioners classify
Peakstars default as a form of force majeure.
To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and unexpected
occurrence or of the failure of the debtor to comply with obligations must be independent of human will; (b) it must be
impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid;
(c) the occurrence must be such as to render it impossible for the debtor to fulfil obligations in a normal
manner; and (d) the obligor must be free from any participation in the aggravation of the injury or loss.
While it may be argued that Peakstars breach of the MoA was unforseen by petitioners, the same us clearly not
"impossible" to foresee or even an event which is independent of human will." Neither has it been shown that said
occurrence rendered it impossible for petitioners to pay their loan obligations to Allied Bank and thus, negates the
formers force majeure theory altogether. In any case, as earlier stated, 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.

R TRANSPORT V. YU
G.R. NO. 174161
JANUARY 21, 2015

J. PERALTA
SOLIDARY LIABILITY
35

FACTS:
Loreta Yu was hit by a bus driven by Antonio P. Gimena, who was then employed by petitioner R Transport Corporation.
Loreta was immediately rushed to the hospital where she was pronounced dead on arrival.
The husband of the deceased, respondent Luisito G. Yu, filed a Complaint for damages before the RTC against R
Transport, Antonio Gimena, and Metro Manila Transport Corporation (MMTC) for the death of his wife.
MMTC denied its liability reasoning that it is merely the registered owner of the bus involved in the incident, the actual
owner, being R Transport. Since it was not actually operating the bus which killed respondents wife, nor was it the
employer of the driver thereof, MMTC alleged that the complaint against it should be dismissed. R Transport alleged that
respondent had no cause of action against it for it had exercised due diligence in the selection and supervision of its
employees and drivers and that its buses are in good condition. Meanwhile, the driver Antonio Gimena was declared in
default for his failure to file an answer to the complaint.
The trial court rendered judgment in favor of Yu ruling that R Transport failed to prove that it exercised the diligence
required of a good father of a family in the selection and supervision of its driver, who, by its negligence, ran over the
deceased resulting in her death. It also held that MMTC should be held solidarily liable with R Transport because it would
unduly prejudice a third person who is a victim of a tort to look beyond the certificate of registration and prove who the
actual owner is in order to enforce a right of action.
The CA affirmed the Decision of the RTC with modification that defendant Antonio Gimena is made solidarily liable for
the damages caused to respondent. R Transport insists that it should not be held solidarily liable with MMTC for it is not
the registered owner of the bus which killed the deceased. R Transport relies in the ruling in Tamayo, where the
responsibility of the registered owner and the actual operator of the truck which caused the death of the passenger is not
solidary.
ISSUE:
Whether the CA erred in finding R Transport liable for the damages caused by the negligence of its employee.
HELD:
No. Under Article 2180 of the New Civil Code, employers are liable for the damages caused by their employees acting
within the scope of their assigned tasks. Once negligence on the part of the employee is established, a presumption
instantly arises that the employer was remiss in the selection and/or supervision of the negligent employee. To avoid
liability for the quasi-delict committed by its employee, it is incumbent upon the employer to rebut this presumption by
presenting adequate and convincing proof that it exercised the care and diligence of a good father of a family in the
selection and supervision of its employees.
R Transport cannot rely on the Tamayo ruling as the case at hand does not involve a breach of contract of carriage, as in
Tamayo, but a tort or quasi-delict under Article 2176. It cannot escape its solidary liability for the liability of the
employer for the negligent conduct of its subordinate is direct and primary, subject only to the defense of due diligence in
the selection and supervision of the employee.

RUKS KONSULT AND CONSTRUCTION V. ADWORLD SIGN AND ADVERTISING CORPORATION

G.R. NO. 204866
JANUARY 21, 2015

J. PERLAS BERNABE
SOLIDARY LIABILITY OF JOINT TORTFEASORS
FACTS:
36

Adworld filed a complaint for damages against Transworld and Comark before the RTC. Adworld alleged that it is the
owner of a billboard in Edsa which was misaligned when the adjacent billboard structure owned by Transworld and used
by Comark collapsed and crashed against it. Transworld admitted the damage caused but failed to pay the amount
demanded by Adworld.
Transworld averred that the collapse of its billboard was due to extraordinarily strong winds. Transworld likewise filed a
complaint against Ruks, the company which built the collapsed billboard structure and alleged that the structure
constructed had a weak and poor foundation not suited for billboards. As such, Ruks should ultimately be held liable for
the damages caused to Adworlds billboard structure.
Comark denied liability marinating that it does not have any interest on Transworlds collapsed billboard structure as it
only contracted the use of the same.
Ruks admitted entering into a contract with Transworld for the construction of the billboard but denied liability for the
damages caused by its collapse. It contended that when Transworld hired its services, there was already an existing
foundation for the billboard and that it merely finished the structure according to the terms and conditions of the contract.
The RTC found both Transworld and Ruks negligent in the construction of the collapsed billboard as they know that the
foundation supporting the same was weak. Agrrieved, both appealed before the CA but the appellate court merely
affirmed the ruling of the RTC.
ISSUE:
Whether or not the CA correctly affirmed the ruling of the RTC declaring Ruks jointly and severally liable with
Transworld for the damages sustained by Adworld.
HELD:
Yes. Jurisprudence defines negligence as the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do. It is the failure to observe for the protection of the interest of another person
that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers
injury.
Under Article 2194 of the Civil Code, joint tortfeasors are solidarily liable for the resulting damage. In other words, joint
tortfeasors are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful
act themselves.
Both Transworld and Ruks were fully aware that the foundation for the formers billboard was weak; yet, neither of them
took any positive step to reinforce the same. They merely relied on each others word that repairs would be done to such
foundation, butnone was done at all. Clearly, the foregoing circumstances show that both Transworld and Ruks are guilty
of negligence in the construction of the formers billboard, and perforce, should be held liable for its collapse and the
resulting damage to Adworlds billboard structure. As joint tortfeasors, therefore, they are solidarily liable to Adworld.

VIGILLA ET AL. V. PHILIPPINE COLLEGE OF CRIMINOLOGY

G.R. NO. 200094
JUNE 10, 2013

J. MENDOZA
SOLIDARY LIABILITY
FACTS:
PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the
Maintenance Department of PCCr under the supervision and control of Atty. Seril, PCCrs Senior Vice President for
37

Administration. The petitioners were made to understand that they were under MBMSI, a corporation engaged in
providing janitorial services to clients. Atty. Seril is also the President and General Manager of MBMSI.
Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been revoked as of July 2, 2003.
On March 16, 2009, PCCr, through its President, respondent Gregory Bautista, citing the revocation, terminated the
schools relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI.
In September, 2009, the dismissed employees, led by their supervisor, Vigilla, filed their respective complaints for illegal
dismissal, reinstatement, back wages, separation pay, underpayment of salaries, overtime pay, holiday pay, service
incentive leave, and 13th month pay against MBMSI, Atty. Seril, PCCr, and Bautista.
The LA held that (a) PCCr was the real principal employer of the complainants ; (b) MBMSI was a mere adjunct or alter
ego/labor-only contractor. The CA affirmed the two Resolutions of the NLRC and pointed out that based on the principle
of solidary liability and Article 1217 of the New Civil Code, petitioners respective releases, waivers and quitclaims in
favor of MBMSI and Atty. Seril redounded to the benefit of the respondents.
ISSUE:
Whether or not the releases, waivers and quitclaims executed by petitioners in favor of MBMSI redounded to the benefit
of PCCr.
HELD:
Yes. The basis of the solidary liability of the principal with those engaged in labor-only contracting is the last paragraph
of Article 106 of the Labor Code, which in part provides: In such cases [labor-only contracting], the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by petitioners in favor of
MBMSI redounded to the benefit of PCCr pursuant to Article 1217 of the New Civil Code. The reason is that MBMSI is
solidarily liable with the respondents for the valid claims of petitioners pursuant to Article 109 of the Labor Code.
Considering that MBMSI, as the labor-only contractor, is solidarily liable with the respondents, as the principal employer,
then the NLRC and the CA correctly held that the respondents solidary liability was already expunged by virtue of the
releases, waivers and quitclaims executed by each of the petitioners in favor of MBMSI pursuant to Article 1217 of the
Civil Code which provides that payment made by one of the solidary debtors extinguishes the obligation.

CESAR AND LOLITA AREZA V. EXPRESS SAVINGS BANK

G.R. NO. 176697
SEPTEMBER 10, 2014

J. PERALTA
LEGAL COMPENSATION
FACTS:
Petitioners have two bank deposits with respondent Express Savings Bank. They were engaged in the business of buy and
sell of brand new and second-hand motor vehicles. On May 2, 2000, they received an order from Gerry Mambuay for the
purchase of a second-hand Pajero and Honda CRV. Mambuay paid petitioners 9 checks payable to different payees and
drawn against Philippine Veterans Bank. Each valued at P200,000.00 for a total of P1,800,000.00.
Petitioners deposited the checks in their savings account with Express. Express in turn deposited the checks with
Equitable PCI Bank. Equitable PCI presented the checks to Philippine Veterans Bank which honored the checks.
Potenciano, branch manager of Express, informed petitioners that the checks they deposited were honoured.
38

Sometime in July 2000, the checks were returned by Philippine Veterans Affairs Office to Philippine Veterans Bank on
the ground that the amount on the face of the checks was altered. Philippine Veterans Bank returned the checks to
Equitable PCI. Equitable PCI informed Express about the dishonoured checks. Equitable PCI initially filed a protest in the
Philippine Clearing House. In February 2001, the Philippine Clearing house ruled in favor of Philippine Veterans. Thus,
Equitable PCI debited the deposit account of the bank in the amount of P1,800,000.00.
On March 9, 2001, petitioners issued a check in the amount of P500,000.00 but the check was dishonoured by Express for
the reason Deposit Under Hold. According to petitioners, Express unilaterally and unlawfully put their account on hold.
Petitioners filed a complaint for sum of money with damages against Express and Potenciano.
ISSUE:
Whether or not the Express had the right to debit the amount of P1,800,000.00 from the appellants accounts by reason of
legal compensation
HELD:
No. There can be no legal compensation on this case. Under Article 1279, in order that compensation may be proper, it is
necessary that (1) each of the obligors be bound principally, and that he be at the same time a principal creditor of each
other; (2) 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) two debts are due; (4) they be liquidated and demandable; (5) over
neither of them there can be any retention or controversy, commenced by third persons and communicated in due time to
the debtor.
While it well-settled that the relationship of the depositors and Express or a similar institution is that of creditor-debtor,
Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in banks and similar
institutions shall be governed by the provisions governing simple loans. The bank is the debtor and the depositor is the
creditor.
However, petitioners are not liable for the deposit of the altered checks. Express, as the depositary and collecting bank,
ultimately bears the loss. Thus, there being no indebtedness to Express on the part of petitioners, legal compensation
cannot take place.

PLANTERS DEVELOPMENT BANK V. SPOUSES LOPEZ

G.R. NO. 186332
OCTOBER 23, 2013

J. BRION
CASUAL BREACH OF CONTRACT
FACTS:
Sometime in 1983, the spouses Ernesto and Florentina Lopez applied for and obtained a real estate loan in the amount of
P3,000,000.00 from Planters Bank. The loan was intended to finance the construction of a four-story concrete dormitory
building.
The loan agreement provided that the loan is payable for 14 years and shall bear a monetary interest at 21% per annum. To
secure the payment of the loan, the spouses Lopez mortgaged a parcel of land.
The parties signed an amendment to the loan agreement. The interest rate was increased to 23% and the term of the loan
was shortened to three years. The parties executed a second amendment to the loan agreement. The interest rate was
further increased to twenty-five percent (25%) p.a. The contract also provided that releases on the loan shall be subject to
Planters Banks availability of funds.
39

The price of the materials and the cost of labor escalated. Eager to finish the project, the spouses Lopez obtained an
additional loan in the amount of P1,200,000.00 from Planters Bank. They entered into a third amendment to the loan
agreement. The amount of the loan and the interest rate were increased to P4,200,000.00 and 27% p.a., respectively.
Furthermore, the term of the loan was shortened to one year.
The spouses Lopez failed to avail the full amount of the loan because Planters Bank refused to release the remaining
amount of P700,000.00. The spouses Lopez filed against Planters Bank a complaint for rescission of the loan agreements
and for damages with the RTC. On November 16, 1984, Planters Bank foreclosed the mortgaged properties in favor of
third parties after the spouses Lopez defaulted on their loan.
ISSUE:
Whether Planters Bank substantially breached the loan agreement.
HELD:
No. The well-settled rule is that rescission will not be permitted for a slight or casual breach of the contract. The question
of whether a breach of contract is substantial depends upon the attending circumstances.
Planters Bank indeed incurred in delay by not complying with its obligation to make further loan releases. Its refusal to
release the remaining balance, however, was merely a slight or casual breach.
The factual circumstances of this case lead us to the conclusion that Planters Bank substantially complied with its
obligation. To reiterate, Planters Bank released P3,500,000.00 of the P4,200,000.00 loan. Only the amount of P700,000.00
was not released. This constitutes 16.66% of the entire loan. Moreover, the progress report dated May 30, 1984 states that
85% of the six-story building was already completed by the spouses Lopez. It is also erroneous to solely impute the noncompletion of the building to Planters Bank. Planters Bank is not an insurer of the buildings construction. External
factors, such as the steep price of the materials and the cost of labor, affected the erection of the building. More
importantly, the spouses Lopez took the risk that the project would not be finished when they constructed a six-story
building instead of four-story structure.
ISSUE:
Whether the Spouses Lopez are entitled to rescission under Article 1191.
HELD:
No. Even assuming that Planters Bank substantially breached its obligation, the fourth paragraph of Article 1191 of the
Civil Code expressly provides that rescission is without prejudice to the rights of third persons who have acquired the
thing, in accordance with Article 1385 of the Civil Code. In turn, Article 1385 states that rescission cannot take place
when the things which are the object of the contract are legally in the possession of third persons who did not act in
bad faith.
In the present case, the mortgaged properties had already been foreclosed. They were already sold to the highest bidder at
a public auction. The spouses Lopez did not cause the annotation of notice of lis pendens at the back of the title of the
mortgaged lot. Moreover, the respondents did not adduce any evidence that would show that the buyers bought the
property with actual knowledge of the pendency of the present case.
Furthermore, the spouses Lopezs failure to pay the overdue loan made them parties in default, not entitled to rescission
under Article 1191 of the Civil Code.

SWIRE DEVELOPMENT CORPORATION V. YU

G.R. NO. 207133
MARCH 9, 2015
40

J. PERALTA
RESCISSION UNDER ART. 1191
FACTS:
Respondent Jayne Yu and petitioner Swire Realty Development Corporation entered into a Contract to Sell on July 25,
1995 covering one residential condominium unit. The total contract price of P7,519,371.80, payable in equal monthly
installments until September 24, 1997. Respondent likewise purchased a parking slot for P600,000.00.
On September 24, 1997, respondent paid the full purchase price for the unit while making a down payment for the parking
lot. However, notwithstanding full payment of the contract price, petitioner failed to complete and deliver the subject unit
on time. This prompted respondent to file a Complaint for Rescission of Contract with Damages before the HLURB
ENCRFO.
The HLURB ENCRFO dismissed respondents complaint and ruled that rescission is not permitted for slight or casual
breach. Upon appeal to the HLURB Board of Commissioners, it reversed the decision of the HLURB ENCFRO. The
report on the ocular inspection conducted on the subject condominium project and subject unit shows that the amenities
under the approved plan have not yet been provided as of May 3, 2002, and that the subject unit has not been delivered as
of August 28, 2002, which is beyond the period of development of December 1999 under the license to sell. The delay in
the completion of the project as well as of the delay in the delivery of the unit are breaches of statutory and contractual
obligations which entitles respondent to rescind the contract, demand a refund and payment of
damages.
ISSUE:
Whether rescission of the contract is proper in the instant case.
HELD:
Yes. Basic is the rule that the right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between them. The breach contemplated in
the said provision is the obligors failure to comply with an existing obligation. When the obligor cannot comply with
what is incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for the court to determine
the period of compliance, the court shall decree the rescission.
In the instant case, the CA aptly found that the completion date of the condominium unit was November 1998 pursuant to
License No. 97-12-3202 dated November 2, 1997 but was extended to December 1999 as per License to Sell No. 99-053401 dated May 8, 1999. However, at the time of the ocular inspection conducted by the HLURB ENCRFO, the unit was
not yet completely finished as the kitchen cabinets and fixtures were not yet installed and the agreed amenities were not
yet available.
Incontrovertibly, petitioner had incurred delay in the performance of its obligation amounting to breach of contract as it
failed to finish and deliver the unit to respondent within the stipulated period. The delay in the completion of the project
as well as of the delay in the delivery of the unit are breaches of statutory and contractual obligations which entitle
respondent to rescind the contract, demand a refund and payment of damages.

GOLDEN VALLEY EXPLORATION V. PINKIAN MINING COMPANY

G.R. NO. 190080
JUNE 11, 2014

J. PERLAS PERNABE
RESCISSION UNDER ART. 1191
41

FACTS:
PMC is the owner of 81 mining claims, 15 of which were covered by Mining Lease Contract (MLC) No. MRD-56, while
the remaining 66 had pending applications for lease. On October 30, 1987, PMC entered into an Operating Agreement
(OA) with GVEI, granting the latter full, exclusive and irrevocable possession, use, occupancy, and control over the
mining claims and every matter pertaining to the examination, exploration, development and mining and the processing
and marketing of the products for a period of 25 years.
PMC extra-judicially rescinded the OA upon GVEIs violation of Section 5.01, Article V thereof.
ARTICLE V
ROYALTIES
5.01 Should the PROPERTIES be placed in commercial production the PINKIAN shall be entitled to a
Royalty computed as follows:
(a)
For gold 3.0 percent of net realizable value of gold
(b) For copper and others 2.0 percent of net realizable value
Net REALIZABLE Value is gross value less the sum of the following: (1) marketing expenses
including freight and insurance; (2) all smelter charges and deductions; (3) royalty payments to the
government; (4) ad valorem and export taxes, if any, paid to the government.
The aforesaid royalties shall be paid to PINKIAN within five (5) days after receipt of the smelter or
refinery returns.
ARTICLE VIII
CANCELLATION/TERMINATION OF AGREEMENT
8.01 This Agreement may be cancelled or terminated prior to the expiration of the period, original
or renewal mentioned in the next preceding Section only in either of the following ways:
a. By written advance notice of sixty (60) days from OPERATOR to PINKIAN with or without cause by
registered
mail
or
personal
delivery
of
the
notice
to
PINKIAN.
b. By written notice from PINKIAN by registered or personal deliver of the notice to OPERATOR based
on the failure to OPERATOR to make any payments determined to be due PINKIAN under Section
5.01 hereof after written demand for payment has been made on OPERATOR: Provided that
OPERATOR shall have a grace period of ninety (90) days from receipt of such written demand within
which to make the said payments to PINKIAN.
GVEI contested PMCs extra-judicial rescission of the OA. PMC no longer responded to GVEIs letter. Instead, it entered
into a Memorandum of Agreement with CVI, whereby the latter was granted the right to enter, possess, occupy and
control the mining claims and to explore and develop the mining claims, mine or extract the ores, mill, process and
beneficiate and/or dispose the mineral products in any method or process, among others, for a period of 25 years.
Thus, GVEI filed a Complaint for Specific Performance, Annulment of Contract and Damages against PMC and CVI
before the RTC.
The RTC rendered a Decision in favor of GVEI, holding that since the mining claims have not been placed in commercial
production, there is no demandable obligation yet for GVEI to pay royalties to PMC. The CA reversed the RTC ruling,
finding that while the OA gives PMC the right to rescind only on the ground of (GVEIs) failure to pay the stipulated
royalties, Article 1191 of the Civil Code allows PMC the right to rescind the agreement based on a breach of any of its
provisions.
ISSUE:
42

Whether or not there was a valid rescission of the OA.

HELD:
Yes. In reciprocal obligations, either party may rescind the contract upon the others substantial breach of the obligation/s
he had assumed thereunder. As a general rule, the power to rescind an obligation must be invoked judicially and cannot be
exercised solely on a partys own judgment that the other has committed a breach of the obligation. 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.
The Court therefore affirms the correctness of the CAs Decision upholding PMCs unilateral rescission of the OA due to
GVEIs non-payment of royalties considering the parties express stipulation in the OA that said agreement may be
cancelled on such ground. This is found in Section 8.01, Article VIII in relation to Section 5.01, Article V of the OA.
By expressly stipulating in the OA that GVEIs non-payment of royalties would give PMC sufficient cause to cancel or
rescind the OA, the parties clearly had considered such violation to be a substantial breach of their agreement.

EDS MANUFACTURING V. HEALTHCHECK INTERNATIONAL

G.R. NO. 162802
OCTOBER 9, 2013

J. PERALTA
RESCISSION UNDER ART. 1191
FACTS:
Healthcheck Inc. provides prepaid health and medical insurance coverage to its clients. it maintains a network of
accredited hospitals and medical clinics, one of which is the De La Salle University Medical Center. Being within the
access of this medical facility, the defendant Eds Manufacturing Inc. with about 5,000 employees saw fit in to obtain
insurance coverage from it. They entered into a one-year contract from May 1, 1998 to April 30, 1999 in which HCI was
to provide the 4,191 employees of EMI and their 4,592 dependents as host of medical services and benefits. Attached to
the Agreement was a Service Program which listed the services that HCI would provide and the responsibilities that EMI
would undertake in order to avail of the services. EMI paid the full premium for the coverage in the staggering amount of
P8,826,307.50.
On July 17, HCI notified EMI that its accreditation with DLSUMC was suspended and advised it to avail of the services
of nearby accredited institutions. Complaints from EMI employees and workers were pouring in that their HMO cards
were not being honored by the DLSUMC and other hospitals and physicians.
On September 3, EMI formally notified HCI that it was rescinding their April 1998 Agreement on account of HCIs
serious and repeated breach of its undertaking including but not limited to the unjustified non-availability of services. It
demanded a return of premium for the unused period after September 3.
HCI instituted an action against EMI for unlawful pretermination of the contract and failure of EMI to submit to a joint
reconciliation of accounts and deliver such assets as properly belonged to HCI. The court ruled in favor of HCI and found
that EMIs rescission of the Agreement on September 3, 1998 was not done through court action or by a notarial act and
was based on casual or slight breaches of the contract. On appeal, the CA reversed the decision of the RTC.
ISSUE:
Whether or not there was a valid rescission of the Agreement between the parties.
HELD:
43

No. The general rule is that rescission (more appropriately, 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. In the absence of a stipulation, a party cannot unilaterally and extrajudicially rescind a contract. A
judicial or notarial act is necessary before a valid rescission (or resolution) can take place. The right cannot be exercised
solely on a partys own judgment that the other committed a breach of the obligation. The operative act which produces
the resolution of the contract is the decree of the court and not the mere act of the vendor.
In the present case, it is apparent that HCI violated its contract with EMI to provide medical service to its employees in a
substantial way. However, although a ground exists to validly rescind the contract between the parties, it appears that EMI
failed to judicially rescind the same.

YULIM INTERNATIONAL V. INTERNATIONAL EXCHANGE BANK

G.R. NO. 203133
FEBRUARY 18, 2015

J. REYES
SURETYSHI; PAYMENT BY CESSION
FACTS:
On June 2, 2000, iBank, a commercial bank, granted Yulim, a domestic partnership, a credit facility in the form of an
Omnibus Loan Line for P5,000,000.00, as evidenced by a Credit Agreement which was secured by a Chattel Mortgage
over Yulims inventories in its merchandise. As further guarantee, the partners, namely, James, Jonathan and Almerick,
executed a Continuing Surety Agreement in favor of iBank.
When Yulim defaulted, iBank sent demand letters to Yulim but without success. iBank then filed a complaint for sum of
money with replevin against Yulim and its sureties. Petitioners moved to dismiss the complaint and insisted that their loan
had been fully paid after they assigned to iBank their condominium unit. Petitioner invoked Article 1255 of the Civil
Code which provides that, the debtor may cede or assign his property to his creditors in payment of his debts. This

cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net
proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor
and his creditors shall be governed by special laws.
Section 2.01 of the Deed of Assignment expressly acknowledges that it is a mere interim security for the
repayment of any loan granted and those that may be granted in the future by the BANK to the
ASSIGNOR and/or the BORROWER, for compliance with the terms and conditions of the relevant credit
and/or loan documents thereof.
Section 2.02 of the Deed of Assignment provides that as soon as title to the condominium unit is issued in
its name, Yulim shall immediately execute the necessary Deed of Real Estate Mortgage in favor of the
BANK to secure the loan obligations of the ASSIGNOR and/or the BORROWER.
The RTC ordered Yulim alone to pay iBank and dismissed the complaint against petitioners James, Jonathan and
Almerick, stating that there was no iota of evidence that the loan proceeds benefitted their families.
Upon appeal to the CA, the appellate court ruled that petitioners failed to prove that they have already paid Yulims
consolidated loan obligations. Nothing in the deed of assignment signified that iBank had accepted the condominium unit
as full payment of petitioners loan. Considering the solidary liability of petitioners, the CA disagreed with the RTCs
ruling that it must be shown that the proceeds of the loan redounded to the benefit of the family of the individual
petitioners before they can be held liable.
ISSUE:
44

(1) Whether the CA erred in ordering petitioners James, Jonathan and Almerick jointly and severally liable with
Yulim.
(2) Whether the deed of assignment over the condominium unit is considered as the full and final payment of
petitioners obligation.
HELD:
(1) No. Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal
debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is
called a suretyship.
In a contract of suretyship, one lends his credit by joining in the principal debtors obligation so as to render
himself directly and primarily responsible with him without reference to the solvency of the principal.
The individual petitioners do not deny that they executed the Continuing Surety Agreement, wherein they jointly
and severally with the PRINCIPAL [Yulim], hereby unconditionally and irrevocably guarantee full and complete
payment when due, whether at stated maturity, by acceleration, or otherwise, of any and all credit
accommodations that have been granted to Yulim by iBank, including interest, fees, penalty and other charges.
(2) No. The condominium unit is a mere temporary security, not a payment to settle their promissory notes. Section
2.02 of the deed of assignment is a plain and direct acknowledgement that the parties really intended to merely
constitute a real mortgage property over the property. The assignment being in its essence a mortgage, it was but a
security and not a satisfaction of the petitioners indebtedness.
Article 1255 of the Civil Code invoked by the petitioners contemplates the existence of two or more creditors and
involves the assignment of the entire debtors property, not a dacion en pago. Under Article 1245 of the Civil
Code, dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be
governed by the law on sales. Nowhere in the Deed of Assignment can it be remotely said that a sale of the
condominium unit was contemplated by the parties, the consideration for which would consist of the amount of
outstanding loan due to iBank from the petitioners.

GILAT SATELLITE V. UNITED COCONUT PLANTERS BANK GENERAL INSURANCE

G.R. NO. 189563
APRIL 7, 2014

CJ. SERENO
SURETYSHIP; LEGAL INTEREST
FACTS:
One Virtual placed with Gilat a purchase order for various telecommunications equipment. To ensure prompt payment, it
obtained from UCPB General Insurance a surety bond in favor of Gilat.
On 24 April 2002, Gilat filed a Complaint against respondent UCPB General Insurance, to recover the amounts
supposedly covered by the surety bond, plus interests and expenses. The RTC ordered defendant surety to pay the plaintiff
the amount of US$1,200,000.00 representing the principal debt under the Surety Bond, with legal interest thereon at the
rate of 12% per annum computed from the time the judgment becomes final and executory until the obligation is fully
settled USD44,004.04 representing attorneys fees and litigation expenses.
The RTC reasoned that Gilat delivered all the equipments. Even with the delivery and installation made, One Virtual
failed to pay any of the payments agreed upon. Considering that its liability was indeed that of a surety, as spelled out in
the Surety Bond executed by and between One Virtual as Principal, UCPB as Surety and GILAT as Creditor/Bond
Obligee, respondent agreed and bound itself to pay.
45

Insofar as the interests were concerned, the RTC denied petitioners claim on the premise that while a surety can be held
liable for interest even if it becomes more onerous than the principal obligation, the surety shall only accrue when the
delay or refusal to pay the principal obligation is without any justifiable cause. Here, respondent failed to pay its surety
obligation because of the advice of its principal (One Virtual) not to pay.
Respondent appealed to the CA but it was dismissed for lack of jurisdiction. The CA ruled that in enforcing a surety
contract, the complementary-contracts-construed-together doctrine finds application. According to this doctrine, the
accessory contract must be construed with the principal agreement. In this case, the CA considered the Purchase
Agreement entered into between petitioner and One Virtual as the principal contract, whose stipulations are also binding
on the parties to the suretyship. Bearing in mind the arbitration clause contained in the Purchase Agreement and pursuant
to the policy of the courts to encourage alternative dispute resolution methods, the RTCs Decision was vacated; petitioner
and One Virtual were ordered to proceed to arbitration.
ISSUE:
Whether or not the CA erred in dismissing the case and ordering petitioner and One Virtual to arbitrate.
HELD:
Yes. Petitioner alleges that arbitration laws mandate that no court can compel arbitration, unless a party entitled to it
applies for this relief. This referral, however, can only be demanded by one who is a party to the arbitration agreement.
Considering that neither petitioner nor One Virtual has asked for a referral, there is no basis for the CAs order to
arbitrate. Articles 1216 and 2047 of the Civil Code clearly provide that the creditor may proceed against the surety
without having first sued the principal debtor. Thus, petitioner should not be ordered to make a separate claim against One
Virtual (via arbitration) before proceeding against respondent. We agree.
Consequently, we cannot sustain respondents claim that the Purchase Agreement, being the principal contract to which
the Suretyship Agreement is accessory, must take precedence over arbitration as the preferred mode of settling disputes.
In other words, the acceptance of a surety agreement does not give the surety the right to intervene in the principal
contract. The suretys role arises only upon the debtors default, at which time, it can be directly held liable by the creditor
for payment as a solidary obligor. Hence, the surety remains a stranger to the Purchase Agreement.
ISSUE:
Whether or not petitioner is entitled to legal interest due to the delay in the fulfilment by respondent of its obligation under
the Suretyship Agreement.
HELD:
Yes. Article 2209 of the Civil Code is clear: if an obligation consists in the payment of a sum of money, and the debtor
incurs a delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest.
However, for delay to merit interest, it must be inexcusable in nature. We agree with petitioner that records are bereft of
proof to show that respondents delay was indeed justified by the circumstances that is, One Virtuals advice regarding
petitioners alleged breach of obligations. Assuming arguendo that the commissioning work was not completed,
respondent has no one to blame but its principal, One Virtual; if only it had paid its obligation on time, petitioner would
not have been forced to stop operations.
Considering that respondent failed to pay its obligation on 30 May 2000 in accordance with the Purchase Agreement, and
that the extrajudicial demand of petitioner was sent on 5 June 2000, we agree with the latter that interest must start to run
from the time petitioner sent its first demand letter (5 June 2000), because the obligation was already due and demandable
at that time.

46

SPOUSES GUEVERRA V. THE COMMONER LENDING CORPORATION

G.R. NO. 204672
FEBRUARY 18, 2015

J. PEREZ
RIGHT OF REPURCHASE; CONSIGNATION OF REDEMPTION PRICE
FACTS:
On December 16, 1996, Sps. Guevarra obtained a P320,000.00 loan from TCLC, which was secured by a real estate
mortgage over a 5,532-square meter parcel of land situated in Guimbal, Iloilo, covered by OCT No. F-31900 emanating
from a free patent granted to Sps. Guevarra on February 25, 1986. The Sps. Guevarra defaulted in the payment of their
loan, prompting TCLC to extra-judicially foreclose the mortgage on the subject Property in accordance with Act No.
3135. In the process, TCLC emerged as the highest bidder at the public auction sale held on June 15, 2000 for the bid
amount of P150,000.00, and on August 25, 2000, 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 OCT No. F-31900 and the issuance of Transfer Certificate of Title No. T-16187 in the name of
TCLC. Thereafter, TCLC demanded that Sps. Guevarra vacate the property, but to no avail.
TCLC applied for a writ of possession before the RTC which the Sps. Guevarra opposed. The Sps. Guevarra challenged
the validity of the foreclosure proceedings due to the purported failure of TCLC to comply with the notice, posting and
publication requirements and lack of authority, as a corporation, to acquire the subject property.
Subsequently, or on September 8, 2005, Sps. Guevarra filed before the RTC a petition for redemption, maintaining that
the redemption period did not expire on August 25, 2001, or 1 year from the registration of the certificate of sale, but will
still expire five years therefrom, or on August 25, 2006.
ISSUE:
Whether the Sps. Guevarra has the right to repurchase the property within 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.
HELD:
Yes. In an extra-judicial foreclosure of registered land acquired under a free patent, the mortgagor may redeem the
property within two years from the date of foreclosure if the land is mortgaged to a rural bank under the Rural Banks Act,
or within one 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 years from the expiration of the aforementioned redemption period, pursuant to Section 119 of the Public Land
Act, which states:
SEC. 119. Every conveyance of land acquired under the free patent or homestead provisions, when
proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period of five
years from the date of the conveyance.
In this case, the subject property was mortgaged to and foreclosed by TCLC, which is a lending or credit institution, and
not a rural bank; hence, the redemption period is one 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. Guevarras right to repurchase said property within five 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 as above-cited.
ISSUE:
47

Whether the tender of repurchase price is necessary for the preservation of the right of repurchase.
HELD:
No. The tender of the repurchase price is not necessary for the preservation of the right of repurchase, because the filing of
a judicial action for such purpose within the five-year period under Section 119 of the Public Land Act is already
equivalent to a formal offer to redeem. On this premise, consignation of the redemption price is equally unnecessary.

SPOUSES SIERRA V. PAIC SAVINGS AND MORTGAGE BANK

G.R. NO. 197857
SEPTEMBER 10, 2014

J. PEREZ
MORTGAGE ACTION; PRESCRIPTION, LACHES
FACTS:
On May 31, 1983, GCI, represented by Zaldaga, obtained from Summa Bank, now respondent PSMB, a loan. As security
therefore, GCI executed in favor of PSMB 6 promissory notes as well as a Deed of Real Estate Mortgage over a parcel of
land. As additional security, petitioners Francisco Sierra, Rosario Sierra, and Spouses Felix Gatlabayan and Salome Sierra
mortgaged four parcels of land in Antipolo City. Records show that after the signing of the mortgage deed, Zaldaga gave
petitioner Francisco Sierra four managers checks which were later successfully encashed, as well as several post-dated
checks.
Eventually, GCI defaulted in the payment of its loan to PSMB, thereby prompting the latter to extrajudicially foreclose the
mortgage on the subject properties in accordance with Act No. 3135 with due notice to petitioners. PSMB emerged as the
highest bidder. Since petitioners failed to redeem the subject properties within the redemption period, their certificates of
title were cancelled and new ones were issued in PSMBs name.
Petitioners filed a complaint for the declaration of nullity of the real estate mortgage and its extrajudicial foreclosure, and
damages against PSMB and Summa Bank before the RTC. 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.
The RTC declared the subject deed and the extrajudicial foreclosure proceedings null and void. While the RTC ruled that
the loan transaction was a valid and binding agreement between Summa Bank and GCI, it held that the subject deed did
not reflect the true intent and agreement between Summa Bank and petitioners who were made to believe that they were
the principal obligors in the loan, thereby invalidating their consent to the mortgage.
The CA reversed and set aside the RTC Decision and dismissed petitioners complaint for lack of merit. The CA likewise
ruled that the action to annul the subject deed had already prescribed, since the same was brought more than four years
from the discovery of the mistake or fraud, reckoned from the time the earliest checks issued to petitioners were
dishonored, or on January 9, 1984, this being the time the consideration or price for the execution of the subject deed
turned out to be false. The CA further held that petitioners were barred by laches from asserting any claim on the subject
properties.
ISSUE:
Whether or not the applicable provision is the ten year prescriptive period of mortgage actions under Article 1142.
HELD:
No. Based on case law, a mortgage action refers to an action to enforce a right necessarily arising from a mortgage. In
the present case, petitioners are not enforcing their rights under the mortgage but are, in fact, seeking to be relieved
therefrom. The complaint filed by petitioners is, therefore, not a mortgage action as contemplated under Article 1142.
48

In any event, even assuming that petitioners have a valid cause of action, the four-year prescriptive period on voidable
contracts shall apply. Since the complaint for annulment was anchored on a claim of mistake, i.e., that petitioners are the
borrowers under the loan secured by the mortgage, the action should have been brought within four (4) years from its
discovery.
The complaint, however, failed to disclose when petitioners learned that they were not the borrowers under the loan
secured by the subject mortgage. Nonetheless, considering that petitioners admitted receipt on June 19, 1984 of PSMBs
letter dated June 11, 1984 informing them of the scheduled foreclosure sale on June 27, 1984 due to GCIs breach of its
loan obligation secured by the subject properties, the discovery of the averred mistake should appear to be reckoned from
June 19, 1984, and not from the dishonor of the checks on January 9, 1984 as ruled by the CA.
ISSUE:
Whether or not the CA erred in dismissing the complaint on the ground of laches.
HELD:
No. Despite notice on June 19, 1984 of the scheduled foreclosure sale, petitioners, for unexplained reasons, failed to
impugn the real estate mortgage and oppose the public auction sale for a period of more than seven (7) years from said
notice. As such, petitioners action is already barred by laches, which, as case law holds, operates not really to penalize
neglect or sleeping on ones 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.

RURAL BANK OF CABADBARAN V. MELECIO-YAP

G.R. NO. 178451
JULY 30, 2014

J. PERLAS BERNABE
MORTGAGE AS AN ACCESSORY CONTRACT; MORTGAGEE IN GOOD FAITH
FACTS:
Erna and respondents are the children of the late spouses Isaac and Trinidad Melecio. They inherited a residential lot and
two other structures erected thereon. The administration and management of the said properties were left to the care of
Erna who was then residing in their ancestral home.
The Melecio Heirs purportedly executed a notarized SPA authorizing Erna to apply for a loan with petitioner RBCI and
mortgage the subject properties. Armed with the said SPA, Erna applied for and was granted a commercial loan by RBCI
The loan was secured by a Real Estate Mortgage over the subject properties.
Erna defaulted in the payment of her loan obligation causing RBCI to extra-judicially foreclose the mortgaged properties.
RBCI emerged as the highest bidder. Since Erna failed to redeem the subject properties, new tax declarations in the name
of RBCI were issued. RBCI informed Erna of its intent to take physical possession of the subject properties while the
actual occupant thereof, a certain Jimmyrando C. Morales, was directed to pay rentals to RBCI.
Respondents claimed that the SPA submitted by Erna in support of her loan application was spurious, and that their
signatures appearing thereon were falsified. As such, they demanded RBCI to release the subject properties from the
coverage of Erna's loan obligation to the extent of their shares. In reply, RBCI maintained the validity of the SPA and its
right to rely on it being a notarized document.

49

In view of respondents refusal to vacate the premises, RBCI applied for and was issued a writ of possession.
Consequently, respondents filed a complaint for declaration of nullity of documents, recovery of possession and
ownership, and damages with prayer for the issuance of a writ of preliminary injunction against Spouses Erna and
Bonifacio Mantala (Sps. Mantala), RBCI, the Office of the Provincial Sheriff, and Spouses Jimmyrando and Teresita
Morales (Sps. Morales) before the RTC.
The RTC rendered a decision in favor of RBCI, declaring the real estate mortgage and the consequential foreclosure
proceedings to be valid and binding against respondents, notwithstanding the allegation of forgery in the questioned
documents. The CA reversed the RTC Decision, finding that Erna had no authority to mortgage the subject properties to
RBCI since the SPA was actually a forgery, and, hence, null and void. Nevertheless, it held that a valid transaction was
executed between RBCI and Erna to the extent of the latters 1/6 share in the subject properties which portion
respondents, as co-owners, may redeem.
ISSUE:
Whether the partial invalidity of the Real Estate Mortgage brought upon by the forged SPA resulted into the partial
invalidation of the loan obligation principally entered into by RBCI and Sps. Mantala.
HELD:
No. A mortgage is merely an accessory agreement and does not affect the principal contract of loan. The mortgages, while
void, however, can still be considered as instruments evidencing the indebtedness. The liability of on the principal
contract of the loan however subsists notwithstanding the illegality of the mortgage. Indeed, where a mortgage is not
valid, the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and
becomes demandable in accordance with the stipulation pertaining to it. Under the foregoing circumstances, what is lost is
merely the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the
principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the
debtor and the amount due to the creditor may be enforced in an ordinary action.
Based on the foregoing, the partial invalidity of the subject real estate mortgage brought about by the forged status of the
subject SPA would not, therefore, result into the partial invalidation of the loan obligation principally entered into by
RBCI and Sps. Mantala.
ISSUE:
Whether RBCI is a mortgagee in good faith for having conducted exhaustive investigations on the history of the
mortgagors title.
HELD:
No. The doctrine of mortgagee in good faith applies only to lands registered under the Torrens system and not to
unregistered lands, as the properties in suit. The principle is inapplicable to banking institutions which are behooved to
exercise greater care and prudence before entering into a mortgage contract. Hence, the ascertainment of the status or
condition of properties offered as security for loans must be a standard and an indispensable part of its operations.
In this case, RBCI failed to observe the required level of caution in ascertaining the genuineness of the SPA considering
that Erna owns only an aliquot part of the properties offered as security for the loan. It should not have simply relied on
the face of the documents submitted since its undertaking to lend a considerable amount of money as a banking institution
requires a greater degree of diligence. Hence, its rights as mortgagee and, now, as co-owner, should only be limited to
Ernas share to the subject properties and not, absent the other co-owners consent, to its entirety.

NFF INDUSTRIAL V. G & L ASSOCIATED BROKERAGE

G.R. NO. 178169
JANUARY 12, 2015

50

J. PERALTLA
VALID DELIVERY
FACTS:
NFF is engaged in the business of manufacturing bulk bags while G&L is one of its customers. Respondent Gerardo
Trinidad is the general manager of G&L.
According to petitioner, respondent ordered a total of 2000 pieces of bulk bags from petitioner at 380 pesos each. In the
purchase order, an instruction was made that the bulk bags were for immediate delivery to G&L Associated Brokerage
Inc., c/o Hi-Cement Corporation. Accordingly, petitioner made deliveries as evidenced by delivery receipts and sales
invoices. These deliveries were duly acknowledged by representatives of respondent company.
On the other hand, respondents alleged that the purchase order specifically provides that bulk bags were to be delivered at
Hi-Cement Corporation to Mr. Raul Ambrosio, respondent companys checker and authorized representative. However,
the bulk bags were not received by the authorized representative in conformity with the terms of the purchase order.
30 days elapsed from the time of the last alleged delivery was mad but no payment was made. As demands remained
unheeded, petitioner filed a complaint for sum of money against respondents on December 19, 2001. The RTC ordered
NFF to pay G&L. The CA reversed the RTCs decision.
ISSUE:
Whether or not there was a valid delivery on the part of petitioner which would give rise to an obligation to pay on the
part of respondent for the value of the bulk bags.
HELD:
Yes. ARTICLE 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has
accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without
intimating to the seller that he has rejected them.
Indeed, the use by respondent of the bulk bags is an act of dominion, which is inconsistent with the ownership of
petitioner. Having received the aforesaid billings, the corresponding delivery receipts and demand letters rendered by
petitioner, respondents should have forthwith called the attention of petitioner, if indeed, its insinuation that the bulk bags
themselves have not been delivered or misdelivered were true. In the ordinary course of business, in case of unwarranted
claims of payment of a sum of money, one would immediately protest the same. But no such action was taken by
respondents despite notice thereof.
Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties
concur. It is an act by which one party parts with the title to and the possession of the property, and the other acquires the
right to and the possession of the same. In its natural sense, delivery means something in addition to the delivery of
property or title; it means transfer of possession. In the Law on Sales, delivery may be either actual or constructive, but
both forms of delivery contemplate "the absolute giving up of the control and custody of the property on the part of the
vendor, and the assumption of the same by the vendee."
Applying the foregoing criteria to the case at bar, We find that there were various occasions of delivery by petitioner to
respondents, and the same was duly acknowledged by respondent Trinidad. Petitioner has actually delivered the bulk bags
to respondent company, albeit the same was not delivered to the person named in the Purchase Order.

SKUNAC CORPORATION V. ROBERTO AND CAESAR SYLIANTENG

G.R. NO. 205879
APRIL 23, 2014
51

J. PERALTA
DOUBLE SALE
FACTS:
Roberto and Caesar base their claim of ownership over the subject lots on a deed of absolute sale executed in favor of
their mother Emerenciana. They allege that Emerenciana acquired said lots from the late Luis Pujalte through a deed of
sale dated June 20, 1958. By virtue of which, she was issued TCT No. 42369. She sold the lots to Roberto and Caesar and
thus they were issued TCT No. 39488.
Skunac, on the other hand, claim that a certain Romeo Puljate was declared as the sole heir of Luis Puljate. Romeo sold
the lots to Skunac and Enriquez in 1992. Thus, TCT No. 5888-R was issued in the name of Skunac while TCT No. 5889R was issues in the name of Enriquez.
The RTC rendered the decision in favor of petitioners Skunac and Enriquez. It declared TCT No. 42369 as null and void.
It further declared that petitioners were buyers in good faith and for value. The CA reversed the RTC Ddecision and
declared as void the TCTs issued in the name of Skunac and Enriquez.
ISSUE:
Whether or not the rule on double sale finds application to this case.
HELD:
No. Reliance by the trial and appellate courts on Article 1544 of the Civil Code is misplaced. The requisites that must
concur for Article 1544 to apply are:
(a) The two (or more sales) transactions must constitute valid sales;
(b) The two (or more) sales transactions must pertain to exactly the same subject matter;
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting
interests; and
(d) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the
very same seller.
Obviously, said provision has no application in cases where the sales involved were initiated not by just one but two
vendors. In the present case, the subject lots were sold to petitioners and respondents by two different vendors
Emerenciana and Romeo Pujalte (Romeo). Hence, Article 1544 of the Civil Code is not applicable.
JOSE JUAN TONG V. GO TIAT KUN
G.R. NO. 196023
APRIL 21, 2014

J. REYES
IMPLIED TRUST; PRESCRIPTION, ESTOPPEL AND LACHES
FACTS:
The petitioners are nine of the ten children of Spouses Juan Tong. Completing the ten children of Spouses Juan Tong is
the deceased Luis Juan Tong, Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go Tiat Kun, and their children, Leon,
Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being already dead, is survived by his wife, Roma Cokee Juan Tong
(respondents).
Sometime in 1957, Juan Tong informed his children of his intention to purchase Lot 998 to be used for the familys
lumber business. However, since he was a Chinese citizen and was disqualified from acquiring the said lot, the title to the
52

property will be registered in the name of his eldest son, Luis, Sr., who at that time was already of age and was the only
Filipino citizen among his children. On December 8, 1978, the single proprietorship of Juan Tong Lumber was
incorporated into a corporation known as the Juan Tong Lumber, Inc. However, Sy Un and Juan Tong both died intestate.
Luis, Sr. died and the respondents, being his surviving heirs, claimed ownership over Lot 998 by succession. Respondents
executed a Deed of Extra-Judicial Settlement of Estate of Luis, Sr., adjudicating unto themselves Lot 998.
Luis, Jr. sold Lot 998-B to FRDC, which in turn sold the same to VGCC. It was only after the petitioners received a letter
from VGCC, on August 31, 1995, that they discovered about the breach of the trust agreement committed by the
respondents.
To protect their rights, the petitioners filed an action for Annulment of Sales, Titles, Reconveyance and Damages of Lot
998-B docketed as Civil Case No. 22730 against Luis, Jr., FRDC and VGCC. On March 6, 1997, the trial court ruled in
favor of the petitioners which were later affirmed by the CA and this Court7 on appeal.
On February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in favor of her
children, resulting in the issuance of TCT No. T-134082 over Lot 998-A. Hence, on August 2, 2005, the petitioners filed
the instant case for Nullification of Titles, and Deeds of Extra-judicial Settlement and Sale and Damages claiming as
owners of Lot 998-A.
After trial, the court a quo rendered its judgment in favor of the petitioners, ruling that there was an implied resulting trust
between Juan Tong, Luis, Sr., the petitioners and the respondents, over Lot 998. On appeal, the CA rendered the herein
assailed decision, which reversed and set aside the trial courts decision, and dismissed the complaint for lack of merit.
The CA ruled that an express trust was created because there was a direct and positive act from Juan Tong to create a
trust.
ISSUE:

(1) Was there an implied resulting trust constituted over Lot 998 when Juan Tong purchased the property and
registered it in the name of Luis, Sr.?

(2) May parol evidence be used as proof of the establishment of the trust?
(3) Were the petitioners action barred by prescription, estoppel and laches?
HELD:
(1) Yes. The principle of a resulting trust is based on the equitable doctrine that valuable consideration and not legal
title determines the equitable title or interest and are presumed always to have been contemplated by the parties.
They arise from the nature or circumstances of the consideration involved in a transaction whereby one person
thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another.
On the other hand, a constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary
relation. Constructive trusts are created by the construction of equity in order to satisfy the demands of justice and
prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to
hold.
An implied resulting trust was created as provided under the first sentence of Article 1448 which is sometimes
referred to as a purchase money resulting trust, the elements of which are: (a) an actual payment of money,
property or services, or an equivalent, constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust. Here, the petitioners have shown that the two elements are
present in the instant case. Luis, Sr. was merely a trustee of Juan Tong and the petitioners in relation to the subject
property, and it was Juan Tong who provided the money for the purchase of Lot 998 but the corresponding
transfer certificate of title was placed in the name of Luis, Sr.

53

(2) Yes. Because an implied trust is neither dependent upon an express agreement nor required to be evidenced by
writing, Article 1457 of our Civil Code authorizes the admission of parol evidence to prove their existence. Parol
evidence that is required to establish the existence of an implied trust necessarily has to be trustworthy and it
cannot rest on loose, equivocal or indefinite declarations.
(3) No. As a rule, implied resulting trusts do not prescribe except when the trustee repudiates the trust. Further, the
action to reconvey does not prescribe so long as the property stands in the name of the trustee. To allow
prescription would be tantamount to allowing a trustee to acquire title against his principal and true owner. It
should be noted that the title of Lot 998 was still registered in the name of Luis Sr. even when he predeceased
Juan Tong. Considering that the implied trust has been repudiated through such death, Lot 998 cannot be included
in his estate except only insofar as his undivided share thereof is concerned.
The doctrine of laches is not strictly applied between near relatives, and the fact that the parties are connected by
ties of blood or marriage tends to excuse an otherwise unreasonable delay.
EXTRAORDINARY DEVELOPMENT CORPORATION V. SAMSON-BICO
G.R. NO. 191090
OCTOBER 13, 2014

J. PEREZ
CO-OWNERSHIP
FACTS:
Apolonio and Maria were husband and wife. They begot two children, namely, Juan, who married Leonarda and Irenea,
who married Santiago. Juan and Leonarda begot six children, namely, Leonardo, Marcelina, Lydia, Cresencia, Lourdes,
and Juan Jr., while Irenea and Santiago begot two children, namely, Herminia and Merlita Samson Flestado, who married
Ely. Herminia and Ely are the respondents in this case.
During his lifetime, Apolonio owned a parcel of land consisting of 29,748 square meters situated Rizal. When Apolonio
and Maria died, the property was inherited by Juan and Irenea. When the latter died, the heirs of Juan and Irenea became
co-owners of the property.
The heirs of Juan, without the consent of respondents, the heirs of Irenea executed in favor of petitioner EDC a Deed of
Absolute Sale covering the subject property. EDC was able to cause the registration of the Deed of Absolute Sale and
transfer the tax declaration over the subject property in its name. This prompted respondents to file the Complaint for
Annulment of Contract and Tax Declaration and Reconveyance of Possession with Damages.
The RTC ruled in favor of respondents. The trial court found that respondents and the heirs of Juan are co-owners of the
subject property; that at the time of sale, the heirs of Juan did not have the right to sell the one half share of the heirs of
Irenea and that EDC was not a buyer in good faith because it knew that respondents were co-owners of the subject
property because Herminia informed EDC of such fact through a letter.
The heirs of Juan and respondents failed to file their brief so the Court of Appeals submitted the case for resolution. The
Court of Appeals partially granted the appeal and ruled that respondents were able to establish their co-ownership over
one-half of the subject property. The appellate court pointed out that the heirs of Juan categorically admitted in their
Answer, as well as during the hearing the existence of co-ownership. The appellate court agreed with the trial courts
finding that the heirs of Juan, as co-owners, could only alienate or convey to EDC their one-half portion of the subject
property which may be allotted to them in the division upon the termination of the co-ownership. Thus, the sale will affect
only their share but not those of the other co-owners who did not consent to the sale. However, the appellate court
reversed the ruling of the trial court that the Deed of Absolute Sale is null and void. According to the appellate court, the
same is valid with respect to the transfer of the rights of the co-owners sellers heirs of Juan over the one-half portion or
14,874 square meters of the subject property, thereby making EDC a co-owner thereof.
54

ISSUE:
Whether the Court of Appeals erred in sustaining the validity of the Deed of Sale with respect to the rights of the heirs of
Juan over of the property.
HELD:
No. Article 493 of the Civil Code recognizes the absolute right of a co-owner to freely dispose of his pro in diviso share as
well as the fruits and other benefits arising from that share, independently of the other co-owners, thus:
Art. 493. Each co-owner shall have the full ownership of his part of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights
are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-ownership.
The execution by appellants Ballesteros of the Deed of Absolute Sale over the subject property which they do not
exclusively own but is admittedly co-owned by them together with the [respondents], was valid only to the extent of the
formers undivided one-half share thereof, as they had no title or interest to transfer the other one-half portion which
pertains to the [respondents] without the latters consent. It is an established principle that no one can give what one does
not have nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer
can acquire no more than what the seller can transfer legally. Thus, since appellant EDCs rights over the subject property
originated from sellers-appellants Ballesteros, said corporation merely stepped into the shoes of its sellers and cannot have
a better right than what its sellers have.
The fact that the agreement in question purported to sell a concrete portion of the hacienda does not render the sale void,
for it is a well-established principle that the binding force of a contract must be recognized as far as it is legally possible to
do so. Since the co-owner/vendors undivided interest could properly be the object of the contract of sale between the
parties, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co-owner, in an ideal
share equivalent to the consideration given under their transaction. In other words, the vendee steps into the shoes of the
vendor as co-owner and acquires a proportionate abstract share in the property held in common.

PILAR DEVELOPMENT CORPORATION V. DUMADAG ET AL.

G.R. NO. 194336
MARCH 11, 2013

J. PERALTA
LEGAL EASEMENT; PUBLIC DOMAIN
FACTS:
On July 1, 2002, petitioner filed a Complaint for accion publiciana with damages against respondents for allegedly
building their shanties, without its knowledge and consent, in its 5,613-square-meter property in Las Pias City. It claims
that said parcel of land, which is duly registered in its name and was designated as an open space of Pilar Village
Subdivision intended for village recreational facilities and amenities for subdivision residents. Respondents denied the
material allegations of the Complaint and briefly asserted that it is the local government, not petitioner, which has
jurisdiction and authority over them.
On May 30, 2007, the trial court dismissed petitioners complaint, finding that the land being occupied by respondents are
situated on the sloping area going down and leading towards the Mahabang Ilog Creek, and within the three-meter legal
easement; thus, considered as public property and part of public dominion under Article 502 of the New Civil Code,
which could not be owned by petitioner.

55

The trial court opined that respondents have a better right to possess the occupied lot, since they are in an area reserved for
public easement purposes and that only the local government of Las Pias City could institute an action for recovery of
possession or ownership.
Referring to Section 2 of Administrative Order No. 99-21 of the DENR, the appellate court ruled that the 3-meter area
being disputed is located along the creek which, in turn, is a form of a stream; therefore, belonging to the public dominion.
Unlike the trial court, however, the CA noted that the proper party entitled to seek recovery of possession of the contested
portion is not the City of Las Pias, but the Republic of the Philippines, through the OSG.
ISSUE:
Whether or not petitioner retains ownership over the property.
HELD:
No. While Article 630 of the Code provides for the general rule that the owner of the servient estate retains the
ownership of the portion on which the easement is established, and may use the same in such a manner as not to affect the
exercise of the easement, Article 635 thereof is specific in saying that all matters concerning easements established
for public or communal use shall be governed by the special laws and regulations relating thereto, and, in the
absence thereof, by the provisions of this Title [Title VII on Easements or Servitudes].
Certainly, in the case of residential subdivisions, the allocation of the 3-meter strip along the banks of a stream, like the
Mahabang Ilog Creek in this case, is required and shall be considered as forming part of the open space requirement
pursuant to P.D. 1216 dated October 14, 1977. Said law is explicit: open spaces are for public use and are, therefore,
beyond the commerce of men and that the areas reserved for parks, playgrounds and recreational use shall be nonalienable public lands, and non-buildable.
Petitioners right of ownership and possession has been limited by law with respect to the 3-meter strip/zone along the
banks of Mahabang Ilog Creek. Despite this, the Court cannot agree with the trial courts opinion, as to which the CA did
not pass upon, that respondents have a better right to possess the subject portion of the land because they are occupying an
area reserved for public easement purposes. Similar to petitioner, respondents have no right or title over it precisely
because it is public land.

RANA V. LEE WONG

G.R. NO. 192861
JUNE 30, 2014

J. PERLAS BERNABE
ABATEMENT OF NUISANCE
FACTS:
Wong and Spouse Ong are co-owners pro-indiviso of a residential land situated in Peace Valley Subdivision, Lahug, Cebu
City, abutting a 10-meter wide subdivision road (subject road). On the opposite side of the subject road, across the WongOng property, are the adjacent lots of Spouses Uy and Spouses Rana. The said lots follow a rolling terrain with the Rana
property standing about two (2) meters higher than and overlooking the Uy property, while the Wong-Ong property is at
the same level with the subject road.
Sps. Rana elevated and cemented a portion of the subject road that runs between the Rana and Wong-Ong properties in
order to level the said portion with their gate. Sps. Rana likewise backfilled a portion of the perimeter fence separating the
Rana and Uy properties without erecting a retaining wall that would hold the weight of the added filling materials. The
matter was referred to the Office of the Barangay Captain of Lahug as well as the Office of the Building Official of Cebu
City (OBO), but to no avail.
56

On September 19, 1997, Wong, Sps. Ong, and Sps. Uy filed a Complaint for Abatement of Nuisance with Damages
against Sps. Rana before the RTC seeking to: (a) declare the subject portion as a nuisance which affected the ingress and
egress of Wong and Sps. Ong to their lot "in the usual and normal manner, such, that they now have to practically jump
from the elevated road to gain access to their lot and scale the same elevation in order to get out"; (b) declare the subject
backfilling as a nuisance considering that it poses a clear and present danger to the life and limb of the Uy family arising
from the premature weakening of Sps. Uy's perimeter fence due to the seeping of rain water from the Rana property that
could cause its sudden collapse; (c) compel Sps. Rana to restore the subject portion to its original condition; (d) compel
Sps. Rana to remove the backfilling materials along Sps. Uy's perimeter fence and repair the damage to the fence; and (e)
pay moral and exemplar/ damages, attorney's fees, litigation expenses, and costs of suit.
ISSUE:
Whether or not the subject portion may be summarily abated.
HELD:
No. It is a standing jurisprudential rule that unless a nuisance is a nuisance per se, it may not be summarily abated. A
nuisance "may either be: (a) a nuisance per se (or one which "affects the immediate safety of persons and property and
may be summarily abated under the undefined law of necessity"); or (b) a nuisance per accidens (or that which "depends
upon certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due
hearing thereon in a tribunal authorized to decide whether such a thing does in law constitute a nuisance.").
With respect to the elevated and cemented subject portion, the Court finds that the same is not a nuisance per se. By its
nature, it is not injurious to the health or comfort of the community. It was built primarily to facilitate the ingress and
egress of Sps. Rana from their house which was admittedly located on a higher elevation than the subject road and the
adjoining Uy, and Wong-Ong properties. Since the subject portion is not a nuisance per se (but actually a nuisance per
accidens) it cannot be summarily abated.

HEIRS OF FRANCISCO NARVASA V. EMILIANA IMBORNAL ET. AL.

G.R. NO. 182908
AUGUST 6, 2014

J. PERLAS BERNABE
PRESCRIPTION; IMPLIED TRUST; ACCRETION
FACTS:
Basilia Imbornal+ had four children, namely, Alejandra, Balbina, Catalina, and Pablo. Francisco I. Narvasa, Sr and Pedro
Ferrer were the children of Alejandra, while petitioner Petra was the daughter of Balbina. Petitioners are the heirs and
successors-in-interest of Francisco, Pedro, and Petra (Francisco, et al.). On the other hand, respondents Emiliana,
Victoriano, Felipe, Mateo, Raymundo, Maria, and Eduardo, all surnamed Imbornal, are the descendants of Pablo.
During her lifetime, Basilia owned a parcel of land (Sabangan property), situated in Pangasinan with an area of 4,144 sq.
m., which she conveyed to her three daughters Balbina, Alejandra, and Catalina (Imbornal sisters) sometime in 1920.
Meanwhile, Catalinas husband, 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 and
OCT No. 1462 was issued in his name. OCT No. 1462 was eventually cancelled, and TCT No. 101495 was issued in the
name of Ciriacos heirs. 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. In 1971, the Second Accretion, which had an area of 32,307 sq. m.,
57

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 an Amended
Complaint for reconveyance, partition, and/or damages against respondents. They anchored their claim on the allegation
that Ciriaco, with the help of his wife Catalina,urged Balbina and Alejandra to sell the Sabangan property, and that
Ciriaco used the proceeds therefrom to fund his then-pending homestead patent application over the Motherland.
In return, Ciriaco agreed that once his homestead patent is approved, he will be deemed to be holding the Motherland
which now included both accretions in trust for the Imbornal sisters.
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.
The RTC rendered a Decision in favor of Francisco, et al. The RTC found that the factual circumstances surrounding the
present case showed that an implied trust existed between Ciriaco and the Imbornal sisters with respect to the Motherland.
With respect to the accretions that formed adjacent to the Motherland, the RTC ruled that the owner of the Motherland is
likewise the owner of the said accretions. Considering that the Imbornal sisters have become proportionate owners of the
Motherland by virtue of the implied trust created between them and Ciriaco, they (Imbornal sisters) and their heirs are
also entitled to the ownership of said accretions despite the fact that respondents were able to register them in their names.
The CA rendered a Decision 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 as the exclusive owners of the Second
Accretion.
ISSUE:
(1)

Whether or not the causes of action pertaining to the Motherland, First Accretion and Second Accretion are
barred by prescription.

(2)

Whether petitioners can assert ownership pver the 1st and 2nd accretion.

(3)

Whether or not there was an implied trust created between the Imbornal sisters and Ciriaco with respect to the
Motherland.

HELD:
(1) The causes of action pertaining to the Motherland and the First Accretion are barred by prescription, but the
reconveyance action with respect to the Second Accretion has been seasonably filed.
An action for reconveyance based on an implied trust prescribes in 10 years. The reference point of the 10-year
prescriptive period is the date of registration of the deed or the issuance of the title. The prescriptive period applies
only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. However,
if the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to
recover title and possession of the property does not run against him. In such a case, an action for reconveyance, if
nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.
Based on the foregoing, Francisco, et al. had then a period of ten years from the registration of the respective titles
covering the disputed properties within which to file their action for reconveyance, taking into account the fact that they
were never in possession of the said properties. Hence, with respect to the Motherland covered by OCT No. 1462 issued
on December 5, 1933 in the name of Ciriaco, an action for reconveyance therefor should have been filed until December
5,1943; with respect to the First Accretion covered by OCT No. P-318 issued on August 15, 1952 in the name of
respondent Victoriano, an action of the same nature should have been filed until August 15, 1962; and, finally, with
respect to the Second Accretion covered by OCT No. 21481 issued on November 10, 1978 in the name of the respondents,
a suit for reconveyance therefor should have been filed until November 10, 1988.
58

All three disputed properties was filed only on February 27, 1984. As such, it was filed way beyond the 10-year
reglementary period within which to seek the reconveyance of two of these properties, namely, the Motherland and the
First Accretion, with only the reconveyance action with respect to the Second Accretion having been seasonably filed.
(2) No. Article 457 of the Civil Code states the rule on accretion as follows: to the owners of lands adjoining the banks of
rivers belong the accretion which they gradually receive from the effects of the current of the waters. 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.

(3) No. An implied trust arises, not from any presumed intention of the parties, but by operation of law in order to satisfy
the demands of justice and equity and to protect against unfair dealing or downright fraud. The burden of proving the
existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements. While implied trusts may be proven by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or
indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.
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. In this case, it cannot be said, merely on the
basis of the oral evidence offered by Francisco, et al., that the Motherland had been either mistakenly or fraudulently
registered in favor of Ciriaco. Accordingly, it cannot be said either that he was merely a trustee of an implied trust holding
the Motherland for the benefit of the Imbornal sisters or their heirs.
A homestead patent award requires proof that the applicant meets the stringent conditionswhich 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. Hence,
when OCT No. 1462 covering the Motherland was issued in his name pursuant to Homestead Patent No. 24991 on
December 15, 1933, Ciriacos title to the Motherland had become indefeasible.

HORTIZUELA V. TAGUFA
G.R. NO. 205867
FEBRUARY 23, 2015

J. MENDOZA
ACTION FOR RECONVEYANCE
FACTS:
The property involved in this case is a parcel of land located at District IV, Tumauini, Isabela containing an area of 539
square meters, more or less, and covered by OCT No. P- 84609 of the Registry of Deeds of Isabela.

59

Before it was titled in the name of Defendant Tagufa, said property was originally owned by plaintiffs parents, Spouses
Epifanio Tagufa and Godofreda Jimenez. Although untitled, the spouses mortgaged the property with the DBP. For failure
to redeem the property, DBP foreclosed the same and sold it to Atty. Romulo Marquez who, in turn, sold it back to
Runsted Tagufa, husband of defendant Gregoria Tagufa, on April 4, 2002 using the fund sent by plaintiff Hortizuela who
was in America and with the agreement that Runsted will reconvey the said property to her sister when demanded.
However, plaintiff discovered that the same unregistered property was titled in the name of Gregoria Tagufa under OCT
No. P-84609 of the Registry of Deeds of Isabela. Thus, a petitioner filed a complaint for reconveyance and recovery of
possession with damages with the MCTC against respondents Tagufa. The MCTC dismissed the complaint for lack of
merit and reasoned that plaintiffs had resorted to a wrong cause of action.
The RTC reversed the MCTC ruling. Aggrieved, respondents filed a petition for review before the CA. According to the
CA, although Hortizuela filed with the MCTC a complaint for reconveyance and recovery of possession of the subject lot,
she was also questioning the validity of the Torrens title, Original Certificate of Title (OCT) No. P-846609. The CA
pointed out that this was in contravention with Section 48 of PD 1529 which provides that a certificate of title shall not be
subject to collateral attack.
ISSUE:
Whether or not an action for reconveyance and recovery of possession constitutes an indirect or collateral attack on the
validity of the subject certificate of title which is proscribed by law.
HELD:
No. Contrary to the pronouncements of the MCTC and the CA, the complaint of Hortizuela was not a collateral attack on
the title warranting dismissal.
The Court is not unmindful of the principle of indefeasibility of a Torrens title and Section 48 of P.D. No. 1528 where it is
provided that a certificate of title shall not be subject to collateral attack. When the Court says direct attack, it means that
the object of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is
indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless
made as an incident thereof.
The MCTC and the CA, failed to take into account that in a complaint for reconveyance, the decree of registration is
respected as incontrovertible and is not being questioned. An action for reconveyance is a recognized remedy, an action in
personam, available to a person whose property has been wrongfully registered under the Torrens system in anothers
name. In an action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the decree but,
respecting it as incontrovertible and no longer open to review, seeks to transfer or reconvey the land from the registered
owner to the rightful owner. Reconveyance is always available as long as the property has not passed to an innocent third
person for value.

ISSUE:
Whether or not the RTC erred in upholding the right of Hotizuela to ask for reconveyance of the subject property.
HELD:
No. The Court is not unaware of the rule that a fraudulently acquired free patent may only be assailed by the government
in an action for reversion pursuant to Section 101 of the Public Land Act. The foregoing rule is, however, not without
exception. A recognized exception is that situation where plaintiff-claimant seeks direct reconveyance from defendant of
public land unlawfully and in breach of trust titled by him, on the principle of enforcement of a constructive trust.
In this case, in filing the complaint for reconveyance and recovery of possession, Hortizuela was not seeking a
reconsideration of the granting of the patent or the decree issued in the registration proceedings. What she was seeking
60

was the reconveyance of the subject property on account of the fraud committed by respondent Gregoria. An action for
reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully or
erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to him. To
hold otherwise would be to make the Torrens system a shield for the commission of fraud.

HEIRS OF THE LATE FELIX BUCTON V. SPOUSES GO

G.R. NO. 188395
NOVEMBER 20, 2013

J. PEREZ
PURCHASER IN GOOD FAITH AND FOR VALUE; PRESCRIPTION
FACTS:
Felix received a phone call from Gonzalo informing him that he has bought the subject property thru a certain Belisario
who represented himself as the attorney-in-fact of Felix. Said certificate of title fell into the hands of Belisario, Pacardo
and Cabili, who allegedly conspired with each other to unlawfully deprive Felix of his ownership of the above-mentioned
property.
As shown in the annotation at the back of the title, the Spouses Bucton purportedly authorized Belisario to sell the subject
property to third persons, as evidenced by an SPA allegedly signed by the Spouses Bucton. On the strength of the said
SPA, Belisario, on 2 March 1981, executed a Deed of Absolute Sale in favor of the Spouses Go.
Claiming that the signatures of the Spouses Bucton on the SPA were forged, the Heirs of Felix filed against the Spouses
Go a complaint for Annulment of the SPA, Deed of Absolute Sale and TCT No. T-34210, Recovery of Ownership and
Possession, Damages, with Prayer for Writ of Preliminary Injunction or Temporary Restraining Order before the RTC.
The Heirs of Felix mainly alleged that since the SPA was spurious, no valid title was conveyed to the Spouses Go.
The RTC held that the complaint filed by the Heirs of Felix is already barred by laches and prescription. From the time
the alleged fraudulent transaction was discovered in 1981 up to 1996 the complainants failed to take any legal step to
assail the title of the Spouses Go.
The Court of Appeals found that the evidence adduced by the Heirs of Felix failed to preponderantly establish that the
questioned SPA was a forgery. The appellate court further declared that the Spouses Go were innocent purchasers for
value who acquired the property without any knowledge that the right of Belisario as attorney-in-fact was merely
simulated.
ISSUE:
Whether or not the CA erred in finding that the Spouses Go are innocent purchasers for value.
HELD:
No. As a general rule, every person dealing with registered land may safely rely on the correctness of the certificate of
title issued therefore and the law will no way oblige him to go beyond the certificate to determine the condition of the
property. However, this principle admits exceptions: a person dealing with registered land has a right to rely on the
Torrens certificate of title and to dispense with the need of inquiring further except when the party has actual knowledge
of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire
into the status of the title of the property in litigation. The presence of anything which excites or arouses suspicion should
then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of the
certificate.

61

An ordinary prudent man in this situation would have first inquired with the registered owner if he is indeed selling his
property and if he authorized the purported agent to negotiate and to sell the said property on his behalf.
It was only after the sale was consummated that Gonzalo called Felix to inform him that he already bought the subject
property from Belisario who was surprised to learn about the transaction. As buyers of the property dealing with an agent,
the Spouses Go are chargeable with knowledge of agents authority or the lack thereof, and their failure to ascertain the
genuineness and authenticity of the latters authority do not entitle them to invoke the protection the law accords to
purchasers in good faith and for value. They cannot close their eyes to facts that should put a reasonable man on his guard
and still claim that he acted in good faith.
ISSUE:
Whether or not the instant case is barred by laches or prescription.
HELD:
No. Ownership and real rights over real property are acquired by ordinary prescription through possession of ten years,
provided that the occupant is in good faith and with just title. As pointed out earlier, the Spouses Go miserably failed to
meet the requirements of good faith and just title, thus, the ten-year prescriptive period is a defense unavailable to them.
It must be stressed that possession by virtue of a spurious title cannot be considered constructive possession for the
purpose of reckoning the ten-year prescriptive period.
And, extraordinary acquisitive prescription cannot, similarly, vest ownership over the property upon the Spouses Go since
the law requires 30 years of uninterrupted adverse possession without need of title or of good faith before real rights over
immovable prescribes. The Spouses Go purportedly took possession of the subject property since March 1981 but such
possession was effectively interrupted with the filing of the instant case before the RTC on 19 February 1996. This period
is 15 years short of the thirty-year requirement mandated by Article 1137.

OSCAR CONSTANTINO V. HEIRS OF CONSTANTINO

G.R. NO. 181508
OCTOBER 2, 2013

J. PEREZ
IN PARI DELICTO
FACTS:
Pedro Constantino, Sr., ancestors of the petitioners and respondents, owned several parcels of land, one of which is an
unregistered parcel of land consisting of 240 square meters in Bulacan. Pedro, Sr. was survived by his six children,
namely: 1) Pedro Jr., the grandfather of the respondents; 2) Antonia 3) Clara, 4) Bruno, survived by his 6 children
including petitioner Casimira Constantino-Maturingan; 5) Eduardo, survived by his daughter Maura; and 6) Santiago,
survived by his five children which includes petitioner Oscar Constantino.
On 17 June 1999, respondents Asuncion and Josefina, great grandchildren of Pedro Sr., in representation of Pedro, Jr.
filed a complaint against petitioners Oscar Constantino, Maxima Constantino and Casimira Maturingan, grandchildren of
Pedro Sr., for the nullification of a document denominated as Pagmamana sa Labas ng Hukuman dated 10 August 1992,
Tax Declaration Nos. 96-10022 (02653) and 96-10022 (02655) and reinstatement of Tax Declaration No. 20814 in the
name of Pedro Sr.
In the said complaint, respondents alleged that sometime in October 1998, petitioners asserted their claim of ownership
over the whole parcel of land owned by the late Pedro Sr., to the exclusion of respondents who are occupying a portion
thereof.

62

The petitioners claimed that the document Pagmamana sa Labas ng Hukuman pertaining to the 240 sq m lot was
perfectly valid and legal. Further, petitioners alleged that the respondents have no cause of action against them
considering that the respondents lawful share over the estate of Pedro Sr., had already been transferred to them as
evidenced by the Deed of Extrajudicial Settlement with Waiver executed by Angelo Constantino, Maria Constantino
(mother of respondent Asuncion), Arcadio Constantino and Mercedes Constantino, all heirs of Pedro Jr.
The RTC ruled that both respondents and petitioners are in pari delicto and dismissed the complaint filed by respondents.
Respondents appealed raising, among others, the erroneous application by the trial court of the doctrine of in pari
delicto in declaring the validity of the document Pagmamana sa Labas ng Hukuman.
The CA ruled in favor of the respondents heirs of Pedro, Jr., declaring that the Extrajudicial Settlement with Waiver
dated 5 December 1968 they executed covering the 192 sq m lot actually belongs to Pedro Jr., hence, not part of the estate
of Pedro Sr.
ISSUE:
Whether or not the doctrine of in pari delicto applies in this case.
HELD:
No. As a doctrine in civil law, the rule on pari delicto is principally governed by Articles 1411 and 1412 of the Civil
Code, which state that:
Article 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each
other,
and
both
shall
be
prosecuted.
Article 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense,
the
following
rules
shall
be
observed:
1. When the fault is on the part of both contracting parties, neither may recover what he has given by
virtue of the contract, or demand the performance of the others undertaking;
The petition at bench does not speak of an illegal cause of contract constituting a criminal offense under Article 1411.
Neither can it be said that Article 1412 finds application although such provision which is part of Title II, Book IV of the
Civil Code speaks of contracts in general, as well as contracts which are null and void ab initio pursuant to Article 1409 of
the Civil Code such as the subject contracts, which as claimed, are violative of the mandatory provision of the law on
legitimes.
Article 1412 of the Civil Code that breathes life to the doctrine speaks of the rights and obligations of the parties to the
contract with an illegal cause or object which does not constitute a criminal offense. It applies to contracts which are void
for illegality of subject matter and not to contracts rendered void for being simulated, or those in which the parties do not
really intend to be bound thereby. Specifically, in pari delicto situations involve the parties in one contract who are both at
fault, such that neither can recover nor have any action against each other.
In this case, there are two Deeds of extrajudicial assignments unto the signatories of the portions of the estate of an
ancestor common to them and another set of signatories likewise assigning unto themselves portions of the same estate.
The separate Deeds came into being out of an identical intention of the signatories in both to exclude their co-heirs of their
rightful share in the entire estate of Pedro Sr. It was, in reality, an assignment of specific portions of the estate of Pedro
Sr., without resorting to a lawful partition of estate as both sets of heirs intended to exclude the other heirs.
Clearly, the principle of in pari delicto cannot be applied. The inapplicability is dictated not only by the fact that two
deeds, not one contract, are involved, but because of the more important reason that such an application would result in
the validation of both deeds instead of their nullification as necessitated by their illegality. It must be emphasized that the
underlying agreement resulting in the execution of the deeds is nothing but a void agreement.
63

Corollarily, given the character and nature of the deeds as being void and inexistent, it has, as a consequence, of no force
and effect from the beginning, as if it had never been entered into and which cannot be validated either by time or
ratification. That said, we cannot give credence to the contention of respondents that no fault can be attributed to them or
that they are free from the effects of violation of any laws arising from the supposed unlawful agreement entered into by
their predecessor-in-interest and the other heirs including petitioners herein.

NEW WORLD DEVELOPERS V. AMA COMPUTER LEARNING CENTER

G.R. NO. 187930
FEBRUARY 23, 2015

CJ. SERENO
LIQUIDATED, EXEMPLARY DAMAGES
FACTS:
AMA leased the entire second floor of the building owned by New World. They entered into a contract of lease covering
the 8-year period from June 15, 1998 to March 14, 2006. Item No. 14 of the Contract of Lease states:
That AMA may pre-terminate this Contract of Lease by notice in writing to New World at least six months before
the intended date of pretermination, provided, however, that in such case, AMA shall be liable to New World for an
amount equivalent to six months current rental as liquidated damages.

In compliance with the contract, AMA paid New World the amount of P450,000 as advance rental and another P450,000
as security deposit.
For the first three years, AMA paid the monthly rent as stipulated in the contract, with the required adjustment in
accordance with the escalation rate for the second and the third years. However, on March 18, 2002, AMA requested the
deferment of the annual increase in the monthly rent by citing financial constraints brought about by a decrease in its
enrollment. New World agreed to reduce the escalation rate. The following year, AMA again requested the adjustment of
the monthly rent and New World obliged. For this purpose, the parties entered into an Addendum to the Contract of
Lease.
On July 6, 2004, AMA removed all of its office equipment and furniture from the leased premised. AMA sent a letter to
New World stating that it decided to pre-terminate the contract on the ground of business losses. AMA also demanded the
refund of its advance rental and security deposit.
New World replied in a letter to which was attached a Statement of Account12 indicating the following amounts to be
paid by AMA: 1) unpaid two months rent in the amount of P466,620; 2) 3% monthly interest for the unpaid rent in the
amount of P67,426.59; 3) liquidated damages equivalent to six months of the prevailing rent in the amount of P1,399,860;
and 4) damage to the leased premises amounting to P15,580. The deduction of the advance rental and security deposit
paid by AMA still left an unpaid balance in the amount of P1,049,486.59.
For failure to arrive at a settlement, New World filed a complaint for sum of money and damages against AMA before the
RTC. The RTC ordered AMA to pay New World P466,620 as unpaid rentals plus 3% monthly penalty interest until
payment, P1,399,869 as liquidated damages equivalent to 6 months rent, with the advance rental and security deposit
paid by AMA to be deducted therefrom, P15,580 for the damage to the leased premises; P100,000 as attorneys fees and
cost of suit.
Upon appeal, the CA reduced the amount of liquidated damages to P933,240 which is equivalent to 4 months rent with
the advance rental and security deposit paid by AMA to be deducted therefrom. The CA ruled that the RTCs imposition
of liquidated damages equivalent to 6 months was iniquitous. The CA also deleted the 3% monthly penalty interest on the
unpaid rent because there was no stipulation in the contract of lease or in the addendum to the contract of lease.
64

ISSUE:
(1) Whether the CA erred when it reduced the amount of liquidated damages.
(2) Whether New World is entitled to exemplary damages.
HELD:
(1) Yes. Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith. The law does not relieve a party from the consequences of a contract it
entered into with all the required formalities. Courts have no power to ease the burden of obligations voluntarily
assumed by parties, just because things did not turn out as expected at the inception of the contract.
Item No. 14 of the Contract of lease expressly states that in case of pre-termination, AMA shall be liable for an
amount equivalent to 6 months current rental as liquidated damages. The resolution of the question of whether a
penalty is reasonable, or iniquitous or unconscionable would depend on factors including but not limited to the
type, extent and purpose of the penalty; the nature of the obligation; the mode of the breach and its consequences;
the supervening realities; and the standing and relationship of the parties. The appreciation of these factors is
essentially addressed to the sound discretion of the court.
Under the terms of the contract, and in light of the failure of AMA to show that it is deserving of this Courts
indulgence, the payment of liquidated damages in an amount equivalent to six months rent is proper.
(1) Yes. Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he
is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or
not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof
of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may
consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he
would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated
damages.
In this case, it is quite clear that New World sustained losses as a result of the unwarranted acts of AMA. Further,
were it not for the stipulation in the contract regarding the payment of liquidated damages, we would be awarding
compensatory damages to New World.
SNOW MOUNTAIN DAIRY V. GMA VETERANS FORCE
G.R. NO. 192446
NOVEMBER 19, 2014

J. PERALTA
ACTUAL, TEMPERATE DAMAGES
FACTS:
Petitioner and respondent GMA Veterans Force, Inc. entered into a security service agreement. On April 13, 2005,
petitioner informed GMA of the former's decision to replace the security personnel effective April 15, 2005; and that all
monies due respondent as provided in the contract shall be settled.
On even date, respondent reiterated that their service agreement was good for one year, which could only be terminated
for a just cause and a 30-day prior notice; that the termination of the security contract even in the absence of just cause
and the lack of due notice may only be accepted provided that petitioner would pay the remaining contract period of 8-1/2
months equivalent to P952,833.00.
Respondent, represented by De Guzman, filed with the RTC a complaint for damages against petitioner. the RTC
rendered its Decision in favor of respondent and ordered petitioner to pay the former compensatory damages representing
65

the unserved portion of the contract covering the period April 15, 2005 to January 3, 2006 in the amount of P952,833.50
and 100,000.00 for attorney's fees and appearances, and the cost of the litigation.
Petitioner appealed the RTC decision to the CA. The CA deleted the award of attorneys fees.
ISSUE:
Whether or not the CA erred when it failed to delete or modify the award of compensatory damages.
HELD:
Yes. Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory
damages.
Notably, the amount awarded was based on the contracted amount of P16,014.00 per security guard per month, multiplied
by 7 security guards and multiplied by the unserved portion of the contract. However, the contracted amount of
P16,014,00 per guard would not totally pertain to respondent as the same would cover the wage of the security guard and
only the remaining portion of the contracted amount, i.e., after deducting the guard's salary, would go to respondent. In
this case, respondent had not shown that the security guards were not assigned to another employer, and that it was
compelled to pay the guards despite the pre-termination of the security agreement to be entitled to the amount of
PI6,014.00 per month. Indeed, no evidence was presented by respondent establishing the actual amount of loss suffered by
reason of the pre-termination. It is elementary that to recover damages, there must be pleading and proof of actual
damages suffered.
Undeniably, however, respondent suffered pecuniary loss because of the pre-termination of its services without any valid
cause. But since there was no proof capable of ascertaining the actual loss, we refer to Article 2224 of the Civil Code.
Temperate damages may be allowed in cases where from the nature of the case, definite proof of pecuniary loss cannot be
adduced, although the court is convinced that the aggrieved party suffered some pecuniary loss. We then affirmed the
CA's award of temperate damages in the amount of P200,000.00 in lieu of actual damages awarded by the RTC since
there was no proof capable of ascertaining the actual loss.

CALANASAN V. DOLORITO
G.R. NO. 171937
NOVEMBER 25, 2013

J. BRION
DONATION
FACTS:
Petitioner Cerila Calanasan took care of her orphan niece, respondent Evelyn C. Dolorito. In 1982, when Evelyn was
already married to respondent Virgilio Dolorito, the petitioner donated to Evelyn a parcel of land which had earlier been
mortgaged for P15,000.00. The donation was conditional: Evelyn must redeem the land and the petitioner was entitled to
possess and enjoy the property as long as she lived. Evelyn signified her acceptance of the donation. Evelyn redeemed
the property, had the title of the land transferred to her name, and granted the petitioner usufructuary rights over the
donated land.
On August 15, 2002, the petitioner, assisted by her sister Teodora Calanasan, complained with the RTC that Evelyn had
committed acts of ingratitude against her. She prayed that her donation in favor of her niece be revoked. The petitioner
died while the case was pending with the RTC. Her sisters, Teodora and Dolores, substituted for her. Respondents filed a
demurrer to evidence. According to them, the petitioner failed to prove that it was Evelyn who committed acts of
ingratitude against the petitioner; thus, Article 765 of the New Civil Code found no application in the case.
66

The RTC dismissed the complaint and held that Article 765 of the New Civil Code did not apply because the ungrateful
acts were committed against Teodora, the donors sister, and not against the donor, the petitioner. The perpetrator of the
ungrateful acts was not Evelyn, but her husband Virgilio.
The CA affirmed the RTC ruling but on a different legal ground. The CA found that the donation was inter vivos and
onerous. Therefore, the deed of donation must be treated as an ordinary contract and Article 765 of the New Civil Code
finds no relevance.
ISSUE:
Whether or not the CA erred in holding that the donation was inter vivos and onerous.
HELD:
No. Article 733. Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory donations
by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed.
A pure/simple donation is the truest form of donation as it is based on pure gratuity. The remuneratory/compensatory
type has for its purpose the rewarding of the donee for past services, which services do not amount to a demandable debt.
A conditional/modal donation, on the other hand, is a consideration for future services; it also occurs where the donor
imposes certain conditions, limitations or charges upon the donee, whose value is inferior to the donation given. Lastly, an
onerous donation imposes upon the donee a reciprocal obligation; this is made for a valuable consideration whose cost is
equal to or more than the thing donated.
Since the donation imposed on the donee the burden of redeeming the property for P15,000.00, the donation was onerous.
As an endowment for a valuable consideration, it partakes of the nature of an ordinary contract; hence, the rules of
contract will govern and Article 765 of the New Civil Code finds no application with respect to the onerous portion of the
donation.
DR. ALANO V. MAGUD-LOGMAO
G.R. NO. 175540
APRIL 14, 2014

J. PERALTA
NEGLIGENCE
FACTS:
Magud-Logmao is the mother of deceased Arnelito Logmao. Defendant-appellant Dr. Filoteo Alano is the Executive
Director of the National Kidney Institute (NKI).
Arnelito Logmao, was brought to the East Avenue Medical Center (EAMC) in Quezon City. At the NKI, the name
Angelito [Logmao] was recorded as Angelito Lugmoso. Lugmoso was immediately attended to and given the necessary
medical treatment. As Lugmoso had no relatives around, Jennifer B. Misa, Transplant Coordinator, was asked to locate
his family by enlisting police and media assistance.
Dr. Enrique T. Ona requested the Laboratory Section to conduct a tissue typing and tissue cross-matching examination.
Dr. Ona was informed that Lugmoso had been pronounced brain dead. Upon learning that Lugmoso was a suitable organ
donor and that some NKI patients awaiting organ donation had blood and tissue types compatible with Lugmoso.
Dr. Alano issued to Dr. Ona a Memorandum to retrieve and remove the kidneys, pancreas, liver and heart of the said
deceased patient and to transplant the said organs to any compatible patient who maybe in need of said organs to live and
survive upon making sure that efforts to locate the relatives have been fully exerted.

67

Plaintiff filed with the court a quo a complaint for damages in connection with the death of her son. Plaintiff alleged that
defendants conspired to remove the organs of Arnelito while the latter was still alive and that they concealed his true
identity. Only Dr. Alano was held liable for damages.
After finding petitioner liable for a quasi-delict, the RTC ordered petitioner to pay respondent P188,740.90 as actual
damages; P500,000.00 as moral damages; P500,000.00 as exemplary damages; P300,000.00 as attorney's fees; and costs
of suit. Petitioner appealed to the CA. The CA deleted the award of actual damages and reduced the award of moral
damages to P250,000.00, exemplary damages to P200,000.00 and attorneys fees to P100,000.00.
ISSUE:
Whether respondent's sufferings were brought about by petitioner's alleged negligence in granting authorization for the
removal or retrieval of the internal organs of respondent's son who had been declared brain dead, thus, making petitioner
liable for damages.
HELD:
No. A careful reading of the above shows that petitioner instructed his subordinates to make certain that all reasonable
efforts are exerted to locate the patient's next of kin, even enumerating ways in which to ensure that notices of the death
of the patient would reach said relatives. It also clearly stated that permission or authorization to retrieve and remove the
internal organs of the deceased was being given ONLY IF the provisions of the applicable law had been complied with.
Such instructions reveal that petitioner acted prudently by directing his subordinates to exhaust all reasonable means of
locating the relatives of the deceased.
There can be no cavil that petitioner employed reasonable means to disseminate notifications intended to reach the
relatives of the deceased. It should be emphasized that the internal organs of the deceased were removed only after he had
been declared brain dead; thus, the emotional pain suffered by respondent due to the death of her son cannot in any way
be attributed to petitioner. Neither can the Court find evidence on record to show that respondent's emotional suffering at
the sight of the pitiful state in which she found her son's lifeless body be categorically attributed to petitioner's conduct.

UNKNOWN OWNER OF THE VESSEL M/V CHINA JOY V. ASIAN TERMINALS INC.
G.R. NO. 195661
MARCH 11, 2015

J. REYES
RES IPSA LOQUITUR
FACTS:
On 25 January 1997, the cargo ship M/V China Joy arrived at the Mariveles Grain Terminal Wharf, operated by Asian
Terminals Inc. (ATI). The Vessel carried soybean meal that had been shipped by ContiQuincyBunge (CQB) an exporter of
soybean meal and related products, in favor of several consignees in the Philippines.
Under the Charter Party Agreement over M/V China Joy, CQB represented itself as the Charterer of the Vessel, with
San Miguel Foods, Inc. as Co-Charterer, and defendant Samsun represented itself as the Agent of the Shipowners but
since Samsun is a foreign corporation not licensed to do business in the Philippines, it transacted its business through
Inter-Asia.
ATI used its Siwertell Unloader No. 2 to unload the soybean meal from the Vessels Hold No. 2. The Siwertell Unloader
is a pneumatic vacubator that uses compressed gas to vertically move heavy bulk grain from within the hatch of the ship
in order to unload it off the ship. The unloading operations were suddenly halted when the head of Unloader No. 2 hit a
flat low-carbon or mild steel bar that was in the middle of the mass of soybean meal.

68

ATI sent a Note of Protest to the Master of the Vessel for the damages sustained by its unloading equipment as a result of
encountering the flat steel bar among the soybean meal. However, the Vessels Master wrote a note on the Protest stating
that it is not responsible for the damage because the metal piece came from the cargo and not from the vessel itself.
ATI sent a claim to defendant Inter-Asia for the damages sustained by its unloading equipment. Inter-Asia rejected ATIs
claim for the alleged reason that it is not the Shipowners Agent. Inter-Asia informed ATI that its principal is Samsun.
When negotiations for settlement failed, ATI filed the instant Complaint for Damages against Samsun, Inter-Asia and the
Unknown Owner of the Vessel M/V China Joy.
Defendants argued that since the metal foreign object was found in the middle of the cargo, it could not have come from
the bottom of the hatch because the hatch had been inspected and found clean prior to loading. The RTC dismissed ATIs
complaint for insufficiency of evidence. ATI filed an appeal, which the CA granted. The CA applied the doctrine of res
ipsa loquitur.
ISSUE:
Whether the CA correctly applied the doctrine of res ipsa loquitur.
HELD:
Yes. First. Since the cargo to be unloaded was free-flowing soybean meal in bulk, ATI correctly used a pneumatic
vacubator unloader to extract the soybean meal from the holds. Under normal unloading procedures of bulk grain, it is not
expected that a metal foreign object would be among the grain to be unloaded. Such an accident does not occur in the
ordinary course of things, unless the loading of the soybean meal at loadport was mismanaged in some way that allowed a
metal foreign object to be co-mingled with the soybean meal cargo.
Second. The damage to the vertical screws of ATIs unloader was caused by the presence of the metal bar among the
soybean meal in Hold No. 2 of the ship: an instrumentality within the exclusive control of the shipowner.
Third, records do not show that ATIs negligence had in any way contributed to the damage caused to its unloader.
VICENTE JOSEFA V. MERALCO
G.R. NO. 182705
JULY 18, 2014

J. BRION
RES IPSA LOQUITUR
FACTS:
A dump truck, a jeepney and a car figured in a vehicular accident. As a result of the accident, a 45-foot wooden electricity
post and other electrical line attachments were damaged. Upon investigation, respondent MERALCO discovered that it
was the truck registered in Josefas name that hit the electricity post.
Meralco demanded from Josefa reimbursement for the replacement cost of the electricity post and its attachments, but
Josefa refused to pay. Thus, Meralco sued Josefa and Pablo Manoco, the truck driver, for damages before the RTC. In its
complaint, Meralco alleged that Manocos reckless driving resulted in damage to its properties. It also imputed primary
liability on Josefa for his alleged negligence in the selection and supervision of Manoco. In defense, Josefa denied that
Manoco was his employee when the accident occurred. He also maintained that he exercised the diligence of a good father
of a family in the selection and supervision of all his employees.
The RTC dismissed the complaint for insufficiency of evidence and held that Meralco failed to establish that it was the
truck that hit the electricity post. The CA reversed the RTC ruling. The CA concluded that the fact that the truck hit the
electricity post was sufficient to hold Josefa vicariously liable regardless of whether Bautista was negligent in driving the
69

truck. The employers presumptive liability in quasi-delicts was anchored on injuries caused by the employees
negligence.
ISSUE:
Whether Bautista is presumed negligent under the doctrine of res ipsa loquitur.
HELD:
Yes. The doctrine of res ipsa loquitur permits an inference of negligence on the part of the defendant or some other
person who is charged with negligence where the thing or transaction speaks for itself. For this doctrine to apply, the
complainant must show that: (1) the accident is of such character as to warrant an inference that it would not have
happened except for the defendants negligence; (2) the accident must have been caused by an agency or instrumentality
within the exclusive management or control of the person charged with the negligence complained of; and (3) the accident
must not have been due to any voluntary action or contribution on the part of the person injured.
The present case satisfies all the elements of res ipsa loquitur. It is very unusual and extraordinary for the truck to hit an
electricity post, an immovable and stationary object, unless Bautista, who had the exclusive management and control of
the truck, acted with fault or negligence. We cannot also conclude that Meralco contributed to the injury since it safely
and permanently installed the electricity post beside the street.
ISSUE:
Whether Josefa is vicariously liable for Bautistas negligence under paragraph 5, Article 2180 of the Civil Code
HELD:
Yes. In quasi-delict cases, the registered owner of a motor vehicle is the employer of its driver in contemplation of law.
The registered owner of any vehicle, even if not used for public service, would primarily be responsible to the public or to
third persons for injuries caused while the vehicle was being driven on highways or streets. The finding that Bautista acted
with negligence in driving the truck gives rise to the application of paragraph 5, Article 2180 of the Civil Code which
holds the employer vicariously liable for damages caused by his employees within the scope of their assigned tasks.
In order for Josefa to be relieved of his vicarious liability, he must show that he exercised due diligence in the selection
and supervision of Bautista. However, Josefa failed to overcome the presumption of negligence against him since he
waived his right to present evidence during trial. We are thus left with no other conclusion other than to rule that Josefa is
primarily liable for all natural and probable consequences of Bautistas negligence.

WESTWIND SHIPPING V. UCPB GENERAL INSURANCE

G.R. NO. 200314
NOVEMBER 25, 2013

J. PERALTA
COMMON CARRIER
FACTS:
Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal containers/skids of tin-free steel for
delivery to the consignee, San Miguel Corporation (SMC). The shipment, covered by Bill of Lading No. KBMA1074was loaded on board a vessel owned and operated by Westwind.
SMC insured the cargoes against all risks with UCPB General. The shipment arrived in Manila, Philippines on August 31,
1993 and was discharged in the custody of the arrastre operator, Asian Terminals (ATI). During the unloading operation,
six containers/skids sustained dents and punctures from the forklift used by the stevedores of Ocean Terminal Services,
Inc. (OTSI). As a consequence, the local ship agent of the vessel issued two Bad Order Cargo Receipt.
70

On September 7, 1993, Orient Freight, the customs broker of SMC, withdrew from ATI the 197 containers/skids,
including the six in damaged condition, and delivered the same at SMCs warehouse. It was discovered upon discharge
that additional nine containers/skids were also damaged due to the forklift operations; thus, making the total number of 15
containers/skids in bad order.
Almost a year after, SMC filed a claim against UCPB, Westwind, ATI, and Orient Freight to recover the amount
corresponding to the damaged 15 containers/skids. When UCPB paid, SMC signed the subrogation receipt. Thereafter, a
complaint for damages against Westwind, ATI, and Orient Freight was filed.
The RTC dismissed UCPBs complaint and the counterclaims of Westwind, ATI, and Orient Freight. The trial court
likewise absolved Orient Oreight from any liability, reasoning that it never undertook the operation of the forklifts which
caused the dents and punctures, and that it merely facilitated the release and delivery of the shipment as the customs
broker and representative of SMC.
The CA sustained the RTC judgment that the claim against ATI already prescribed. However, it rendered a contrary view
as regards the liability of Westwind and Orient Freight. For the appellate court, Westwind, not ATI, is responsible for the
six damaged containers/skids at the time of its unloading. It concluded that the common carrier, not the arrastre operator,
is responsible during the unloading of the cargoes from the vessel and that it is not relieved from liability and is still
bound to exercise extraordinary diligence at the time in order to see to it that the cargoes under its possession remain in
good order and condition. The CA also considered that Orient Freight is liable for the additional nine damaged
containers/skids, agreeing with UCPBs contention that Orient Freight is a common carrier bound to observe
extraordinary diligence and is presumed to be at fault or have acted negligently for such damage.
ISSUE:
Whether or not Orient Freight is a common carrier and thus liable for the damages of the cargoes.
HELD:
Yes. A customs broker has been regarded as a common carrier because transportation of goods is an integral part of its
business. Thus, for undertaking the transport of cargoes from ATI to SMCs warehouse in Calamba, Laguna, Orient
Freight is considered a common carrier. As long as a person or corporation holds itself to the public for the purpose of
transporting goods as a business, it is already considered a common carrier regardless of whether it owns the vehicle to be
used or has to actually hire one. Cargoes, while being unloaded, generally remain under the custody of the carrier.
In the case at bar, it was established that, except for the six containers/skids already damaged, Orient Freight received the
cargoes from ATI in good order and condition; and that upon its delivery to SMC, additional nine containers/skids were
found to be in bad order, as noted in the Delivery Receipts issued by Orient Freight and as indicated in the Report of
Cares Marine & Cargo Surveyors. The mere proof of delivery of goods in good order to the carrier, and their arrival in the
place of destination in bad order, make out a prima facie case against the carrier, so that if no explanation is given as to
how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability.
ISSUE:
Whether or not there was delivery of the cargoes to ATI.
HELD:
No. There is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee
or to his duly authorized agent and a reasonable time is given him to remove the goods. In this case, since the discharging
of the containers/skids, which were covered by only one bill of lading, had not yet been completed at the time the damage
occurred, there is no reason to imply that there was already delivery, actual or constructive, of the cargoes to ATI.
SPOUSES CHIN KONG WONG CHOI V. UNITED COCONUT PLANTERS BANK
G.R. NO. 207747
MARCH 11, 2015
71

J. CARPIO
ASSIGNMENT OF CREDIT; RULES OF CONSTRUCTION GOVERNING CONTRACTS
FACTS:
The Spouses Choi entered into a Contract to Sell with Primetown. The Contract to Sell provided that Spouses Choi agreed
to buy a condominium unit in Kiener from Primetown. UCPB executed a Memorandum of Agreement and Sale of
Receivables and Assignment of Rights and Interests with Primetown.
The Agreement provided that Primetown, in consideration of P748,000,000.00, assigned, transferred, conveyed and set
over unto UCPB all Accounts Receivables accruing from Primetowns Kiener together with the assignment of all its
rights, titles, interests and participation over the units covered by or arising from the Contracts to Sell from which the
Accounts Receivables have arisen. Included in the assigned accounts receivable was the account of Spouses Choi, who
proved payment of one monthly amortization to UCPB.
The Spouses Choi filed a complaint for refund of money with interest and damages against Primetown and UCPB before
the HLURB RFO VI. Spouses Choi alleged that despite their full payment of the purchase price, Primetown failed to
finish the construction of Kiener and to deliver the condominium unit to them.
The HLURB RFO VI found that only the accounts receivable on the condominium unit were transferred to UCPB. The
HLURB Board of Commissioners, however, suspended the proceedings against Primetown, but ordered UCPB to refund
the full amount paid by Spouses Choi. The HLURB BOC found that UCPB was the legal successor-in-interest of
Primetown against whom the Spouses Chois action for refund could be enforced. Thus, UCPB appealed to the Office of
the President. The OP affirmed the decision of the HLURB Board of Commissioners. The OP held that UCPB, being
Primetowns successor-in-interest, was jointly and severally liable with Primetown for its failure to deliver the
condominium unit.
ISSUE:
Whether UCPB assumed the liabilities and obligations of Primetown under its contract to sell with Spouses Choi and thus,
is solidarily liable with Primetown for its failure to deliver the condominium unit.
HELD:
No. UCPB is a mere assignee of the rights and receivables under the Agreement, UCPB did not assume the obligations
and liabilities of Primetown under its contract to sell with Spouses Choi.
An assignment of credit has been defined as an agreement by virtue of which the owner of a credit, known as the assignor,
by a legal cause such as sale, dation in payment or exchange or donation - and without need of the debtors consent,
transfers that credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the
same extent as the assignor could have enforced it against the debtor. In every case, the obligations between assignor and
assignee will depend upon the judicial relation which is the basis of the assignment. An assignment will be construed in
accordance with the rules of construction governing contracts generally, the primary object being always to ascertain and
carry out the intention of the parties. This intention is to be derived from a consideration of the whole instrument, all parts
of which should be given effect, and is to be sought in the words and language employed.
In the present case, the Agreement conveys the straightforward intention of Primetown to sell, assign, transfer, convey
and set over to UCPB the receivables, rights, titles, interests and participation over the units covered by the contracts
to sell. It explicitly excluded any and all liabilities and obligations, which Primetown assumed under the contracts to sell.
It was not clear whether the amount not exceeding 30,000,000.00, Philippine currency in the Agreement referred to
receivables or liabilities. Under the Rules of Court, when different constructions of a provision are otherwise equally
proper, that is to be taken which is the most favorable to the party in whose favor the provision was made. The assignment
72

of receivables did not make UCPB the owner or developer of the unfinished project to make it solidarily liable with
Primetown.

SPOUSES FELIPE SOLITARIOS AND JULIA TORDA V. SPOUSES JAQUE

G.R. NO. 199852
NOVEMBER 12, 2014

J. VELASCO
SALE OR EQUITABLE MORTGAGE; PACTUM COMMISSORIUM
FACTS:
A parcel of agricultural land designated as Lot 4089 was originally registered in the name of petitioner Felipe Solitarios
and, thereafter, in the name of the respondents, spouses Jaque. In a Complaint for Ownership and Recovery of Possession
with the RTC, the respondents spouses Jaque alleged that they purchased Lot 4089 from the petitioners, spouses Solitarios
in stages. According to respondents, they initially bought one-half of Lot No. 4089 for P7,000.00. This sale is allegedly
evidenced by a notarized Deed of Sale dated May 8, 1981. Two months later, the spouses Solitarios supposedly
mortgaged the remaining half of Lot 4089 to the Jaques via a Real Estate Mortgage (REM) dated July 15, 1981, to secure
a loan amounting to P3,000.00.
After almost two (2) years, the spouses Solitarios finally agreed to sell the mortgaged half. However, instead of executing
a separate deed of sale for the second half, they executed a Deed of Sale dated April 26, 1983 for the whole lot to save on
taxes, by making it appear that the consideration for the sale of the entire lot was only P12,000.00 when the Jaques
actually paid PI9,000.00 in cash and condoned the spouses Solitarios' P3,000.00 loan. On the basis of this second
notarized deed, the Jaques registered Lot 4089 in its name.
In spite of the sale, the Jaques, supposedly out of pity for the spouses Solitarios, allowed the latter to retain possession of
Lot 4089, subject only to the condition that the spouses Solitarios will regularly deliver a portion of the property's
produce. In an alleged breach of their agreement, however, the spouses Solitarios stopped delivering any produce
sometime in 2000 and even claimed ownership over Lot 4089.
For their part, the spouses Solitarios denied selling Lot 4089 and explained that they merely mortgaged the same to the
Jaques after the latter helped them redeem the land from the PNB. The spouses Solitarios narrated that, way back in 1975,
they obtained a loan from PNB secured by a mortgage over Lot 4089. They were able to pay this loan and redeem their
property with their own funds. Shortly thereafter, in 1976, they again mortgaged their property to PNB to secure
a P5,000.00 loan. This time, the Jaques volunteered to pay the mortgage indebtedness, including interests and charges and
so gave the spouses Solitarios P7,000.00 for this purpose. However, this accommodation was made, so the spouses
Solitarios add, with the understanding that they would pay back the Jaques by delivering to them a portion of the produce
of Lot 4089, in particular, one half of the produce of the rice land and one-fourth of the produce of the coconut land
ISSUE:
Whether the parties effectively entered into a contract of absolute sale or an equitable mortgage of Lot 4089.
HELD:
The transaction between the parties of the present case is actually one of equitable mortgage pursuant to the foregoing
provisions of the Civil Code. When doubt exists as to the true nature of the parties' transaction, courts must construe such
transaction purporting to be a sale as an equitable mortgage, as the latter involves a lesser transmission of rights and
interests over the property in controversy.
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:

73

(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When
the
vendor
remains
in
possession
as
lessee
or
otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period
of
redemption
or
granting
a
new
period
is
executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
This Court had held that a purported contract of sale where the vendor remains in physical possession of the land, as
lessee or otherwise, is an indicium of an equitable mortgage. If the transaction had really been one of sale, as the Jaques
claim, they should have asserted their rights for the immediate delivery and possession of the lot instead of allowing the
spouses Solitarios to freely stay in the premises for almost seventeen (17) years from the time of the purported sale until
their filing of the complaint.
The Jaques extended two loans to the spouses Solitarios, who in exchange, offered to the former the subject property, not
to transfer ownership thereto, but to merely secure the payment of their debts. The only reasonable conclusion that may be
derived from the execution of the Deeds of Sale in favor of the Jaques is to ensure that the Solitarios will pay their
obligation.
ISSUE:
Whether the transfer of the subject property to the Jaques is pactum commissorium.
HELD:
Yes. Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.
As we have repeatedly held, the only right of a mortgagee in case of non-payment of debt secured by mortgage would be
to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. The mortgagor's
default does not operate to automatically vest on the mortgagee the ownership of the encumbered property, for any such
effect is against public policy, as earlier indicated.
It does not appear, under the premises, that the Jaques availed themselves of the remedy of foreclosure, or that they
bought the subject property in an auction sale after the spouses Solitarios failed to pay their debt obligation. The amount
reflected in the 1981 Deed of Sale is telling. The sum of P7,000.00 representing the alleged purchase price of one-half of
the subject property in the 1981 Deed of Sale is actually the amount advanced to the spouses Solitarios by way of loan.
Other than the testimony of Gaston Jaque, there is no evidence showing that this purchase price was actually paid or that
the subject property was bought in a foreclosure sale.
HEIRS OF DELA ROSA V. BATONGBACAL
G.R. NO. 179205
JULY 30, 2014

J. PEREZ
SALE OR EQUITABLE MORTGAGE; CO-OWNERSHIP
FACTS:
The subject property consists of a 3,750 square meter-portion of the 15,001 square meters and is registered under the
names of Reynaldo Del a Rosa, Eduardo Dela Rosa, Araceli Del a Rosa and Zenaida Dela Rosa. Sometime in 1984,
Reynaldo offered to sell the subject property to Guillermo Batongbacal and Mario Batongbacal for F50.00 per square
meter or for a total of Pl87,500.00.
74

RESIBO
Tinaggap ko ngayong araw na ito kay Engr. Guillermo A. Batongbacal, ng Poblacion II, Marilao, Bulacan, ang
halagang sampung libong piso (P10,000.00) salaping Pilipino, hilang bahaging hayad sa bahagi ng lupang may
sukat na 3,750 sq.m. na aking kabahagi sa isang (1) lagay na lupang nasasaog, Marilao, Bulakan, sinasaklaw ng
T.C.T. No. T-1 07449, ng Bulakan, na ipinagkasundo kong ipagbili sa naulit na Engr. Guillermo A. Batongbacal sa
halagang Limampung Piso (P50.00) salaping Filipino, bawat isang (1) metrong parisukat. Ang paunang hayad na
aking tinanggap ukol sa lupang nabanggit sa itaas ay P21 ,500.00, nuong Abril 14-18, 1984. Ang halagang dapat
pa niyang bayaran sa akin ay P 156,000.00, na ang halagang dalawampung libong piso (P20,000.00) ay
bahayaran niya sa akin sa araw na nag power-ofattorney nina Zenaida dela Rosa, at Enrique Magsaloc ay aking
nahigay sa nasahing Engr. Guillermo A. Batongbacal; na ang nalalahing hahaging bayad ay kanyang habayaran sa
akin ng Sampung libong piso (P10,000.00) salaping Pilipino, bawat buwan hanggang sa matapusan ang pagbabayad
ng kabuuang halaga na Isang Daang at Walumpu't Pitong libo Limang Daang Piso (P187,500.00). Ang bahaging
aking ipinagbibili ay ang Lote No. 1, may sukat na 3,750 sq.m. na makikita sa nakalakip na sketch plan na aking
ding nilagdaan sa ikaliliwanag ng kasulutang ito

Subsequent to the execution of the said agreement, Mario and Guillermo, on their own instance, initiated a survey to
segregate the area, delineating the boundaries of the subdivided parts. As a result, they came up with a subdivision plan
specifically designating the subject property signed by a Geodetic Engineer. Mario and Guillermo made several demands
from Reynaldo to deliver the SPA as agreed upon, but such demands all went unheeded.
Guillermo and Mario initiated an action for Specific Performance or Rescission and Damages before the RTC. They
asserted that they have a better right over the subject property and alleged that the subsequent sale thereof effected by
Reynaldo to third persons is void as it was done in bad faith.
Reynaldo countered that the Contract to Sell is void, because he never gave his consent thereto. Reynaldo insisted that he
was made to understand that the contract between him and the Batongbacals was merely an equitable mortgage whereby it
was agreed that the latter will loan to him the amount of P31,500.00 payable once he receives his share in the proceeds of
the sale of the land registered under TCT No. T-1 07449.
ISSUE:
Whether the contract entered into by parties was a Contract to Sell or an equitable mortgage.
HELD:
The parties entered into a contract of sale.
An equitable mortgage is defined as one although lacking in some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and
contains nothing impossible or contrary to law. For the presumption of an equitable mortgage to arise, two requisites must
concur: (1) that the parties entered into a contract denominated as a sale; and (2) the intention was to secure an existing
debt by way of mortgage. Consequently, the non-payment of the debt when due gives the mortgagee the right to foreclose
the mortgage, sell the property and apply the proceeds of the sale for the satisfaction of the loan obligation.
A perusal of the contract denominated as Resibo reveals the utter frailty of petitioners' position because nothing therein
suggests, even remotely, that the subject property was given to secure a monetary obligation. The terms of the contract set
forth in no uncertain terms that the instrument was executed with the intention of transferring the ownership or the subject
property to the buyer in exchange for the price. Nowhere in the deed is it indicated that the transfer was merely intended
to secure a debt obligation. On the contrary, the document clearly indicates the intent of Reynaldo to sell his share in the
property. The primary consideration in determining the true nature of a contract is the intention of the parties. If the words
of a contract appear to contravene the evident intention of the parties, the latter shall prevail.
ISSUE:
Whether the contract to sell denominated as Resibo is unenforceable because Reynaldo cannot bind his co-owners into
such contract without an SPA.
75

HELD:
No. Art. 493. Each co-owner shall have the full ownership of his part and or 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 arc 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 m the division upon the termination of the co-ownership.
A condition set forth in a sale contract requiring a co-owner to secure an authority from his co-owners for the alienation of
his share should be considered mere surplusage and does not affect the validity or the enforceability of the contract.
As a co-owner of the subject property, Reynaldo's right to sell, assign or mortgage his ideal share in the property held in
common is sanctioned by law. In view of the nature of co-ownership, the terms in the Contract to Sell, which limited the
subject to Reynaldo's ideal share in the property held in common is perfectly valid and binding.
OPTIMUM DEVELOPMENT BANK V. SPOUSES JOVELLANOS
G.R. NO. 189145
DECEMBER 4, 2013

J. PERLAS BERNABE
MACEDA LAW
FACTS:
On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell with Palmera Homes, Caloocan City for a total
consideration of P1,015,000.00. The Sps. Jovellanos took possession of the subject property upon a down payment of
P91,500.00, undertaking to pay the remaining balance of the contract price in equal monthly installments of P13,107.00
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 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. Jovellanoss
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. Eventually,
Optimum fileda complaint for unlawful detainer before the MeTC.
The MeTC ordered Sps. Jovellanos to vacate the subject property. The RTC affirmed the MeTCs judgment. The CA
reversed and set aside the RTCs 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.
6552 (Maceda Law). Accordingly, it concluded that the subject matter is one which is incapable of pecuniary estimation
and thus, within the jurisdiction of the RTC.
ISSUE:
Whether or not there was a valid and effective cancellation of the Contract to Sell in accordance with Section 4 of RA
6552.
HELD:
Yes. Sec. 4 of RA 6552 provides that the seller shall give the buyer a grace period of not less than sixty days from the date
the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller
may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.
76

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 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 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.
NICHOLAS DIEGO V. RODOLFO AND EDUARDO DIEGO
G.R. NO. 179965
FEBRUARY 20, 2013

J. DEL CASTILLO
CONTRACT TO SELL CANNOT BE RESCINDED
FACTS:
In 1993, petitioner Nicolas and his brother Rodolfo, respondent, entered into an oral contract to sell covering Nicolass
share, as co-owner of the familys Diego Building. Rodolfo made a down payment and they agreed that the deed of sale
shall be executed upon payment of the remaining balance. However, Rodolfo failed to pay the remaining balance.
The building was leased out to third parties, but Nicolass share in the rents were not remitted to him by respondent
Eduardo, another brother of Nicolas. Instead, Eduardo gave Nicolass monthly share in the rents to Rodolfo. Despite
demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an accounting and remit his share in the rents
and fruits of the building, and Eduardo continued to hand them over to Rodolfo.
Nicolas filed a Complaint against Rodolfo and Eduardo before the RTC. Nicolas prayed that Eduardo be ordered to render
an accounting of all the transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas
his share in the rents; and that Eduardo and Rodolfo be held solidarily liable for attorneys fees and litigation expenses.
Rodolfo and Eduardo argued that Nicolas had no more claim in the rents in the Diego Building since he had already sold
his share to Rodolfo.
The trial court rendered its Decision ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment
by the latter of the balance of the agreed purchase price. Nicolas appealed to the CA which sustained the trial courts
Decision in toto. The CA held that since there was a perfected contract of sale between Nicolas and Rodolfo, the latter
may compel the former to execute the proper sale document.
ISSUE:
Whether or not the contract entered by Nicholas and Rodolfo was a contract to sell or a contract of sale.
HELD:
The contract is a contract to sell. A stipulation in the contract, where the vendor promises to execute a deed of absolute
sale upon the completion by the vendee of the payment of the price, indicates that the parties entered into a contract to
sell.

77

There is no dispute that in 1993, Rodolfo agreed to buy Nicolass share in the Diego Building for the price of
P500,000.00. There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received, P250,000.00.
Significantly, it is also not disputed that the parties agreed that the remaining amount of P250,000.00 would be paid after
Nicolas shall have executed a deed of sale.
This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and
distinguishing characteristic of a contract to sell.
The parties could have executed a document of sale upon receipt of the partial payment but they did not. This is thus an
indication that Nicolas did not intend to immediately transfer title over his share but only upon full payment of the
purchase price. Having thus reserved title over the property, the contract entered into by Nicolas is a contract to sell.
Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This
was made clear by the nature of the agreement. It must be stressed that it is anathema in a contract to sell that the
prospective seller should deliver title to the property to the prospective buyer pending the latters payment of the price in
full. It certainly is absurd to assume that in the absence of stipulation, a buyer under a contract to sell is granted
ownership of the property even when he has not paid the seller in full. If this were the case, then prospective sellers in a
contract to sell would in all likelihood not be paid the balance of the price.
ISSUE:
Whether the remedy of rescission is available in contracts to sell.
HELD:
No. The remedy of rescission is not available in contracts to sell.
In a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed
upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the
price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost
ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to
sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying
the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the
contract and not rescinding it.
Since the agreement is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition.
The non-fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer. Without respondents full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondents failure to pay the purchase price in full is not
the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the
petitioner from being bound to convey title to respondent.
PATRIMONIO V. GUTIERREZ
G.R. NO. 187769
JUNE 4, 2014

J. BRION
CONTRACT OF LOAN
FACTS:
Petitioner and the respondent Napoleon Gutierrez entered into a business venture under the name of Slam Dunk
Corporation. In the course of their business, the petitioner pre-signed several checks to answer for the expenses of Slam
78

Dunk. Although signed, these checks had no payees name, date or amount. The blank checks were entrusted to Gutierrez
with the specific instruction not to fill them out without previous notification to and approval by the petitioner.
In the middle of 1993, without the petitioners knowledge and consent, Gutierrez went to Marasigan (the petitioners
former teammate), to secure a loan in the amount of P200,000.00 on the excuse that the petitioner needed the money for
the construction of his house. In addition to the payment of the principal, Gutierrez assured Marasigan that he would be
paid an interest of 5% per month from March to May 1994.
Marasigan acceded to Gutierrez request and gave him P200,000.00 sometime in February 1994. Gutierrez simultaneously
delivered to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank, Greenhills Branch, Check
No. 21001764 with the blank portions filled out with the words Cash Two Hundred Thousand Pesos Only, and the
amount of P200,000.00. The upper right portion of the check corresponding to the date was also filled out with the
words May 23, 1994 but the petitioner contended that the same was not written by Gutierrez.
On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason ACCOUNT CLOSED. It was
later revealed that petitioners account with the bank had been closed since May 28, 1993. Marasigan sought recovery
from Gutierrez, to no avail. Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner.
On September 10, 1997, the petitioner filed before the RTC a Complaint for Declaration of Nullity of Loan and Recovery
of Damages against Gutierrez and co-respondent Marasigan and asserted that he was not privy to the parties loan
agreement.
ISSUE:
Whether or not the contract of loan entered into by Gutierrez should be nullified for being void.
HELD:
Yes. Article 1318 of the Civil Code enumerates the essential requisites for a valid contract, namely:
1. consent of the contracting parties;
2. object certain which is the subject matter of the contract; and
3. cause of the obligation which is established
In the absence of any showing of any agency relations or special authority to act for and in behalf of the petitioner, the
loan agreement Gutierrez entered into with Marasigan is null and void. Thus, the petitioner is not bound by the parties
loan agreement. While there may be a meeting of the minds between Gutierrez and Marasigan, such agreement cannot
bind the petitioner whose consent was not obtained and who was not privy to the loan agreement. Hence, only Gutierrez is
bound by the contract of loan.
Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally sufficient because the
authority to enter into a loan can never be presumed. The contract of agency and the special fiduciary relationship inherent
in this contract must exist as a matter of fact.
PHILIPPINE DEPOSIT INSURANCE CORPORATION V. BUREAU OF INTERNAL REVENUE
G.R. NO. 172892
JUNE 13, 2013

J. DE CASTRO
PREFERENCE OF CREDIT
FACTS:
The Monetary Board prohibited Rural Bank of Tuba (RBTI) from doing business in the Philippines and placed it under
receivership in accordance with Section 30 of the New Central Bank Act. PDIC was designated as receiver. PDIC
79

conducted an evaluation of RBTIs financial condition and determined that RBTI remained insolvent. Thus, the Monetary
Board issued a resolution directing PDIC to proceed with the liquidation of RBTI.
Accordingly and pursuant to Section 30 of the New Central Bank Act, PDIC filed in the RTC of La Trinidad, Benguet a
petition for assistance in the liquidation of RBTI. The trial court gave the petition due course and approved it. As an
incident of the proceedings, the BIR intervened as one of the creditors of RBTI. The BIR prayed that the proceedings be
suspended until PDIC has secured a tax clearance required under Section 52(C) of the Tax Code.
The trial court found merit in the BIRs motion and granted it. PDIC moved for partial reconsideration of the Order dated
February 14, 2003 with respect to the directive for it to secure a tax clearance. It argued that Section 52(C) of the Tax
Code of 1997 does not cover closed banking institutions as the liquidation of closed banks is governed by Section 30 of
the New Central Bank Act. The motion was denied. The appellate court agreed with the trial court that banks under
liquidation by PDIC are covered by Section 52(C) of the Tax Code of 1997.
ISSUE:
Whether securing the tax clearance constitutes a complete disregard of the order of preference under the Civil Code.
HELD:
Yes. The law expressly provides that debts and liabilities of the bank under liquidation are to be paid in accordance with
the rules on concurrence and preference of credit under the Civil Code. Duties, taxes, and fees due the Government enjoy
priority only when they are with reference to a specific movable property, under Article 2241(1) of the Civil Code, or
immovable property, under Article 2242(1) of the same Code. However, with reference to the other real and personal
property of the debtor, sometimes referred to as free property, the taxes and assessments due the National Government,
other than those in Articles 2241(1) and 2242(1) of the Civil Code, such as the corporate income tax, will come only in
ninth place in the order of preference.
If the BIRs contention that a tax clearance be secured first before the project of distribution of the assets of a bank under
liquidation may be approved, then the tax liabilities will be given absolute preference in all instances, including those that
do not fall under Articles 2241(1) and 2242(1) of the Civil Code. In order to secure a tax clearance which will serve as
proof that the taxpayer had completely paid off his tax liabilities, PDIC will be compelled to settle and pay first all tax
liabilities and deficiencies of the bank, regardless of the order of preference under the pertinent provisions of the Civil
Code. Following the BIRs stance, therefore, only then may the project of distribution of the banks assets be approved
and the other debts and claims thereafter settled, even though under Article 2244 of the Civil Code such debts and claims
enjoy preference over taxes and assessments due the National Government. The BIR effectively wants this Court to ignore
Section 30 of the New Central Bank Act and disregard Article 2244 of the Civil Code.
YNGSON V. PHILIPPINE NATIONAL BANK
G.R. NO. 171132
AUGUST 15, 2012

J. VILLARAMA
PREFERENCE OF CREDIT V. LIEN
FACTS:
ARCAM is engaged in the operation of a sugar mill. Between 1991 and 1993, ARCAM applied for and was granted a
loan by PNB. To secure the loan, ARCAM executed a Real Estate Mortgage over a 350,00 square meter parcel of land
covered by TCT No. 340592-R and a Chattel Mortgage over various personal properties.
ARCAM defaulted on its obligations. Thus, on November 25, 1993, pursuant to the provisions of the Real Estate
Mortgage and Chattel Mortgage, PNB initiated extrajudicial foreclosure proceedings in RTC Pampanga. The public
auction was scheduled on December 29, 1993 for the mortgaged real properties and December 8, 1993 for the mortgaged
personal properties. On December 7, 1993, ARCAM filed before the SEC a Petition for Suspension of Payments,
80

Appointment of a Management or Rehabilitation Committee, and Approval of Rehabilitation Plan, with application for
issuance of a temporary restraining order (TRO) and writ of preliminary injunction. The SEC issued a TRO and
subsequently a writ of preliminary injunction, enjoining PNB and the Sheriff of the RTC of Guagua, Pampanga from
proceeding with the foreclosure sale of the mortgaged properties.
The SEC ruled that ARCAM can no longer be rehabilitated and decreed that ARCAM be dissolved and placed under
liquidation. The SEC Hearing Panel also granted PNBs motion to dissolve the preliminary injunction and appointed Atty.
Manuel D. Yngson, Jr. & Associates as Liquidator for ARCAM. With this development, PNB revived the foreclosure case
and requested the RTC Clerk of Court to re-schedule the sale at public auction of the mortgaged properties.
Contending that foreclosure during liquidation was improper, petitioner filed with the SEC a Motion for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the foreclosure sale of ARCAMs assets. On
July 28, 2000, PNB resumed the proceedings for the extrajudicial foreclosure sale of the mortgaged properties. PNB
emerged as the highest winning bidder in the auction sale, and certificates of sale were issued in its favor.
Petitioner filed with the SEC a motion to nullify the auction sale and posited that all actions against companies which are
under liquidation, like ARCAM, are suspended because liquidation is a continuation of the petition for suspension
proceedings. In its Opposition, PNB asserted that neither P.D. No. 902-A nor the SEC rules prohibits secured creditors
from foreclosing on their mortgages to satisfy the mortgagors debt after the termination of the rehabilitation proceedings
and during liquidation proceedings.
On January 4, 2005, the SEC issued a Resolution denying petitioners motion to nullify the auction sale. It held that PNB
was not legally barred from foreclosing on the mortgages.
ISSUE:
Did the SEC then err in ruling that PNB was not barred from foreclosing on the mortgages?
HELD:
No. The court has already upheld the right of the secured creditor to foreclose the mortgages in its favor during the
liquidation of a debtor corporation. If rehabilitation is no longer feasible and the assets of the corporation are finally
liquidated, secured creditors shall enjoy preference over unsecured creditors, subject only to the provisions of the Civil
Code on concurrence and preference of credits. Creditors of secured obligations may pursue their security interest or lien,
or they may choose to abandon the preference and prove their credits as ordinary claims. Moreover, Section 2248 of the
Civil Code provides:
Those credits which enjoy preference in relation to specific real property or real rights, exclude all others
to the extent of the value of the immovable or real right to which the preference refers.
It is worth mentioning that under Republic Act No. 10142, otherwise known as the Financial Rehabilitation and
Insolvency Act (FRIA) of 2010, the right of a secured creditor to enforce his lien during liquidation proceedings is
retained. In this case, PNB elected to maintain its rights under the security or lien; hence, its right to foreclose the
mortgaged properties should be respected.
As to petitioner's argument on the right of first preference as regards unpaid wages, a distinction should be made between
a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien
creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110
of the Labor Code, does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor. Consequently, the right of first preference for unpaid
wages may not be invoked in this case to nullify the foreclosure sales conducted pursuant to PNB 's right as a secured
creditor to enforce its lien on specific properties of its debtor, ARCAM.
ANG V. COURT OF APPEALS
G.R. NO. 177874
SEPTEMBER 29, 2008
81

J. CARPIO MORALES
WARRANTIES; PRESCRIPTION
FACTS:
Under a "car-swapping" scheme, respondent Soledad sold his Mitsubishi GSR sedan 1982 model to petitioner Ang by
Deed of Absolute Sale dated July 28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988,
also by Deed of Absolute Sale of even date. As Ang's car was of a later model, Soledad paid him an additional
P55,000.00. The following provision of the Deed of Absolute Sale reflecting the kind of warranty made by Soledad reads:
I hereby covenant my absolute ownership to (sic) the above-described property and the same is free from
all liens and encumbrances and I will defend the same from all claims or any claim whatsoever; will save
the vendee from any suit by the government of the Republic of the Philippines.
Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern Motors, a secondhand auto display center. The vehicle was eventually sold to a certain Bugash for P225,000.00, by Deed of Absolute Sale
dated August 14, 1992. Before the deed could be registered in Bugash's name, however, the vehicle was seized by virtue
of a writ of replevin on account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay
the mortgage debt constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance the amount of P62,038.47. Soledad refused to reimburse the
said amount, despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence. The City
Prosecutor's Office dismissed the complaint for insufficiency of evidence, drawing Ang to file on November 9, 1993 the
first of three successive complaints for damages against Soledad before the RTC but the same was dismissed for failure to
submit the controversy to barangay conciliation. Ang secured a certification to file action and again filed a complaint for
damages which was also dismissed on the ground that the amount involved is not within its jurisdiction. Ang thereupon
filed on July 15, 1996 with the MTCC a third complaint.
After trial, the MTCC dismissed the complaint on the ground of prescription. The Deed of Sale was dated and executed on
28 July 1992, the complaint before the Barangay terminated 21 September 1995 per Certification to File Action attached
to the Complaint, and this case eventually was filed with this Court on 15 July 1996, this action has already been barred
since more than six (6) months elapsed from the delivery of the subject vehicle to the plaintiff buyer to the filing of this
action, pursuant to the aforequoted Article 1571.
ISSUE:
Whether the third complaint had prescribed.
HELD:
Yes. The resolution of the sole issue of whether the complaint had prescribed hinges on a determination of what kind of
warranty is provided in the Deed of Absolute Sale subject of the present case. The prescriptive period for instituting
actions based on a breach of express warranty is that specified in the contract, and in the absence of such period, the
general rule on rescission of contract, which is four years. As for actions based on breach of implied warranty, the
prescriptive period is, under Art. 1571 (warranty against hidden defects of or encumbrances upon the thing sold) and Art.
1548 (warranty against eviction), six months from the date of delivery of the thing sold.
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines express warranty as follows:
Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of
such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying
thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller's opinion
only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied
upon by the buyer."
82

On the other hand, an implied warranty is that which the law derives by application or inference from the nature of the
transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it.
Among the implied warranty provisions of the Civil Code are: as to the seller's title (Art. 1548), against hidden defects
and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction (Art. 1548).
In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute Sale was forged, Soledad
gave an implied warranty of title. In pledging that he "will defend the same from all claims or any claim whatsoever and
will save the vendee from any suit by the government of the Republic of the Philippines," Soledad gave a warranty against
eviction. Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is six
months after the delivery of the vehicle, following Art. 1571.
But even if the date of filing of the action is reckoned from the date petitioner instituted his first complaint for damages on
November 9, 1993, and not on July 15, 1996 when he filed the complaint subject of the present petition, the action just the
same had prescribed, it having been filed 16 months after July 28, 1992, the date of delivery of the vehicle.

83