University of Santo Tomas

Digested by: DC 2016 Members

Editors:
Tricia Lacuesta

CIVIL LAW
Lorenzo Gayya
Cristopher Reyes
Macky Siazon
Janine Arenas
Ninna Bonsol
Lloyd Javier

Recent Jurisprudence
 Civil Law (Recent
Jurisprudence)

Table of Contents

Persons and Family Relations 4

Psychological Incapacity 4
Filiation 8
Legitimation 8
Vested Right 9
Obligations and Contracts 10
Breach of Contract 10
Payment 12
Novation 13
Essential Requisites of Contract 14
Consent 16
Default 17
Estoppel 18
Laches 19
Rescission 20
Surety 23
Property 25
Real Property 25
Ejectment 26
Accion Reinvindicatoria 28
Acquisitive Prescription 29
Right of Way 30
Land Titles and Deeds 31
Property Reserved For Public/Quasi-Public Purpose 31
Jurisdiction of Courts 32
Cloud on Title 33
Certificate of Titles Covering the Same Land 34
Jurisdiction of DAR 35
Possession and Occupation 36
Where Date of Registration is Reckoned from 37
Forgery 38
Alienable and Disposable Character of Land 39
Exemption from CARP 41
Amendment and Alteration of Certificates 42
Reconstitution 43
Proof of Ownership of a Land 45
Proof of Conveyance of Land 46
Free Patent 47
Attack on Certificate of Title 48

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Action for Reconveyance 52

Innocent Purchasers for Value 53
Mortgagee in Good Faith and for Value 56
Reversion 57
Wills and Successions 58
Compromise 59
Credit Transactions 62
Chattel Mortgage 62
Loan/Mutuum 63
Mortgage 67
Pactum Commissorium 73
Extrajudicial Foreclosure 74
Redemption 77
Suretyship 79
Guaranty 80
Sales 81
When Sale is Perfected 81
Delivery 82
Bill Of Lading 83
Earnest Money 84
Simulated Sale 85
Equitable Mortgage 87
Redemption 89
Assignment of Credit 90
Partnerships, Agencies, and Trusts 91
Agency 91
Trust 94
Special Power of Attorney 95
Torts and Damages 97

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CIVIL LAW

PERSONS AND FAMILY RELATIONS

PSYCHOLOGICAL INCAPACITY

VALERIO E. KALAW v. MA. ELENA FERNANDEZ

G.R. No 166357, January 14, 2015, BERSAMIN, J.

Article 36 of the Family Code must not be so strictly and too literally read and
applied given the clear intendment of the drafters to adopt its enacted version of
less specificity obviously to enable some resiliency in its application.

Facts:

This is a motion for reconsideration from the 2011 decision of the Supreme
Court which denied the declaration of nullity based on psychological incapacity of the
marriage of Valerio and Ma. Elena. The Court initially in its 2011 decision denied
evidence coming from expert witnesses, and the utter disregard of Elena to her
childs welfare by frequently bringing them to her long hours of mahjong sessions.
The court initially brushed aside the trial courts finding of psychological incapacity
by relying on a stringent rules. Now finding merit, the Court takes a second hard look
on its 2011 decision.

Issue:

Whether or not trial courts finding of psychological incapacity whenever

supported by evidence be accorded respect over strict protectionist and stringent
rules guided by Molina and previous decisions.

Ruling:

Yes. It is not enough reason to ignore the findings and evaluation by the trial
court and substitute Supreme Courts as an appellate tribunal only because the
Constitution and the Family Code regard marriage as an inviolable social institution.
There is a need to stress that the fulfillment of the constitutional mandate for the
State to protect marriage as an inviolable social institution only relates to a valid
marriage. No protection can be accorded to a marriage that is null and void ab initio,
because such a marriage has no legal existence. In declaring a marriage null and void
ab initio, therefore, the Courts really assiduously defend and promote the sanctity of
marriage as an inviolable social institution. The foundation of our society is thereby
made all the more strong and solid.

Here, the findings and evaluation by the RTC as the trial court deserved
credence because it was in the better position to view and examine the demeanor of
the witnesses while they were testifying. The position and role of the trial judge in the
appreciation of the evidence showing the psychological incapacity were not to be
downplayed but should be accorded due importance and respect.

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After a long and hard second look, the Court considers it improper and
unwarranted to give to such expert opinions a merely generalized consideration and
treatment, least of all to dismiss their value as inadequate basis for the declaration of
the nullity of the marriage. Instead, the Court holds that said experts sufficiently and
competently described the psychological incapacity of the respondent within the
standards of Article 36 of the Family Code. The SC upholds the conclusions reached
by the two expert witnesses because they were largely drawn from the case records
and affidavits, and should not anymore be disputed after the RTC itself had accepted
the veracity of the petitioners factual premises.

In hindsight, it may have been inappropriate for the Court to impose a rigid
set of rules, as the one in Molina, in resolving all cases of psychological incapacity.
Understandably, the Court was then alarmed by the deluge of petitions for the
dissolution of marital bonds, and was sensitive to the OSG's exaggeration of Article
36 as the "most liberal divorce procedure in the world." The unintended
consequences of Molina, however, has taken its toll on people who have to live with
deviant behavior, moral insanity and sociopathic personality anomaly, which, like
termites, consume little by little the very foundation of their families, our basic social
institutions. Far from what was intended by the Court, Molina has become a straight-
jacket, forcing all sizes to fit into and be bound by it, wittingly or unwittingly. The
Court, in conveniently applying Molina, has allowed diagnosed sociopaths,
schizophrenics, nymphomaniacs, narcissists and the like, to continuously debase and
pervert the sanctity of marriage. Ironically, the Roman Rota has annulled marriages
on account of the personality disorders of the said individuals. The Court need not
worry about the possible abuse of the remedy provided by Article 36, for there are
ample safeguards against this contingency, among which is the intervention by the
State, through the public prosecutor, to guard against collusion between the parties
and/or fabrication of evidence. The Court should rather be alarmed by the rising
number of cases involving marital abuse, child abuse, domestic violence and
incestuous rape.

ROBERT F. MALLILIN v. LUZ G. JAMESOLAMIN and the REPUBLIC OF THE

PHILIPPINES
G.R. No. 192718, February 18, 2015, MENDOZA, J.

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.

Facts:

Robert F. Mallilin (Robert) filed a petition for declaration of nullity of marriage

with Luz G. Jamesolamin (Luz) whom he has 3 children. Robert alleged that at the
time of the celebration of their marriage, Luz was suffering from psychological and
mental incapacity and unpreparedness to enter into such marital life and to comply
with its essential obligations and responsibilities. Such incapacity became even more
apparent during their marriage when Luz exhibited clear manifestation of immaturity,
irresponsibility, deficiency of independent rational judgment, and inability to cope
with the heavy and oftentimes demanding obligation of a parent. Robert disclosed

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that Luz was already living in California, USA, and had married an American. He also
revealed that when they were still engaged, Luz continued seeing and dating another
boyfriend, a certain Lt. Liwag. He also claimed that from the outset, Luz had been
remiss in her duties both as a wife and as a mother.

The RTC declared the marriage null and void on the ground of psychological
incapacity on the part of Luz as she failed to comply with the essential marital
obligations. The OSG interposed an appeal with the CA stating that the real cause of
the marital discord was the sexual infidelity of Luz. Such ground should not result in
the nullification of the marriage under the law, but merely constituted a ground for
legal separation. The CA reversed the RTC decision.

Issue:

Whether or not the totality of the evidence adduced proves that Luz was
psychologically incapacitated to comply with the essential obligations of marriage.

Ruling:

No. A petition for declaration of nullity of marriage is anchored on Article 36 of

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

There is hardly a doubt that the intendment of the law has been to confine the
meaning of "psychological incapacity" to the most serious cases of personality
disorders clearly demonstrative of an utter insensitivity or inability to give meaning
and significance to the marriage. Psychological incapacity as required by Article 36
must be characterized by (a) gravity, (b) juridical antecedence and (c) incurability.

The Court is of the considered view that Roberts evidence failed to establish
the psychological incapacity of Luz. 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. Based on the
records, Robert failed to prove that her disposition of not cleaning the room,
preparing their meal, washing the clothes, and propensity for dating and receiving
different male visitors, was grave, deeply rooted, and incurable within the
parameters of jurisprudence on psychological incapacity.

The alleged failure of Luz to assume her duties as a wife and as a mother, as
well as her emotional immaturity, irresponsibility and infidelity, cannot rise to the
level of psychological incapacity that justifies the nullification of the parties'
marriage. The Court has repeatedly stressed that psychological incapacity
contemplates "downright incapacity or inability to take cognizance of and to assume

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the basic marital obligations," not merely the refusal, neglect or difficulty, much less
ill will, on the part of the errant spouse. Psychological incapacity refers only to the
most serious cases of personality disorders clearly demonstrative of an utter
insensitivity or inability to give meaning and significance to the marriage.

As correctly found by the CA, sexual infidelity or perversion and abandonment

do not, by themselves, constitute grounds for declaring a marriage void based on
psychological incapacity. 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." Other than his allegations, however, no other convincing evidence was
adduced to prove that these sexual indiscretions were considered as nymphomania,
and that it was grave, deeply rooted, and incurable within the term of psychological
incapacity embodied in Article 36. To stress, Roberts testimony alone is insufficient to
prove the existence of psychological incapacity.

Third, the psychological report of Villanueva, Guidance Psychologist II of the

Northern Mindanao Medical Center, Cagayan de Oro City, was insufficient to prove
the psychological in capacity of Luz. There was nothing in the records that would
indicate that Luz had either been interviewed or was subjected to a psychological
examination. The finding as to her psychological incapacity was based entirely on
hearsay and the self-serving information provided by Robert.

GLENN VINAS v. MARY GRACE PAREL VINAS

G.R. No. 208790, January 21, 2015, REYES, J.

It was not enough that the spouse alleged to be psychologically incapacitated,

had difficulty in complying with his/her marital obligations, or was unwilling to
perform these obligations. Proof of a natal or supervening disabling factor an
adverse integral element in the respondents personality structure that effectively
incapacitated him from complying with his essential marital obligations had to be
shown.

Facts:

Glenn filed a Petition for the declaration of nullity of his marriage with Mary
Grace. He alleged that Mary Grace was insecure, extremely jealous, outgoing and
prone to regularly resorting to any pretext to be able to leave the house. She
thoroughly enjoyed the night life, and drank and smoked heavily even when she was
pregnant. Further, Mary Grace refused to perform even the most essential household
chores of cleaning and cooking. When Glenn confronted her about her behavior, she
showed indifference. She eventually left their home without informing Glenn. Glenn
later found out that she left for an overseas employment in Dubai. Dr. Tayag, a
clinical psychologist diagnosed Mary Grace to be suffering from a Narcissistic
Personality Disorder with anti-social traits. Dr. Tayag concluded that Mary Grace and
Glenns relationship is not founded on mutual love, trust, respect, commitment and
fidelity to each other. Hence, Dr. Tayag recommended the propriety of declaring the
nullity of the couples marriage.

Issue:

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Whether or not Mary Grace is psychologically incapacitated to perform her

marital obligations.

Ruling:

No. In Bier v. Bier (G.R. No. 173294, February 27, 2008), the Court ruled that it
was not enough that respondent, alleged to be psychologically incapacitated, had
difficulty in complying with his marital obligations, or was unwilling to perform these
obligations. Proof of a natal or supervening disabling factor an adverse integral
element in the respondents personality structure that effectively incapacitated him
from complying with his essential marital obligations had to be shown.

It is worth noting that Glenn and Mary Grace live with each other for more or
less seven years from 1999 to 2006. The foregoing established fact shows that living
together as spouses under one roof is not an impossibility. Mary Graces departure
from their home in 2006 indicates either a refusal or mere difficulty, but not absolute
inability to comply with her obligation to live with her husband.

The Court understands the inherent difficulty attendant to obtaining the

statements of witnesses who can attest to the antecedence of a persons
psychological incapacity, but such difficulty does not exempt a petitioner from
complying with what the law requires. While the Court also commiserates with
Glenns marital woes, the totality of the evidence presented provides inadequate
basis for the Court to conclude that Mary Grace is indeed psychologically
incapacitated to comply with her obligations as Glenns spouse.

FILIATION

RODOLFO S. AGUILAR v. EDNA G. SIASAT

G.R. No. 200169, January 28, 2015, DEL CASTILLO, J.

Filiation may be proved by an admission of legitimate filiation in a public

document or a private handwritten instrument and signed by the parent concerned.

Facts:

Rodolfo S. Aguilar alleged that he is the only son and sole surviving heir of the
Alfredo and Candelaria Aguilar spouses and that Respondent Edna Siasat could have
stolen the land titles. Rodolfo presented documents to prove his filiation such as his
high school records, Income Tax Return, Alfredos SSS form, Sheet of Employment,
marriage certificate and recommendation letter, all stating that the deceased Aguilar
spouses were his parents. He also presented testimonies from his aunt, sister and
wife. Siasat on the other hand, that petitioner is not the natural nor adoptive son by
the Aguilar spouse. She also asserted that upon the death of Candelaria Siasat-
Aguilar, her brothers and sisters inherited her estate as she had no issue and that the
subject titles were not stolen, but entrusted to her for safekeeping by Candelaria,
who is her aunt.

Issue:

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Whether or not filiation may still be proved absent the certificate of live birth.

Ruling:

Yes. The filiation of illegitimate children, like legitimate children may also be
established an admission of legitimate filiation in a public document or a private
handwritten instrument and signed by the parent concerned. The due recognition of
an illegitimate child in any authentic writing is, in itself, a consummated act of
acknowledgment of the child, and no further court action is required. In fact, it is
treated not just a ground for compulsory recognition as it is in itself a voluntary
recognition. Moreover, following Article 3(1) of the United Nations Convention on the
Rights of a Child, the best interests of the child shall be a primary consideration. It is
therefore the policy of the Family Code to liberalize the rule on the investigation of
the paternity and filiation of children, especially of illegitimate children. Since
petitioner has shown that he is the legitimate issue of the Aguilar spouses, then he is
as well heir to the latters estate. Respondent is then left with no right to inherit from
her aunt Candelaria Siasat-Aguilars estate.

LEGITIMATION

BBB* v. AAA*
G.R. No. 193225, February 9, 2015, REYES, J.

Article 177 of the Family Code provides that "only children conceived and
born outside of wedlock of parents who, at the time of the conception of the former,
were not disqualified by any impediment to marry each other may be legitimated."
Article 178 states that "legitimation shall take place by a subsequent valid marriage
between parents."

Facts:

[BBB] and [AAA] had a relationship when the latter was still raising her first
child borne [CCC] from a previous relationship. During the relationship with [BBB],
[AAA] bore two more children namely, [DDD] and [EEE]. To legalize their relationship,
[BBB] and [AAA] married in civil rights and thereafter, the birth certificates of the
children, including [CCCs], was amended to change their civil status to be
legitimated by virtue of the said marriage. However, the relationship was not perfect.
There were fights and arguments which caused them to have strained relationship
one of which is the support for [CCC] of [BBB].

Issue:

Whether or not [BBB] should give support to [CCC].

Ruling:

Yes. In the case at bar, the parties do not dispute the fact that BBB is not
CCCs biological father. Such being the case, it was improper to have CCC legitimated
after the celebration of BBB and AAAs marriage. Clearly then, the legal process of

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legitimation was trifled with BBB voluntarily but falsely acknowledged CCC as his son.
Article 1431 of the New Civil Code pertinently provides:

Art. 1431. Through estoppel an admission or representation is rendered

conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.

At least for the purpose of resolving the instant petition, the principle of
estoppel finds application and it now bars BBB from making an assertion contrary to
his previous representations. He should not be allowed to evade a responsibility
arising from his own misrepresentations. He is bound by the effects of the
legitimation process. CCC remains to be BBBs son, and pursuant to Article 179 of the
Family Code, the former is entitled to the same rights as those of a legitimate child,
including the receipt of his fathers support.

VESTED RIGHT

ADORACION CAROLINO (SPOUSE AND IN SUBSTITUTION OF THE DECEASED

JEREMIAS A. CAROLINO) v. GEN. GENEROSO SENGA, AS CHIEF OF STAFF OF
THE ARMED FORCES OF THE PHILIPPINES (AFP); BRIG. GEN. FERNANDO
ZABAT, AS CHIEF OF THE AFP FINANCE CENTER; COMMO. REYNALDO
BASILIO, AS CHIEF OF THE AFP-GHQ MANAGEMENT AND FISCAL OFFICE;
AND COMMO. EMILIO MARAYAG, PENSION AND GRATUITY OFFICER, PENSION
AND GRATUITY MANAGEMENT CENTER, AFP FINANCE CENTER
G.R. No. 189649, April 20, 2015, PERALTA, J.

Vested rights include not only legal or equitable title to the enforcement of a
demand, but also an exemption from new obligations after the right has vested. After
a law is amended, the original law continues to be in force with regard to all rights
that had accrued prior to such amendment. After the right has vested, the state may
not impair it by legislative enactment, by the enactment or by the subsequent repeal
of a municipal ordinance, or by a change in the constitution of the State, except in a
legitimate exercise of the police power.

Facts:

In 1976, Jeremias A. Carolino, petitioner's husband, retired from the AFP under
RA No. 340, and started receiving pension benefits since then until it was terminated
in 2005. He was informed that his loss of Filipino citizenship caused his
disqualification from receiving pension benefits pursuant to the provisions of PD No.
1638 which was issued only in 1979.

Issue:

Whether or not retiree's retirement benefits may be terminated pursuant to a

law enacted subsequent to his retirement.

Ruling:

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No. Under Article 4 of the Civil Code, it is provided that laws shall have no
retroactive effect, unless the contrary is provided. It is said that the law looks to the
future only and has no retroactive effect unless the legislator may have formally
given that effect to some legal provisions. PD No. 1638 does not contain any
provision regarding its retroactive application, nor may the same be implied from its
language. Since PD No. 1638, as amended, is about the new system of retirement
and separation from service of military personnel, it is not applicable to those who
retired before its effectivity in 1979. After an act is amended, the original act
continues to be in force with regard to all rights that had accrued prior to such
amendment.

In the present case, petitioner's husband acquired vested right to the

payment of his retirement benefits which must be respected and cannot be affected
by the subsequent enactment of PD No. 1638 which provides that loss of Filipino
citizenship terminates retirement benefits. Vested rights include not only legal or
equitable title to the enforcement of a demand, but also an exemption from new
obligations after the right has vested.

OBLIGATIONS AND CONTRACTS

BREACH OF CONTRACT

RICARDO C. HONRADO v. GMA NETWORK FILMS INC.

G.R. No. 204702, January 14, 2015, CARPIO, J.

The agreement is the law between the parties.

Facts:

Respondent GMA Network Films, Inc. (GMA Films) entered into a "TV Rights
Agreement" (Agreement) with petitioner under which petitioner, as licensor of 36
films, granted to GMA Films, for a fee of P60.75 million, the exclusive right to telecast
the 36 films for a period of three years. Under Paragraph 3 of the Agreement, the
parties agreed that all betacam copies of the [films] should pass through broadcast
quality test conducted by GMA-7, the TV station operated by GMA Network, Inc.
(GMA Network), an affiliate of GMA Films. The parties also agreed to submit the films
for review by the Movie and Television Review and Classification Board (MTRCB) and
stipulated on the remedies in the event that MTRCB bans the telecasting of any of the
films.

GMA Films sued petitioner in the RTC of Quezon City alleging that it rejected
Evangeline Katorse because its running time was too short for telecast and
petitioner only remitted P900,000 to the owner of Bubot (Juanita Alano [Alano]),
keeping for himself the balance of P350,000. Petitioner denied liability, counter-
alleging that after GMA Films rejected Evangeline Katorse, he replaced it with another
film, Winasak na Pangarap, which GMA Films accepted. As proof of such acceptance,
petitioner invoked a certification of GMA Network, dated 30 March 1999, attesting
that such film is of good broadcast quality (Film Certification).

Issue:

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Whether or not petitioner is liable for breach of the Agreement and breach of
trust.

Ruling:

No. The petitioner did not commit any breach of the agreement because
GMAs rejection of the film finds no basis in the agreement. In terms devoid of any
ambiguity, Paragraph 4 of the Agreement requires the intervention of MTRCB, the
state censor, before GMA Films can reject a film and require its replacement.
Specifically, Paragraph 4 requires that MTRCB, after reviewing a film listed in the
Agreement, disapprove or X-rate it for telecasting. GMA Films does not allege, and
the Court found no proof on record indicating that MTRCB reviewed Winasak na
Pangarap and X-rated it. Indeed, GMA Films own witness, Jose Marie Abacan
(Abacan), then Vice-President for Program Management of GMA Network, testified
during trial that it was GMA Network which rejected Winasak na Pangarap because
the latter considered the film bomba. In doing so, GMA Network went beyond its
assigned role under the Agreement of screening films to test their broadcast quality
and assumed the function of MTRCB to evaluate the films for the propriety of their
content. This runs counter to the clear terms of Paragraphs 3 and 4 of the
Agreement. The Court held that regardless of the import of the Film Certification,
GMA Films rejection of Winasak na Pangarap finds no basis in the Agreement.

PRISCILO B. PAZ v. NEW INTERNATIONAL ENVIRONMENTAL UNIVERSALITY,

INC.
G.R. No. 203993, April 20, 2015, PERLAS-BERNABE, J.

If a party to a contract of lease violates its terms and conditions, the other
party should go to court to make the former refrain from his 'illegal' activities or seek
rescission of the contract, rather than taking the law into his own hands. Otherwise,
he is liable for breach of contract for illegally terminating the same.

Facts:

Paz entered into a MOA with New International Environmental Universality Inc.
whereby the former shall allow the latter to use the aircraft hangar space at the
Davao Airport exclusively for company aircraft. In a letter, Paz complained that the
hangar space was being used for trucks and equipment instead of for aircraft only. He
further demanded the company to vacate the premises. In turn, the company filed a
complaint against Paz for breach of contract. It claimed that Paz had disconnected its
electric and telephone lines, security guards prevented its employees from entering
the leased premises, and violated the terms of the MOA when he took over the
hangar space without giving respondent the requisite six 6-month advance notice of
termination.

Issue:

Whether or not Paz violated the terms of the MOA.

Ruling:

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Yes. Paz is liable for breach of contract for effectively evicting the company
from the leased premises even before the expiration of the term of the lease. If it
were true that the company was violating the terms and conditions of the lease, he
should have gone to court to make the company refrain from its 'illegal' activities or
seek rescission of the MOA, rather than taking the law into his own hands.

PAYMENT

NATIONAL POWER CORPORATION v. LUCMAN M. IBRAHIM, et al.

G.R. No. 175863, February 18, 2015, PEREZ, J.

Article 1242 of the Civil Code is an exception to the rule that a valid payment
of an obligation can only be made to the person to whom such obligation is rightfully
owed. It contemplates a situation where a debtor pays a "possessor of credit" i.e.,
someone who is not the real creditor but appears, under the circumstances, to be the
real creditor. In such scenario, the law considers the payment to the "possessor of
credit" as valid even as against the real creditor taking into account the good faith of
the debtor.

Facts:

NPC took possession of the subject land for the purpose of building thereon a
hydroelectric power plant pursuant to its Agus 1 project. The subject lands portion is
of a private estate under Mangondato, was occupied by NPC under the mistaken
belief that such land is part of the vast tract of public land reserved for its use by the
government. Mangondato first discovered NPCs occupation of the subject land in the
year that NPC started its construction of the Agus 1 plant. Shortly after such
discovery, Mangondato began demanding compensation for the subject land from
NPC. NPC finally acquiesced to the fact that the subject land is private land and
consequently acknowledged Mangondatos right, as registered owner, to receive
compensation therefor. With an agreement basically out of reach, Mangondato filed a
complaint for reconveyance while NPC filed for expropriation. RTC ruled in favor of
NPC. Thereafter, the Ibrahims and Maruhoms filed a complaint against Mangondato
and NPC, disputing Mangondatos claim of ownership. RTC granted Ibrahims petition
for TRO. CA affirmed. They found that the Ibrahims and Maruhoms are the true
owners and not Mangondato.

Issue:

Whether or not it is correct, in view of the facts and circumstances in this

case, to hold NPC liable in favor of the Ibrahims and Maruhoms for the rental fees and
expropriation indemnity adjudged due for the subject land.

Ruling:

No. No "bad faith" may be taken against NPC in paying Mangondato the rental
fees and expropriation indemnity due the subject land. RTC and CA erred in their
finding of bad faith because they have overlooked the utter significance of one
important fact: that NPCs payment to Mangondato of the rental fees and
expropriation indemnity adjudged due for the subject land was required by the final

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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
NPC but was made only in compliance to the lawful orders of a court with jurisdiction.
It was not NPC that "allowed" the payment of the rental fees and expropriation
indemnity to Mangondato. Indeed, given the circumstances, the more accurate
rumination would be that it was the RTC that ordered or allowed the payment to
Mangondato and that NPC merely complied with the order or allowance. Since NPC
was only acting under the lawful orders of a court in paying Mangondato, no bad faith
can be taken against it.

Without the existence of bad faith, the ruling of the RTC and CA apropos NPCs
remaining liability to the Ibrahims and Maruhoms becomes devoid of legal basis. In
fact, NPCs previous payment to Mangondato of the rental fees and expropriation
indemnity due the subject land pursuant to the final judgment may be considered to
have extinguished the formers obligation regardless of who between Mangondato,
on one hand, and the Ibrahims and Maruhoms, on the other, turns out to be the real
owner of the subject land. Either way, NPC cannot be made liable to the Ibrahims and
Maruhoms. Payment made in good faith to any person in possession of the credit
shall release the debtor. Article 1242 of the Civil Code is an exception to the rule that
a valid payment of an obligation can only be made to the person to whom such
obligation is rightfully owed. It contemplates a situation where a debtor pays a
"possessor of credit" i.e., someone who is not the real creditor but appears, under the
circumstances, to be the real creditor. In such scenario, the law considers the
payment to the "possessor of credit" as valid even as against the real creditor taking
into account the good faith of the debtor. Borrowing the principles behind Article
1242 of the Civil Code, we find that Mangondatobeing the judgment creditor 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, NPCs payment to
Mangondato of the fees and indemnity due for the subject land as a consequence of
the execution could still validly extinguish its obligation to pay for the same even as
against the Ibrahims and Maruhoms.

NOVATION

BANK OF THE PHILIPPINE ISLANDS v. AMADOR DOMINGO

G.R. No. 169407, March 25, 2015, LEONARDO-DE CASTRO, J.

Article 1293 of the New Civil Code provides that 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.

Facts:

Spouses Domingo executed a Promissory Note secured by a chattel mortgage

over a Mazda car in favor of Makati Auto Center, Inc. Later, Makati Auto Center, Inc.
assigned all its rights and interests over the said Promissory Note and chattel

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mortgage to Far East Bank and Trust Company (FEBTC). However, by virtue of a
merger, all the assets and liabilities of FEBTC were transferred to and absorbed by
BPI. When Spouses Domingo defaulted, BPI demanded the payment of balance of the
Promissory Note. When the spouses Domingo still failed to comply with its demands,
BPI filed a Complaint for Replevin and Damages. The Spouses Domingo contended
that they made payments by issuing postdated checks and that since the subject
vehicle was sold to Carmelita Gonzales, the latter assumed the payment of the
balance of the mortgaged loan. The MeTC ruled in favor of BPI. It held that there was
no novation because the Spouses Domingo were not expressly released from their
obligations. The RTC dismissed the complaint and held that in novation, consent of
the creditor to the substitution of the debtor need not be by express agreement as it
can be merely implied. The CA affirmed the finding of the RTC that novation took
place. It held that consent of the creditor to the substitution of debtors need not
always be express and may be inferred from the acts of the creditor.

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.

Ruling:

No. Novation is the extinguishment of an obligation by the substitution or

change of the obligation by a subsequent one which extinguishes or modifies the
first, either by changing the object or principal conditions, or by substituting the
person of the debtor, or by subrogating a third person to the rights of the creditor.
Article 1293 of the New Civil Code provides that 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.

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.

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. 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. The creditor may therefore
enforce the obligation against both debtors. Absent proof that BPI gave its clear and

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unmistakable consent to release the spouses Domingo from the obligation to pay the
car loan, Carmelita is simply considered an additional debtor.

ESSENTIAL REQUISITES OF CONTRACT

SM LAND, INC., v. BASES CONVERSION AND DEVELOPMENT AUTHORITY AND

ARNEL PACIANO D. CASANOVA, ESQ., IN HIS OFFICIAL CAPACITY AS
PRESIDENT AND CEO OF BCDA
G.R. No. 203655, March 18, 2015, VELASCO JR., J.

The following are the essential requisites of contracts: (a) consent; (b) object
or subject matter; and (c) cause or consideration.

Facts:

SM Land submitted to Bases and Conversion Development Authority a

proposal for the development of the lot through public-private joint venture
agreement. Upon arriving at mutually acceptable terms and conditions, a
Certification of Successful Negotiations was issued by the BCDA and signed by both
parties. Through the said Certification, the BCDA undertook to "subject SMLIs
Original Proposal to Competitive Challenge and committed itself to "commence the
activities for the solicitation for comparative proposals."

Instead of proceeding with the Competitive Challenge, the BCDA addressed a

letter to Jose T. Gabionza, Vice President of SMLI, stating that it will welcome any
"voluntary and unconditional proposal" to improve the original offer, with the
assurance that the BCDA will nonetheless respect any right which may have accrued
in favor of SMLI. Without responding to SMLIs new proposal, the BCDA sent a
memorandum to the Office of the President, categorically recommending the
termination of the Competitive Challenge.

Alarmed by this development, SMLI, urged the BCDA to proceed with the
Competitive Challenge as agreed upon. However, the BCDA, via the assailed
Supplemental Notice No. 5, terminated the Competitive Challenge altogether.
Thereafter, the BCDA informed SMLI of the OPs decision to subject the development
of the subject property to public bidding.

The Court in its Decision directed BCDA to subject SMLIs duly accepted
unsolicited proposal for the development of the Bonifacio South Property to a
competitive challenge. On Motion for Reconsideration, BCDA claims that BCDA and
SMLI do not have a contract that would bestow upon the latter the right to demand
that its unsolicited proposal be subjected to a competitive challenge. Assuming
arguendo the existence of such an agreement between the parties, respondents
contend that the same may be terminated by reasons of public interest.

Issue:

Whether or not BCDA and SMLI have entered into a contract that would
bestow upon SMLI the right to demand competitive challenge.

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Ruling:

Yes, there exists a valid agreement between SMLI and BCDA. In the case at
bar, there is, between BCDA and SMLI, a perfected contracta source of rights and
reciprocal obligations on the part of both parties. Consequently, a breach thereof may
give rise to a cause of action against the erring party.

The first requisite, consent, is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. In the
case at bar, when SMLI submitted the first Unsolicited Proposal to BCDA on December
14, 2009, the submission constituted an offer to undertake the development of the
subject property. BCDA then entered into negotiations with SMLI until the BCDA finally
accepted the terms of the final unsolicited proposal. Their agreement was thereafter
reduced into writing through the issuance of the Certification of Successful
Negotiations where the meeting of the parties minds was reflected.

Then, to manifest their assent to the terms thereof and their respective
obligations, both partiesBCDA and SMLI, represented by Gen. Narciso L. Abaya and
Ms. Ana Bess Pingol, respectivelyaffixed their signatures on the Certification of
Successful Negotiations and had it notarized on August 6, 2010.

Cause, on the other hand, is the essential reason which moves the parties to
enter into the contract. It is the immediate, direct and proximate reason which
justifies the creation of an obligation through the will of the contracting parties.
Complementing this is Article 1350 of the New Civil Code which provides that [i]n
onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other. As such, the cause of the
agreement in the case at hand is their interest in the sale or acquisition and
development of the property and their undertaking to perform their respective
obligations, among others, as reflected in the Certificate of Successful Negotiations
and in the Terms of Reference (TOR) issued by BCDA.

Lastly, object certain refers to the subject matter of the contract. It is the
thing to be delivered or the service to be performed. Here, when the BCDA Board
issued, on August 6, 2010, the Certification of Successful Negotiations, it not only
accepted SMLIs Unsolicited Proposal and declared SMLI eligible to enter into the
proposed JV activity. It also agreed to subject [SMLI]s Original Proposal to
Competitive Challenge pursuant to Annex C [of the NEDA JV Guidelines], which
competitive challenge process shall be immediately implemented following the [TOR]
Volumes 1 and 2. Moreover, said Certification provides that the BCDA shall, thus,
commence the activities for the solicitation for comparative proposals xxx starting on
August 10, 2010, on which date [SMLI] shall post the required Proposal Security xxx.

The elements of a valid contract being present, there thus exists between
SMLI and BCDA a perfected contract, embodied in the Certification of Successful
Negotiations, upon which certain rights and obligations spring forth, including the
commencement of activities for the solicitation for comparative proposals.

This agreement is the law between the contracting parties with which they are
required to comply in good faith. Verily, it is BCDAs subsequent unilateral
cancellation of this perfected contract which the Court deemed to have been tainted
with grave abuse of discretion. BCDA could not validly renege on its obligation to

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subject the unsolicited proposal to a competitive challenge in view of this perfected

contract, and especially so after BCDA gave its assurance that it would respect the
rights that accrued in SMLIs favor arising from the same.

CONSENT

ANGEL V. TALAMPAS, Jr. v. MOLDEX REALTY, INC.

G.R. No. 170134, June 17, 2015, BRION, J.

Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract. The offer must be
certain, and the acceptance, whether express or implied, must be absolute. An
acceptance is considered absolute and unqualified when it is identical in all respects
with that of the offer so as to produce consent or a meeting of the minds.

Facts:

Angel V. Talampas, Jr. (Talampas, Jr.) herein petitioner, owner and general
manager of Angel V. Talampas Jr. Construction (AVTJC) entered into a contract with
Moldex Realty Corp. (Moldex) wherein AVTJC would develop a residential subdivision
on a land owned by Moldex located somewhere in Cavite. Thereafter construction
began, however, Moldex later on, sent a letter to Talampas, Jr. unilaterally terminating
the contract entered into it with AVTJC on the ground that Moldex had decided to
suspend the implementation of the site development. Thereafter, Moldex offered to
pay AVTJC billings for accomplished works, unrecouped costs of equipment
mobilization and demobilization, unrecouped payment of insurance bond, and the
release of all retention fees payments that Talampas, Jr. accepted or received. Later
on, Talampas Jr. sued Moldex for breach of contract before the RTC and prayed for
payment of equipment rentals, cost of opportunity lost, and damages, among others.

The RTC held in favor of Talampas, Jr. and ordered Moldex to pay Talampas, Jr.
On appeal with the CA, the CA reversed the decision of the RTC and held that the
acceptance by AVTJC of the aforementioned billings constitutes ratification of the
termination unilaterally done by Moldex. Hence, this petition.

Issue:

Whether or not there has been ratification by Talampas, Jr. over the unilateral
termination of the contract undertaken by Moldex.

Ruling:

None. There has been no ratification nor consent given by Talampas, Jr. over
the unilateral termination undertaken by Moldex. The Court found no such meeting of
the minds between the parties on the matter of termination because the petitioners
acceptance of the respondents offer to terminate was not absolute.

To terminate their contract, the respondent offered to pay the petitioner

billings for accomplished works, unrecouped costs of equipment mobilization and

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demobilization, unrecouped payment of insurance bond, and the release of all

retention fees payments that the petitioner accepted or received.

Nevertheless, despite receipt of payments, no absolute acceptance of the

respondents offer took place because the petitioner still demanded the payment of
equipment rentals, cost of opportunity lost, among others. In fact, the payments
received were for finished or delivered works and for expenses incurred for the
respondents account. By making the additional demands, the petitioner effectively
made a qualified acceptance or a counteroffer, which the respondent did not accept.
Under these circumstances, there is no full consent.

DEFAULT

RODRIGO RIVERA v. SPOUSES SALVADOR CHUA and VIOLETA CHUA

G.R. No. 184458, January 14, 2015, PEREZ, J.

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.

Facts:

Rivera contracted a loan to spouses Chua as evidenced by the promissory

note (not a negotiable instrument though) which provides the following:

It is agreed and understood that failure on my part to pay the amount of

(120,000.00) One Hundred Twenty Thousand Pesos on December 31, 1995. 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.

Based on the above, Rivera is on the position that demand is still required for
his liability. Further, the rate of interest was also in dispute.

Issues:

1. Whether or not a prior demand is still needed to hold Rivera liable based on
the note.
2. Whether or not the interest rate of 5% per month is valid.

Ruling:

1. No. Art. 1169 provides that the demand by the creditor shall not be
necessary in order that delay may exist: (1) When the obligation or the law expressly
so declare. We refer to the clause in the Promissory Note containing the stipulation of
interest which expressly requires the debtor (Rivera) to pay a 5% monthly interest
from the date of default until the entire obligation is fully paid for. The parties

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evidently agreed that the maturity of the obligation at a date certain, 31 December
1995, will give rise to the obligation to pay interest. The Promissory Note expressly
provided that after 31 December 1995, default commences and the stipulation on
payment of interest starts.

2. No. As observed by [Rivera], the stipulated interest of 5% per month or

60% per annum in addition to legal interests and attorneys fees is, indeed, highly
iniquitous and unreasonable. Stipulated interest rates are illegal if they are
unconscionable and the Court is allowed to temper interest rates when necessary.
Since the interest rate agreed upon is void, the parties are considered to have no
stipulation regarding the interest rate, thus, the rate of interest should be 12% per
annum computed from the date of judicial or extrajudicial demand.

ESTOPPEL

JOSE C. GO, et al. v. BANGKO SENTRAL NG PILIPINAS and REGISTER OF

DEEDS OF NASUGBU, BATANGAS
G.R. No. 202262, July 8, 2015, BERSAMIN, J.

Under estoppel by deed, a party to a deed and his privies are precluded from
denying any material fact stated in the deed as against the other party and his
privies.

Facts:

Orient Commercial Banking Corporation (OCBC) was placed under receivership

and the PDIC, as designated Receiver, took over all the assets, properties, obligations
and operations of OCBC. Jose C. Go, the principal and biggest stockholder of OCBC,
with his affiliate companies, challenged the said action of the PDIC before the RTC of
Manila, which was dismissed. Pending appeal to the CA, the PDIC proceeded with the
liquidation of OCBC pursuant to a Monetary Board Resolution. The BSP filed with the
RTC of Manila a complaint for sum of money with preliminary attachment against Go
et al. to recover deficiency obligations owed by OCBC. The writ of preliminary
attachment was granted and upon posting of bond, the real and personal properties
of Go et al. were attached. The controversy reached the Court and during the
pendency of the appeal, the parties entered into a compromise agreement. Said
agreement, which was approved by the court, contained a provision that "failure on
the part of the defendants to fully settle their outstanding obligations and to comply
with any of the terms of this Compromise Agreement shall entitle the plaintiff to
immediately ask for a Writ of Execution against all assets of the Ever Crest Golf Club
Resort, Inc., and Mega Heights, Inc., now or hereafter arising upon the signing of this
Compromise Agreement."

Due to Gos non-compliance with the compromise agreement, BSP moved for
the execution of the said agreement against the properties of Ever Crest Golf Club
Resort, Inc. and Mega Heights, Inc. which were levied upon by the sheriff. The motion
to execute was initially denied but on reconsideration, it was granted. The
petitioners and Ever Crest filed a petition for certiorari before the CA and a 60-day
TRO was issued. However, upon the lapse of the period of 60 days, the public
auction proceeded, and the properties of Ever Crest were sold to BSP as the highest

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bidder. Eventually, the CA dismissed the petition for certiorari. Petitioners motion for
reconsideration was denied. The petitioners argued that the issuance of the order of
execution was tainted with grave abuse of discretion because the execution was
directed against the properties of Ever Crest despite Ever Crest being neither a
defendant in the cases between BSP and Go, nor a signatory to the compromise
agreement.

Issue:

Whether or not the petitioners are estopped from claiming that the subject
properties cannot be subject of levy pursuant to a writ of execution.

Ruling:

Yes. There are three kinds of estoppels, to wit: (1) estoppel in pais; (2)
estoppel by deed; and (3) estoppel by laches. Under the first kind, a person is
considered in estoppel if by his conduct, representations, admissions or silence when
he ought to speak out, whether intentionally or through culpable negligence, "causes
another to believe certain facts to exist and such other rightfully relies and acts on
such belief, as a consequence of which he would be prejudiced if the former is
permitted to deny the existence of such facts." Under estoppel by deed, a party to a
deed and his privies are precluded from denying any material fact stated in the deed
as against the other party and his privies. Under estoppel by laches, an equitable
estoppel, a person who has failed or neglected to assert a right for an unreasonable
and unexplained length of time is presumed to have abandoned or otherwise
declined to assert such right and cannot later on seek to enforce the same, to the
prejudice of the other party, who has no notice or knowledge that the former would
assert such rights and whose condition has so changed that the latter cannot,
without injury or prejudice, be restored to his former state.

Here, the petitioners are estopped by deed by virtue of the execution of the
compromise agreement. They were the ones who had offered the properties of Ever
Crest to Bangko Sentral, and who had also assured that all the legalities and
formalities for that purpose had been obtained. They should not now be allowed to
escape or to evade their responsibilities under the compromise agreement just to
prevent the levy on execution of Ever Crests properties.

LACHES

PHIL-AIR CONDITIONING CENTER v. RCJ LINES AND ROLANDO ABADILLA, JR.

G.R. No. 193821, November 23, 2015, BRION, J.

In general, there is no room to apply the concept of laches when the law
provides the period within which to enforce a claim or file an action in court.

Facts:

Phil-Air sold to RCJ Lines 4 Carrier Paris 240 air-conditioning units for buses
(units). The units included compressors, condensers, evaporators, switches, wiring,
circuit boards, brackets, and fittings. RCJ Lines accepted the delivery of the units,

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which Phil-Air then installed after they were inspected by RCJ Lines president Rolando
Abadilla, Sr. RCJ Lines issued three post-dated checks in favor of Phil-Air to partly
cover the unpaid balance. All the post-dated checks were dishonored when Phil-Air
subsequently presented them for payment. In view of the failure of RCJ Lines to pay
the balance despite demand, Phil-Air filed a complaint for sum of money with prayer
for the issuance of a writ of preliminary attachment. RCJ Lines admitted that it
refused to pay the balance because Phil-Air allegedly breached its warranty. RCJ Lines
averred that the units did not sufficiently cool the buses despite repeated repairs. It
insists that Phil-Air was guilty of laches because it waited for eight years to file the
collection case.

Issue:

Whether or not the claim of Phil-Air was barred by laches.

Ruling:

No. In general, there is no room to apply the concept of laches when the law
provides the period within which to enforce a claim or file an action in court. Phil-Air's
complaint for sum of money is based on a written contract of sale. The ten-year
prescriptive period under Article 1144 of the Civil Code thus applies. The elements of
laches are: 1) conduct on the part of the defendant or one under whom he claims,
giving rise to the situation of which complaint is made and for which the complainant
seeks a remedy; 2) delay in asserting the complainant's right, the complainant
having had knowledge or notice of defendant's conduct and having been afforded an
opportunity to institute a suit; 3) lack of knowledge or notice on the part of the
defendant that the complainant would assert the right on which he bases his claim;
and 4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred.

Not all the elements of laches are present in the present case. Phil-Air filed the
complaint with the RTC on April 1, 1998. The time elapsed from August 4, 1989 (the
date of the price quotation, which is the earliest possible reckoning point), is eight
years and eight months, well within the ten-year prescriptive period. There was
simply no delay (second element of laches) where Phil-Air can be said to have
negligently slept on its rights. More significantly, there is no basis for laches as the
facts of the present case do not give rise to an inequitable situation that calls for the
application of equity and the principle of laches.

RESCISSION

THE WELLEX GROUP, INC. v. U-LAND AIRLINES, CO., LTD.

G.R. No. 167519, January 14, 2015, LEONEN, J.

The absence of fraud in a transaction does not mean that rescission under
Article 1191 is not proper.

Facts:

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Wellex and U-Land entered into a Memorandum of Agreement to expand their

respective airline operations in Asia. It stated that within 40 days from its execution
date, Wellex and U-Land would execute a share purchase agreement covering U-
Lands acquisition APIC shares PEC shares. Thereafter they agreed that if they were
unable to agree on the terms of the share purchase agreement and the joint
development agreement within 40 days from signing, then the First Memorandum of
Agreement would cease to be effective. In case no agreements were executed, the
parties would be released from their respective undertakings, except that Wellex
would be required to refund the US$3 million given as initial funding by U-Land for
the development projects. If Wellex failed, U-Land would have the right to recover on
the 57,000,000 PEC shares. However, the parties failed to enter into any share
purchase agreement. Despite such failure, subsequent transactions still transpired. U-
Land claimed that Wellex had unjustifiably refused to enter into the Share Purchase
Agreement. U-Land filed a Complaint praying for rescission of the First Memorandum
of Agreement and damages against Wellex. RTC ruled for the rescission of the
agreement. On appeal, the CA affirmed such ruling. Hence, the petition.

Issue:

Whether or not the First Memorandum of Agreement may be rescinded.

Ruling:

Yes. U-Land was not defrauded by Wellex to agree to the First Memorandum of
Agreement. U-Land was already aware that APC was not a subsidiary of APIC after the
40-day period. Still, it agreed to be bound by the First Memorandum of Agreement by
making the remittances from June 30 to September 25, 1998. Thus, Wellexs failure
to inform respondent U-Land that APC was not a subsidiary of APIC when the
agreement was being executed did not constitute fraud.

However, the absence of fraud does not mean that Wellex is free of culpability.
By failing to inform U-Land that APC was not yet a subsidiary of APIC at the time of
the execution of agreement, Wellex violated Article 1159 of the Civil Code. It was
incumbent upon Wellex to negotiate the terms of the pending share purchase
agreement in good faith. This duty included providing a full disclosure of the nature of
the ownership of APIC in APC. Unilaterally compelling U-Land to remit money to
finalize the transactions indicated in the Second Memorandum of Agreement cannot
constitute good faith. The case is not an action to declare the agreement null and
void due to fraud at the inception of the contract or dolo causante. The case is not an
action for fraud based on Article 1381 of the Civil Code. Rescission or resolution
under Article 1191 is predicated on the failure of one of the parties in a reciprocal
obligation to fulfill the prestation as required by that obligation. It is not based on
vitiation of consent through fraudulent misrepresentations.

ROGELIO S. NOLASCO, NICANORA N. GUEVARA, LEONARDA N. ELPEDES,

HEIRS OF ARNULFO S. NOLASCO, AND REMEDIOS M. NOLASCO,
REPRESENTED BY ELENITA M. NOLASCO v. CELERINO S. CUERPO, JOSELITO
ENCABO, JOSEPH ASCUTIA, AND DOMILO LUCENARIO
G.R. No. 210215, December 9, 2015, PERLAS-BERNABE, J.

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For a contracting party to be entitled to rescission (or resolution) the other

contracting party must be in substantial breach of the terms and conditions of their
contract.

Facts:

Rogelio S. Nolasco et al., as vendors, and Celerino S. Cuerpo et al., as vendee,

entered into a Contract to Sell a parcel of land. They agreed, among others, that the
sellers shall transfer the title over the subject land from a certain Edilberta N. Santos
to sellers' names, and, should they fail to do so, the buyers may cause the said
transfer and charge the costs incurred against the monthly amortizations. Thereafter,
the buyers sent the sellers a letter seeking to rescind the subject contract on the
ground of financial difficulties in complying with the same. They also sought the
return of the amount they had paid. As their letter went unheeded, the buyers filed a
complaint for rescission before the RTC. The RTC ruled in favor of the buyers and was,
later, upheld by the CA.

Issue:

Whether or not the CA correctly affirmed the RTC's ruling.

Ruling:

No. More accurately referred to as resolution, the right of rescission under

Article 1191 is predicated on a breach of faith that violates the reciprocity between
the parties to the contract. This retaliatory remedy is given to the contracting party
who suffers the injurious breach on the premise that it is 'unjust that a party be held
bound to fulfill his promises when the other violates his.'" Note that the rescission (or
resolution) of a contract will not be permitted for a slight or casual breach, but only
for such substantial and fundamental violations as would defeat the very object of
the parties in making the agreement. Ultimately, the question of whether a breach of
contract is substantial depends upon the attending circumstances.

A plain reading of paragraph 7 of the subject contract reveals that while the
RTC and the CA were indeed correct in finding that petitioners failed to perform their
obligation to effect the transfer of the title to the subject land from one Edilberta N.
Santos to their names within the prescribed period, said courts erred in concluding
that such failure constituted a substantial breach that would entitle respondents to
rescind (or resolve) the subject contract. To reiterate, for a contracting party to be
entitled to rescission (or resolution) in accordance with Article 1191 of the Civil Code,
the other contracting party must be in substantial breach of the terms and conditions
of their contract. A substantial breach of a contract, unlike slight and casual breaches
thereof, is a fundamental breach that defeats the object of the parties in entering into
an agreement. Here, it cannot be said that petitioners' failure to undertake their
obligation under paragraph 7 defeats the object of the parties in entering into the
subject contract, considering that the same paragraph provides respondents
contractual recourse in the event of petitioners' non-performance of the aforesaid
obligation, that is, to cause such transfer themselves in behalf and at the expense of
petitioners. Hence, the petition was partially granted.

ASB REALTY CORPORATION v. ORTIGAS & COMPANY LIMITED PARTNERSHIP

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G.R. No. 202947, December 9, 2015, BERSAMIN, J.

The Civil Code uses rescission in two different contexts, namely: (1) rescission
on account of breach of contract under Article 1191; and (2) rescission by reason of
lesion or economic prejudice under Article 1381.

Facts:

Ortigas entered into a Deed of Sale with Amethyst Pearl Corporation

involving a land for P2.024M. The RD issued a new TCT in the name of Amethyst and
that the conditions in the Deed of Sale were annotated as encumbrances. Amethyst
assigned the property to ASB under a Deed of Assignment in Liquidation in
consideration of 10,000 shares of the ASB's outstanding capital stock. The RD issued
a new TCT in the name of ASB with the same encumbrances annotated. Later,
Ortigas filed for specific performance against ASB alleging that ASB violated the
terms of the deed. Ortigas prayed for the reconveyance of the property or the
demolition of the structure, payment of penalties, attorney's fees and costs of suit.
The RTC dismissed the complaint stating that Ortigas is guilty of laches warranting a
presumption that the party entitled to assert it either abandoned it and that the
vendee referred to in the deed is Amethyst and not ASB. Initially, the CA affirmed the
RTCs decision but later reversed itself stating that Amethyst failed to finish
construction within the stated period in the deed and that Ortigas has a prescriptive
period of 10 years to enforce its remedies and that the mere assignment of the lot to
ASB does not defeat the right of Ortigas to avail the remedies. With regard to the
alleged inaction of Ortigas, it has the discretion to initiate action against the violators
hence, estoppel must fail.

Issue:

Whether or not the action for rescission by Ortigas would prosper.

Ruling:

No. The Civil Code uses rescission in two different contexts, namely: (1)
rescission on account of breach of contract under Article 1191; and (2) rescission by
reason of lesion or economic prejudice under Article 1381. Based on the foregoing,
Ortigas' complaint was predicated on Article 1191 of the Civil Code. Rescission under
Article 1191 of the Civil Code is proper if one of the parties to the contract commits a
substantial breach of its provisions. It abrogates the contract from its inception and
requires the mutual restitution of the benefits received; hence, it can be carried out
only when the party who demands rescission can return whatever he may be obliged
to restore.

Considering the foregoing, Ortigas did not have a cause of action against the
petitioner for the rescission of the Deed of Sale. Under Section 2, Rule 2 of the Rules
of Court, a cause of action is the act or omission by which a party violates a right of
another. The essential elements of a cause of action are: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the defendant not to violate such right; and (3) an act or
omission on the part of the defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the
latter may maintain an action for recovery of damages or other relief. It is only upon

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the occurrence of the last element that the cause of action arises, giving the plaintiff
the right to file an action in court for the recovery of damages or other relief.

The second and third elements were absent herein. The petitioner was not
privy to the Deed of Sale because it was not the party obliged thereon. Not having
come under the duty not to violate any covenant in the Deed of Sale when it
purchased the subject property despite the annotation on the title, its failure to
comply with the covenants in the Deed of Sale did not constitute a breach of contract
that gave rise to Ortigas' right of rescission. It was rather Amethyst that defaulted on
the covenants under the Deed of Sale; hence, the action to enforce the provisions of
the contract or to rescind the contract should be against Amethyst. In other words,
rescission could not anymore take place against the petitioner once the subject
property legally came into the juridical possession of the petitioner, who was a third
party, to the Deed of Sale.

SURETY

ESTANISLAO and AFRICA SINAMBAN v. CHINA BANKING CORPORATION

G.R. No. 193890, March 11, 2015, REYES, J.

Where there is a concurrence of two or more creditors or of two or more

debtors in one and the same obligation, Article 1207 provides that among them,
"[t]here is a solidary liability only when the obligation expressly so states, or when
the law or the nature of the obligation requires solidarity."

Facts:

The Spouses Manalastas executed a REM in favor of China Banking

Corporation (Chinabank) covering two real estate properties. The spouses
Manalastas also executed several promissory notes in favor of Chinabank. In two of
the PNs, petitioners Estanislao and Africa Sinamban signed as co-makers. Chinabank
filed a complaint against the spouses Manalastas and spouses Sinamban alleging
that they reneged on their loan obligations under the PNs. In this petition for review,
the spouses Sinamban seek to be completely relieved of any liability on the PNs
interposing among others the issue/defense that the CA erred in not considering the
Spouses Sinambans obligations more onerous and burdensome on their part as mere
sureties (co-maker) compared to the spouses Manalastas.

Issue:

Whether or not the CA erred in not considering the Spouses Sinambans

obligations more onerous and burdensome on their part as mere sureties (co-maker)
compared to the spouses Manalastas.

Ruling:

No. A co-maker of a PN who binds himself with the maker "jointly and
severally" renders himself directly and primarily liable with the maker on the debt,
without reference to his solvency.

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According to Article 2047 of the Civil Code, if a person binds himself solidarily
with the principal debtor, the provisions of Articles 1207 to 1222 of the Civil Code
(Section 4, Chapter 3, Title I, Book IV) on joint and solidary obligations shall be
observed. Thus, where there is a concurrence of two or more creditors or of two or
more debtors in one and the same obligation, Article 1207 provides that among
them, "[t]here is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity." It is settled that
when the obligor or obligors undertake to be "jointly and severally" liable, it means
that the obligation is solidary. In this case, the spouses Sinamban expressly bound
themselves to be jointly and severally, or solidarily, liable with the principal makers of
the PNs, the spouses Manalastas.

CCC INSURANCE CORPORATION v. KAWASAKI STEEL CORPORATION, et al.

G.R. No. 156162, June 22, 2015, LEONARDO-DE CASTRO, J.

As provided in Article 2047, the surety undertakes to be bound solidarily with

the principal obligor. That undertaking makes a surety agreement an ancillary
contract as it presupposes the existence of a principal contract.

Facts:

Kawasaki, and F.F. Maacop Construction Company, Inc. (FFMCCI) executed a

Consortium Agreement for the purpose of contracting with the Philippine Government
for the construction of a fishing port network in Pangasinan. The Project was awarded
to the Kawasaki-FFMCCI Consortium (Consortium). Kawasaki, on behalf of the
Consortium, secured from the PCIB a Letter of Credit in favor of DPWH to guarantee
the faithful performance by it of its obligation under the Construction Contract. The
Republic then made an advance payment for the project. For the release of its share
in said advance payment and in compliance with the Consortium Agreement, FFMCCI
secured a Performance Bond and a Surety Bond from CCCIC in favor of Kawasaki.
FFMCCI eventually received the amount of advance payment. While the project was
ongoing, FFMCCI ceased performing its work in the Project after suffering financial
problems. In line with this, Kawasaki formally demanded that CCCIC, as surety, to pay
it the amounts covered by the Surety and Performance Bonds. CCCIC did not act
upon the demand because allegedly said bonds were mere counter-guarantees, for
which CCCIC could only be held liable upon the filing of a claim by the Republic
against the Kawasaki-FFMCCI Consortium. Kawasaki filed before the RTC a
Complaint against CCCIC to collect on the Surety Bond and the Performance Bond.
After trial, the RTC dismissed the complaint. Upon appeal, the CA reversed the RTC
decision. Hence, this petition.

Issue:

Whether or not CCCIC is liable to Kawasaki under the Surety and Performance
Bonds.

Ruling:

Yes. The Surety and Performance Bonds do not contain any condition that
CCCIC would be liable only if, in addition to the default on its undertakings by

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FFMCCI, the Republic also made a claim against the PCIB Letter of Credit furnished by
Kawasaki, on behalf of the Kawasaki-FFMCCI Consortium. The Court cannot give any
additional meaning to the plain language of the undertakings in the Surety and
Performance Bonds. Article 1370 of the Civil Code provides that "[i]f the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control. It is not disputed that FFMCCI, due
to financial difficulties, was unable to repay the advance payment it received from
Kawasaki and to finish its scope of work in the Project, thus, FFMCCI defaulted on its
obligations to Kawasaki. Given the default of FFMCCI, CCCIC as surety became
directly, primarily, and absolutely liable to Kawasaki as the obligee under the Surety
and Performance Bonds.

PROPERTY

REAL PROPERTY

MANILA ELECTRIC COMPANY v. THE CITY ASSESSOR AND CITY TREASURER

OF LUCENA CITY
G.R. No. 166102, August 5, 2015, LEONARDO-DE CASTRO, J.

Under the Local Government Code, machinery, to be deemed real property

subject to real property tax, need no longer be annexed to the land or building.

Facts:

MERALCO received from the City Assessor of Lucena a copy of Tax Declaration
No. 019-6500 covering transformer and electric post, transmission line, electric meter
and insulator, located in Quezon Ave. Ext. Under the Tax Declaration, these electric
facilities were subjected to real property tax as of 1985. MERALCO claimed that its
capital investment consisted only of its substation facilities and that MERALCO was
exempted from payment of real property tax on said substation facilities. On the
other hand, the Assessor claims that MERALCO could no longer claim exemption from
real property tax on its machineries with the enactment of RA 7160, or the Local
Government Code.

Issue:

Whether or not the transformer, electric post, transmission line, electric meter
and insulator are real properties.

Ruling:

Yes. The machinery subject to real property tax under Section 199 of the Local
Government Code "may or may not be attached, permanently or temporarily to the
real property;" and the physical facilities for production, installations, and
appurtenant service facilities, those which are mobile, self-powered or self-propelled,
or are not permanently attached must (a) be actually, directly, and exclusively used
to meet the needs of the particular industry, business, or activity; and (2) by their
very nature and purpose, be designed for, or necessary for manufacturing, mining,
logging, commercial, industrial, or agricultural purposes. Although the Civil Code

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under article 415 provides a definition of real properties, the LGC being a special law
prevails.

EJECTMENT

SIO TIAT KING v. VICENTE G. LIM, et al.

G.R. No. 185407, June 22, 2015, REYES, J.

A third party's possession of a property is legally presumed to be based on a

just title, a presumption which may be overcome by the purchaser in a judicial
proceeding for recovery of the property. Through such a judicial proceeding, the
nature of the adverse possession by the third party may be determined, after such
third party is accorded due process and the opportunity to be heard. The third party
may be ejected from the property only after he has been given an opportunity to be
heard, conformably with the time-honored principle of due process.

Facts:

Spouses Calidguid executed a Compromise Agreement binding themselves to

pay the amount of P2,520,000.00 to Spouses Lee. However, the former failed to
comply with the terms of the said decision, leading the latter to avail of the remedy
of execution. Consequently, a parcel of land belonging to the Spouses Calidguid was
levied on execution. During its sale at a public auction, the judgment creditor, Jaime
Lee, emerged as the highest bidder. As an assignee of the Spouses Calidguid, Sio Tiat
King (King) redeemed the subject property before the expiration of the redemption
period. 11 years thereafter, King filed a motion for the issuance of a writ of
possession which was granted by the RTC. A Notice to Vacate was addressed to all
persons affected thereby. The Lims, claiming their right over the property as
registered owners of the same, filed an Entry of Appearance with Motion to Quash
Writ of Execution. However, the RTC denied the same. The Lims filed a Petition for
Certiorari before the CA alleging that the RTC erred when it issued a decision ousting
them from their property by virtue of the writ of possession, without a separate and
independent action to resolve the issue of ownership. The CA annulled the order of
the RTC. Kings Motion for Reconsideration was denied by CA. Hence, this petition.

Issue:

Whether or not the Lims may be evicted from the property by virtue of a writ
of possession issued in favor of King.

Ruling:

No. Under Article 433 of the Civil Code, actual possession under claim of
ownership raises a disputable presumption of ownership. The true owner must resort
to judicial process for the recovery of the property. While King and the Lims are
contending for the possession and ownership of the same property, an ejectment suit
should have been filed by King before the Lims could be evicted from the property.
This is due to the existence of their ostensibly conflicting titles coupled with the Lims'
actual possession over the property. "One who claims to be the owner of a property
possessed by another must bring the appropriate judicial action for its physical

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recovery. The 'judicial process' could mean no less than an ejectment suit or a
reivindicatory action, in which the ownership claims of the contending parties may be
properly heard and adjudicated." King took a procedural shortcut when he applied for
the issuance of a writ of possession instead of filing a suit to recover possession of
the property against the Lims. Besides, as the CA had espoused, the issuance of the
writ of possession produced a peculiar situation in which the writ sought by King was
directed against himself as the assignee of the judgment debtors.

TOMASA J. SABELLINA v. DOLORESBURAY, LEDENIA VILLAMOR, ARLENE

MAGSAYO, LUDIMA ROMULO, RAMON CANADELLA, ROBERTO ACIDO, MARIO
ESPARGUERA, RODRIGO ACIDO, RONNIE UBANGAN and CONCEPCION
REBUSTO
G.R. No. 187727, September 2, 2015, BRION, J.

In ejectment cases, possession, not ownership, is the central issue.

Facts:

Petitioner Tomasa Sabellina filed a complaint for unlawful detainer against the
respondents before the MCTC of Laguindingan-Gitagum, Misamis Oriental. Tomasa
claimed that she is the owner of a 13, 267- square meter parcel of land in
Mauswagon, Laguindingan, Misamis Oriental and that she inherited the property after
her parents death pursuant to a Deed of Extrajudicial Settlement she executed with
her co-heirs. Tomasa further alleged that she allowed the respondents to construct
their houses on the lot on condition that they would vacate the property when she
needed it and in early 2003, she verbally requested the respondents to vacate the lot
but they refused.

The respondents denied Tomasas allegations and claimed that the DENR
declared the subject lot alienable and disposable; (2) that they had possessed the
subject lot in good faith since the 1970s and had acquired it through acquisitive
prescription and that Tomasa did not object when they constructed a chapel on the
lot without her permission.

The MCTC rendered a decision ejecting the respondents. The RTC found no
compelling reason to amend or reverse the findings of the MCTC. The CA reversed the
decisions of the lower courts.

Issue:

Whether or not the CA erred in dismissing the complaint and in ruling that
Tomasa had failed to establish her allegations of tolerance by preponderance of
evidence.

Ruling:

No. The petitioners father, Demetrio Jaramillo, entered the property in 1948
and declared it in his name under T.D. No. 4343. Demetrio died on 7 November 1953
but his heirs continued to declare the property for tax purposes in his name until
1994. On 30 April 1990, the heirs of Demetrio executed a Deed of Extrajudicial
Settlement adjudicating the subject lot to Tomasa. Tomasa declared the property in

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her name under T.D. No. 944316- P in 1997, T.D. 024034 in 2002, and 027372 in
2005. However, at an uncertain point in time prior to the extrajudicial settlement, the
respondents entered the property and occupied it under undetermined
circumstances.

Like the lower courts, the Court is convinced that the petitioner is the rightful
owner of the subject lot. However, this case is an ejectment proceeding where
possession, not ownership, is the central issue. While the petitioners tax declarations
are good indicia of her possession in the concept of an owner, this only refers to
possession de jure not possession de facto. Indisputably, the respondents are in the
actual physical possession of the subject lot. The tax declarations do not shed light
on the circumstances of the respondents entry into the property. From the
petitioners evidence, only the affidavits of Tomasa Sabellina and Elena R. Jaramillo,
and the promissory agreement from Roberto Acido are instructive as to the nature of
the respondents possession.

The petitioner failed to present convincing proof of her allegation of tolerance.

There is no competent evidence to support her claim other than her own self-serving
affidavit repeating her allegations in the complaint. Allegations are not evidence and
without evidence, bare allegations do not prove facts. The petitioner, however, is not
left without a remedy in law. She may still avail of the plenary actions of accion
publiciana or accion reinvindicatoria to recover possession and vindicate her
ownership over the property.

ACCION REINVINDICATORIA

SPOUSES ROMEO and ADORINA JAVIER v. SPOUSES EVANGELINE and

VIRGILIO DE GUZMAN, ARNEL, EDGAR and HENRY PINEDA and REGINO
RAMOS
G.R. No. 186204, September 2, 2015, PERALTA, J.

A boundary dispute must be resolved in the context of accion

reivindicatoria, not an ejectment case. A boundary dispute is not about possession,
but encroachment.

Facts:

Spouses Javier (plaintiffs) are the absolute owners of a parcel of land and are
in prior physical possession of the entire property. Sps. De Guzman unlawfully
entered and arrogated unto themselves ownership thereof by enclosing the same
with concrete hollow blocks fence. Sps. Javier made a request to conduct a relocation
survey so as to prove the metes and bounds of said property and in the said survey it
appears that Sps. De Guzman have encroached an area. Despite demands, they
continued to remain and Sps. Javier suffered. Sps. Javier filed with the MTCC, a
Complaint against Sps. De Guzman for Ejectment. MTCC dismissed the complaint on
the ground that such is a boundary dispute and a plenary action with the RTC is the
proper remedy. RTC reversed. CA reinstated the MTCC decision.

Issue:

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Whether or not the remedy of Sps, Javier should be an action for recovery of
possession and not one for ejectment.

Ruling:

Yes. The MTCC and the CA are correct that the meat of the controversy
between herein parties is the actual boundaries or the metes and bounds of their
respective lots. Manalang v. Bacani (G.R. No. 156995, 2015) is quite instructive: A
boundary dispute must be resolved in the context of accion reivindicatoria, not an
ejectment case. The boundary dispute is not about possession, but encroachment,
that is, whether the property claimed by the defendant formed part of the plaintiffs
property. A boundary dispute cannot be settled summarily under Rule 70 of the ROC,
the proceedings under which are limited to unlawful detainer and forcible entry.

Opposing possessory rights over certain areas of adjacent lots, arising from
claims of ownership thereof, cannot be resolved in a summary action such as an
ejectment suit. The issues involved in such a controversy should be fully threshed out
in an action like accion reivindicatoria, especially when plaintiff fails to establish
actual prior possession. It was already held therein that if a party is indeed the owner
of the premises subject of this suit and she was unlawfully deprived of the real right
of possession or the ownership thereof, she should present her claim before the RTC
in an accion publiciana or an accion reivindicatoria, and not before the MTC in a
summary proceeding of unlawful detainer or forcible entry.

ACQUISITIVE PRESCRIPTION

ROBERTO STA. ANA DY, et al. v. BONIFACIO A. YU, et al.

G.R. No. 202632, July 08, 2015, PERLAS-BERNABE, J.

Section 41 of the Code of Civil Procedure provides for the applicable

prescriptive period to vest ownership over the subject portion, considering that
Article 1116 of the New Civil Code provides that prescription already running before
the effectivity of this Code shall be governed by laws previously in force.

Facts:

The subject Lot 1519 was inherited by the Dy children, including petitioner
Roberto, from their parents. Since Carlos and Lilia sold their respective shares over
the properties to their brother pursuant to an Extrajudicial Settlement with Sale,
Roberto was issued OCT No. 511 over Lot 1519. Roberto filed a complaint
for recovery of possession with damages against Susana and Sixto Tan. He alleged
that the occupation of Rosario, and later Susana, of the property was by mere
accommodation, but Susana contended that Robertos father, Adriano Dy Chiao,
donated the subject land to Rosario. Susana also attacked the validity of the
Extrajudicial Settlement with Sale as well as Robertos OCT No. 511. The RTC
dismissed Roberto's complaint and declared Rosario as the lawful owner of the
subject lot. Pending appeal to the CA, Roberto and his wife, executed a Deed of
Donation in favor of their children petitioners over Lot 1519. The CA then reversed
the ruling of the RTC and ruled that Rosario's defenses attacking the validity of OCT
No. 511 on the ground of fraud amounted to a prohibited collateral attack on

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Roberto's title. Rosario's motion for reconsideration and petition for review were
denied. Thus, the decision attained finality.

Prior to the resolution of Rosario's motion for reconsideration in the Recovery

Case, Rosario filed a complaint for reconveyance with damages against
Roberto before the RTC Branch 26, which was dismissed on the ground of litis
pendentia and forum shopping. Rosario also filed a complaint for the annulment
and/or rescission of the Deed of Donation with damages against petitioners before
the same RTC branch. The RTC-Branch 26 dismissed the Annulment Case on the
ground of litis pendentia and forum shopping. However, on reconsideration, the
Annulment Case was reinstated finding that the controversy principally involved
annulment of donation, which is not identical with the Recovery and Reconveyance
Cases. The RTC-Branch 26 ordered the annulment and/or rescission of the Deed of
Donation, as well as the reconveyance of Lot 1519-A, in respondents' favor. It upheld
respondents' claim of ownership over Lot 1519-A not on account of the donation
made by Dy Chiao to Rosario, but by virtue of acquisitive prescription. The CA
affirmed the said ruling.

Issue:

Whether or not the respondents are the lawful owners of the subject lot, thus
making the Deed of Donation executed by Roberto in favor of his children null and
void.

Ruling:

Yes. While there is no gainsaying that the first deed of donation executed by
Dy Chiao in Rosario's favor is void for failure to comply with the formalities under the
old and new Civil Code, it has not been disputed that Rosario was in actual, open,
public, and continuous possession of Lot 1519-A under a claim of ownership since
1938. Section 41 of the Code of Civil Procedure provides for the applicable
prescriptive period (ten years) to vest ownership over the subject portion,
considering that Article 1116 of the New Civil Code provides that "[p]rescription
already running before the effectivity of this Code [(August 30, 1950)] shall be
governed by laws previously in force x x x."

Based on the foregoing, it is then clear that Rosario's actual possession of Lot
1519-A for more than ten years under Section 41 of the Code of Civil Procedure, had
already ripened into ownership at the time Roberto filed his complaint in the
Recovery Case in May 22, 1989, as well as at the time the Decision ordering the
issuance of OCT No. 511 was rendered in October 14, 1986, and necessarily the
issuance of the OCT itself in October 6, 1987. Note that even under the New Civil
Code, Rosario's possession of the said portion still ripened into ownership since she
has been in uninterrupted possession thereof for more than thirty (30) years, even in
the absence of good faith and just title. Hence, there is no denying that Rosario and
now, her heirs, i.e., herein respondents, are the rightful owners of Lot 1519-A by
virtue of acquisitive prescription.

As a logical consequence, petitioners did not become owners of the subject

property even after a TCT had been issued in their names. Since Rosario's claim of
ownership was limited only to Lot 1519-A and not the entire Lot 1519, the donation

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remains to be valid insofar as it involves that portion rightfully belonging to the Dy

children.

EASEMENT OF RIGHT OF WAY

DEMETRIA DE GUZMAN, et al. v. FILINVEST DEVELOPMENT CORPORATION

G.R. No. 191710, January 14, 2015, DEL CASTILLO, J.

The easement of right of way shall be established at the point least prejudicial to the
servient estate.

Facts:

De Guzman, et al. were co-owners in fee simple of a parcel of land. One of its
adjoining properties is Filinvest Home Subdivision Phase IV-A, a subdivision owned
and developed by respondent Filinvest Development Corporation which, coming from
petitioners' property, has a potential direct access to Marcos highway either by foot
or vehicle. As such, petitioners filed a Complaint for Easement of Right of
Way against respondent before the RTC, which rendered a decision granting
petitioners the right of way. Upon respondent's appeal, the CA affirmed petitioners'
entitlement to legal easement of right of way. As none of the parties appealed the
said CA Decision, the same became final and executory. Petitioners insisted that the
right of way pertains only to Road Lot 15 where the fence separating their property
from respondent's subdivision, which was supposed to be removed to grant them
access thereto, is located. On the other hand, it was respondent's contention that the
right of way covers the whole stretch from petitioners' property all the way to its
subdivision's gate leading to Marcos Highway. In resolving the same, the RTC
deduced that the right of way granted pertains only to Road Lot 15. The CA agreed
with respondent and granted the appeal. Hence, the petition.

Issue:

Whether or not the right of way granted to petitioners covers merely Road Lot
15.

Ruling:

No. The right of way granted to petitioners covers the network of roads within
respondent's subdivision and not merely Road Lot 15. To the Court's mind, the cause
of confusion as regards the extent of the right of way granted to petitioners is the
absence in the said RTC Decision of any categorical statement with respect thereto.
Be that as it may, it is not difficult to conclude therefrom that what was intended to
serve as petitioners' right of way consisted of the road network within respondent's
subdivision and not merely of Road Lot 15. As may be recalled, the RTC then in
resolving the complaint for easement of right of way was confronted with the
contentious issue as to which between the two routes from petitioners' property, i.e.,
the one passing through respondent's subdivision leading to Marcos Highway or the
one passing through another property leading to Sumulong Highway, is the more
adequate and less prejudicial route pursuant to the requirement of the law. Thus,
when it made the following comparison and eventually concluded that the route

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passing through respondent's subdivision is the more adequate and the less
prejudicial way, what it obviously had it mind was the road network in respondent's
subdivision since the measurement thereof in meters corresponds with that
mentioned by the RTC.

LAND TITLES AND DEEDS

PROPERTY RESERVED FOR PUBLIC/QUASI-PUBLIC PURPOSE

NAVY OFFICERS' VILLAGE ASSOCIATION, INC. (NOVAI) v. REPUBLIC OF THE

PHILIPPINES
G.R. No. 177168, August 03, 2015, BRION, J.

Property which has been reserved for public or quasi-public use or purpose
are non-alienable and shall not be subject to sale or other disposition until again
declared alienable by law or by proclamation of the President.

Facts:

TCT No. T-15387 was issued in NOVAI's name covering a 475,009 square-
meter parcel of land situated inside the former Fort Andres Bonifacio Military
Reservation (FBMR). On July 12, 1957, then President Carlos P. Garcia issued
Proclamation No. 423 reserving for military purposes the subject lot. On September
29, 1965, then Pres. Diosdado Macapagal issued Proclamation No. 461 which
excluded the subject lot from Fort McKinley. However, on October 25, 1965, Pres.
Macapagal issued Proclamation No. 478 reserved the subject lot for the Veterans
Federation of the Philippines (VFP). On November 15, 1991, the property was the
subject of a Deed of Sale between the Republic, through former Land Management
Bureau (LMB) Director Abelardo G. Palad, Jr. and NOVAI. The Republic sought to
cancel NOVAIs title claiming that the lot is part of a military reservation and that the
title is fictitious. NOVAI counter-argued that the property was no longer part of the
public dominion, as the land had long been segregated from the military reservation
pursuant to Proclamation No. 461.

Issue:

Whether or not the subject property is inalienable.

Ruling:

Yes. NOVAI failed to discharge its burden of proving that the property was
withdrawn from the intended public or quasi-public use. Under CA 141, the President
may classify lands of the public domain as alienable and disposable, mineral or
timber land, and transfer such lands from one class to another at any time. While
Proclamation No. 461 withdrew a certain area or parcel of land from the FBMR and
made the covered area available for disposition in favor of the AFPOVAI, Proclamation
No. 478 subsequently withdrew the property from the total disposable portion and
reserved it for the use of the VRMTC. With the issuance of Proclamation No. 478, the
property was transferred back to that class of public domain land reserved for public
or quasi-public use. Property which are intended for public or quasi- public use or for

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some public purpose are public dominion property of the State and are outside the
commerce of man. NOVAI, therefore, could not have validly purchased the property in
1991.

JURISDICTION OF COURTS

ROSARIO BANGUIS-TAMBUYAT V. WENIFREDA BALCOM-TAMBUYAT

G.R. No. 202805, March 23, 2015, DEL CASTILLO, J.

The active participation of the party against whom the action was brought,
coupled with his failure to object to the jurisdiction of the court or quasi-judicial body
where the action is pending, is tantamount to an invocation of that jurisdiction and a
willingness to abide by the resolution of the case and will bar said party from later on
impugning the court or bodys jurisdiction.

Facts:

During the marriage of Adriano and Wenifreda, Adriano acquired a parcel of

land in Bulacan. The deed of sale over the said property was signed by Adriano alone
as vendee and one Rosario Banguis as a witness. When the TCT of the property was
issued, it was under the name of Adriano married to Rosario.

Wenifreda filed a Petition for Cancellation of the title alleging that she was the
surviving spouse of Adriano and that the TCT was erroneously registered and made in
the name of Adriano married to Rosario. Rosario claimed that she alone bought the
property using her personal funds and that she and Adriano were married.

The trial court held that under the Property Registration Decree, court
authorization is required for any alteration or amendment of a certificate of title when
any error, omission or mistake was made in entering a certificate; that it has been
established that Wenifreda is the surviving spouse of Adriano, and the subject
property was acquired during their marriage, but it was erroneously registered in the
name of another.

On appeal, Rosario contends that she is the actual owner and possessor of the
property and by virtue of which, a proper action in a different court exercising general
jurisdiction should be filed, rather than in the current trial court which sits merely as
a land registration court.

Issue:

Whether or not the court sitting as a land registration court can resolve the
objections raised by Rosario.

Ruling:

Yes. The trial court in LRC Case No. P-443-99 was not precluded from resolving
the objections raised by Banguis in her opposition to the petition for cancellation; a
separate action need not be filed in a different court exercising general jurisdiction.
Banguis should be considered to have acquiesced and freely submitted the case to

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the trial court for complete determination on her opposition, when she went to trial
and adduced and submitted all her relevant evidence to the court. The active
participation of the party against whom the action was brought, coupled with his
failure to object to the jurisdiction of the court or quasi-judicial body where the action
is pending, is tantamount to an invocation of that jurisdiction and a willingness to
abide by the resolution of the case and will bar said party from later on impugning
the court or bodys jurisdiction.

CLOUD ON TITLE

CLT REALTY DEVELOPMENT CORPORATION v. PHIL-VILLE DEVELOPMENT AND

HOUSING CORPORATION, et al.
G.R. No. 160728, March 11, 2015, LEONARDO-DE CASTRO, J.

Any title that traces its source to an inexistent mother title is void.

Facts:

A complaint for quieting of title, damages and injunction was filed by Phil-Ville
Development and Housing Corporation (PDH) against CLT and the Register of Deeds
of Metro Manila before the RTC of Caloocan City, claiming that it is the registered
owner and actual possessor of sixteen (16) parcels of land in the same city. It also
argued that CLTs TCT, although apparently valid or effective, is in truth and in fact,
invalid and ineffective. On the other hand, CLT prayed for the issuance of a writ of
injunction before the same court, claiming its valid right and title over the properties.
The RTC declared PDH the true owner of the properties and declared CLTs title null
and void. The CA affirmed the RTC ruling.

Issue:

Whether or not CLTs TCT imposes a cloud on PDHs titles to the sixteen (16)
parcels of land.

Ruling:

No. Of particular relevance to this present case is the ruling in the 2009
Manotok Resolution that the certificate of title of CLT, who is also a party to said
consolidated cases, is null and void. Therefore, the cloud on respondent PDHs
sixteen (16) titles, subject matter of the complaint, had already been removed. From
its answer in the complaint filed before the RTC to its memorandum filed before this
Court, CLT proudly traces the problematic TCT to its previous owner, Estelita Hipolito,
who acquired said lot from Dimson.

In Manotok, the same title was also the subject matter of one of the
consolidated cases. Hipolito's title emanated from Dimsons TCT, a title issued
pursuant to an order of the CFI. Dimsons title appears to have been sourced from an
OCT. In Manotok, it was established that the true date of OCT No. 994 is May 3, 1917,
and that there is only one (1) OCT No. 994. The decree of registration was issued on
April 19, 1917, and actually received for transcription by the Register of Deeds on
May 3, 1917. 51 Thus, all the titles that traced its roots to the spurious OCT No. 994

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dated April 19, 1917 were invalidated, including CLTs TCT. It is evident from all three
titles CLT's, Hipolitos and Dimsons that the properties they purport to cover
were originally registered on the 19th day April, in the year nineteen hundred and
seventeen in the Registration Book of the Office of the Register of Deeds of Rizal.
Note, as earlier established, there is no such OCT No. 994 originally registered on 19
April 1917.

Thus, any title that traces its source to OCT No. 994 dated 17 April 1917 is
void, for such mother title is inexistent. The fact that the Dimson and CLT titles made
specific reference to an OCT No. 994 dated 17 April 1917 casts doubt on the validity
of such titles since they refer to an inexistent OCT. This error alone is, in fact,
sufficient to invalidate the Dimson and CLT claims over the subject property if
singular reliance is placed by them on the dates appearing on their respective titles.
As a matter of fact, in Alfonso v. Office of the President and Phil-Ville Development
and Housing Corporation, the Court penalized the former register of deeds of
Caloocan who acquiesced to the change of the date and registration of OCT No. 994
from May 3, 1917 to April 19, 1917, which wreaked havoc on our countrys land titling
system, and led to much confusion that continued to rear its ugly head in many
cases pending before the courts. Our findings regarding the titles of Jose Dimson
necessarily affect and even invalidate the claims of all persons who seek to derive
ownership from the Dimson titles. These include CLT, which acquired the properties
they laid claim on from Estelita Hipolito who in turn acquired the same from Jose
Dimson.

In view of the foregoing disquisitions, invalidating the titles of Dimson, the title
of CLT should also be declared a nullity inasmuch as the nullity of the titles of Dimson
necessarily upended CLTs propriety claims. As earlier highlighted, CLT had anchored
its claim on the strength of Hipolitos title and that of Dimsons TCT. Remarkably and
curiously though, the said TCT was never presented in evidence for purposes of
tracing the validity of titles of CLT. On this basis alone, the present remand
proceedings remain damning to CLTs claim of ownership. Thus, both requisites in
order for an action for quieting of title to prosper have been met in this case: (1) PDH
established its equitable title or interest in the sixteen (16) parcels of land subject of
the action; and (2) the TCT found to overlap titles to said properties of PDH was
previously declared invalid.

CERTIFICATE OF TITLES COVERING THE SAME LAND

JOSE YULO AGRICULTURAL CORPORATION v. SPOUSES PERLA CABAYLO

DAVIS AND SCOTT DAVIS
G.R. No. 197709, August 3, 2015, DEL CASTILLO, J.

The general rule is that where two certificates of title purport to include the
same land, the earlier in date prevails.

Facts:

A lot owned by Jose Yulo was subdivided into lots covered by 2 TCTs. The first
lot was further subdivided. Among these lots are lots 24, 25, 72, 91, 92, and 96. Yulo
sold lots 91, 92, and 96 to the Madrinas. Lots 24, 25, 91, 92 and 96 were

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subsequently mortgaged to Nation Bank, which eventually foreclosed and became

the owner of the lots. Nation Bank sold these lots to Spouses Davis and 3 TCTs were
then issued in their favor over lots 91, 92, and 96. On the other hand, a new TCT was
issued over lot 72 in the name of Jose Yulo Agricultural Corporation (JYAC). Lot 72 was
further subdivided. Among these lots are lots 3 and 5 which were sold to Spouses
Trajera. Spouses Davis then received demand letters from the Trajeras requiring them
to remove a portion of the improvements which they claim encroached upon their
respective properties. Spouses Davis then filed a case for quieting of title against the
Trajeras, Yulo and Nation Bank before the RTC. The RTC ruled in favor of Spouses
Davis, and was affirmed by the CA.

Issue:

Whether or not Spouses Davis have better rights than JYAC over lots 91, 92,
and 96.

Ruling:

Yes. The Court held in a line of cases that the general rule is that in the case of
the two certificates of title, purporting to include the same land, the earlier in date
prevails. In successive registrations, where more than one certificate is issued in
respect of a particular estate or interest in land, the person claiming under the prior
certificate is entitled to the estate or interest and that person is deemed to hold
under the prior certificate who id the holder of, or whose claim is derived directly or
indirectly from the person who was the holder of the earliest certificate issued in
respect thereof.

Given the foregoing facts, Yulo and JYAC knew everything as far as his land is
concerned, or is charged with knowledge at least. Yulo was the sole owner of the
properties involved, and he and his outfit were the sellers of the properties which
eventually were acquired by Spouses Davis and the Trajeras. They cannot claim to be
ignorant of everything that went on with the properties they owned. They cannot be
allowed to benefit from their own mistakes at the expense of Spouses Davis.

If there is anybody who must be considered in bad faith, it is they; they should
have known that there was an overlapping of titles in their very own lands. Thus,
there is no doubt that Spouses Davis titles were derived from Yulos and this fact was
not even assailed or denied by JYAC in any of its pleadings.

JURISDICTION OF DAR

THE HON. SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM v.

NEMESIO DUMAGPI
G.R. No. 195412, February 4, 2015, REYES, J.

DARABs New Rules of Procedure issued on May 30, 1994 expressly

recognized, under Section 1(g), Rule II thereof, that matters involving strictly the
administrative implementation of R.A. No. 6657, otherwise known as the CARL of
1988 and other agrarian laws as enunciated by pertinent rules, shall be the exclusive
prerogative of and cognizable by the Secretary of the DAR.

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Facts:

Respondent filed a complaint for Accion Reivindicatoria, Quieting of Title, and

Damages before the RTC against Aguilar, Valencia, Custodio and the Secretary of DAR
(herein petitioners), wherein he alleged that he is the owner of subject land and that
due to his open, notorious, adverse and exclusive possession, occupation and
cultivation of the said land in the concept of owner since July 4, 1945, during which
he introduced improvements thereon, the said lot has long been converted into his
private property by operation of law. He applied for a free patent over the land which
was approved but was never released due to the opposition from petitioners. It was,
later on, when he discovered that the titles had been issued to private defendants.
The private defendants moved to dismiss the complaint on September 19, 1997 on
the ground that the controversy involved the implementation of the agrarian reform
law, which is outside the courts jurisdiction. DAR in its answer sought the dismissal
of the complaint, arguing that Nemesio did not own or possess the subject lot and
thus has no cause of action to recover title and possession, much less seek the
removal of a cloud over his alleged title, even as the titles issued by DAR can only be
attacked directly and not collaterally.

Issue:

Whether or not DAR has jurisdiction over the controversy.

Ruling:

Yes. As the lead agency in the governments Agrarian Reform Program, DAR
issued Administrative Order No. 09-89, Series of 1989, on May 5, 1989, containing
the "Rules and Procedures Governing Titling and Distribution of Lots in DAR
Settlement Projects," intended to accelerate the issuance of CLOAs to qualified
beneficiaries in settlement projects administered by the DAR; it covers the titling and
distribution of agricultural lands within proclaimed settlement projects under the
administration of the DAR, as provided for by existing laws. Moreover, as the lead
agency mandated to implement the government's agrarian reform program, the DAR
is the real party in interest, since at issue is the validity of its actions comprising the
determination of the qualified agrarian reform beneficiaries and the issuance of
CLOAs and titles to them. Since, therefore, the implementation of agrarian law is
within the exclusive jurisdiction of the DAR Secretary, and issues concerning the
issuance of the subject titles can only be raised to the DAR Secretary, the RTC has no
jurisdiction to decide Civil Case No. 3985, and its judgment therein is of necessity
void and can never become final.

POSSESSION AND OCCUPATION

REPUBLIC OF THE PHILIPPINES v. CECILIA GRACE L. ROASA, married to GREG

AMBROSE ROASA, as herein represented by her Attorneys-in-Fact,
BERNARDO M. NICOLAS, JR. and ALVIN B. ACAYEN
G.R. No. 176022, February 2, 2015, PERALTA, J.

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Section 14(1) of the Property Registration Decree should be interpreted to

include possession before the declaration of the lands alienability as long as at the
time of the application for registration, the land has already been declared part of
the alienable and disposable agricultural public lands.

Facts:

Republic of the Philippines, through the OSG, opposed the application for
registration of title over a parcel of land filed by the respondent. It alleged that the
respondent failed to comply with the required 30-year adverse possession since the
subject land was declared alienable and disposable land of the public domain only on
March 15, 1982 per CENRO certification, and the application was filed only on
December 12, 2000. Hence, any period of possession prior to the date when the
subject land was classified as alienable and disposable is inconsequential and should
be excluded from the computation of the 30-year period of possession.

Issue:

Whether or not possession of the lot by respondent and her predecessors-in-

interest before the establishment of alienability of the said land should be excluded in
the computation of the period of possession for purposes of registration.

Ruling:

No. Section 14(1) of the Property Registration Decree should be interpreted to

include possession before the declaration of the lands alienability as long as at the
time of the application for registration, the land has already been declared part of the
alienable and disposable agricultural public lands. There was no other legislative
intent that could be associated with the date, June 12, 1945, as written in our
registration laws except that it qualifies the requisite period of possession and
occupation. The law imposes no requirement that land should have been declared
alienable and disposable agricultural land as early as June 12, 1945.

Therefore, what is important in computing the period of possession is that the

land has already been declared alienable and disposable at the time of the
application for registration. Upon satisfaction of this requirement, the computation of
the period may include the period of adverse possession prior to the declaration that
land is alienable and disposable.

WHERE DATE OF REGISTRATION IS RECKONED FROM

CLT REALTY DEVELOPMENT CORPORATION v. HI-GRADE FEEDS

CORPORATION, REPUBLIC OF THE PHILIPPINES (through OSG), REGISTER OF
DEEDS OF METRO MANILA, DISTRICT III, CALOOCAN CITY, and the COURT OF
APPEALS
G.R. No. 160684, September 2,2015, PEREZ, J.

The date of registration is reckoned from the time of the title's transcription in
the record book of the Registry of Deeds (RD). Therefore, the date appearing on the

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face of a title refers to the date of issuance of the decree of registration, as provided
in Sections 41 and 42 of the Land Registration Act or Section 40 of the P.D. 1529.

Facts:

Hi-Grade is the registered owner of two parcels of land under Ruiz and
Leuterio, which is a derivative title of the mother title. It was sold to Gonzales. Upon
Gonzalez's death, the land was subdivided into seven lots. Seven new titles were
issued under the children of Gonzalez. The Government expropriated the seven lots
then consolidated the titles and then further subdivided the property into 77 lots.
One of the 77 lots was under Benito which was further subdivided into Lot-A and 17-
B. Lot 17-B was later on under Madulid, Sr., which was later on sold to Hi-Grade.
Another lot is Lot No. 52, which was under Alvarez. Soon after, Alvarez sold it to
Madulid, Sr. Afterwards, Madulid, Sr. sold the lot to Hi-Grade. CLT is the registered
owner of the TCT by virtue of a Deed of Absolute Sale with Real Estate Mortgage
executed by the former registered owner, Hipolito. The conflict arose due to an
overlapping of the properties of CLT and Hi-Grade, which prompted CLT to file a case
for Annulment of Transfer Certificates of Title, Recovery of Possession, and Damages.
RTC ruled in favor of CLT because Hi-Grade's title, the older title, cannot prevail over
CLT's title because it suffers from patent defects and infirmities. CA reversed and
ruled as baseless the RTCs reliance on the testimonies of CLTs witnesses.

Issue:

Whether or not CLTs OCT shall prevail over Hi-Grades OCT.

Ruling:

No. CLT's OCT No. 994 is dated 19 April 1917 and Hi-Grade's OCT No. 994 is
dated 3 May 1917. A title can only have one date of registration, as there can only be
one title covering the same property. The date of registration is reckoned from the
time of the title's transcription in the record book of the Registry of Deeds (RD).
Therefore, the date appearing on the face of a title refers to the date of issuance of
the decree of registration, as provided in Sections 41 and 42 of the Land Registration
Act or Section 40 of the P.D. 1529. Based on the Decree in Land Registration Case
(LRC), the decree registering OCT No. 994, the date of the issuance is 19 April 1917
while on the other hand, OCT No. 994 was received for transcription by the RD on 3
May 1917. In this case, the date which should be reckoned as the date of registration
of the title is the date when the mother title was received for transcription, 3 May
1917. Therefore, as the date of transcription in the record book of the RD is 3 May
1917, it is ruled that the genuine title is the title of Hi-Grade.

Also, as correctly ruled by CA, CLT failed to prove by preponderance of

evidence, the alleged defects and infirmities in TCT No. 4211, the title from whence
Hi-Grade's titles were derived. CLT failed to discharge such burden. CLT's evidence
must stand or fall on its own merits and cannot be allowed to draw strength from the
alleged weakness of the evidence of Hi-Grade. As already shown, such allegation was
proven wrong by documents on records. As opposed to CLT's evidence, Hi-Grade was
able to establish the chain of titles linking its titles, TCTs No. 237450 and T-14691, to
the derivative title, TCT No. 4211, to the mother title, OCT No. 994. As the Court has
priorly pronounced, any title that traces its source to a void title, is also void. The
spring cannot rise higher than its source. Nemo potest plus Juris ad alium transferre

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quam ipse habet. All titles that trace its source to OCT No. 994 dated 19 April 1917,
are therefore void, for such mother title is inexistent. Because CLT so traces its title to
OCT No. 994 dated 19 April 1917, the title of CLT is void.

FORGERY

BETTY GEPULLE-GARBO v. SPOUSES VICTOREY ANTONIO GARABATO and

JOSEPHINE S. GARABATO
G.R. No. 200013, January 14, 2015, VILLARAMA, JR., J.

As a rule, forgery cannot be presumed and must be proved by clear, positive

and convincing evidence, the burden of proof lies on the party alleging forgery. One
who alleges forgery has the burden to establish his case by a preponderance of
evidence, or evidence which is of greater weight or more convincing than that which
is offered in opposition to it.

Facts:

On June 17, 1977, a Deed of Sale7 was executed between Eduviges and
Florence whereby the former sold to the latter a 303-square meter parcel of land,
covered by Transfer Certificate of Title (TCT) No. 17986, in Pasay City. The deed of
sale was signed by Nick Garbo. In 1996, respondent Victorey, married to co-
respondent Josephine, registered the subject property in his name by virtue of a Deed
of Sale executed by Florence in his favor. On October 15, 1996, respondent was
issued TCT No. 136900. On August 2, 2001, petitioner filed a petition for cancellation
of TCT No. 136900 against respondents. She impugns the validity of the June 17,
1977 Deed of Sale on the ground that the signatures of Nick and Eduviges were
forged by Florence. Petitioner also assailed the deed of sale between Florence and
Victorey. Petitioner claimed that Nick had previously sought the examination of his
alleged signature on the June 17, 1977 Deed of Sale by the National Bureau of
Investigation (NBI). The NBI examiner allegedly found that the questioned signature
and the standard signatures of Nick were not written by one and the same person.

Issue:

Whether or not the signatures of Nick and Eduviges appearing on the

instruments were forged.

Ruling:

No. Petition is without merit. In any event, Section 1, Rule 131 of the Rules of
Court provides that the burden of proof is the duty of a party to prove the truth of his
claim or defense, or any fact in issue by the amount of evidence required by law. As a
rule, forgery cannot be presumed and must be proved by clear, positive and
convincing evidence, the burden of proof lies on the party alleging forgery. One who
alleges forgery has the burden to establish his case by a preponderance of evidence,
or evidence which is of greater weight or more convincing than that which is offered
in opposition to it. The fact of forgery can only be established by a comparison
between the alleged forged signature and the authentic and genuine signature of the
person whose signature is theorized to have been forged. The opinion of handwriting

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experts are not necessarily binding upon the court, the experts function being to
place before the court data upon which the court can form its own opinion. This
principle holds true especially when the question involved is mere handwriting
similarity or dissimilarity, which can be determined by a visual comparison of
specimens of the questioned signatures with those of the currently existing ones. A
finding of forgery does not depend entirely on the testimonies of handwriting experts,
because the judge must conduct an independent examination of the questioned
signature in order to arrive at a reasonable conclusion as to its authenticity.

In this case, both the RTC and CA found that Albacea did not explain the
manner of examination of the specimen signatures in reaching his conclusion.
Albacea did not point out distinguishing marks, characteristics and discrepancies in
and between genuine and false specimens of writing which would ordinarily escape
notice or detection by an untrained observer.

ALIENABLE AND DISPOSABLE CHARACTER OF LAND

REPUBLIC OF THE PHILIPPINES v. SPS. JOSE CASTUERA and PERLA

CASTUERA
G.R. No. 203384, January 14, 2015, CARPIO, J.

The advance plan and the CENRO certification are insufficient proofs of the
alienable and disposable character of the property.

Facts:

Andres Valiente owned a 3,135-square meter land in Zambales. In 1978, he

sold the property to respondents Jose and Perla Castuera (Spouses Castuera). On 21
May 2003, the Spouses Castuera filed with the RTC an application5 for original
registration of title over the property. The Spouses Castuera also presented
documentary evidence to support their application. The documents included tax
receipts and an advance plan with a notation, Checked and verified against the
cadastral records on file in this office and is for registration purposes. This survey is
within the Alienable and Disposable land proj. No. 3-H certified by Director of Forestry
on June 20, 1927 per LC Map No. 669 Sheet 1. Petitioner Republic of the Philippines
(petitioner), through the Office of the Solicitor General, filed an opposition to the
application for original registration.

Issue:

Whether or not the advance plan and the CENRO certification are sufficient
proofs of the alienable and disposable character of the property.

Ruling:

No. The advance plan and the CENRO certification are insufficient proofs of
the alienable and disposable character of the property. The Spouses Castuera, as
applicants for registration of title, must present a certified true copy of the
Department of Environment and Natural Resources Secretarys declaration or
classification of the land as alienable and disposable.

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HEIRS OF RAFAEL GOZO represented by CASTILLO GOZO and RAFAEL GOZO,

JR. v. PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH DAY
ADVENTIST CHURCH (PUMCO), SOUTH PHILIPPINE UNION MISSION OF SDA
(SPUMCO) and SEVENTH DAY ADVENTIST CHURCH AT SIMPAK, LALA, LANAO
DEL NORTE represented by BETTY PEREZ
G.R. No. 195990, August 05, 2015, PEREZ, J.

Public land not shown to have been reclassified or released as alienable

agricultural land or alienated to a private person cannot be acquired by private
persons without any grant, express or implied, from the government.

Facts:

Respondents took possession of the subject property by introducing

improvements thereon, based on the 28 February 1937 Deed of Donation. Petitioners
who were heirs of the Spouses Rafael and Concepcion Gozo were the original owners
of the area. However, Spouses Gozo were not the registered owners of the property
yet by the time of the donation although they were the lawful possessors thereof. It
was only on 5 October 1953 that the Original Certificate of Title was issued pursuant
to the Homestead Patent granted by the President. Nevertheless, when verified with
the Register Deeds, it appeared that the donation was not annotated in the title. A
compromise was initially reached by the parties wherein the petitioners were allowed
by respondents to harvest on the subject property. After six decades, petitioners filed
an action for Declaration of Nullity of Document, Recovery of Possession and
Ownership with Damages against PUMCO-SDA. Petitioners claimed that the
possession of PUMCO-SDA on the subject property was merely tolerated by
petitioners and therefore could not ripen into ownership.

Issue:

Whether or not the contract of donation was void.

Ruling:

Yes. At the time the Deed of Donation was executed by the Spouses Gozo on
28 February 1937, the subject property was part of the inalienable public domain. It
was only almost after two decades later or on 5 October 1953 that the State ceded
its right by granting their patent application and issuing an original certificate of title
in their favor. Prior to such conferment of title, the Spouses Gozo possessed no right
to dispose of the land. Under the Regalian doctrine all lands of the public domain
belong to the State. All public lands not shown to have been reclassified or released
as alienable agricultural land or alienated to a private person by the State remain
part of the alienable public domain. No public land can be acquired by private
persons without any grant, express or implied, from the government. It is an
established principle that no one can give what one does not have, nemo dat quod
non habet. As a void contract, the Deed of Donation produces no legal effect
whatsoever. Logically, it could not have transferred title to the subject property from
the Spouses Gozo to PUMCO-SDA and there can be no basis for the church's demand
for the issuance of title under its name.

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EXEMPTION FROM CARP

NOEL L. ONG, et al., v. NICOLASA O. IMPERIAL, et al.

G.R. No. 197127, July 15, 2015, LEONARDO-DE CASTRO, J.

To be exempt from CARP, all that is needed is one valid reclassification of the
land from agricultural to non-agricultural by a duly authorized government agency
before June 15, 1988, when the CARL took effect.

Facts:

Ong, et. al, are registered owners of a parcel of land. However, the Municipal
Agrarian Reform Officer notified the petitioners that the subject property was covered
by CARL. Petitioners then filed an application for exemption clearance with the DAR,
which was however denied. The petitioners appealed the orders before the Office of
the President, which reversed the decision of DAR. On appeal, the CA however
reversed OPs decision and agreed with DAR. Hence, the present petition.

Issue:

Whether or not the subject landholding of the petitioners is exempted from

the coverage of the government's Comprehensive Agrarian Reform Program.

Ruling:

Yes. To be exempt from CARP, all that is needed is one valid reclassification of
the land from agricultural to non-agricultural by a duly authorized government
agency before June 15, 1988, when the CARL took effect. As to what is a "duly
authorized government agency," the DAR Handbook for CARP Implementors
recognizes and discusses the LGU's authority to reclassify lands under Republic Act
No. 7160 or the Local Government Code. Thus, all lands that already classified as
commercial, industrial or residential before 15 June 1988 no longer need any
conversion clearance. Moreover, all lands previously converted by government
agencies to non-agricultural uses prior to the effectivity of the CARL are outside its
coverage. Since the subject property had been reclassified as residential/commercial
land with the enactment of City Ordinance No. 1313 in 1975, it can no longer be
considered as an "agricultural land" within the ambit of RA 6657.

AMENDMENT AND ALTERATION OF CERTIFICATES

ERNESTO OPPEN, INC. v. ALBERTO COMPAS, substituted by his heirs namely,

CLIFFORD M. COMPAS AND JOAN M. COMPAS, and PHILIPPINE MERCHANT
MARINE SCHOOL, INC.
G.R. No. 203969, October 21, 2015, MENDOZA, J.

Relief under Sec. 108 of PD No. 1529 can only be granted if there is unanimity
among the parties, or that there is no adverse claim or serious objection on the part
of any party in interest.

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Facts:

The subject matter of the case involves two parcels of land in Las Pias City
previously registered in the name of PMMSI. The two properties were levied upon
pursuant to the writ of execution issued by MeTC-Branch 7 and a Notice of Levy in
favor of MBI was annotated at the back of the titles. On another case, the MeTC-
Branch 16 issued a writ of execution, and pursuant to such, EOI annotated its lien on
one of the lots. Thereafter, the said lot was sold in a public auction where EOI was the
highest bidder. A new title over one of the lots was issued in favor of EOI. Meanwhile,
an alias writ of execution was issued by MeTC-Branch 7 in connection with the case
between PMMSI and MBI. The two lots were then sold to respondent Alberto Compas
in a public auction. A final deed of sale was issued to him and thus, Compas filed a
petition to cancel the TCTs and for the issuance of new titles in his name before RTC-
Las Pias. Upon learning that one of the lots was already titled under EOIs name, he
filed his motion to admit amended petition. EOI filed two motions to dismiss. The first
was denied on the ground that Compas could rightfully enforce its lien on the
property. EOI filed the second one arguing that under Section 108 of PD No. 1529 the
court with jurisdiction was the court where the original registration was filed and
docketed. RTC-Las Pias issued an order denying EOI's second motion to dismiss on
the ground that Section 108 of P.D. No. 1529 was inapplicable and that it was vested
with jurisdiction under Section 2 thereof. The CA rendered the decision sustaining the
jurisdiction of RTC-Las Pias.

Issue:

Whether or not the RTC- Las Pias has jurisdiction to hear the amended
petition.

Ruling:

Yes. The jurisdiction of regional trial courts in land registration cases is

conferred by Section 2 of P.D. No. 1529. The CA was correct in stating that EOI's
reliance on Section 108 of P.D. No. 1529 was misplaced. The appellate court aptly
cited Philippine Veteran's Bank v. Valenzuela where the Court held that the prevailing
rule was that proceedings under Section 108 were summary in nature, contemplating
corrections or insertions of mistakes which were only clerical but certainly not
controversial issues. Relief under the said legal provision can only be granted if there
is unanimity among the parties, or that there is no adverse claim or serious objection
on the part of any party in interest. Thus, the petition was properly filed with the RTC-
Las Pias where it was docketed as LRC Case No. LP-05-0089, and not before the
court which heard the original registration proceeding under LRC No. N-1238, as the
petition involved adversarial issues. EOI cannot insist that the action should have
been filed with the RTC where the original registration was filed and issued
considering that the case involved controversial issues. The parties obviously lacked
unanimity as EOI even filed a motion to dismiss for failure to state a cause of action,
claiming that its Torrens Title was indefeasible and could not be collaterally attacked.

RECONSTITUTION

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REPUBLIC OF THE PHILIPPINES v. CESAR C. PASICOLAN and GREGORIO C.

PASICOLAN
G.R. No. 198543, April 15, 2015, DEL CASTILLO, J.

The survey plan and technical description are not competent and sufficient
sources of reconstitution when the petition is based on Section 2(f) of RA No. 26.
They are mere additional documentary requirements. Where the RTC ordered
reconstitution on the basis of the survey plan and technical description, the order of
reconstitution is void for want of factual support.

Facts:

Cesar and Gregorio filed a petition for reconstitution of OCT No. 8450 before
the RTC of Tuguegarao City. Petitioners presented as evidence, among others, a copy
of a report by the LRA which states that from the Record Book of Cadastral Lots on
files, it appears that the Decree was issued for the Lot. However, the copy of said
decree was no longer available. The RTC finding the petition to be sufficient in form
and substance granted the reconstitution of the title. The OSG appealed to the CA,
claiming that petitioners failed to present competent evidence to show that the
alleged lost certificate of title was valid and subsisting at the time of its loss and that
a mere copy of the decree is not a sufficient basis for reconstitution. The CA affirmed
the decision of the RTC. The OSG contends that the certification made by the LRA
merely proved the subsequent appearance in the LRA but can never serve to prove
the titles authenticity for purposes of reconstitution.

Issue:

Whether or not the CA erred in affirming the trial courts finding that
reconstitution is justified on the basis of a copy of an unauthenticated decree and
evidence on record.

Ruling:

Yes. Respondents failed to present a competent source of reconstitution. Sec.

2 of RA No. 26 enumerates the sources from which reconstitution of lost or destroyed
original certificates of title may be based.

The other pieces of documentary evidence submitted by respondents do not

warrant the reconstitution of their alleged lost title. The pieces of documentary
evidence presented are not similar to those mentioned in paragraphs (a) to (e) of
Section 2 of RA No. 26, which all pertain to documents issued or are on file with the
Registry of Deeds. Under the principle of ejusdem generis, where general words
follow an enumeration of persons or things by words of a particular and specific
meaning, such general words are not to be construed in their widest extent but are to
be held as applying only to persons or things of the same kind or class as those
specifically mentioned.

Also, the survey plan and technical description are not competent and
sufficient sources of reconstitution when the petition is based on Section 2 (f) of RA
No. 26. They are mere additional documentary requirements. Where the RTC ordered
reconstitution on the basis of the survey plan and technical description, the order of
reconstitution is void for want of factual support.

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REPUBLIC OF THE PHILIPPINES v. WILFREDO MANCAO

G.R. No. 174185, July 22, 2015, BERSAMIN, J.

No petition for the judicial reconstitution of a Torrens title that does not
strictly adhere to the requirements of Republic Act No. 26, albeit unopposed, should
be granted even on the pretext that the reconstitution would not affect the
ownership or possession of the property.

Facts:

The respondent filed his petition for judicial reconstitution of OCT No. 11097
and was granted by the RTC. The Republic appealed the judgment and claimed that
the respondent did not comply with the requirements for judicial reconstitution
prescribed in Republic Act No. 26. Hence, they should have dismissed the petition for
judicial reconstitution instead of granting it. The CA however, dismissed the appeal.

Issue:

Whether or not the reconstitution was wrongfully granted.

Ruling:

Yes. The judicial reconstitution of a Torrens title under Republic Act No. 26
means the restoration in the original form and condition of a lost or destroyed Torrens
certificate attesting the title of a person to registered land. The purpose of the
reconstitution is to enable, after observing the procedures prescribed by law, the
reproduction of the lost or destroyed Torrens certificate in the same form and in
exactly the same way it was at the time of the loss or destruction.

To ensure the reconstitution proceedings from abuse, Republic Act No. 26 has
laid down the mandatory requirements to be followed. It was clear to both the RTC
and the CA that the respondent did not comply with the requirements for judicial
reconstitution prescribed in Republic Act No. 26. Hence, they should have dismissed
the petition for judicial reconstitution instead of granting it. The RTC and the CA
thereby unwarrantedly disregarded the respondents abject non-compliance with the
mandatory requirements for judicial reconstitution prescribed in Republic Act No. 26.
Accordingly, they did not exercise the greatest caution in entertaining and
processing petitions for judicial reconstitution of allegedly lost or destroyed Torrens
title despite the frequent warning from the Court for the lower courts to exercise the
greatest caution in the interest of preventing the filing of such petitions after an
unusual delay from the time of the alleged loss or destruction. Indeed, they ought to
have been aware that innumerable litigations and controversies have been spawned
by the reckless and hasty grant of such petitions.

PROOF OF OWNERSHIP OF A LAND

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ROSARIO BANGUIS-TAMBUYAT v. WENIFREDA BALCOM-TAMBUYAT

G.R. No. 202805, March 23, 2015, DEL CASTILLO, J.

Where a party has the means in his power of rebutting and explaining the
evidence adduced against him, if it does not tend to the truth, the omission to do so
furnishes a strong inference against him.

Facts:

During the marriage of Adriano and Wenifreda, Adriano acquired a parcel of

land in Bulacan. The deed of sale over the said property was signed by Adriano alone
as vendee and one Rosario Banguis as a witness. When the TCT of the property was
issued, it was under the name of Adriano married to Rosario.

Wenifreda filed a Petition for Cancellation of the title alleging that she was the
surviving spouse of Adriano and that the TCT was erroneously registered and made in
the name of Adriano married to Rosario. Rosario claimed that she alone bought the
property using her personal funds and that she and Adriano were married.

The trial court held that Wenifreda is the surviving spouse of Adriano, and the
subject property was acquired during their marriage, but it was erroneously
registered in the name of another.

Issue:

Whether or not Wenifreda is the surviving spouse of Adriano.

Ruling:

Yes, Wenifreda is the surviving spouse of Adriano. All that is required in

resolving this issue is to determine who between them is Adrianos spouse; it was
unnecessary for Banguis to prove that she is the actual owner of the property. Title to
the property is different from the certificate of title to it.

Nonetheless, if Banguis felt that she had to go so far as to demonstrate that

she is the true owner of the subject property in order to convince the trial court that
there is no need to cancel TCT T-145321, then she was not precluded from presenting
evidence to such effect. Understandably, with the quality of Wenifredas documentary
and other evidence, Banguis may have felt obliged to prove that beyond the
certificate of title, she actually owned the property. Unfortunately for her, the
Supreme Court is not convinced of her claimed ownership; the view taken by the CA
must be adopted that she and Adriano could not have been co-owners of the subject
property as she failed to present sufficient proof that she contributed to the purchase
of the subject property, while the deed of sale covering the subject property showed
that Adriano alone was the vendee. The Supreme Court is not a trier of facts, so it
must rely on the findings of facts of the Court of Appeals, which are thus considered
conclusive and binding. Moreover, the Court notes that while Banguis claims that she
alone paid for the property using her own funds and money borrowed from her sister,
she nonetheless acknowledges that Adriano is a co-owner thereof, thus implying that
he contributed to its acquisition. Such contradictory statements cast serious doubts

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on her claim; basically, if she were the sole purchaser of the property, it would only
be logical and natural for her to require that her name be placed on the deed of sale
as the vendee, and not as mere witness which is what actually occurred in this
case. On the other hand, if Adriano contributed to its purchase, Banguis would have
required that her name be placed on the deed as a co-vendee just the same. Her
failure to explain why despite her claims that she is the purchaser of the property
she allowed Adriano to be denominated as the sole vendee, renders her claim of
ownership doubtful. Where a party has the means in his power of rebutting and
explaining the evidence adduced against him, if it does not tend to the truth, the
omission to do so furnishes a strong inference against him. One cannot also ignore
the principle that the rules of evidence in the main are based on experience, logic,
and common sense.

PROOF OF CONVEYANCE OF LAND

HEIRS OF DATU DALANDAG KULI, represented by DATU CULOT DALANDAG v.

DANIEL R. PIA, FILOMENA FOLLOSCO, and JOSE FOLLOSCO, SR.
G.R. No. 199777, June 17, 2015, SERENO, C.J.

While the law requires the Register of Deeds to obtain a copy of the Deed of
Conveyance before cancelling the sellers title, its subsequent failure to produce the
copy, after a new title had already been issued is not a sufficient evidence to hold
that the claimed sale never actually happened.

Facts:

The parcel of land subject of this case (Lot 2327) was originally owned by Datu
Kuli. When Datu Kuli died, the possession of Lot 2327 was passed on to his heirs,
herein petitioners. When the petitioners sought to have Datu Kulis title reconstituted,
they were informed by the Register of Deeds that a different title had already been
issued in the name of respondent Jose Follosco, Sr (Jose). It appears from the records
that Datu Kuli, during his lifetime, sold in favor of respondent Daniel Pia (Pia), Lot
2327. Thereafter, respondent Pia sold Lot 2327 to respondent Jose.

Claiming that they had always been in possession of the property and that
Datu Kuli never sold the property to any of the respondents, petitioners filed a
Complaint for Quieting of Title with the RTC. Despite the failure of the Register of
Deeds to present a copy of the alleged Deed of Conveyance issued by Datu Kuli in
favor of respondent Pia, the RTC still rendered a judgment in favor of respondents and
held that even though the Register of Deeds could no longer produce a copy of the
Deed of Conveyance stating that Datu Kuli had sold Lot 2327 to Pia, it was convinced
that there was indeed a conveyance from Datu Kuli to Pia over Lot 2327. On appeal,
the decision of the trial court was affirmed by the CA. Hence, this petition.

Petitioners argue that the failure of the Register of Deeds to produce a copy of
the Deed of Conveyance used as basis to cancel Datu Kulis OCT proves that the
property was never sold to Pia.

Issue:

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Whether or not the failure of the Register of Deeds to present a copy of the
Deed of Conveyance proves that the property was never sold to respondent Pia.

Ruling:

No. The Court agrees with the RTC and rule that even though copies of the
Deed of Sale and the OCT of Datu Kuli can no longer be produced now, the evidence
presented sufficiently shows that the deed conveying the property to respondent Pia
was presented to the Register of Deeds on 21 December 1940, and that this deed
was the basis for the cancellation of Datu Kulis original title. The failure on the part
of the Register of Deeds to present a copy of the Deed of Sale when required by the
trial court was duly explained by them. It appears that the records containing the
Deed of Sale are no longer readable, because they are "very much
mutilated." Nevertheless, the Register of Deeds was able to certify that the following
entry or notation was found in the first volume of its Primary Entry Book:

Entry No. 7512

Date of Registration: Dec. 21, 1940 at 7:58am
Nature of Document: Deed of Sale
Date of Document: (Dilapidated Portion)
Executed by: Datu Dalandag Kuli
In favor of: Daniel R. Pia
Amount: P390.00

Although the Deed of Sale itself can no longer be located, the Court agrees
with the RTCs conclusion that the above notation proves that "there was at one time
in the past such document recorded in the Register of Deeds but that with the
passage of time, the same became tattered, unreadable, badly dilapidated, and
mutilated and could not be found or recognized to boot."

FREE PATENT

ANASTACIO TINGALAN v. SPOUSES RONALDO AND WINONA MELLIZA

G.R. No. 195247, June 29, 2015, VILLARAMA, JR., J.

Section 124 of the Public Land Act is clear and explicit that a contract which
purports to alienate, transfer, convey or encumber any homestead within the
prohibitory period is void from its execution.

Facts:

Anastacio Tingalan was the original owner of the 5-hectare subject property
and a free patent was issued under his name. In a Deed of Absolute Sale, Anastacio
sold it to Spouses Melliza and since then, they have been in possession of the
property. The Owners Duplicate Certificate of Title and Tax Declaration were issued
under the spouses names who paid for the taxes. However, 23 years later, Elena
Tunanan filed an adverse claim. Anastacio countered and demanded that the spouses
vacate the property, but the latter refused. Anastacio filed for Quieting of Title and
Recovery of Possession claiming that he is the owner of the property since his title
was never cancelled and that the sale was null and void since it was executed within

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the five-year prohibitory period under the Public Land Act. The RTC upheld the validity
of the sale because the sale executed is not the kind of violation as contemplated in
the law as the transfer was not yet complete with the issuance of a new TCT. It was
affirmed by the CA and it further ruled that the case was barred by laches.

Issue:

Whether or not Anastacio and his heirs are barred by laches from asserting
their rights over the subject property even if the deed of sale was not valid.

Ruling:

No. The contract of sale entered into between petitioner Anastacio and
respondent-spouses on March 28, 1977 is null and void from inception for being
contrary to law and public policy. As a void contract it is imprescriptible and not
susceptible of ratification. Following Section 118 of the Public Land Act, the subject
land could not have been validly alienated or encumbered on March 28, 1977 which
was way within five years from the date of the issuance of the free patent under the
name of petitioner Anastacio on October 4, 1976. The legal consequences of such
sale clearly made within the prohibitory period are stated under Section 124 of
the Public Land Act. This provision of law is clear and explicit and a contract which
purports to alienate, transfer, convey or encumber any homestead within the
prohibitory period is void from its execution. The Court has held in a number of cases
that such provision of law is mandatory with the purpose of promoting a specific
public policy to preserve and keep in the family of the patentee that portion of the
public land which the State has gratuitously given to them.
A void contract produces no legal effect whatsoever in accordance with the
principle quod nullum est nullum producit effectum. It could not transfer title to the
subject property and there could be no basis for the issuance of a title from petitioner
Anastacios name to the names of respondent-spouses. It is not susceptible of
ratification and the action for the declaration of its absolute nullity is
imprescriptible. It was therefore an error for both courts a quo to rule that
petitioners failure to act on such considerable time has already barred him by
estoppel and laches.

SPOUSES ALFONSO ALCUITAS, SR. (deceased-represented by his heirs) and

ESTELA ALCUITAS (for herself and as representative of the heirs of the
deceased Alfonso Alcuitas, Sr.) v. MINVILUZ C. VILLANUEVA.
G.R. No. 207964, September 16, 2015, MENDOZA, J.

The right to repurchase under Sec. 119 of CA 141 does not cease once the
propertys nature and classification gets changed. What the law strictly requires is
that the repurchase must be for the purpose of preserving the land for the use of the
patentee and his family.

Facts:

Minviluz Villanueva is the registered owner of a parcel of land by virtue of her

Free Patent application. Sps. Alcuitas leased the property and operated a gasoline
station on the subject property. Thereafter, the subject land was reclassified into
commercial zone. In 1993, Minviluz mortgaged her property to a third person to

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secure her loan. The mortgage was extrajudicially foreclosed after Minviluz reneged
on her obligation. Sps. Alcuitas bought the property during the public auction.

The sheriff executed a Deed of Sale in favor of Sps. Alcuitas after Minviluz
failed to redeem the property within the one-year redemption period. Title was
transferred to Sps. Alcuitas thereafter. Within five years from the date of conveyance
to Sps. Alcuitas, Minviluz informed the buyers of her desire to redeem the subject
property for residential purposes, but Sps. Alcuitas refused. Thereafter, Minviluz filed
a complaint for Redemption of Real Property.

Issue:

Whether or not Minviluz may still redeem the subject property from the Sps.
Alcuitas.

Ruling:

Yes. Sec. 119 of CA 141, as amended, is clear. Every conveyance of land

acquired under free patent shall be subject to repurchase by the applicant within a
period of five (5) years from the date of conveyance. The law is intended to grant a
house for each citizen where his family may settle and live beyond the reach of
financial misfortune. The law is also intended to conserve the family home and to
promote the spread of small land ownership in favor of the underprivileged.

The right to repurchase under Sec. 119 of CA 141 does not cease once the
propertys nature and classification gets changed. What the law strictly requires is
that the repurchase must be for the purpose of preserving the land for the use of the
patentee and his family. The law gives more importance to the purpose behind the
patentee's repurchase than the reclassification or utilization of the property. In this
case, while it is true that a gasoline station has been built on the subject property
and the same has been reclassified into a commercial zone, Minviluzs primary
purpose for repurchasing said property is for residential purposes.

ATTACK ON CERTIFICATE OF TITLE

IMELDA SYJUCO, et al. v. FELISA D. BONIFACIO and VSD REALTY &

DEVELOPMENT CORPORATION
G.R. No. 148748, January 14, 2015, LEONARDO-DE CASTRO, J.

To determine whether an attack on a certificate of title is direct or indirect,

the relevance of the object of the action instituted and the relief sought therein must
be examined. The attack is direct when the object of an action or proceeding 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 is nevertheless made as an incident thereof.

Facts:

Petitioners Syjuco are the registered co-owners of the subject land. They then
leased the property to Manufacturers Bank who was the one who built the
improvements on the same with stipulation that they will become the owners of
these improvements after the expiration of the lease. They also subleased the

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property to Kalayaan Development Corporation (KDC) and respondent Bonifacio is a

lessee of KDC. One of their tenants informed them that their property was being
offered for sale. Syjuco also discovered the existence of a title in the name of
respondent Bonifacio which he claims to be void as there can be no segregation of a
property that was previously segregated. To protect their rights and interest over the
subject land, petitioners lodged a petition for the declaration of nullity and
cancellation of Bonifacios title over the subject land. Subsequently, petitioners
discovered that Bonifacio sold the subject land in favor of VSD Realty. Petitioners
alleged that although the title of petitioners, and the title of Bonifacio and VSD Realty
contained different technical descriptions, said certificates of title actually pertained
to one and the same property. RTC ruled in favor of the respondent. On appeal, the
CA dismissed petitioners appeal. Hence the petition.

Issue:

Whether or not the action instituted by petitioners is a prohibited collateral

attack on the certificate of title of respondents over the subject land.

Ruling:

No. The instituted action in this case is clearly a direct attack on a certificate
of title to real property. In their complaint for quieting of title, petitioners specifically
pray for the declaration of nullity and/or cancellation of respondents title over the
subject land. The relief sought by petitioners is certainly feasible since the objective
of an action to quiet title, as provided under Article 476 of the Civil Code of the
Philippines, is precisely to quiet, remove, invalidate, annul, and/or nullify "a cloud on
title to real property or any interest therein by reason of any instrument, record,
claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be
prejudicial to said title."

Moreover, petitioners have duly established during the trial that they and/or
their predecessors-in-interest have been in uninterrupted possession of the subject
land since 1926 and that it was only in 1994 when they found out that respondent
Bonifacio was able to register the said property in her name in another title. It was
also only in 1995 when petitioners learned that respondent Bonifacio was able to sell
and transfer her title over the subject land in favor of respondent VSD Realty. Also,
the rule on the incontrovertibility or indefeasibility of title has no application in this
case given the fact that the contending parties claim ownership over the subject land
based on their respective certificates of title thereon which originated from different
sources. The indefeasibility of a title under the Torrens system could be claimed only
if a previous valid title to the same parcel of land does not exist. Where the issuance
of the title was attended by fraud, the same cannot vest in the titled owner any valid
legal title to the land covered by it; and the person in whose name the title was
issued cannot transmit the same, for he has no true title thereto. This ruling is a mere
affirmation of the recognized principle that a certificate is not conclusive evidence of
title if it is shown that the same land had already been registered and that an earlier
certificate for the same land is in existence.

THE HEIRS OF EUGENIO LOPEZ, SR. NAMELY, OSCAR M. LOPEZ, MANUEL M.

LOPEZ AND PRESENTACION L. PSINAKIS v. THE HONORABLE FRANCISCO

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QUERUBIN, IN HIS CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL

COURT OF ANTIPOLO, BRANCH 74, THE HEIRS OF ALFONSO SANDOVAL AND
HIS WIFE ROSA RUIZ, REPRESENTED BY THEIR ATTORNEY-IN-FACT, MRS.
IMELDA RIVERA
G.R. No. 155405, March 18, 2015, LEONARDO-DE CASTRO, J.

An action is deemed an attack on a title when the object of the action or

proceeding is to nullify the title, and thus challenge the judgment pursuant to which
the title was decreed.

Facts:

Sandoval and Ozaeta filed an Application for Registration of Title for two
parcels of land situated in Antipolo. The CFI ordered the registration of the lots in
their names. Spouses Sandoval and Spouses Ozaeta sold the properties to Eugenio
Lopez. In the Deed of Absolute Sale, the vendors-applicants obligated themselves to
file in the land registration case the necessary motion in order that the certificates of
title will be issued in the name of Eugenio Lopez. Unfortunately, this obligation was
not complied with for so many years. Upon learning of this fact, the Lopez heirs filed
their Motion dated April 28, 1997 in the land registration case. Said motion contained
the Deed of Absolute Sale and prayed that the decrees of registration over the
subject properties be issued in the names of the Lopez heirs. At that time, LRC No. N-
2858, LRC Rec. No. N-18887 was still pending before the RTC of Pasig City, Branch
152 as the decrees of registration were yet to be issued despite the Order of the trial
court that directed the LRA to proceed with the issuance of the decrees.

While the Motion dated April 28, 1997 was pending before the trial court,
Decree Nos. N-217643 and N-217644 and OCT Nos. O-1603 and O-1604 were issued
in the name of the applicants Sandoval and Ozaeta and their respective spouses. The
Lopez heirs then filed a Motion dated November 25, 1998, which prayed for the
annulment of Decree Nos. N-217643 and N-217644 and OCT Nos. O-1603 and O-
1604. The issuance of said decrees of registration and certificates of title allegedly
preempted the RTC of Pasig City in resolving the Motion dated April 28, 1997 and that
the same were issued by the LRA under dubious circumstances.

Issue:

Whether or not the Motion dated November 25, 1998 is proper for purposes of
impugning the questioned decrees and the corresponding original certificates of title.

Ruling:

Yes. The Court of Appeals adjudged that the Lopez heirs' Motion dated
November 25, 1998 was a collateral attack on the certificates of title covering the
subject properties, which is proscribed by Section 48 of Presidential Decree No. 1529.
In Sarmiento v. Court of Appeals, the Supreme Court differentiated a direct attack
from a collateral attack on the title as follows:

An action is deemed an attack on a title when the object of the

action or proceeding is to nullify the title, and thus challenge the
judgment pursuant to which the title was decreed. The attack is

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direct when the object of the 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 is nevertheless made
as an incident thereof.
The Court of Appeals, however, overlooked the fact that the Lopez heirs never
attacked the Decision dated May 31, 1966 of the then CFI of Rizal in LRC No. N-2858,
LRC Rec. No.N-18887, i.e., the judgment pursuant to which the decrees of registration
were issued. Far from it, the Lopez heirs actually recognized the validity of said
judgment. In filing their first motion to have the Deed of Absolute Sale recognized
prior to the issuance of the decrees, the Lopez heirs do not question the final
judgment of the land registration court that the subject properties were owned by the
spouses Sandoval and the spouses Ozaeta for they derived their own right to the
properties from said applicants. When the decrees of registration were still issued in
the names of said original applicants, due to peculiar circumstances that occurred
outside the proceedings in the land registration court, petitioners were unjustly
deprived of the opportunity to enforce the remedy accorded to them under Section
22 of PD No. 1529.

TERESA D. TUAZON v. SPOUSES ANGEL AND MARCOSA ISAGON

G.R. No. 191432, September 02, 2015, BRION, J.

A person who possesses a title issued under the Torrens system is entitled to
all the attributes of ownership including possession. A certificate of title cannot be
subject to a collateral attack in an action for unlawful detainer.

Facts:

Maria's children, namely Gloria, Angel, Felix, and Flaviano, executed a Deed of
Conformity in which they honored the Deed of Extrajudicial Settlement executed by
their grandmother and aunts, subject to the condition that they would get one-sixth
of Lot 103 (subject lot) as their share. Angel mortgaged his share to petitioner Teresa
Tuazon through a Kasulatan ng Sanglaan. Angel Isagon thereafter refused and failed
to redeem the mortgaged property.

Lot 103 is covered by an undated and reconstituted Transfer Certificate of Title

(TCT) No. (N.A.) RT-1925 issued in Teresa's name. Spouses Angel and Marcosa Isagon
(respondents) started to build a small hut on a portion of Lot 103 without Teresa's
knowledge. Then, they started to construct a house despite Teresa's protest. Teresa
sent a final demand letter to respondents to vacate and to pay rental fees. The
respondents did not reply.

Teresa filed a complaint for unlawful detainer against the respondents before
the MTCC of Sta. Rosa, Laguna. She prayed that the respondents be ordered to
vacate the subject property and to pay compensation for its use and occupancy. In
their answer, the respondents alleged that they were occupying the subject property
as owners. They also alleged that Teresa fraudulently obtained TCT No. (N.A.) RT-
1925.

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The MTCC decided in favor of Teresa and ordered the respondents to vacate
the subject property and to pay reasonable rent and attorney's fees. The RTC
affirmed in toto the decision of the MTCC. The CA reversed the RTC's ruling.

Issue:

Whether or not Teresa has the better right of physical possession against the
mortgagor as shown in the Kasulatan ng Sanglaan.

Ruling:

Yes. While the CA is correct that a mortgage does not transfer ownership, the
indefeasibility of a Torrens title should have been given primary consideration. A
person who possesses a title issued under the Torrens system is entitled to all the
attributes of ownership including possession. A certificate of title cannot be subject to
a collateral attack in an action for unlawful detainer. A collateral attack is made
when, in an action to obtain a different relief, the validity of a certificate of title is
questioned.

In the present case, the respondents alleged in their answer that the
certificate of title issued in the name of Teresa was fraudulently obtained. This
defense constitutes a collateral attack on the title and should not therefore be
entertained. To directly assail the validity of TCT No. (N.A.) RT-1925, a direct action for
reconveyance must be filed. In the present case, based on the certificate of title,
Teresa is the owner of the subject property and is entitled to its physical possession.

ACTION FOR RECONVEYANCE

MARIFLOR T. HORTIZUELA, represented by JOVIER TAGUFA v. GREGORIA

TAGUFA, ROBERTO TAGUFA and ROGELIO LUMABAN
G.R. No. 205867, February 23, 2015, MENDOZA, J.

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.

Facts:

Runsted Tagufa, husband of Gregoria, bought an unregistered parcel of land

using funds sent by his sister, Mariflor Hortizuela who was in the US, with the
agreement that Runsted will reconvey the property to Hortizuela. However, she
discovered that the property was titled in Gregorias name. She filed an action for
recovery of possession and reconveyance of the property before the MCTC. The court
dismissed the complaint for a wrong cause of action. The RTC reversed. The CA
upheld the MCTC decision holding that the filing of such complaint for reconveyance
subjects the certificate of title to a collateral attack which is prohibited by PD 1529.
Hortizuela argues that the action for reconveyance was not a collateral attack as she
was not seeking the nullification of the title, but merely reconveyance as Gregoria
acted as trustee for her benefit as the real owner.

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Issue:

Whether or not an action for reconveyance and recovery of possession

constitutes a collateral attack on the validity of the title which is prohibited by law.
Ruling:

No. An action for reconveyance is a recognized remedy, an action in

personam, available to a person whose property has been wrongfully registered
under the Torrens system in anothers name. In an action for reconveyance, the
decree is not sought to be set aside. It does not seek to set aside the decree but,
respecting it as incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner. Reconveyance is
always available as long as the property has not passed to an innocent third person
for value. There is no quibble that a certificate of title, like in the case at bench, can
only be questioned through a direct proceeding. The MCTC and the CA, however,
failed to take into account that in a complaint for reconveyance, the decree of
registration is respected as incontrovertible and is not being questioned. What is
being sought is the transfer of the property wrongfully or erroneously registered in
another's name to its rightful owner or to the one with a better right. If the
registration of the land is fraudulent, the person in whose name the land is registered
holds it as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property.

The fact that Gregoria was able to secure a title in her name does not operate
to vest ownership upon her of the subject land. Registration of a piece of land under
the Torrens System does not create or vest title, because it is not a mode of acquiring
ownership. A certificate of title is merely an evidence of ownership or title over the
particular property described therein. It cannot be used to protect a usurper from the
true owner; nor can it be used as a shield for the commission of fraud; neither does it
permit one to enrich himself at the expense of others.

INNOCENT PURCHASERS FOR VALUE

RUBY RUTH S. SERRANO MAHILUM v. SPOUSES ILANO

G.R. No. 197923, June 22, 2015, DEL CASTILLO, J.

In order that the holder of a certificate of title issued by virtue of the

registration of a voluntary instrument may be considered a holder in good faith and
for value, the instrument registered should not be forged. Consequently, if there is no
new title issued in one s favor, there is no new title to annul and the issue of good
faith or bad faith becomes irrelevant.

Facts:

Petitioner entrusted the original owners duplicate copy of TCT over a parcel of
land owned by her to Teresa Perez a purported real estate broker who claimed that
she can assist petitioner in obtaining a loan with the TCT as collateral. When the
petitioner demanded the return of the title, Perez failed to produce the same. Perez
admitted that the title was lost. Consequently, petitioner executed an Affidavit of

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Loss and caused the same to be annotated upon the original registry copy of the TCT.
Petitioner was informed, however, that her TCT was not lost but that it was presented
to the registry by respondent Spouses who claimed that the property covered by the
title was sold to them. The sale, however, was not registered. Thereafter the
petitioner filed an action for annulment of agreement and deed of absolute sale. The
respondents filed a Demurrer to Evidence, arguing that the complaint failed to state a
cause of action in that petitioner failed to allege that respondents were purchasers in
bad faith or with notice of a defect in the title; Thus, the presumption that
respondents are purchasers in good faith prevails. The RTC ruled in favor petitioner.
On appeal, the CA granted respondents demurrer to evidence. Hence, this petition.

Issue:
Whether or not the failure to allege bad faith in the complaint is a fatal defect
considering that the subject documents were a forgery and hence, null and void from
the beginning.

Ruling:

No. Since a new title was never issued in respondents favor and, instead, title
remained in petitioners name, the former never came within the coverage and
protection of the Torrens system, where the issue of good or bad faith becomes
relevant. Since respondents never acquired a new certificate of title in their name,
the issue of their good or bad faith which is central in an annulment of title case is of
no consequence; petitioners case is for annulment of the Agreement and Deed of
Absolute Sale, and not one to annul title since the certificate of title is still in her
name. The jurisprudential bases for the CAs pronouncement that there is a failure to
state a cause of action if there is no allegation in the complaint that respondents
were purchasers in bad faith involved complaints for annulment of new titles issued
to the buyers; they cannot apply to petitioners case where title remains in her name.
Petitioners case is to annul the agreement and deed of sale based on the allegation
that they are forgeries, and that respondents were parties to the fraud; since no new
title was issued in respondents favor, there is no new title to annul. Indeed, if the
agreement and deed of sale are forgeries, then they are a nullity and convey no title.
The underlying principle is that no one can give what one does not have. Nemo dat
quod non habet.

JOSEFINA C. BILLOTE v. IMELDA SOLIS, et al.

G.R. No. 181057, June 17, 2015, PERALTA, J.

An innocent purchaser for value is defined as one who buys the property of another,
without notice that some other person has a right or interest in such property and pays the
full price for the same, at the time of such purchase or before he has notice of the claims or
interest of some other person in the property. An innocent purchaser for value includes an
innocent lessee, mortgagee, or other encumbrancer for value and that their claim as an
innocent purchaser for value must be substantiated by proof.

Facts:

Imelda Solis is one of the heirs of Hilario Solis. On the claim that the owners
duplicate was missing, she filed a petition for issuance of new owners duplicate of
title which was granted by the RTC. She executed a deed of extrajudicial settlement

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on her favor the disputed lot and thus later on registered under her name and sold
the same to Sps. Badar. Meanwhile, Josefina Billot and William claimed that they were
heirs of Hilario, filed a petition for annulment of decision granting Imeldas Petition for
Issuance of New Owners Duplicate Certificate and contended that William has the
possession of the title. They also prayed that the property be reverted back to them
since Sps. Badar were not innocent purchasers for value because they have
knowledge that Imelda was not the real owner of the property. CA granted the
annulment of judgment but did not nullify the title because Sps. Badar are innocent
purchasers for value.

Issue:

Whether or not Sps. Badar were innocent purchasers for value.

Ruling:

No. An innocent purchaser for value is defined as one who buys the property of
another, without notice that some other person has a right or interest in such property and
pays the full price for the same, at the time of such purchase or before he has notice of the
claims or interest of some other person in the property. An innocent purchaser for value
includes an innocent lessee, mortgagee, or other encumbrancer for value and that their
claim as an innocent purchaser for value must be substantiated by proof.

The fact that the subject property was already covered by the title issued
under the names of respondents Imelda and Adelaida, by itself, does not
automatically lead to the conclusion that the spouses Badar had no knowledge of
some other party's interest over the property unless it is substantiated by proof.
Thus, since the Court of Appeals only relied on the testimony of the Sps. Badar that
they had no knowledge about Imeldas doing at that they relied only on the title itself
with proof to such claim, they cannot be considered as innocent purchasers for value.

THE REGISTER OF DEEDS OF NEGROS OCCIDENTAL and the NATIONAL

TREASURER OF THE REPUBLIC OF THE PHILIPPINES v. OSCAR ANGLO, SR.,
and ANGLO AGRICULTURAL CORPORATION, represented by OSCAR ANGLO,
JR.
G.R. No. 171804, August 5, 2015, LEONEN, J.

It is a condition sine qua non that the person who brings an action for
damages against the assurance fund be the registered owner, and, as to holders of
transfer certificates of title, that they be innocent purchasers in good faith and for
value.

Facts:

Alfredo de Ocampo filed an application before the Court of First Instance of

Negros Occidental to register two parcels of prime sugar land. The CFI of Negros
Occidental ordered the registration of the lots in favor of de Ocampo. De Ocampo
entered into a Deed of Conditional Sale with Oscar Anglo, Sr. However, the Republic
caused the annotations of notices of lis pendens in Anglo Sr.'s transfer certificate of
title. Despite the notices of lis pendens, Anglo, Sr. conveyed the lots to Anglo
Agricultural Corporation in exchange for shares of stock. Thereafter, the CA

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promulgated a Decision against de Ocampo and his successors-in-interest. Anglo, Sr.

and Anglo Agricultural Corporation filed a Complaint for Recovery of Damages from
the Assurance Fund against the Register of Deeds of Negros Occidental and the
National Treasurer.

Issue:

Whether or not Anglo, Sr. and Anglo Agricultural Corporation are entitled to a
claim from the Assurance Fund.

Ruling:

No. Pecuniary compensation by way of damages paid out of the Assurance

Fund are available to rightfully entitled parties who have interest in land but shut off
from obtaining titles thereto. In the case at hand however, Anglo Sr. no longer had an
interest over the lots after he had transferred these to respondent Anglo Agricultural
Corporation in exchange for shares of stock. Hence, he no longer has a claim from
the Assurance Fund. Respondent Anglo Agricultural Corporation on the other hand,
cannot be considered a transferee in good faith, considering it was aware of the title's
notices of lis pendens. It is a condition sine qua non that the person who brings an
action for damages against the assurance fund be the registered owner, and, as to
holders of transfer certificates of title, that they be innocent purchasers in good faith
and for value. Hence, Anglo Agricultural Corporation also has no right to claim
damages from the Assurance Fund.

MORTGAGEE IN GOOD FAITH AND FOR VALUE

LAND BANK OF THE PHILIPPINES v. BELLE CORPORATION

G.R. No. 205271, September 02, 2015, PERALTA, J.

When the purchaser or the mortgagee is a bank, the rule on innocent

purchasers or mortgagees for value is applied more strictly. Since the banking
business is impressed with public interest, they are expected to be more cautious, to
exercise a higher degree of diligence, care and prudence, than private individuals in
their dealings, even those involving registered lands. Banks may not simply rely on
the face of the certificate of title.

Facts:

Respondent Belle Corporation filed a Complaint for quieting of title and

damages against Florosa A. Bautista (Bautista) and the Register of Deeds of Tagaytay
City alleging that respondent is the registered owner in possession of four (4) parcels
of land known as Lots 1 to 4 located at Barangay Sungay, Tagaytay City.

During the presentation of evidence by the defense, respondent was informed

that Bautista is no longer the owner of the property covered by TCT No. P-671 as it
was already foreclosed by petitioner Land Bank of the Philippines and that TCT No. P-
3663 was issued in the bank's name.

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Respondent filed a Motion for Leave to File Amended Petition impleading

petitioner as indispensable party. Bautista mortgaged to petitioner the land covered
by TCT No. P-671 in order to secure a loan amounting to 10,000,000.00. Bautista
defaulted in her obligation resulting in the foreclosure of the property. Upon
Bautista's failure to redeem the property and petitioner's consolidation of ownership,
TCT No. P-671 was cancelled and TCT No. P-3663 was registered.

Claiming that it is an innocent mortgagee for value, petitioner asserted that it

observed due diligence and prudence expected of it as a banking institution. It
pointed out that prior to the approval of the loan application, its representative
verified the status of the collateral covered by TCT No. P-671, which revealed t at the
subject property was registered in the name of Bautista and that the same is free and
clear of any lien or encumbrance. Also, upon ocular inspection, no adverse ownership
or interest was found.

Issue:

Whether or not respondent Belle Corporation is the registered owner of the

lots.

Ruling:

Yes. The Court agrees with respondent that the entries written in TCT No. T-
1863 to T-1867 failed to accurately record the origin of said titles. Having depended
on erroneous entries stated on the face of said titles, the result of the verification
survey issued by Engr. Pangyarihan is, as a consequence, a mistake insofar as it
states which between TCT No. T-1863 and TCT No. P-671 has precedence.

Undoubtedly, the origins of TCT Nos. P-1863 to P-1867 are OCT Nos. 0-216 and
55. Whether the 7,693 sq. m. overlapping portion is actually located in Lots 1-C and
1-B (LRC) Psd 91 74 or in Lots 1 and 2, Psu-1 09694 is no longer material. Either way,
respondent's title over such portion must prevail since OCT No. 0-216 and OCT No. 55
were registered on March 30, 1959 and July 31, 1941, respectively. In comparison,
OCT No. OP-283, which is the mother title of TCT No. P-671 in the name of Bautista,
was registered much later on February 4, 1977.

Having finally settled that respondent is the rightful owner of the contested
7,693 sq. m. portion of the lot covered by TCT No. P-1863, the issue of whether
petitioner is a mortgagee in good faith and for value shall be resolved.

In general, the issue of whether a mortgagee is in good faith cannot be

entertained in a Rule 45 petition. This is because the ascertainment of good faith or
the lack thereof, and the determination of negligence are factual matters which lay
outside the scope of a petition for review on certiorari. Good faith, or the lack of it, is
a question of intention. In ascertaining intention, courts are necessarily controlled by
the evidence as to the conduct and outward acts by which alone the inward motive
may, with safety, be determined. Considering that the RTC was silent on the matter
while the CA ruled against petitioner, this Court shall make its own determination.
It the instant case, petitioner readily admitted that during the appraisal and
inspection of the property on January 11, 1994 it duly noted the observation that the
subject property was traversed by an access road leading to the Tagaytay Highlands
Golf Course. However, it concluded, albeit erroneously, that the access road is still a

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part of TCT No. P-671 because its existence cannot be established despite
verifications conducted by its property appraisers with the DENR's Land Management
Section Region IV and Tax Mapping Section of the Tagaytay City Assessor's Office due
to lack of records of any survey plan delineating the portion occupied by the said
road from the subject property."
A person who deliberately ignores a significant fact that could create suspicion
in an otherwise reasonable person is not a mortgagee in good faith. A mortgagee
cannot close his eyes to facts which should put a reasonable man on his guard and
claim that he acted in good faith under the belief that there was no defect in the title
of the mortgagor. His mere refusal to believe that such defect exists or the willful
closing of his eyes to the possibility of the existence of a defect in the mortgagor's
title will not make him an innocent mortgagee for value if it afterwards develops that
the title was in fact defective, and it appears that he had such notice of the defect as
would have led to its discovery had he acted with that measure of precaution which
may reasonably be required of a prudent man in a like situation.

REVERSION

ELISEO MALTOS and ROSITA P. MALTOS v. HEIRS OF EUSEBIO BORROMEO

G.R. No. 172720, September 14, 2015, LEONEN, J.

Reversion under Section 101 of the Public Land Act is not automatic. The
Office of the Solicitor General must first file an action for reversion.

Facts:

Eusebio Borromeo (Eusebio) was issued a free patent over a piece of

agricultural land. Within the five-year period, he sold the land to Eliseo Maltos
(Eliseo). A title therefore was issued in favor of Eliseo. Before Eusebio died, he told his
wife and children to nullify the sale made to Eliseo and nullify the title in favor of
Eliseo because the sale was within the five-year prohibitory period so the heirs of
Eusebio filed a complaint for Nullity of Title and Reconveyance of Property against
Eliseo. Eliseo contended that the land should revert back to the state automatically
and not to the heirs of Eusebio.
Issue:

Whether or not the land sold within the five-year prohibitory period should
revert back automatically to the state.

Ruling:

No. Under Section 101 of the Public Land Act, all actions for the reversion to the
Government of lands of the public domain or improvements thereon shall be
instituted by the Solicitor-General or the officer acting in his stead, in the proper
courts, in the name of Commonwealth of the Philippines. Reversion of lands to the
state is not automatic, and the Office of the Solicitor General is the proper party to
file an action for reversion. At the time the free patent was issued, Eusebio already
had title over the property and the sale between Eusebio and Eliseo is void for being
made within the five-year prohibitory period. Since Eusebio already had the valid

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title, the land should revert back to the Heirs of Eusebio without prejudice to an
action for reversion by the government.

WILLS AND SUCCESSIONS

ANDY ANG v. SEVERINO PACUNIO, et al.

G.R. No. 208928, July 8, 2015, PERLAS-BERNABE, J.

In the right of representation, representatives will be called to the succession

by the law and not by the person represented; and the representative does not
succeed the person represented but the one whom the person represented would
have succeeded.

Facts:

Respondents filed a Complaint for Declaration of Nullity of Sale,

Reconveyance, and Damages against petitioner Andy Ang before the RTC involving a
parcel of land originally registered in Felicisima Udiaan's name. Respondents alleged
that they are the grandchildren and successors-in-interest of Udiaan. Ang, on the
other hand, allegedly acquired the subject land when an impostor falsely
representing herself as Udiaan sold the land to him, as evidenced by a Deed of
Absolute Sale. Respondents demanded the return of the land, but to no avail. Hence,
they filed the aforesaid complaint, contending that Udiaan could not have validly sold
the subject land to petitioner considering that she was already dead for more than 20
years when the sale occurred.

Ang contended that he is a buyer in good faith and stated that he was initially
prevented from entering the subject land since it was being occupied by the Heirs of
Alfredo Gaccion. The RTC ruled in Ang's favor and dismissed the case for lack of
merit. The CA affirmed with modification the RTC. It agreed with the RTC's finding
that respondents are not real parties in interest to the instant case, considering that,
as mere grandchildren of Udiaan, they have no successional rights to Udiaan's estate.
The CA, however, nullified the Questioned Deed of Absolute Sale and ordered the
distribution of the subject property to different parties.

Issue:

Whether or not the right of representation is available to respondents.

Ruling:

No. In the instant case, respondents claim to be the successors-in-interest of

the subject land just because they are Udiaan's grandchildren. Under the law,
however, respondents will only be deemed to have a material interest over the
subject land and the rest of Udiaans estate for that matter if the right of
representation provided under Article 970, in relation to Article 982, of the Civil Code
is available to them. In this situation, representatives will be called to the succession
by the law and not by the person represented; and the representative does not
succeed the person represented but the one whom the person represented would
have succeeded.

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For such right to be available to respondents, they would have to show first
that their mother: (a) predeceased Udiaan; (b) is incapacitated to inherit; or (c) was
disinherited, if Udiaan died testate. However, as correctly pointed out by the CA,
nothing in the records would show that the right of representation is available to
respondents. Hence, the RTC and the CA correctly found that respondents are not real
parties in interest to the instant case.

COMPROMISE

DAVID M. DAVID v. FEDERICO M. PARAGAS, JR.

G.R. No. 176973, February 25, 2015, MENDOZA, J.

A compromise agreement is a contract whereby the parties make reciprocal

concessions in order to resolve their differences and, thus, avoid or put an end to a
lawsuit, in order to be binding upon the litigants with the force and effect of a
judgment, must have been executed by them

Facts:

David, Paragas, and Lobrin agreed to venture into business and created Olympia
International Ltd. (Olympia) in Hong Kong. In 2002, Lobrin discovered that David
failed to remit cash equivalent of their transaction. The board of directors then
stripped David of his position as Director. As a result, David filed a complaint for
Declaratory Relief alleging that he is entitled to hold the 30% cash equivalent of the
bonus points for the benefit of the subscribers in the Pares-Pares program. Paragas
and Lobrin filed their counterclaims against David.

A compromise agreement was entered that they will withdraw their complaint
and counterclaims against each other. The compromise agreement however was
entered in the name of David and Olympia. The RTC approved this compromise
agreement. Paragas questioned the agreement alleging that it was entered in the
name of Olympia which was never a party to the case. The CA reversed the RTCs
approval of the compromise agreement saying that it was entered between David
and Olympia, the latter not being a party to the case; the compromise agreement
therefore is invalid.

Issue:

Whether or not the compromise agreement entered into between David and
Olympia is valid.

Ruling:

No. A compromise agreement is a contract whereby the parties make

reciprocal concessions in order to resolve their differences and, thus, avoid or put an
end to a lawsuit. A judicially approved compromise agreement, in order to be binding
upon the litigants with the force and effect of a judgment, must have been executed
by them. In this case, the compromise agreement was signed by David and Olympia.
The terms and conditions were agreed upon by David and Olympia. It must be noted
that Olympia is a separate being, or at least should be treated as one distinct from

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the personalities of its owners, partners or even directors. Because Olympias

involvement in the compromise was not the same as that of the other parties who
were, in the first place, never part of it, the compromise agreement could not have
the force and effect of a judgment binding upon the litigants, specifically Lobrin and
Paragas. Conversely, the judicially approved withdrawal of the claims on the basis of
that compromise could not be given effect for such agreement did not concern the
parties in the case.

PEOPLES GENERAL INSURANCE CORP. (FORMERLY: PEOPLE'S TRANS-EAST

ASIA INSURANCE CORP.) v. COL. FELIX MATEO A. RUNES
G.R. No. 212092, April 8, 2015, MENDOZA, J.

A Compromise Agreement which is not contrary to law, morals, good customs,

public policy and public order shall be granted.

Facts:

Col. Felix Mateo Runes as the first party filed an action for sum of money with
damages against Peoples General Insurance Corp. (second party), represented by
Ernesto Del Rosario and the Spouses Manuzon. The RTC rendered a decision in favor
of Runes, which was affirmed by the CA. it categorically stated the second party is
jointly and severally liable with the Spouses Manuzon to the extent of the bond worth
Php1,470,134.70. The SC affirmed such decision, but the other party moved for
reconsideration. Before there could be an entry of judgment, the parties have
mutually decided to amicably settle the civil case on January 14, 2015 to put an end
to expenses and inconvenience of a prolonged litigation, and not as an admission of
any liability. The second party agreed to pay Runes Php 1,000,000.00 in six monthly
installments and to issue twelve checks. If there will be two defaults, the obligation
will become due and demandable and Runes will be entitled to the issuance of a writ
of execution for the payment of the unpaid amount. The parties submitted to the
Court the Joint Motion for Judgment Based on Attached Compromise Agreement.

Issue:

Whether or not the Compromise Agreement should be granted.

Ruling:

Yes. Since the Compromise Agreement appears to be not contrary to law,

morals, good customs, public policy and public order, the Joint Motion for Judgment
Based on Attached Compromise Agreement shall be granted. The parties are ordered
to faithfully comply with the terms and conditions of the said agreement.

REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY CABARLE, NOELJAMILI,

MARITES HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER BERNAL,
AGUSTEV ESTRE, MARILOU SAGUN, AND ENRIQUE LEDESMA, JR. v. NAPAR
CONTRACTING & ALLIED SERVICES, NORMAN LACSAMANA,*** JONAS
INTERNATIONAL, INC., AND PHILIP YOUNG
G.R. No. 195654, November 25, 2015, DEL CASTILLO, J.

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A judicially approved compromise agreement has the effect and authority

of res judicata. It is final, binding on the parties, and enforceable through a writ of
execution. Article 2041 of the Civil Code, however, allows the aggrieved party to
rescind the compromise agreement and insist upon his original demand upon failure
and refusal of the other party to abide by the compromise agreement.

Facts:

Petitioners are the employees of respondent Napar, a recruitment agency

owned and managed by respondent Lacsamana. Napar assigned petitioners at
respondent Jonas. Sometime in 2002, petitioners filed their complaints with the NLRC
against respondents for non-payment of benefits provided under the Labor Code. On
January 13, 2003, petitioners and respondents entered into a Joint Compromise
Agreement which provides that Napar will give petitioners new work assignments. In
accordance with the Joint Compromise Agreement, petitioners, on several instances,
reported to Napar. Petitioners were paid P7,000.00 each as part of the agreement but
were required by Napar to submit several documents, attend orientation seminars,
undergo interviews and take and pass qualifying examinations, before they could be
posted to their new assignments. Petitioners failed to comply, thus, were not given
new assignments.

Due to the failure of Napar to comply with the Compromise Agreement,

petitioners filed with the LA new four separate complaints against Napar. The LA
issued a decision in favor of petitioners. On appeal, the NLRC reversed the LAs
decision and held that the Compromise Agreement operates as res judicata between
the parties. The decision of the NLRC was affirmed by the CA, hence, this petition.

Issue:

Whether or not petitioners complaint is already barred by res judicata.

Ruling:

No. A compromise agreement, once approved, has the effect of res

judicata between the parties and should not be disturbed except for vices of consent,
forgery, fraud, misrepresentation, and coercion. A judgment upon compromise is
therefore not appealable, immediately executory, and can be enforced by a writ of
execution. However, this broad precept enunciated under Article 2037 of the Civil
Code has been qualified by Article 2041 of the same Code which recognizes the right
of an aggrieved party to either (1) enforce the compromise by a writ of execution, or
(2) regard it as rescinded and insist upon his original demand, upon the other party's
failure or refusal to abide by the compromise.

At the outset, it must be emphasized that there was no indication that

petitioners deliberately refused to comply with the procedures prior to their
purported reassignment. Petitioners alleged that they reported to Napar several
times waiting for their assignment and that Napar was giving them a run-around
even as they tried to comply with the requirements. These matters were not disputed
by respondents. Thus, the Court cannot agree with respondents that petitioners were
the ones who violated the compromise agreement. Napar's scheme of requiring
petitioners to comply with reassessment procedures only seeks to prevent

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petitioners' immediate reassignment.

Respondents' non-compliance with the strict terms of the Joint Compromise

Agreement of reassigning petitioners and ensuring that they will be given work within
the required time constitutes repudiation of the agreement. As such, the agreement
is considered rescinded in accordance with Article 2041 of the Civil Code. Petitioners
properly chose to rescind the compromise agreement and exercised the option of
filing anew their complaints, pursuant to Art. 2041. It was error on the part of the CA
to deny petitioners' the right of rescission.

CREDIT TRANSACTIONS

CHATTEL MORTGAGE

NUNELON MARQUEZ v. ELISAN CREDIT CORPORATION

G.R. No. 194642, April 6, 2015, BRION, J.

Although a promise expressed in a chattel mortgage to include debts that are

yet to be contracted can be a binding commitment that can be compelled upon, the
security itself, however, does not come into existence or arise until after a chattel
mortgage agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract conformably
with the form prescribed by the Chattel Mortgage Law.

Facts:

Nunelon Marquez obtained a first loan from Elisan Credit Corporation (ECC) for
P53,000 payable in 180 days. Marquez signed a promissory note which provides that
it is payable in weekly installments and subject to 26% annual interest. In case of
non-payment, he agreed to pay 10% monthly penalty based on the total amount
unpaid and another 25% of such for attorneys fees. To further secure payment of
the loan, Marquez executed a chattel mortgage over a motor vehicle which reads
that, among others, the motor vehicle shall stand as a security for the first loan and
"all other obligations of every kind already incurred or which may hereafter be
incurred."

Subsequently, Marquez obtained a second loan from ECC for P55,000, as

evidenced by a promissory note and a cash voucher. The promissory note covering
the second loan contained exactly the same terms and conditions as the first
promissory note. When the second loan had matured, Marquez only paid P29,600,
leaving an unpaid balance of P25,040. Due to liquidity problems, Marquez asked ECC
if he could pay in daily installments until the second loan is paid, to which the latter
acquiesced. Twenty-one (21) months after the second loans maturity, Marquez had
already paid P56,440, an amount greater than the principal.

Despite the receipt of such an amount, ECC filed a complaint for judicial
foreclosure of the chattel mortgage because Marquez allegedly failed to settle the
balance of the second loan despite demand. It further alleged that pursuant to the
terms of the promissory note, Marquezs failure to fully pay upon maturity triggered
the imposition of the 10% monthly penalty and 25% attorneys fees. Before Marquez

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could file an answer, the MTC approved the writ of replevin which ECC sought for. The
MTC found for Marquez and held that the second loan was fully extinguished. The RTC
initially affirmed the ruling but reversed the same upon reconsideration. The CA
affirmed the reversal.

Issue:

Whether or not the chattel mortgage may cover the second loan.

Ruling:

No. While a pledge, real estate mortgage, or antichresis may exceptionally

secure after-incurred obligations so long as these future debts are accurately
described, a chattel mortgage, however, can only cover obligations existing at the
time the mortgage is constituted. Although a promise expressed in a chattel
mortgage to include debts that are yet to be contracted can be a binding
commitment that can be compelled upon, the security itself, however, does not come
into existence or arise until after a chattel mortgage agreement covering the newly
contracted debt is executed either by concluding a fresh chattel mortgage or by
amending the old contract conformably with the form prescribed by the Chattel
Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to
cover the after-incurred obligation can constitute an act of default on the part of the
borrower of the financing agreement whereon the promise is written but, of course,
the remedy of foreclosure can only cover the debts extant at the time of constitution
and during the life of the chattel mortgage sought to be foreclosed.

The only obligation specified in the chattel mortgage contract was the first
loan which the petitioner later fully paid. By virtue of Section 3 of the Chattel
Mortgage Law, the payment of the obligation automatically rendered the chattel
mortgage terminated; the chattel mortgage had ceased to exist upon full payment of
the first loan. Being merely an accessory in nature, it cannot exist independently of
the principal obligation. The parties did not execute a fresh chattel mortgage nor did
they amend the chattel mortgage to comply with the Chattel Mortgage Law which
requires that the obligation must be specified in the affidavit of good faith. Simply
put, there no longer was any chattel mortgage that could cover the second loan upon
full payment of the first loan.

LOAN/MUTUUM

WT CONSTRUCTION, INC. v. THE PROVINCE OF CEBU

G.R. No. 208984, September 16, 2015, PERLAS-BERNABE, J.

Forbearance, within the context of usury law, has been described as a

contractual obligation of a lender or creditor to refrain, during a given period of time,
from requiring the borrower or debtor to repay the loan or debt then due and
payable.

Facts:

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The Province of Cebu wanted to build the Cebu International Convention

Center (CICC) and engaged WT Construction, Inc. (WTCI), the winning bidder of Phase
I and II of CICC, to begin construction. As Phase II neared completion, the Province of
Cebu caused WTCI to perform additional works on the project, to which WTCI agreed.
After completing the project and the additional works, WTCI billed the Province of
Cebu, but the latter refused to pay. In 2008, WTCI demanded payment before the trial
court.

Issue:
Whether or not the liability of the Province of Cebu is in the nature of a loan or
forbearance of money.

Ruling:

No. Forbearance, within the context of usury law, has been described as a
contractual obligation of a lender or creditor to refrain, during a given period of time,
from requiring the borrower or debtor to repay the loan or debt then due and
payable. Forbearance of money, goods, or credit refers to arrangements other than
loan agreements where a person agrees to the temporary use of his money, goods or
credits pending the happening of certain events or fulfillment of certain conditions
such that if these conditions are breached, the said person is entitled not only to the
return of the principal amount given, but also to compensation for the use of his
money equivalent to the legal interest since the use or deprivation of funds is akin to
a loan.

Here, the liability of the Province of Cebu to WTCI is not in the nature of a
forbearance of money as it does not involve an acquiescence to the temporary use of
WTCI's money, goods or credits. Rather, this case involves WTCI's performance of a
particular service, i.e., the performance of additional works on CICC. Case law
provides that the liability arising from the non-payment for the construction works do
not partake of a loan or forbearance of money but is more in the nature of a contract
of service.

Hence, the Province of Cebu is liable for 6% interest per annum in the concept of
actual or compensatory damages pursuant to Eastern Shipping Lines v. CA from the
time the claim is made extrajudicially (although for failure to appeal on time, the date
was reckoned from date of judicial demand).

On top of that, the Province of Cebu is also liable for 6% legal interest per
annum from the date of finality of judgment awarding sum of money, until its full
satisfaction. This is in view of the principle that in the interim, the obligation assumes
the nature of a forbearance of credit which, pursuant to Eastern Shipping Lines, Inc.
as modified by Nacar, is subject to legal interest at the rate of 6% per annum.

NUNELON MARQUEZ v. ELISAN CREDIT CORPORATION

G.R. No. 194642, April 6, 2015, BRION, J.

While Central Bank Circular No. 905-82 effectively removed the ceiling on
interest rates for both secured and unsecured loans, regardless of maturity, nothing
in the said circular could possibly be read as granting carte blanche authority to
lenders to raise interest rates to levels that would be unduly burdensome, to the

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point of oppression on their borrowers. In exercising this power to determine what is

iniquitous and unconscionable, courts must consider the circumstances of each case,
since what may be iniquitous and unconscionable in one may be totally just and
equitable in another.

Facts:

Nunelon Marquez obtained a first loan from Elisan Credit Corporation (ECC) for
P53,000 payable in 180 days. Marquez signed a promissory note which provides that
it is payable in weekly installments and subject to 26% annual interest. In case of
non-payment, he agreed to pay 10% monthly penalty based on the total amount
unpaid and another 25% of such for attorneys fees. To further secure payment of
the loan, Marquez executed a chattel mortgage over a motor vehicle which reads
that, among others, the motor vehicle shall stand as a security for the first loan and
"all other obligations of every kind already incurred or which may hereafter be
incurred."
Subsequently, Marquez obtained a second loan from ECC for P55,000, as
evidenced by a promissory note and a cash voucher. The promissory note covering
the second loan contained exactly the same terms and conditions as the first
promissory note. When the second loan had matured, Marquez only paid P29,600,
leaving an unpaid balance of P25,040. Due to liquidity problems, Marquez asked ECC
if he could pay in daily installments until the second loan is paid, to which the latter
acquiesced. Twenty-one (21) months after the second loans maturity, Marquez had
already paid P56,440, an amount greater than the principal.

Despite the receipt of such an amount, ECC filed a complaint for judicial
foreclosure of the chattel mortgage because Marquez allegedly failed to settle the
balance of the second loan despite demand. It further alleged that pursuant to the
terms of the promissory note, Marquezs failure to fully pay upon maturity triggered
the imposition of the 10% monthly penalty and 25% attorneys fees. Before Marquez
could file an answer, the MTC approved the writ of replevin which ECC sought for. The
MTC found for Marquez and held that the second loan was fully extinguished. The RTC
initially affirmed the ruling but reversed the same upon reconsideration. The CA
affirmed the reversal.

Issue:

Whether or not the stipulated interest, penalty and attorneys fees were
excessive.

Ruling:

Yes. Notwithstanding the foregoing, the Court found the stipulated rates of
interest, penalty and attorney's fees to be exorbitant, iniquitous, unconscionable and
excessive. The courts can and should reduce such astronomical rates as reason and
equity demand.

Article 1229 of the Civil Code provides: The judge shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no performance, the penalty may also be reduced
by the courts if it is iniquitous or unconscionable." Article 2227 of the Civil Code, on
the other hand, states: "Liquidated damages, whether intended as an indemnity or a

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penalty, shall be equitably reduced if they are iniquitous or unconscionable. More

importantly, Article 1306 of the Civil Code is emphatic: "The contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy."

Thus, stipulations imposing excessive rates of interest and penalty are void for
being contrary to morals, if not against the law. Further, it is repeatedly held that
while Central Bank Circular No. 905-82, effectively removed the ceiling on interest
rates for both secured and unsecured loans, regardless of maturity, nothing in the
said circular could possibly be read as granting carte blanche authority to lenders to
raise interest rates to levels that would be unduly burdensome, to the point of
oppression on their borrowers. In exercising this power to determine what is
iniquitous and unconscionable, courts must consider the circumstances of each case
since what may be iniquitous and unconscionable in one may be totally just and
equitable in another.

Applying the foregoing principles, we hereby reduce the stipulated rates as

follows: the interest of twenty-six percent (26%) per annum is reduced to two percent
(2%) per annum; the penalty charge of ten percent (10%) per month, or one-hundred
twenty percent (120%) per annum is reduced to two percent (2%) per annum; and
the amount of attorney's fees from twenty-five percent (25%) of the total amount due
to two percent (2%) of the total amount due.

NORLINDA S. MARILAG v. MARCELINO B. MARTINEZ

G.R. No. 201892, July 22, 2015, PERLAS-BERNABE, J.

Settled is the principle which the Court has affirmed in a number of cases that
stipulated interest rates of three percent (3%) per month and higher are excessive,
iniquitous, unconscionable, and exorbitant.

Facts:

Rafael, respondent's father, obtained from petitioner a loan with a stipulated

monthly interest of five percent, payable within a period of six months. The loan was
secured by a real estate mortgage over a parcel of land covered by TCT. Rafael
however, failed to settle his obligation upon maturity despite repeated demands. This
prompted petitioner to file a Complaint for Judicial Foreclosure of Real Estate
Mortgage before the RTC. Upon failure to file his answer and, upon petitioner's
motion, Rafael was declared in default. After an ex parte presentation of petitioner's
evidence, the RTC issued a Decision in the foreclosure case, declaring the stipulated
5% monthly interest to be usurious and reducing the same to 12% per annum.

Issue:

Whether or not the stipulated 5% monthly interest is excessive and

unconscionable.

Ruling:

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Yes. The Court finds the stipulated 5% monthly interest to be excessive and
unconscionable. In a plethora of cases, the Court has affirmed that stipulated interest
rates of three percent (3%) per month and higher are excessive, iniquitous,
unconscionable, and exorbitant, hence, illegal and void for being contrary to morals.

In Agner v. BPI Family Savings Bank, Inc., the Court had the occasion to rule:
settled is the principle which this Court has affirmed in a number of cases that
stipulated interest rates of three percent (3%) per month and higher are excessive,
iniquitous, unconscionable, and exorbitant. While Central Bank Circular No. 905-82,
which took effect on January 1, 1983, effectively removed the ceiling on interest rates
for both secured and unsecured loans, regardless of maturity, nothing in the said
circular could possibly be read as granting carte blanche authority to lenders to raise
interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets. Since the stipulation on the interest rate is void for
being contrary to morals, if not against the law, it is as if there was no express
contract on said interest rate; thus, the interest rate may be reduced as reason and
equity demand.

As such, the stipulated 5% monthly interest should be equitably reduced to

1% per month or 12% p.a. reckoned from the execution of the real estate mortgage
on July 30, 1992.

NEIL B. AGUILAR and RUBEN CALIMBAS v. LIGHTBRINGERS CREDIT

COOPERATIVE
G.R. No. 209605, January 12, 2015, Mendoza, J.

A check constitutes an evidence of indebtedness and is a veritable proof of an

obligation.

FACTS:

Lightbringers Credit Cooperative filed a complaint for sum of money against

Tantiangco, Aguilar and Calimbas alleging that they were members of the cooperative
who borrowed funds but gave a lower net loan from the proceeds of such evidenced
by cash disbursement vouchers and PNB checks which were varying in amount. They
claimed that such discrepancies showed that they never borrowed the amounts being
collected. They also asserted that no interest could be claimed as there was no
written agreement to the imposition. The MCTC absolved Tantiangco but found both
Calimbas and Aguilar liable to their respective debts. The RTC affirmed the MCTC
decisions stating that the PNB checks were concrete evidence of the indebtedness of
Agular and Calimbas.

Issue:

Whether or not a contract of loan exists.

Ruling:

Yes. The Court agrees with the findings of fact of the MCTC and the RTC that a
check was a sufficient evidence of a loan transaction. The findings of fact of the trial

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court, its calibration of the testimonies of the witnesses and its assessment of the
probative weight thereof, as well as its conclusions anchored on the findings are
accorded high respect, if not conclusive effect.

In Pacheco v. Court of Appeals, the Court has expressly recognized that a

check constitutes an evidence of indebtedness and is a veritable proof of an
obligation. Hence, it can be used in lieu of and for the same purpose as a promissory
note. In fact, in the seminal case of Lozano v. Martinez, the Supreme Court pointed
out that a check functions more than a promissory note since it not only contains an
undertaking to pay an amount of money but is an "order addressed to a bank and
partakes of a representation that the drawer has funds on deposit against which the
check is drawn, sufficient to ensure payment upon its presentation to the bank." The
Court reiterated this rule in the relatively recent Lim v. Mindanao Wines and Liquour
Galleria stating that a check, the entries of which are in writing, could prove a loan
transaction.

There is no dispute that the signatures of the petitioners were present on both
the PNB checks and the cash disbursement vouchers. The checks were also made
payable to the order of the petitioners. Hence, respondent can properly demand that
they pay the amounts borrowed. If the petitioners believe that there is some other
bogus scheme afoot, then they must institute a separate action against the
responsible personalities. Otherwise, the Court can only rule on the evidence on
record in the case at bench, applying the appropriate laws and jurisprudence.

MORTGAGE

SPOUSES JOSE O. GATUSLAO and ERMILA LEONILA LIMSIACO-GATUSLAO v.

LEO RAY V. YANSON
G.R. No. 191540, January 21, 2015, DEL CASTILLO, J.

It is settled that the issuance of a Writ of Possession may not be stayed by a

pending action for annulment of mortgage or the foreclosure itself.

Facts:

Petitioner Limsiaco-Gatuslao is the daughter of the late Limsiaco, who was the
registered owner of two parcels of land. He mortgaged the said lots along with the
house standing thereon to PNB. Upon Limsiacos failure to pay, PNB extrajudicially
foreclosed on the mortgage and caused the properties sale at a public auction where
it emerged as the highest bidder. When the one-year redemption period expired
without Limsiacos estate redeeming the properties, PNB caused the consolidation of
titles in its name. Thereafter, a Deed of Absolute Sale was executed by PNB
conveying the subject properties in favor of respondent Yanson, who later on filed
with the RTC an Ex-Parte Motion for Writ of Possession pursuant to Section 7 of Act
No. 3135, as amended. The RTC granted the issuance of the writ. Petitioners moved
for reconsideration which was denied. Respondent moved to execute the possessory
writ which was granted.

Issues:

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1. Whether or not the pending action for annulment of foreclosure of

mortgage and the corresponding sale at public auction of the subject properties
operates as a bar to the issuance of a writ of possession.
2. Whether or not Sps. Gatuslao may be evicted by a mere ex parte writ of
possession as they were not parties to the foreclosure.
3. Whether or not Yanson may avail of a writ of possession pursuant to Section
7 of Act No. 3135, as amended.

Ruling:

1. No. BPI Family Savings Bank, Inc. v. Golden Power Diesel Sales Center, Inc.
(G.R. No. 176019, January 12, 2011), reiterates the long-standing rule that It is
settled that a pending action for annulment of mortgage or foreclosure sale does not
stay the issuance of the writ of possession. The trial court, where the application for a
writ of possession is filed, does not need to look into the validity of the mortgage or
the manner of its foreclosure. The purchaser is entitled to a writ of possession
without prejudice to the outcome of the pending annulment case. This is in line with
the ministerial character of the possessory writ.

2. Yes. Sps. Gatuslao are the mortgagor Limsiacos heirs. It was precisely
because of Limsiacos death that petitioners obtained the right to possess the subject
properties and, as such, are considered transferees or successors-in-interest of the
right of possession of the latter. As Limsiacos successors-in-interest, the spouses
merely stepped into his shoes and are, thus, compelled not only to acknowledge but,
more importantly, to respect the mortgage he had earlier executed in favor of
Yanson. They cannot effectively assert that their right of possession is adverse to that
of Limsiaco as they do not have an independent right of possession other than what
they acquired from him. Not being third parties who have a right contrary to that of
the mortgagor, the trial court was thus justified in issuing the writ and in ordering its
implementation.

3. Yes. Yanson, as a transferee or successor-in interest of PNB by virtue of the

contract of sale between them, is considered to have stepped into the shoes of PNB.
As such, he is necessarily entitled to avail of the provisions of Section 7 of Act No.
3135, as amended, as if he is PNB. Further, respondent may rightfully take
possession of the subject properties through a writ of possession, even if he was not
the actual buyer thereof at the public auction sale, in consonance with the courts
ruling in Ermitao v. Paglas (G.R. No. 174436, January 23, 2013), which
acknowledged respondent's right, as a subsequent buyer of the properties from the
actual purchaser of the same in the public auction sale, to possess the property after
the expiration of the period to redeem sans any redemption. Verily, Ermitao
demonstrates the applicability of the provisions of Section 7 of Act No. 3135 to such a
subsequent purchaser like Yanson in the present case.

ST. RAPHAEL MONTESSORI SCHOOL, INC., REPRESENTED BY TERESITA G.

BADIOLA v. BANK OF THE PHILIPPINE ISLANDS
G.R. No. 184076, October 21, 2015, PERALTA, J.

The issuance of a writ of possession to a purchaser in a public auction is a

ministerial function of the court, which cannot be enjoined or restrained, even by the

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filing of a civil case for the declaration of nullity of the foreclosure and consequent
auction sale.

Facts:

Spouses Andaya obtained a loan for themselves and on behalf of St. Raphael
from BPI, secured by real estate mortgages. They defaulted on their obligation, thus
BPI extrajudicially foreclosed the mortgaged property. The spouses failed to redeem
the property, BPI executed an Affidavit of Consolidation and the property was issued
in its name and upon petition, was issued a Writ of Possession by the court. The
Spouses failed to vacate the subject property, BPI asked the sheriff to implement the
writ of possession which was earlier deferred. St. Raphael sought to be restored to
the possession of the premises, which the court granted, in order to maintain the
status quo. The CA reversed the status quo order, and upheld the writ of possession
of BPI.

Issue:

Whether or not the writ of possession that was issued ex-parte as a result of
the foreclosure of the mortgages executed by the Spouses Andaya on the subject
property can be enforced and utilized by BPI to oust St. Raphael from the physical
possession of its school buildings built on the same subject property.

Ruling:

Yes. The issuance of a writ of possession to a purchaser in a public auction is

a ministerial function of the court, which cannot be enjoined or restrained, even by
the filing of a civil case for the declaration of nullity of the foreclosure and
consequent auction sale. Once title to the property has been consolidated in the
buyers name upon failure of the mortgagor to redeem the property within the one-
year redemption period, the writ of possession becomes a matter of right belonging
to the buyer. The buyer can demand possession of the property at anytime. Its right
to possession has then ripened into the right of a confirmed absolute owner and the
issuance of the writ becomes a ministerial function that does not admit of the
exercise of the courts discretion. The court, acting on an application for its issuance,
should issue the writ as a matter of course and without delay.

UNITED OVERSEAS BANK OF THE PHILIPPINES, INC. v. THE BOARD OF

COMMISSIONERS-HLURB, J.O.S. MANAGING BUILDERS, INC., AND EDUPLAN
PHILS., INC.
G.R. No. 182133, June 23, 2015, PERALTA, J.

While a mortgage may be nullified if it was in violation of Section 18 of P.D.

No. 957, such nullification applies only to the interest of the complaining buyer.

Facts:

EDUPLAN bought from JOS Managing Builders Condominium Unit E, 10 th Floor

of the Aurora Milestone Tower. EDUPLAN has fully paid the consideration but JOS
Managing Builders failed to cause the issuance of a CCT over the condominium unit
in the name of EDUPLAN. EDUPLAN learned that the lots on which the condominium

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building project Aurora Milestone Tower was erected had been mortgaged to United
Overseas Bank of the Philippines without the prior written approval of the HLURB. The
said mortgage was subsequently foreclosed and the Bank emerged as the highest
bidder. Consequently, EDUPLAN filed a complaint for specific performance and
damages against JOS Managing Builders and United Overseas Bank before the
HLURB. HLURB Arbiter ruled in favor of EDUPLAN and declared the mortgage
executed as well as the foreclosure proceedings null and void. HLURB Board of
Commissioners affirmed the Arbiter's decision, but deleted an award. Hence, United
Overseas Bank filed a petition for review under Rule 43 before the CA but the same
was dismissed.

Issue:

Whether or not the HLURB erred in declaring null and void the entire mortgage
executed between JOS Managing Builders and United Overseas Bank.

Ruling:

Yes. While a mortgage may be nullified if it was in violation of Section 18 of

P.D. No. 957, such nullification applies only to the interest of the complaining buyer. It
cannot extend to the entire mortgage. A buyer of a particular unit or lot has no
standing to ask for the nullification of the entire mortgage.

Since EDUPLAN has an actionable interest only over Unit E, 10 th Floor, Aurora
Milestone Tower, it is but logical to conclude that it has no standing to seek for the
complete nullification of the subject mortgage and the HLURB was incorrect when it
voided the whole mortgage between JOS Managing Builders and United Overseas
Bank.

Considering that EDUPLAN had already paid the full purchase price of the subject
unit, the latter is entitled to the transfer of ownership of the subject property in its
favor. This right is provided for in Section 25 of P.D. No. 957. Hence, the petition was
granted.

SPOUSES EMILIANO L. JALBAY, SR. and MAMERTA C. JALBAY v. PHILIPPINE

NATIONAL BANK
G.R. No. 177803, August 3, 2015, PERALTA, J.

The doctrine of the mortgagee in good faith, wherein buyers or mortgagees

dealing with property covered by a Torrens Certificate of Title are no longer required
to go beyond what appears on the face of the title, is not applicable to banks, since a
banking institution is expected to exercise due diligence before entering into a
mortgage contract.

Facts:

Spouses Jalbay sought the reconstitution of a title over a lot they own and
such title was released to their daughter Virginia Agus, while the Spouses were
working abroad. Agus applied for a loan with PNB and constituted a real estate
mortgage over the lot as a security. When Agus failed to settle her obligation, PNB

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foreclosed the mortgage over the property and became the highest bidder at the
public auction. When Spouses Jalbay learned about the same, they filed a complaint
against PNB contending that the mortgage and the foreclosure proceedings were
invalid for lack of consent of the real registered owners. The RTC declare the real
estate mortgage and the foreclosure proceedings null and void. However, the CA
reversed the decision of the RTC. Now, Spouses Jalbay posited that PNB did not act
with the requisite diligence when it approved the loan application of Agus and that
PNB was not a mortgagee in good faith.

Issue:

Whether or not PNB exerted the requisite diligence in granting the loan and
entering into the real estate mortgage.

Ruling:

Yes. A banking institution is expected to exercise due diligence before entering

into a mortgage contract. Indeed, under the doctrine of the mortgagee in good
faith, wherein buyers or mortgagees dealing with property covered by a Torrens
Certificate of Title are no longer required to go beyond what appears on the face of
the title. However, the rule that persons dealing with registered lands can rely solely
on the certificate of title is not applicable to banks. Thus, before approving a loan
application, it is a standard operating practice for these institutions to conduct an
ocular inspection of the property offered for mortgage and to verify the veracity of
the title to determine its real owners.

In this case, the Court held that PNB has complied with the required degree of
diligence, prudence, and care in dealing with the mortgagor. There was also no sign
or circumstance which could have possible triggered suspicion on the banks part.
Aside from the fact that the certificate of title to the subject lot is authentic and
issued in the name of the Spouses Jalbay, they also appeared to have been the ones
occupying the property.

METROPOLITAN BANK AND TRUST COMPANY v. CPR PROMOTIONS AND

MARKETING, INC. and SPOUSES CORNELIO P. REYNOSO, JR. and LEONIZA F.
REYSONO
G.R. No. 200567, June 22, 2015, VELASCO, JR., J.

Where the proceeds of the sale are insufficient to pay the debt, the
mortgagee has the right to recover the deficiency from the debtor.

Facts:

Spouses Leoniza F. Reynoso and Cornelio P. Reynoso, Jr., as Treasurer and

President of CPR Promotions, respectively, executed a continuing surety agreement
binding themselves solidarily with CPR Promotions to pay any and all loans CPR
Promotions may have obtained from MBTC. CPR Promotions defaulted in the payment
of their loans covered by fifteen (15) PNs and secured by two REMs in favor of MBTC.
The REMs were foreclosed. Notwithstanding the foreclosure, MBTC alleged that there
remained a deficiency balance. CPR Promotions and Spouses Reynoso failed to settle
the alleged deficiency. Thus, MBTC filed an action for collection of sum of money

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against them. RTC ruled in favor of MBTC that there, indeed, was a balance. However,
CA reversed the judgment and ordered MBTC to refund to Spouses Reynoso the
amount of PhP722,602.22 representing the remainder of the proceeds of the
foreclosure sale with legal interest.

Issue:

Whether or not the CA gravely abused its discretion when it ruled that MBTC
failed to prove that a deficiency balance resulted after conducting the extrajudicial
foreclosure sales of the mortgaged properties.

Ruling:

No. MBTC failed to prove that there is a deficiency balance of PhP

2,628,520.73. The Court has already ruled in several cases that in extrajudicial
foreclosure of mortgage, where the proceeds of the sale are insufficient to pay the
debt, the mortgagee has the right to recover the deficiency from the debtor. In
ascertaining the deficit amount, Sec. 4, Rule 68 of the Rules of Court is elucidating, to
wit:

Section 4. Disposition of proceeds of sale. The amount realized from the

foreclosure sale of the mortgaged property shall, after deducting the costs of the
sale, be paid to the person foreclosing the mortgage, and when there shall be any
balance or residue, after paying off the mortgage debt due, the same shall be paid to
junior encumbrancers in the order of their priority, to be ascertained by the court, or
if there be no such encumbrancers or there be a balance or residue after payment to
them, then to the mortgagor or his duly authorized agent, or to the person entitled to
it.

Verily, there can only be a deficit when the proceeds of the sale is not
sufficient to cover (1) the costs of foreclosure proceedings; and (2) the amount due to
the creditor, inclusive of interests and penalties, if any, at the time of foreclosure.

BANK OF THE PHILIPPINE ISLANDS v. SPOUSES JOHNSON & EVELYN CO &

JUPITER REAL ESTATE VENTURES, INC.
G.R. No. 171172, November 09, 2015, JARDELEZA, J.

The remedy from an order granting a writ of possession after the lapse of
redemption period is an ordinary appeal. After the lapse of the redemption period,
the remedy of a debtor to contest the possession of the property is a separate action,
e.g., action for recovery of ownership, for annulment of mortgage and/or annulment
of foreclosure, and not the appeal provided for in Section 8 of Act No. 3135.

Facts:

BPI foreclosed the real estate mortgage of Sps. Co pursuant to Act No. 3135.
After the expiration of the period for redemption the spouses filed a complaint for the
nullification of foreclosure proceedings while BPI filed a petition for the issuance of a
writ of possession. In an Order, the RTC issued the writ of possession prayed for.
Thereafter, the spouses filed a notice of appeal of the said Order. In its comment, BPI

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argued that the order of the trial court granting a writ of possession is merely
interlocutory from which no appeal is taken.

Issue:

Whether or not the remedy from an order granting a writ of possession is an

ordinary appeal.

Ruling:

Yes. The order for the issuance of a writ of possession being final, is a proper
subject for appeal. It is the ministerial duty of the trial court to issue a writ of
possession in favor of the purchaser who has already consolidated its title. After the
consolidation of title in the buyer's name for failure of the mortgagor to redeem the
property, the writ of possession becomes a matter of right. Its issuance to a
purchaser in an extrajudicial foreclosure sale is merely a ministerial function. The trial
court has no discretion on this matter. Hence, any assertion of discretion in
connection with such issuance is misplaced, and a petition for certiorari is not a
proper remedy.

However, this remedy of appeal is different from the remedy provided in

Section 8 of Act No. 3135. Act No. 3135 finds no application after the lapse of the
redemption period, and the remedy of a debtor to contest the possession of the
property is a separate action, and not the appeal provided for in Section 8 of the Act.

The remedy provided under Section 8 of Act No. 3135 to the debtor becomes
available only after the purchaser acquires actual possession of the property. This is
required because until then the debtor, as the owner of the property, does not lose
his right to possess. However, upon the lapse of the redemption period without the
debtor exercising his right of redemption and the purchaser consolidates his title, it
becomes unnecessary to require the purchaser to assume actual possession thereof
before the debtor may contest it. Possession of the property becomes an absolute
right of the purchaser as an incident of his ownership. Accordingly, the debtor
contesting the purchaser's possession may no longer avail of the remedy under
Section 8 of Act No. 3135, but should pursue a separate action e.g., action for
recovery of ownership, for annulment of mortgage and/or annulment of foreclosure.

PACTUM COMMISSORIUM

HOME GUARANTY CORPORATION v. LA SAVOIE DEVELOPMENT CORPORATION

G.R. No. 168616, January 28, 2015, LEONEN, J.

Prompt assignment and conveyance without the need of conducting

foreclosure proceedings, judicial or otherwise is indicative of pactum commissorium
which is void and ineffectual and does not serve to vest ownership.

Facts:

La Savoie Development Corporation, engaged in the business of real estate

development, found itself unable to pay its obligations to its creditors with the onset

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of the Asian financial crisis in 1997 the devaluation of the Philippine peso and due to
other factors such as lack of working capital, high interest rates, etc. Thus it filed a
petition for the declaration of state of suspension of payments with approval of
proposed rehabilitation plan. With La Savoie's compliance and finding its petition to
be sufficient in form and substance, then Regional Trial Court Judge Estela Perlas-
Bernabe issued a Stay Order, staying the enforcement of all claims against La Savoie.
However, Home Guaranty Corporation filed an Opposition even though it was not a
creditor of petitioner. It asserted that it had a material and beneficial interest in the
petition, in relation to the interest of Philippine Veterans Bank (PVB), Planters
Development Bank (PDB), and Land Bank of the Philippines (LBP), which are listed as
creditors. On the other hand, La Savoie asserted that for the assignment to take
effect, Home Guaranty Corporation had to first pay the holders of the La Savoie
Development Certificates. The RTC however, issued an Order denying due course to
La Savoie's Petition for Rehabilitation and lifting the stay Order. In the meantime,
Home Guaranty Corporation, through Planters Development Bank, paid a total of
P128.5 million as redemption value to certificate holders. It now claims that the
properties comprising the Asset Pool should be excluded from the rehabilitation
proceedings as these have now been removed from the dominion of La Savoie and
have been conveyed and assigned to it. La Savoie contends that the transfer was
ineffectual as the Stay Order was in effect at the time of the execution of the Deed.

Issue:

Whether or not Home Guaranty should be excluded from the coverage of La

Savoie's Petition for Rehabilitation.

Ruling:

No. First, rehabilitation proceedings are not bound by procedural rules spelled
out in the Rules of Court. The Interim Rules, not the Rules of Court, was the
procedural law and as such it provided an exception to the general principle that an
appeal stays the judgment or final order appealed from. On the case at hand, there
was no order enjoining or restraining the order appealed from. Therefore, Home
Guaranty as guarantor was capacitated, in accordance with Sections 12 and 13 of the
Contract of Guaranty to effect payment to the holders of the LSDC certificates.

Viewed solely through the lens of the Trust Agreement and the Contract of
Guaranty, the transfer made to Home Guaranty on the strength of the Deed of
Conveyance appears valid and binding. The argument that the preference of credit
does not apply in rehabilitation proceedings, does not apply to corporations who have
sought to put themselves under receivership but, for lack of judicial sanction, have
not been put under or are no longer under receivership. Therefore, while La Savoie
remained to be not under receivership, a valid transfer of the properties comprising
the Asset Pool was made in favor of Home Guaranty. They would thus be beyond the
reach of rehabilitation proceedings and no longer susceptible to the rule against
preference of creditors.

However, the transfer made to Home Guaranty Corporation was ineffectual.

The execution of a Deed of Conveyance without resorting to foreclosure is indicative
of pactum commissorium. In this case, Sections 13.1 and 13.2 of the Contract of
Guaranty call for the "prompt assignment and conveyance to Home Guaranty
Corporation of all the corresponding properties in the Asset Pool. Moreover, Sections

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13.1 and 13.2 dispense with the need of conducting foreclosure proceedings, judicial
or otherwise. This goes to show that there is automatic appropriation by the paying
guarantor of the properties held as security. It is null and void. Accordingly, whatever
conveyance was made by Planters Development Bank to Home Guaranty Corporation
in view of this illicit stipulation is ineffectual. It did not vest ownership in Home
Guaranty Corporation.

EXTRAJUDICIAL FORECLOSURE

SPOUSES RODOLFO and MARCELINA GUEVARRA v. THE COMMONER LENDING

CORPORATION, INC.
G.R. No. 204672, February 18, 2015, PERLAS-BERNABE, J.

In an extra-judicial foreclosure of registered land acquired under a free

patent, the mortgagor may redeem the property within 2 years from the date of
foreclosure if the land is mortgaged to a rural bank, or within 1 year from the
registration of the certificate of sale if the land is mortgaged to parties other than
rural banks. If the mortgagor fails to exercise such right, he or his heirs may still
repurchase the property within 5 years from the expiration of the aforementioned
redemption period pursuant to Section 119 of the Public Land Act (PLA).

Facts:

Sps. Guevarra obtained a loan from TCLC, which was secured by a real estate
mortgage over a parcel of land. Sps. Guevarra, however, defaulted in the payment of
their loan, prompting TCLC to extra-judicially foreclose the mortgage on the subject
property in accordance with Act No. 3135. In the process, TCLC emerged as the
highest bidder at the public auction sale. Eventually, Sps. Guevarra failed to redeem
the subject property within the 1 year reglementary period, which led to the issuance
of Transfer Certificate of Title in the name of TCLC. Thereafter, TCLC demanded that
Sps. Guevarra vacate the property, but to no avail. RTC granted TCLCs petition
resulting in the issuance of the writ of possession. CA affirmed.

Issue:

Whether or not the CA committed a reversible error in ruling that the

repurchase price for the subject property should be fixed by TCLC.

Ruling:

No. In an extra-judicial foreclosure of registered land acquired under a free

patent, the mortgagor may redeem the property within 2 years from the date of
foreclosure if the land is mortgaged to a rural bank, or within 1 year from the
registration of the certificate of sale if the land is mortgaged to parties other than
rural banks. If the mortgagor fails to exercise such right, he or his heirs may still
repurchase the property within 5 years from the expiration of the aforementioned
redemption period pursuant to Section 119 of the Public Land Act (PLA). 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 1 year from
the registration of the certificate of sale. Given that Sps. Guevarra failed to redeem

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the subject property within the aforestated redemption period, TCLC was entitled, as
a matter of right, to consolidate its ownership and to possess the same. Nonetheless,
such right should not negate Sps. Guevarra's right to repurchase said property within
5 years from the expiration of the redemption period.

In this relation, 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 5 year period under Section 119 of the PLA is already equivalent
to a formal offer to redeem. Consignation of the redemption price is equally
unnecessary, thus we now proceed to determine the proper amount of the
repurchase price. Redemptions from lending or credit institutions, like TCLC, are
governed by Section 78 of the General Banking Law of 2000. Nonetheless, the Court
cannot subscribe to TCLC's contention that it is entitled to its total claims under the
promissory note and the mortgage contract in view of the settled rule that an action
to foreclose must be limited to the amount mentioned in the mortgage. Hence,
amounts not stated therein must be excluded, like the penalty charges of 3% per
month included in TCLC's claim. A penalty charge is likened to a compensation for
damages in case of breach of the obligation. Being penal in nature, it must be
specific and fixed by the contracting parties.

Settled is the principle which this Court has affirmed in a number of cases that
stipulated interest rates of 3% per month and higher are excessive, iniquitous,
unconscionable, and exorbitant. While CB Circ. No. 905-82, effectively removed the
ceiling on interest rates for both secured and unsecured loans, regardless of maturity,
nothing in the said circular could possibly be read as granting carte blanche authority
to lenders to raise interest rates to levels which would either enslave their borrowers
or lead to a hemorrhaging of their assets. Since the stipulation on the interest rate is
void for being contrary to morals, if not against the law, it is as if there was no
express contract on said interest rate; thus, the interest rate may be reduced as
reason and equity demand. As such, the stipulated 3% monthly interest should be
equitably reduced to 1% per month or 12% per annum reckoned from the execution
of the real estate mortgage, until the filing of the petition in Cadastral Case No. 122.

SPOUSES BENITO BAYSA and VICTORIA BAYSA v. SPOUSES FIDEL PLANTILLA

and SUSAN PLANTILLA, REGISTER OF DEEDS OF QUEZON CITY, and THE
SHERIFF OF QUEZON CITY
G.R. No. 159271, July 13, 2015, BERSAMIN, J.
To enable the extrajudicial foreclosure of a Real Estate Mortgage (REM), the
special power to sell should have been either inserted in the REM itself or embodied
in a separate instrument attached to the REM.

Facts:

Spouses Baysa and Spouses Plantilla executed a Real Estate Mortgage

pursuant to a loan in favor of spouses Baysa in which Paragraph 13 thereof provides:

Paragraph 13. x x x; - In the event of non-payment of the entire principal and

accrued interest due under the conditions described in this paragraph, the
mortgagors expressly and specifically agree to the extra-judicial foreclosure
of the mortgaged property.

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Based on the above, the lower court and CA agreed that an extra judicial
foreclosure is valid. On the contrary, Spouses Chua claim that it is not.

Issue:

Whether or not the CA is correct in rendering that an extrajudicial foreclosure

of REM is valid based on the above stipulation provided in par. 13 of the REM.

Ruling:

No. Based on the text of par. 13 of the REM, the petitioners evidently agreed
only to the holding of the extrajudicial foreclosure should they default in their
obligations. Their agreement was a mere expression of their amenability to
extrajudicial foreclosure as the means of foreclosing the mortgage, and did not
constitute the special power or authority to sell the mortgaged property to enable the
mortgagees to recover the unpaid obligations. What was necessary was the special
power or authority to sell whether inserted in the REM itself, or annexed thereto
that authorized the respondent spouses to sell in the public auction their mortgaged
property.

The requirement for the special power or authority to sell finds support in the
civil law. To begin with, because the sale of the property by virtue of the extrajudicial
foreclosure would be made through the sheriff by the respondent spouses as the
mortgagees acting as the agents of the petitioners as the mortgagors-owners, there
must be a written authority from the latter in favor of the former as their agents;
otherwise, the sale would be void. Secondly, considering that, pursuant to Article
1878, (5), of the Civil Code, a special power of attorney was necessary for entering
into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration, the written authority
must be a special power of attorney to sell. Contrary to the CAs opinion, therefore,
the power or authority to sell by virtue of the extrajudicial foreclosure of the REM
could not be necessarily implied from the text of paragraph 13, supra, expressing the
petitioners agreement to the extrajudicial foreclosure.

Having found and declared the extrajudicial foreclosure of the REM and the
foreclosure sale of the mortgaged property of the petitioner void for want of the
special power to sell, there is no right of redemption to speak of if the foreclosure was
void.

BANK OF THE PHILIPPINE ISLANDS (formerly Prudential Bank) v. SPOUSES

DAVID M. CASTRO and CONSUELO B. CASTRO
G.R. No. 195272, January 14, 2015, PEREZ, J.

The mistakes and omissions which would invalidate notice pertain to those
which: 1) are calculated to deter or mislead bidders, 2) to depreciate the value of the
property, or 3) to prevent it from bringing a fair price.

Facts:

The Complaint has its origins from the two loans contracted by respondent
Spouses David M. Castro (David) and Consuelo B. Castro (Consuelo) from Prudential

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Bank in the amounts of P100,000.00 and P55,000.00 in July and August 1987. The
P100,000.00 loan was secured by a Real Estate Mortgage (REM) over petitioners'
property located in Quezon City and covered by TCT No. 364277 while the P55,000.00
loan was secured by another REM over two parcels of land located in Alaminos,
Laguna covered by TCT Nos. T-2225 and T-2226, registered in the name of Davids
mother, Guellerma Malabanan. The loans remained unpaid as of 30 April 1996.
Prudential Bank, through counsel, filed two separate petitions for foreclosure of the
mortgage. In their first petition, Prudential Bank admitted that through inadvertence,
the photocopies of the first two pages of the REM covering the properties in Laguna
were mixed and attached to the photocopies of the last two pages of the REM
covering the Quezon City property. Thus, in the Notice of Sheriffs Sale, the name
Guellerma Malabanan rep. by her AIF David M. Castro appeared as mortgagor while
the amount of mortgaged indebtedness is P96,870.20. The real property described
therein however is the Quezon City property. In their Complaint, Spouses Castro
alleged that the extrajudicial foreclosure and sale of the Quezon City property is null
and void for lack of notice and publication of the extrajudicial foreclosure sale.
Spouses Castro proffered that the property foreclosed is not one of the properties
covered by the REM executed by Guellerma Malabanan which was the basis of the
Notice of Sheriffs Sale which was posted and published. Spouses Castro prayed for
the declaration of the Sheriffs Certificate of Sale as null and void and for award of
damages.

Issue:

Whether or not the errors in the Notice of Sheriffs Sale invalidate the notice
and render the sale and the certificate of such sale void.

Ruling:

No. In Philippine National Bank v. Maraya, Jr., the Court elucidated that one of
the most important requirements of Act No. 3135 is that the notice of the time and
place of sale shall be given. The mistakes and omissions which would invalidate
notice pertain to those which: 1) are calculated to deter or mislead bidders, 2) to
depreciate the value of the property, or 3) to prevent it from bringing a fair price. The
errors pointed out by respondents appear to be harmless. The evils that can result
from an erroneous notice did not arise. There was no intention to mislead, as the
errors in fact did not mislead the bidders as shown by the fact that the winning
registered bid of P396,000.00 is over and above the real amount of indebtedness of
P209,205.05. Notably, the mentioned amount of P96,870.20 refers to the mortgage
indebtedness not the value of the property. Equally notable is the announcement in
the notice that the amount excludes penalties, charges, attorneys fees and all legal
fees and expenses for the foreclosure and sale. As regards the designation of
Guellerma Malabanan as the mortgagor, the Court agree with the reference made by
the Court of Appeals to the case of Langkaan Realty Devt Inc. v. UCPB which ruled
that the erroneous designation of an entity as the mortgagor does not invalidate the
notice of sale.

REDEMPTION

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THE CITY OF DAVAO represented by THE CITY TREASURER OF DAVAO CITY v.

THE INTESTATE OF AMADO S. DALISAY, represented by SPECIAL
ADMINISTRATOR ATTY. NICASIO B. PADERNA, G.R. No. 207791, July 15,
2015, MENDOZA, J.

A valid redemption of property must appropriately be based on the law which

is the very source of this substantive right. It is, therefore, necessary that compliance
with the rules set forth by law and jurisprudence should be shown in order to render
validity to the exercise of this right. Hence, when the Court is beckoned to rule on
this validity, a hasty resort to elementary rules on construction proves inadequate.

Facts:

The real properties of the estate of Dalisay were advertised for sale at a public
auction for non-payment of real estate taxes. Since, no bidders appeared on the date
of the public auction, the aforesaid properties were acquired by the City Government
of Davao (the City) pursuant to Section 263 of RA No. 7160. From the acquisition of
the City of Davao more than 1 year had already passed before the Estate inquired the
status of the real property. As a response, the city through its treasurer erroneously
belatedly issued a declaration of forfeiture which should have been done earlier.
Thus, the estate claimed that they have the right to redeem from the period of
declaration and not from the acquisition of the City of Davao when no bidders
attended the public auction. On the contrary, the City of Davao avers that the period
commences from the date of the forfeiture, that is, the date of the auction.

Issue:

Whether or not the one (1) year redemption period of forfeited tax delinquent
properties purchased by the local government for want of a bidder is reckoned from
the date of the auction.

Ruling:

Yes. It is now apparent that the previous rule enunciating the reckoning period
of redemption for tax delinquent properties from the date of the registration of sale of
the property is no longer controlling. Section 261 now mandates that the owner of
the delinquent real property or person having legal interest therein, or his
representative, has the right to redeem the property within one (1) year from the
date of sale upon payment of the delinquent tax and other fees.

Inasmuch as the crafter of the Local Government Code clearly worded the
above-cited Section to repeal PD No. 464, it is a clear showing of their legislative
intent that RA No. 7160 was to supersede PD No. 464. As such, it is apparent that in
case of sale of tax delinquent properties, RA No. 7160 is the general law applicable.
From the foregoing, the owner of the delinquent real property or person having legal
interest therein, or his representative, has the right to redeem the property within
one (1) year from the date of sale upon payment of the delinquent tax and other
fees. Verily, the period of redemption of tax delinquent properties should be counted
not from the date of registration of the certificate of sale, as previously provided by
Section 78 of PD No. 464, but rather on the date of sale of the tax delinquent
property, as explicitly provided by Section 261 of RA No. 7160.

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SURETYSHIP

YULIM INTERNATIONAL COMPANY LTD., JAMES YU, JONATHAN YU, and

ALMERICK TIENG LIM v. INTERNATIONAL EXCHANGE BANK (now Union Bank
of the Philippines)
G.R. No. 203133, February 18, 2015, REYES, J.

A surety is considered in law as being the same party as the debtor in relation
to whatever is adjudged touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable.

Facts:

iBank, a commercial bank, granted Yulim, a domestic partnership, a credit

facility in the form of an Omnibus Loan Line as evidenced by a Credit
Agreement which was secured by a Chattel Mortgage over Yulims inventories in its
merchandise warehouse. As further guarantee, the partners, namely, James, Jonathan
and Almerick, executed a Continuing Surety Agreement in favor of iBank. The above
promissory notes (PN) were later consolidated under a single promissory note. Yulim
defaulted on the said note. iBank sent demand letters to Yulim, through its President,
James, and through Almerick, but without success. iBank then filed a Complaint for
Sum of Money. RTC dismissed the complaint and ordered Yulim alone to pay iBank. CA
granted iBanks appeal.

Issue:

Whether or not the CA erred in ordering James, Jonathan and Almerick jointly
and severally liable with Yulim to pay iBank.

Ruling:

No. Firstly, 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. Under Article 2047 of the Civil Code, these words are
said to describe a contract of suretyship. In a contract of suretyship, one lends his
credit by joining in the principal debtors obligation so as to render himself directly
and primarily responsible with him without reference to the solvency of the
principal. According to the above Article, if a person binds himself solidarily with the
principal debtor, the provisions of Articles 1207 to 1222, or Section 4, Chapter 3, Title
I, Book IV of the Civil Code on joint and solidary obligations, shall be observed. Thus,
where there is a concurrence of two or more creditors or of two or more debtors in
one and the same obligation, Article 1207 provides that among them, there is a
solidary liability only when the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity. A surety is considered in law as being the
same party as the debtor in relation to whatever is adjudged touching the obligation

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of the latter, and their liabilities are interwoven as to be inseparable. Also, it is well
settled that when the obligor or obligors undertake to be "jointly and severally" liable,
it means that the obligation is solidary, as in this case. There can be no mistaking the
same import of Article I of the Continuing Surety Agreement executed.

Thereunder, in addition to binding themselves "jointly and severally" with

Yulim to "unconditionally and irrevocably guarantee full and complete payment" of
any and all credit accommodations that have been granted to Yulim, the petitioners
further warrant that their liability as sureties "shall be direct, immediate and not
contingent upon the pursuit [by] the BANK of whatever remedies it may have against
the PRINCIPAL of other securities." There can thus be no doubt that the individual
petitioners have bound themselves to be solidarily liable with Yulim for the payment
of its loan with iBank.

GUARANTY

ALLIED BANKING CORPORATION v. JESUS YUJUICO

G.R. No. 163116, June 29, 2015, BERSAMIN, J.

In guaranty, the guarantor binds himself to the creditor to fulfill the obligation
of the principal debtor in case the latter should fail to do so. In contrast, the surety is
solidarily bound to the obligation of the principal debtor.

Facts:

General Bank & Trust Company (Genbank) granted YLTC an Omnibus Credit
Line amounting to P800,000 to be made available by overdrafts, loans and advances
upon condition that the principals of YLTC would personally bind themselves in a
Continuing Guarantee to secure payment of obligations drawn on said credit
extended by Genbank. Hence, Gregoria Paredes, Clarencio Yujuico and Jesus Yujuico,
principal stockholders of YLTC as sureties, executed a Continuing Guarantee. Then,
Genbank granted YLTC a credit line of P1.5M which included the preceding P800,000-
credit line and the principal stockholders again executed a Continuing Guarantee.
Genbank granted YLTC a credit line of P5M and Clarence Yujuico, as lone surety,
executed a Continuing Guarantee. Meanwhile, loans contracted by YLTC became due
and demandable. However, Genbank was placed under liquidation by the Monetary
Board. Allied Banking, as successor-in-interest of Genbank, sought to collect the
amount covered by the promissory notes but YLTC failed to pay. Hence, Allied
Banking filed a collection suit. The RTC dismissed the complaint against Jesus since
he had been sued for those obtained by YLTC after the third guaranty agreement in
which Jesus was not a signatory. Jesus, as a guarantor did not consent to the novation
of the credit agreement between Genbank and YLTC increasing its credit line.
Moreover, he revoked his guaranty under the old credit line and should be released
from his undertaking. The RTC decision was affirmed by the CA.

Issue:

Whether or not the undertaking of Jesus was of a surety and not a guarantor.

Ruling:

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Yes, his undertaking is one of surety. In guaranty, the guarantor "binds himself
to the creditor to fulfill the obligation of the principal debtor in case the latter should
fail to do so." The liability of the guarantor is secondary to that of the principal debtor
because he "cannot be compelled to pay the creditor unless the latter has exhausted
all the property of the debtor, and has resorted to all the legal remedies against the
debtor." In contrast, the surety is solidarily bound to the obligation of the principal
debtor. Although the first part of the continuing guaranties showed that Jesus as the
signatory had agreed to be bound "either as guarantor or otherwise," the usage of
term guaranty or guarantee in the caption of the documents, or of the word
guarantor in the contents of the documents did not conclusively characterize the
nature of the obligations assumed therein. With the stipulations in the continuing
guaranties indicating that he was the surety of the credit line extended to YLTC, Jesus
was solidarity liable to Genbank for the indebtedness of YLTC. In other words, he
thereby rendered himself "directly and primarily responsible" with YLTC, "without
reference to the solvency of the principal.

Be that as it may, the continuing guaranties could not answer for the
promissory notes amounting to P6,020,184.90 that the petitioner sought to judicially
recover from Jesus as surety. The courts below found and declared that the
continuing guaranties of February 8, 1966 and February 22, 1967 were not renewed
after the expiration of the credit line. The petitioner did not establish that another
suretyship by Jesus ensured the payment of the credit line issued on April 4, 1968
upon the expiration of the credit line for 1967. What was shown instead is that on
February 6, 1974, or about seven years after the expiration of the continuing
guaranty of February 22, 1967, it was Clarencio who executed a continuing guaranty
for P5,000,000.00. Since Genbank accepted the promissory note of P5,200,000.00 on
April 30, 1975, the continuing guaranty that Clarencio executed about two months
earlier covered that amount. Hence, Clarencio, not Jesus, was the party solidarily
liable for the indebtedness incurred after February 6, 1974 starting with the
promissory note dated April 30, 1975.

SALES

WHEN SALE IS PERFECTED

FAR EAST BANK AND TRUST COMPANY v. PHILIPPINE DEPOSIT INSURANCE

CORPORATION, G.R. No. 172983, July 22, 2015, BRION, J.

A contract of sale is perfected upon the meeting of the minds of the parties on
the essential elements of the contract, i.e., consent, object certain, and the
consideration of the contract.

Facts:

The Central Bank invited banks for the purchase of the PBC. In answer to the
formal invitation, the FEBTC submitted its bid and was accepted after finding it as the
most advantageous. The FEBTC as the buyer, the PBC as the seller, and the Central
Bank entered into MOA. The PBC was represented by Liquidator Santos. The FEBTC
also took possession and custody of the fixed assets of the PBC. The FEBTC wrote a
letter to Liquidator Santos, following up the execution of the deeds of sale over the

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fixed assets of the PBC. However, Liquidator Santos failed to execute the purchase
agreement covering the disputed fixed assets.

The respondent PDIC, thereafter, took over as the new PBC Liquidator. The
PDIC President replaced Liquidator Santos. Liquidator Naagas informed the FEBTC
that all the fixed assets of the PBC can be purchased only at their present appraisal
value. He also proceeded to start the bidding or negotiated sale to third persons of
the PBC's fixed assets. This move prompted the FEBTC to file before the RTC
a motion to compel the Liquidator to execute the implementing deeds of sale over
the disputed PBC fixed assets.

Issue:

Whether or not the PDIC, as the Liquidator of the PBC, may be compelled to
execute the deeds of sale over the nine (9) disputed PBC fixed assets.

Ruling:

Yes, as there was a perfected contract of sale over the disputed fixed assets. It
is well-established that a contract undergoes various stages that include its
negotiation or preparation, its perfection, and finally, its consummation.

Negotiation covers the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is concluded
(perfected). The perfection of the contract takes place upon the concurrence of its
essential elements. A contract which is consensual as to perfection is so established
upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the
object and on the cause or consideration. The consummation stage begins when the
parties perform their respective undertakings under the contract, culminating in its
extinguishment.

Specifically, contracts of sale are perfected by mutual consent, when the

seller obligates himself, for a price certain, to deliver and transfer ownership of a
specified thing or right to the buyer over which the latter agrees. Mutual consent, as
a state of mind, may only be inferred from the confluence of two acts of the parties:
an offer certain as to the object of the contract and its consideration, and an absolute
acceptance of the offer, i.e., with respect to the exact object and consideration
embodied in the offer. While it may not be possible to expect the acceptance
to echo every nuance of the offer, it is imperative that it assents to those points in
the offer that, under the operative facts of each contract, are not only material but
motivating as well.

Simply put, a contract of sale is perfected upon the meeting of the minds of
the parties on the essential elements of the contract, i.e., consent, object certain,
and the consideration of the contract. Based on the above well-established
principles, the Court rules that the essential elements of a contract of sale are
present in the MOA as confirmed by the FEBTC's bid and the provisions of the MOA
and the PA. This conclusion becomes more apparent upon a closer review of the
developments in the various stages of the parties' contract of sale.

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DELIVERY

NFF INDUSTRIAL CORPORATION v. G & L ASSOCIATED BROKERAGE and/or

GERARDO TRINIDAD
G.R. No. 178169, January 12, 2015, PERALTA, J.

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.

Facts:

G&L ordered bulk bags from NFF payable within 30 days covered by PO No.
97-002 payable within 30 days from delivery with instructions that the bulk bags
were for immediate delivery to G&L c/o Hi-Cement Corporation. G&L ordered an
additional stock of bulk bags. NFF made deliveries of the bulk bags to Hi-Cements
evidenced by a document showing the date of delivery , amount, delivery receipts
and sales invoices. NFF alleged that the deliveries were acknowledged by
representatives of G&L. NFF also claims that the receipts were rubber stamped, dated
and signed by the security guard-on-duty as well as other representatives of G&L.
The invoices were duly served upon, and recived by one Marian Gabay who
represented G&L. On the other hand, G&L alleged that the bulk bags were to be
delivered at Hi-Cement to Mr. Raul Ambrosio who was G&Ls cheker and authorized
representative. They claimed that the bulk bags were not recieved because it was
not brought to the authorized representative. NFF sent a demand letter to G&L for
non-payment of the bulk bags but G&L failed to respond even in the succeeding
phone calls. After a third demand letter which was unheeded, NFF filed for a sum of
money. The RTC ruled in favor of NFF but the CA reverse the RTCs decision.

Issue:

Whether or not there is a valid delivery of the bulk bags.

Ruling:

Yes. Based on the direct examination, it is clear that petitioner has actually
delivered the bulk bags to respondent company, albeit the same was not delivered to
the person named in the Purchase Order. In addition, by allowing petitioners
employee to pass through the guard-on-duty, who allowed the entry of delivery into
the premises of Hi-Cement, which is the designated delivery site, respondents had
effectively abandoned whatever infirmities may have attended the delivery of the
bulk bags. As a matter of fact, if respondents were wary about the manner of
delivery, such issue should have been brought up immediately after the first delivery
was made. Instead, Mr. Trinidad acknowledged receipt of the first batch of the bulk
bags and even followed up the remaining balance of the orders for delivery.

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 toand 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

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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."

BILL OF LADING

EASTERN SHIPPING LINES, INC. v. BPI/MS INSURANCE CORP., and MITSUI

SUMITOMO INSURANCE CO., LTD.
G.R. No. 182864, January 12, 2015, PEREZ, J.

Mere proof of delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima facie case of fault or
negligence against the carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the transporter shall be
held responsible.

Facts:

At Yokohama, Japan, Sumitomo Corporation shipped on board Eastern

Shipping Lines vessel M/V Eastern Venus 22 coils of various Steel Sheet in good
order and condition for transportation to and delivery at the port of Manila,
Philippines in favor of consignee Calamba Steel Center, Inc. (Calamba Steel) located
in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos. ESLIYMA001.
The declared value of the shipment was US$83,857.59 as shown by an Invoice with
Nos. KJGE-03-1228-NT/KE3. The shipment was insured with the respondents BPI/MS
and Mitsui against all risks under Marine Policy No. 103-GG03448834.

The complaint alleged that the shipment arrived at the port of Manila in an
unknown condition (later found to be already damaged prior to its delivery to ATI)
and was turned over to ATI for safekeeping. Upon withdrawal of the shipment by the
Calamba Steels representative, it was found out that part of the shipment was
damaged and was in bad order condition such that there was a Request for Bad Order
Survey. Calamba Steel attributed the damages on both shipments to ESLI as the
carrier and ATI as the arrastre operator in charge of the handling and discharge of the
coils and filed a claim against them. When ESLI and ATI refused to pay, Calamba
Steel filed an insurance claim for the total amount of the cargo against BPI/MS and
Mitsui as cargo insurers. As a result, BPI/MS and Mitsui became subrogated in place of
and with all the rights and defenses accorded by law in favor of Calamba Steel.

Issues:

1. Whether or not Eastern Shipping Lines Inc. (ESLI) is liable for the damage in
the shipment.
2. Whether or not Eastern Shipping Lines Inc. (ESLI) liability is limited due to
the failure to state in the bill of lading itself the actual amount of the shipment.

Ruling:

1. Yes. From the evidence, ESLI was negligent, whether solely or together with
ATI. ESLI cannot invoke its non-liability solely on the manner the cargo was
discharged and unloaded. The actual condition of the cargoes upon arrival prior to
discharge is equally important and cannot be disregarded. Proof is needed that the

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cargo arrived at the port of Manila in good order condition and remained as such prior
to its handling by ATI. Common carriers, from the nature of their business and on
public policy considerations, are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common carriers are responsible for
the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them.

2. No. COGSA provides under Section 4, Subsection 5 that an amount

recoverable in case of loss or damage shall not exceed US$500.00 per package or per
customary freight unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading. As to the non-
declaration of the value of the goods on the bill of lading, there is no error on the part
of the appellate court when it ruled that there was a compliance of the requirement
provided by COGSA. The declaration requirement does not require that all the details
must be written down on the very bill of lading itself. It must be emphasized that all
the needed details are in the invoice, which contains the itemized list of goods
shipped to a buyer, stating quantities, prices, shipping charges, and other details
which may contain numerous sheets. In Unsworth Transport International (Phils.), Inc.
v. Court of Appeals (G.R. No. 166250, July 26, 2010), the Court held that the insertion
of an invoice number does not in itself sufficiently and convincingly show that
petitioner had knowledge of the value of the cargo. However, the same interpretation
does not squarely apply if the carrier had been advised of the value of the goods as
evidenced by the invoice and payment of corresponding freight charges. It would be
unfair for ESLI to invoke the limitation under COGSA when the shipper in fact paid the
freight charges based on the value of the goods.

EARNEST MONEY

FIRST OPTIMA REALTY CORPORATION v. SECURITRON SECURITY SERVICES,

INC.
G.R. No. 199648, January 28, 2015, DEL CASTILLO, J.

Earnest money only applies to a perfected sale. Prior payment of earnest

money even before the property owner can agree to sell his property is irregular and
cannot be used to bind the owner to the obligations of a seller.

Facts:
Securitron, looking to expand its business, sent a letter to petitioner - through
its Executive Vice-President Carolina Young offering to purchase the subject property
at P6,000.00 per square meter. Securitron was unable to personally negotiate with
Young or the petitioners Board of Directors as the negotiations were confined with
telephone calls with Youngs secretary. Despite personal negotiations, Young declined
to accept payment, saying that she still needed to secure her sisters advice on the
matter. She likewise informed Eleazar that prior approval of petitioners Board of
Directors was required for the transaction. However, Securitron thereafter sent a
Letter to the petitioner which indicate among others the payment of earnest money

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in the amount of P100,000.00. A check with the same amount accompanied such
letter. The letter and check was coursed through the petitioners receptionist who
then issued a provisional receipt. The check was eventually deposited with and
credited to petitioners bank account. Respondent therefore demanded in writing that
petitioner proceed with the sale.

Issue:

Whether or not the receipt of earnest money is indicative of a perfected sale

between the parties.

Ruling:

No. Earnest money applies to a perfected sale, however on the present case,
the parties never got past the negotiation stage. Nothing shows that the parties had
agreed on any final arrangement containing the essential elements of a contract of
sale. Respondents subsequent sending of the letter bearing the payment of the
earnest money and check to petitioner, without awaiting the approval of petitioners
board of directors and Youngs decision, or without making a new offer, constitutes a
mere reiteration of its original offer which was already rejected previously. Thus,
petitioner was under no obligation to reply. It would be absurd to require a party to
reject the very same offer each and every time it is made; otherwise, a perfected
contract of sale could simply arise from the failure to reject the same offer made for
the hundredth time. Thus, said letter cannot be considered as evidence of a
perfected sale, which does not exist in the first place. The letter made no new offer
replacing the first which was rejected. In a potential sale transaction, the prior
payment of earnest money even before the property owner can agree to sell his
property is irregular, and cannot be used to bind the owner to the obligations of a
seller under an otherwise perfected contract of sale.

SIMULATED SALE

VALENTINA CLEMENTE v. COURT OF APPEALS, et al.

G.R. No. 175483, October 14, 2015, JARDELEZA, J.

If the words of a contract appear to contravene the evident intention of the

parties, the latter shall prevail. Such intention is determined not only from the
express terms of their agreement, but also from the contemporaneous and
subsequent acts of the parties. This is especially true in a claim of absolute
simulation where a colorable contract is executed.

Facts:

Adela Shotwell owned properties in Q.C., subdivided as Lots 32, 34 and 35-B.
From 1985 to 1987, Adela simulated the transfer of Lots 32 and 34 to her two (2)
grandsons, Carlos Jr. and Dennis Shotwell while Lot 35-B remained with Adela. It is
undisputed that the transfers were never intended to vest title to the grandsons who
will both return the lots to Adela when requested. Prior to Adelas departure for the
US, Adela requested Carlos Jr. to execute a deed of reconveyance over the lots and
register the same. Adela then executed a deed of absolute sale over Lots 32 and 34

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to Valentina Shotwell and a special power of attorney in the latters favor to take
charge and manage, for the formers benefit, all of her properties in the Philippines.

When Valentina returned to the Philippines, she registered the sale over Lots
32 and 34, and TCTs was issued in her name, respectively. Adela died in the US and
was succeeded by her four (4) children, namely Annie, Carlos Sr., Anselmo, and
Corazon (private respondents). Valentina sought to eject two (2) of Adelas children
who were staying on the properties. When Carlos Sr. and Anselmo learned of the
transfer of titles to Valentina, they filed a complaint for reconveyance over the
properties. In their amended complaint, the children sought nullification of the Deeds
of Absolute Sale. When Carlos Sr. died, he was substituted by Dennis. The RTC
decided in the private respondents favor and the CA affirmed the same with
modification, ruling that the deeds were instead simulated.

Issue:

Whether or not the Deeds of Absolute Sale between Valentina and Adela over
the properties are void.

Ruling:

Yes. There was no valid contract of sale between Valentina and Adela because
their consent was absent. In ruling that the Deeds of Absolute Sale were absolutely
simulated, the lower courts considered the totality of the prior, contemporaneous and
subsequent acts of the parties. The following circumstances give a conclusion that
the Deeds of Absolute Sale are simulated, and that the transfers were never intended
to affect the juridical relation of the parties:

(1) There was no indication that Adela intended to alienate her properties in favor
of Valentina. In fact, the letter of Adela to Dennis reveals that she has
reserved the ownership of the properties in favor of Dennis.
(2) Adela continued exercising acts of dominion and control over the properties,
even after the execution of the Deeds of Absolute Sale, and though she lived
abroad for a time. In Adelas letter to a certain Candy, she advised the latter
to stay in one of the properties. Also, in Valentinas letter to her cousin Dennis,
she admitted that Adela continued to be in charge of the properties; that she
has no say when it comes to the properties; that she does not intend to
claim exclusive ownership of Lot 35-B; and that she is aware that the
ownership and control of the properties are intended to be consolidated in
Dennis favor.
(3) The SPA executed on the same day as the Deeds of Absolute Sale appointing
Valentina as administratrix of Adelas properties, including the properties, is
repugnant to Valentinas claim that the ownership of the same had been
transferred to her.
(4) The previous sales of the properties to Dennis and Carlos, Jr. were simulated.
This history, coupled with Adelas treatment of Valentina, and the surrounding
circumstances of the sales, strongly show that Adela only granted Valentina
the same favor she had granted to Dennis and Carlos Jr. The letter to Dennis
convincingly shows Adelas intention to give him the Properties.

Valentina claims this letter was not properly identified and is thus, hearsay
evidence. The records, however, show that the letter was admitted by the trial court

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in its order. While it is true that the letter is dated prior (or six days before to be
exact) to the execution of the Deeds of Absolute Sale and is not conclusive that Adela
did not change her mind, We find that the language of the letter is more consistent
with the other pieces of evidence that show Adela never intended to relinquish
ownership of the properties to Valentina. Valentinas letter to her cousin Dennis also
sufficiently establishes that Adela retained control over the properties, even after the
execution of the Deeds of Absolute Sale. Valentina herself admitted that she was only
following the orders of Adela, and that she has no claim over the properties. In the
letter, Adela even requested her granddaughter Candy to stay in the house rent- and
expense-free.

Valentina claims that Candy and the house referred to in the letter were not
identified. Records show, however, that Valentina has testified she has a cousin
named Candy Shotwell who stayed at one of the properties. Clearly, the submission
of Valentina to the orders of Adela does not only show that the latter retained
dominion over the Properties, but also that Valentina did not exercise acts of
ownership over it. If at all, her actions only affirm the conclusion that she was merely
an administratrix of the Properties by virtue of the SPA.

EQUITABLE MORTGAGE

HEIRS OF ANTERO SOLIVA v. SEVERINO, JOEL, GRACE, CENON, JR., RENATO,

EDUARDO, HILARIO, all surnamed SOLIVA, ROGELIO V. ROLEDA, and SANVIC
ENTERPRISES, INC., represented by its Manager, SANTOS PORAQUE
G.R. No. 159611, April 22, 2015, BRION, J.

An equitable mortgage is one which, although lacking the proper formalities,

form or words, or other requisites prescribed by law for a mortgage, nonetheless
shows the real intention of the parties to make the property subject of the contract
as security for debt and contains nothing impossible or anything contrary to law in
this intent.

Facts:

Spouses Ceferino and Juana have five (5) children, namely: Dorotea
(deceased), Cenon, Severino, Victoriano and Antero. The spouses owned parcels of
land in Calbayog City. A 1,600-square meter portion of one of the parcels (Parcel 2) of
said land was owned by Mancol which was sold to Cenon. The sale was evidenced by
a notarized deed of sale entitled "Escritura de Compra-Venta Absoluta." Since Cenon
lives in Manila, he left the possession and enjoyment of the property to his parents.
When Ceferino died, Juana sold the remaining square meter portions of Parcel 2 to
Cenon through a Deed of Conditional Sale with Pacto A Retro. Consequently, Cenon
sold Parcel 2 to Roleda which the latter sold to Sanvic Enterprises, Inc. (SEI).
Subsequently, Antero alleges that the sale of the said parcel of land is not a true sale
but an equitable mortgage.

The Regional Trial Court (RTC) ruled that there was a valid sale and that Cenon
has exclusive rights over the property hence may sell it by virtue of his ownership
over it. The Court of Appeals (CA) modified the RTCs decision. It declared the Antero,
et. al, Cenon, et. al. and SEI as co-owners of Parcel 2. The CA agreed that the 1,600-

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square meter portion of Parcel 2 belongs exclusively to Cenon. Additionally, it pointed

out that the "Escritura de Compra-Venta Absoluta," which Mancol executed in favor of
Cenon, was duly notarized and therefore a public document that has in its favor the
presumption of regularity. Hence, the present petition is filed.

Issue:

Whether or not the sale of Parcel 2 is an equitable mortgage and not a true
sale.

Ruling:

No. The 1970 Conditional Sale with Pacto de Retro is a true sale, not an
equitable mortgage under Article 1602 of the Civil Code. A contract of sale, whether
an absolute sale or with a right of repurchase, is presumed by law to be an equitable
mortgage under any of the following circumstances:

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.

In any of the foregoing cases, any money, fruits, or other benefit to be

received by the vendee as rent or otherwise shall be considered as interest which
shall be subject to the usury law. For the presumption of an equitable mortgage to
arise under any of the circumstances enumerated in Article1602, however, two
requisites must concur: (a) that the parties entered into a contract denominated as a
contract of sale; and (b) that their intention was to secure an existing debt by way of
mortgage.

The CA debunked Anteros argument that the 1970 Pacto de Retro Sale was
an equitable mortgage because it found nothing which supports his theory that the
"sale with right to repurchase was executed to secure a debt. Moreover, it pointed
out that Cenons administration of the property from 1962 up to his death in 1987
indubitably shows that he had, all the while, been in constructive possession of the
property.

The Court upheld the CAs ruling on this issue for the following reasons:

First, Cenon immediately declared in his name the property sold and had
continuously paid taxes for it, sourced from the propertys income. As an owner,
Cenon has the right to the propertys fruits and income which he could freely dispose
of according to his discretion. Thus, contrary to Anteros claim, Cenons payment of
the taxes from the propertys income is in fact consistent with his exercise of
ownership rights over the property.

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Second, Cenon and his children benefited from the propertys produce.

Third, Juana, as the vendor a retro, never questioned the nature of the 1970
Pacto de Retro sale as a mortgage, nor argued that in reality it was intended to
secure a debt.

Fourth, other than his bare allegation, Antero (with the plaintiffs a quo) did not
present any evidence to prove that what the parties to the 1970 Sale a Retro actually
intended was to secure a debt, instead of a true sale.

REDEMPTION

AQA GLOBAL CONSTRUCTION, INC. v. PLANTERS DEVELOPMENT BANK

JE-AN SUPREME BUILDERS AND SALES CORPORATION v. PLANTERS
DEVELOPMENT BANK (Consolidated Petitions)
G.R. No. 211649 & G.R. No. 211742, August 12, 2015, PERLAS-BERNABE, J.

Upon the expiration of the right of redemption, the possession of the property
shall be given to the purchaser or last redemptioner unless a third party is actually
holding the property adversely to the judgment obligor. For the exception to apply,
the property need not only be possessed by a third party, but also held by him
adversely to the judgment obligor.

Facts:

For failure of KTC (mortgagor) to redeem the properties, Planters bank applied
for a writ of possession, which was granted by the RTC. The writ of possession
together with the Notice to Vacate was served to petitioner AQA, which occupied the
subject properties. AQA moved to intervene in the case and to be excluded from the
implementation of the writ of possession, claiming that its possession: (a) was
adverse to that of KTC; and (b) stemmed from a ten (10) year contract of lease, with
petitioner Je-an, which had bought the subject property from Little Giant Realty
Corporation, the registered owner of the subject properties.

On the other hand, Je-An filed an Affidavit of Third Party Claim to stay the
implementation of the writ of possession, alleging that its right to possess the subject
properties was: (a) separate and distinct from that of KTC; and (b) derived from a
Contract to Sell executed by Little Giant. After hearing AQA's motion, the RTC issued
an Order excluding AQA and Je-An from the implementation of the writ of possession.

Issue:

Whether or not RTC is correct in staying the implementation of the writ of

possession against AQA and Je-An.

Ruling:

No. Upon the expiration of the right of redemption, the possession of the
property shall be given to the purchaser or last redemptioner unless a third party is
actually holding the property adversely to the judgment obligor. For the exception to
apply, the property need not only be possessed by a third party, but also held by him
adversely to the judgment obligor - such as that of a co-owner, agricultural tenant or

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usufructuary, who possess the property in their own right and not merely the
successor or transferee of the right of possession of, or privy to, the judgment obligor.

Clearly, the stay of the implementation of the writ of possession prayed for by
Je-An on the basis of such inchoate right would becloud the integrity and derogate
the indefeasibility of the torrens title issued in favor of Planters bank as a confirmed
owner, which the Court cannot allow. Corollarily, the enforcement of the writ of
possession cannot also be stayed in favor of AQA which merely derived its possession
from Je-An through an unregistered contract of lease. The Court simply cannot
subscribe to AQA's claim that its status as a tenant renders its possession adverse to
that of Planters bank.

ASSIGNMENT OF CREDIT

METROPOLITAN BANK & TRUST COMPANY v. G & P BUILDERS,

INCORPORATED, SPOUSES ELPIDIO AND ROSE VIOLET PARAS, SPOUSES
JESUS and MA. CONSUELO PARAS AND VICTORIA PARAS
G.R. No. 189509, November 23, 2015, LEONEN, J.

Through the assignment of credit, the new creditor is entitled to the rights
and remedies available to the previous creditor. Moreover, under Article 1627 of the
Civil Code, the assignment of a credit includes all the accessory rights, such as a
guaranty, mortgage, pledge, or preference.

Facts:

G & P Builders, Incorporated (G & P) filed a Petition for Rehabilitation. Among

the allegations in the Petition is that G & P obtained a loan from Metrobank and
mortgaged 12 parcels of land as collateral. G & P's loan obligation amounted to
P52,094,711.00 at the time of the filing of the Petition before the trial court. The trial
court issued a Stay Order on March 18, 2003, and the initial hearing was set on May
6, 2003. However, while the rehabilitation proceedings were pending, Metrobank and
G & P executed a Memorandum of Agreement (first MOA) on August 11, 2003, where
the parties agreed that 4 out of the 12 parcels of land mortgaged would be released
and sold. The sale of the parcels of land amounted to P15,000,000.00. Pursuant to the
first MOA, the amount was deposited with Metrobank "for subsequent disposition and
application [in conformity with] the Court approved Rehabilitation Plan. Then,
Metrobank entered into a Loan Sale and Purchase Agreement with Elite Union
Investments Limited (Elite Union). The former sold G & P's loan account for
P10,419,000.00.

Issue:

Whether or not an agreement between a secured creditor and a third party,

which transferred to the third party all of the creditor's rights and interests over the
debtor's loan obligation and was executed during the pendency of corporate
rehabilitation proceedings, covered the P15,000,000.00 proceeds of the sale of
mortgaged properties deposited with the creditor.

Ruling:

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Yes. The first MOA between petitioner and G & P, as approved by the trial
court, is clear that the application of the P15,000,000.00 deposit would be subject to
the court-approved rehabilitation plan. G & P's obligation was still subsisting at this
point as the parties did not agreed to outright payment, whether full or partial. When
Metrobank entered into the Loan Sale and Purchase Agreement with Elite Union, the
entire obligation was transferred to Elite Union. Assignment of credit, which has a
similar effect with that of a sale, has been defined as the process of transferring the
right of the assignor to the assignee who would then have the right to proceed
against the debtor. The assignment may be done gratuitously or onerously. Through
the assignment of credit, the new creditor is entitled to the rights and remedies
available to the previous creditor. Moreover, under Article 1627 of the Civil Code, the
assignment of a credit includes all the accessory rights, such as a guaranty,
mortgage, pledge, or preference.

The Loan Sale and Purchase Agreement entitled Elite Union to all the rights
and interests that petitioner had had as creditor of respondent G & P, including the
securities of the loan account. Petitioner cannot vary the terms of the first MOA in
relation to the status of the P15,000,000.00 deposit through its interpretation of the
Loan Sale and Purchase Agreement. The first MOA was judicially approved by the trial
court as a compromise agreement between petitioner and respondent G & P. Hence,
the terms of the first MOA, as the applicable law, governs the parties and their
assigns and/or heirs. A compromise agreement once approved by final order of the
court has the force of res judicata between the parties and should not be disturbed
except for vices of consent or forgery. Hence, a decision on a compromise agreement
is final and executory; it has the force of law and is conclusive between the parties. It
transcends its identity as a mere contract binding only upon the parties thereto, as it
becomes a judgment that is subject to execution in accordance with the Rules.

To reiterate, the compromise judgment approved Metrobanks priority or

preference as to the deposit. However, Metrobank assigned this priority or preference
in favor of Elite Union. SC cannot speculate as to the reasons why Metrobank sold all
its rights and interests over G & P's loan account for a lower price. Without sufficient
evidence, legal basis, and compelling reasons, SC cannot read beyond the written
agreements between the parties.

PARTNERSHIPS, AGENCIES, AND TRUSTS

AGENCY

MANUEL JUSAYAN, ALFREDO JUSAYAN, and MICHAEL JUSAYAN v. JORGE

SOMBILLA
G.R. No. 163928, January 21, 2015, BERSAMIN, J.

Whether or not an agency has been created is determined by the fact that
one is representing and acting for another.

Facts:

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Wilson Jesena, the owner of the subject land, entered in an agreement with
Jorge Sombilla wherein Wilson designated Jorge as his agent to supervise the tilling
and farming of his Riceland. Before such agreement expired, Wilson sold the land to
Timoteo Jusayan. Later, Jorge and Timoteo agreed to Jorges possession of the land
sans accounting of the cultivation expenses and actual produce of the land provided
that Jorge annually delivered to him 110 cavans of palay and paid the irrigation fees.
Subsequently, Timoteo demanded the return of the possession of the land but the
request remained unheeded. This prompted Timoteo to file complaint for recovery of
possession and accounting against Jorge in the RTC. With the death of Timoteo, the
petitioners substituted him as the plaintiffs.

For his part, Jorge asserted that since the agreement is an agricultural lease,
he enjoys security of tenure and such could not terminate without valid cause. The
RTC ruled in favor of Jusayan and upheld the contractual relationship of agency
between Timoteo and Jorge. On appeal, the CA reversed the RTC ruling holding that
the contractual relationship between the parties was one of agricultural tenancy.

Issue:

Whether or not the relationship between the petitioners and respondent is

that of agency.

Ruling:

No. In agency, the agent binds himself to render some service or to do

something in representation or on behalf of the principal, with the consent or
authority of the latter. The basis of the civil law relationship of agency is
representation, the elements of which are, namely: (a) the relationship is established
by the parties consent, express or implied; (b) the object is the execution of a
juridical act in relation to a third person; (c) the agent acts as representative and not
for himself; and (d) the agent acts within the scope of his authority. Whether or not
an agency has been created is determined by the fact that one is representing and
acting for another.

The claim of Timoteo that Jorge was his agent contradicted the verbal
agreement he had fashioned with Jorge. By assenting to Jorges possession of the
land sans accounting of the cultivation expenses and actual produce of the land
provided that Jorge annually delivered to him 110 cavans of palay and paid the
irrigation fees belied the very nature of agency, which was representation. The verbal
agreement between Timoteo and Jorge left all matters of agricultural production to
the sole discretion of Jorge and practically divested Timoteo of the right to exercise
his authority over the acts to be performed by Jorge. While in possession of the land,
therefore, Jorge was acting for himself instead of for Timoteo. Unlike Jorge, Timoteo
did not benefit whenever the production increased, and did not suffer whenever the
production decreased. Timoteos interest was limited to the delivery of the 110
cavans of palay annually without any concern about how the cultivation could be
improved in order to yield more produce.

V-GENT, INC., v. MORNING STAR TRAVEL and TOURS, INC.

G.R. No. 186305, July 22, 2015, BRION, J.

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In suits where an agent represents a party, the principal is the real party-in-
interest; an agent cannot file a suit in his own name on behalf of the principal.

Facts:

Petitioner V-Gent bought twenty-six two-way plane tickets from respondent

Morning Star. V-Gent returned a total of fifteen unused tickets to the defendant but
only six tickets were refunded. Petitioner V-Gent then filed a money claim against
Morning Star for payment of the unrefunded tickets plus attorney's fees. Morning Star
questioned V-Gent's personality to file the suit. It asserted that the passengers, in
whose names the tickets were issued, are the real parties-in-interest. The MeTC
dismissed the complaint for lack of a cause of action.

V-Gent appealed to the RTC wherein the latter granted the appeal. It set aside
the MeTC's judgment and ordered Morning Star to pay V-Gent the value of the
unrefunded tickets plus attorney's fees. Morning Star then filed a petition for review
with the CA wherein it questioned the RTC's appreciation of the evidence and also
reiterated V-Gent's legal standing, submitting once again that V-Gent is not the real
party-in-interest. The CA held that V-Gent is not a real party in- interest because it
merely acted as an agent of the passengers who bought the tickets from Morning
Star with their own money.

Issue:

Whether or not V-Gent is not a real party-in-interest because it merely acted

as an agent of the passengers.

Ruling:

Yes. V-Gent admits that it purchased the plane tickets on behalf of the
passengers as the latter's agent. The tickets were issued in the name of the
passengers and paid for with the passengers' money. No dispute or conclusion in the
lower courts' minds on this point; hence, both the MeTC and the CA commonly found
that V-Gent acted as an agent of the passengers when it purchased the passengers'
plane tickets. However, while the MeTC held that V-Gent could sue as an agent acting
in his own name on behalf of an undisclosed principal, the CA held that it could not
because the requirements for such a suit by the agent had not been satisfied.

The Court agrees with the Court of Appeals. Every action must be prosecuted
or defended in the name of the real party-in-interest - the party who stands to be
benefited or injured by the judgment in the suit. In suits where an agent represents a
party, the principal is the real party-in-interest; an agent cannot file a suit in his own
name on behalf of the principal. Thus an agent may sue or be sued solely in its own
name and without joining the principal when the following elements concur: (1) the
agent acted in his own name during the transaction; (2) the agent acted for the
benefit of an undisclosed principal; and (3) the transaction did not involve the
property of the principal. When these elements are present, the agent becomes
bound as if the transaction were its own.

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In the present case, only the first element is present; the purchase order and
the receipt were in the name of V-Gent. However, the remaining elements are absent
because: (1) V-Gent disclosed the names of the passengers to Morning Star - in fact
the tickets were in their names; and (2) the transaction was paid using the
passengers' money. Therefore, Rule 3, Section 3 of the Rules of Court cannot apply. To
define the actual factual situation, V-Gent, the agent, is suing to recover the money
of its principals - the passengers - who are the real parties-in-interest because they
stand to be injured or benefited in case Morning Star refuses or agrees to grant the
refund because the money belongs to them. From this perspective, V-Gent evidently
does not have a legal standing to file the complaint.

V-GENT, INC., v. MORNING STAR TRAVEL and TOURS, INC.

G.R. No. 186305, July 22, 2015, BRION, J.

The power to collect and receive payments on behalf of the principal is an

ordinary act of administration covered by the general powers of an agent. On the
other hand, the filing of suits is an act of strict dominion.

Facts:

Petitioner V-Gent bought twenty-six two-way plane tickets from respondent

Morning Star. V-Gent returned a total of fifteen unused tickets to the defendant but
only six tickets were refunded. Petitioner V-Gent then filed a money claim against
Morning Star for payment of the unrefunded tickets plus attorney's fees. Morning Star
questioned V-Gent's personality to file the suit. It asserted that the passengers, in
whose names the tickets were issued, are the real parties-in-interest. The MeTC
dismissed the complaint for lack of a cause of action. V-Gent argued that by making a
partial refund, Morning Star was already estopped from refusing to make a full refund
on the ground that V-Gent is not the real party-in-interest to demand reimbursement.

Issue:

Whether or not by making a partial refund, Morning Star was already estopped
from refusing to make a full refund on the ground that V-Gent is not the real party-in-
interest to demand reimbursement.

Ruling:

No. The power to collect and receive payments on behalf of the principal is an
ordinary act of administration covered by the general powers of an agent. On the
other hand, the filing of suits is an act of strict dominion. Under Article 1878 (15) of
the Civil Code, a duly appointed agent has no power to exercise any act of strict
dominion on behalf of the principal unless authorized by a special power of attorney.
An agent's authority to file suit cannot be inferred from his authority to collect or
receive payments; the grant of special powers cannot be presumed from the grant of
general powers. Moreover, the authority to exercise special powers must be duly
established by evidence, even though it need not be in writing.

By granting the initial refund, Morning Star recognized V-Gent's authority to

buy the tickets and collect refunds on behalf of the passengers. However, Morning

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Star's recognition of V-Gent's authority to collect a refund for the passengers is not
equivalent to recognition of V-Gent's authority to initiate a suit on behalf of the
passengers. Morning Star therefore, is not estopped from questioning V-Gent's legal
standing to initiate the suit.

TRUST

NORMA EDITA R. DY SUN-ONG v. JOSE VICTORY R. DY SUN

G.R. No. 207435, July 01, 2015, CARPIO, J.

The existence of implied trust prevents prescription from setting in because

the defense of prescription cannot be set up in an action to enforce trust.

Facts:

Norma filed a complaint for delivery of shares against her brother Jose. The
complaint alleged that Jose was the holder in trust of 90,848,000 shares of Yakult
Philippines belonging to the heirs of the late Don Vicente Dy Sun. Norma claimed that
18,169,600 shares belong to her and that her demand was not heeded by Jose.

The CA held that Normas cause of action has already prescribed. It held that
it was only after the lapse of about 22 years that Norma demanded in writing the
delivery of the shares of stock. The CA also agreed with Jose that Normas long
inaction in asserting her right to the subject shares of stock bars her from recovering
them under the equitable principle of laches.

Issue:

Whether or not the CA erred in its outright dismissal of the case.

Ruling:

Yes, since the petition has merit. The Court remanded the case to the RTC for
trial and judgment on the merits. The interpretations of the parties of the factual
matters in dispute are so diametrically opposed that the outright dismissal by the CA
was improper.

Petitioner invokes Articles 1453 and 1457 of the Civil Code in claiming her
alleged shares from respondent. Said Articles read as follows:

Art. 1453. When property is conveyed to a person in reliance upon his

declared intention to hold it for, or transfer it to another or the grantor, there
is an implied trust in favor of the person whose benefit is contemplated.
Art. 1457. An implied trust may be proved by oral evidence.
Petitioner's theory of her case relies upon implied trust under Article 1453.
Petitioner further states that the existence of implied trust prevents prescription from
setting in because the defense of prescription cannot be set up in an action to
enforce trust. Petitioner is willing to present evidence, such as letters between herself
and respondent as well as checks representing the cash dividends on the YPI shares,
to prove that neither prescription nor laches had set in. Respondent, on the other

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hand, denies petitioner's claim of implied trust and asserts that his previous act of
giving petitioner a share of the cash dividends on the YPI shares was pure liberality
on his part. Respondent insists that petitioner's cause of action, if any, has
prescribed.

The following are questions of facts which the Court cannot pass upon: (1) the
alleged existence of an implied trust between petitioner and respondent, (2)
respondent's alleged repudiation of the implied trust, and (3) prescription of
petitioner's cause of action, if any. The CA's dismissal of the case was premature as
these matters need presentation and appreciation of evidence. For a fair and just
disposition of the case at hand, the parties should be allowed to present their
respective claims and defenses in a full blown trial.

SPECIAL POWER OF ATTORNEY

SPOUSES ROLANDO and HERMINIA SALVADOR v. SPOUSES ROGELIO AND

ELIZABETH RABAJA and ROSARIO GONZALES
G.R. No. 199990, February 4, 2015, MENDOZA, J.

According to Article 1990 of the New Civil Code, insofar as third persons are
concerned, an act is deemed to have been performed within the scope of the agent's
authority, if such act is within the terms of the power of attorney, as written.

Facts:

Spouses Rolando and Herminia Salvador are registered owners of a parcel of

land located in Mandaluyong City. Herminia personally introduced Rosario Gonzales to
Spouses Rabaja as the administrator of the said property handing over to her the
owners duplicate certificate of title. Gonzales then presented the SPA executed by
Rolando. The parties executed a contract to sell transferring the property to Spouses
Rabaja. The latter made several payments which were received by Gonzales.
However, Spouses Salvador complained to Spouses Rabaja that they did not receive
any payment from Gonzales. Spouses Rabaja was prompted to suspend further
payment of the purchase price; and as a consequence, they received a notice to
vacate the subject property from Spouses Salvador for non-payment of rentals.
Thereafter, Spouses Salvador instituted an action for ejectment against Spouses
Rabaja. In turn, Spouses Rabaja filed an action for rescission of contract against
Spouses Salvador and Gonzales, the subject matter of the present petition.

Spouses Salvador and their counsel failed to attend the pre-trial conference.
Consequently, the RTC issued the pre-trial order declaring Spouses Salvador in
default and allowing Spouses Rabaja to present their evidence ex parte and Gonzales
to present evidence in her favor. The RTC ruled that since the contract entered into
was a reciprocal contract, it could be validly rescinded by Spouses Rabaja stating that
Gonzales was undoubtedly the attorney-in-fact of Spouses Salvador. The CA affirmed
the decision with modifications.

Issue:

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Whether or not Gonzales could validly receive the payments of Spouses

Rabaja.
Ruling:

Yes. Gonzales, as agent of Spouses Salvador, can receive the payment of

spouses Rabaja. According to Article 1990 of the New Civil Code, insofar as third
persons are concerned, an act is deemed to have been performed within the scope of
the agent's authority, if such act is within the terms of the power of attorney, as
written. In this case, Spouses Rabaja did not recklessly enter into a contract to sell
with Gonzales. They required her presentation of the power of attorney before they
transacted with her principal and when Gonzales presented the SPA to Spouses
Rabaja, the latter had no reason not to rely on it. The Court holds that, indeed,
Gonzales acted within the scope of her authority. The SPA precisely stated that she
could administer the property, negotiate the sale and collect any document and all
payments related to the subject property. As the agent acted within the scope of his
authority, the principal must comply with all the obligations.

VALENTINA CLEMENTE v. COURT OF APPEALS, et al.

G.R. No. 175483, October 14, 2015, JARDELEZA, J.

The execution of an SPA for the administration of the properties, on the same
day the Deeds of Absolute Sale were executed, is antithetical to the relinquishment
of ownership.

Facts:

Adela Shotwell owned properties in Q.C., subdivided as Lots 32, 34 and 35-B.
From 1985 to 1987, Adela simulated the transfer of Lots 32 and 34 to her two (2)
grandsons, Carlos Jr. and Dennis Shotwell while Lot 35-B remained with Adela. It is
undisputed that the transfers were never intended to vest title to the grandsons who
will both return the lots to Adela when requested. Prior to Adelas departure for the
US, Adela requested Carlos Jr. to execute a deed of reconveyance over the lots and
register the same. Adela then executed a deed of absolute sale over Lots 32 and 34
to Valentina Shotwell and a SPA in the latters favor to take charge and manage, for
the formers benefit, all of her properties in the Philippines.

When Valentina returned to the Philippines, she registered the sale over Lots
32 and 34, and TCTs was issued in her name, respectively. Adela died in the US and
was succeeded by her four (4) children, namely Annie, Carlos Sr., Anselmo, and
Corazon (private respondents). Valentina sought to eject two (2) of Adelas children
who were staying on the properties. When Carlos Sr. and Anselmo learned of the
transfer of titles to Valentina, they filed a complaint for reconveyance over the
properties. In their amended complaint, the children sought nullification of the Deeds
of Absolute Sale. When Carlos Sr. died, he was substituted by Dennis. The RTC
decided in the private respondents favor and the CA affirmed the same with
modification, ruling that the deeds were instead simulated.

Issue:

Whether or not the execution of SPA is for the reconstitution of the land titles.

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Ruling:

No. Valentina claims that she has sufficiently explained that the SPA is not for
the administration of the properties, but for the reconstitution of their titles. The
Court agrees with the lower courts that the execution of an SPA for the administration
of the properties, on the same day the Deeds of Absolute Sale were executed, is
antithetical to the relinquishment of ownership. The SPA shows that it is so worded as
to leave no doubt that Adela is appointing Valentina as the administratrix of her
properties. Had the SPA been intended only to facilitate the processing of the
reconstitution of the titles, there would have been no need to confer other powers of
administration, such as the collection of debts, filing of suit, etc., to petitioner. In any
case, the explanation given by Valentina that the SPA was executed so as only to
facilitate the reconstitution of the titles of the properties is not inconsistent with the
idea of her being the administratrix of the properties. On the other hand, the idea of
assigning her as administratrix is not only inconsistent, but also repugnant, to the
intention of selling and relinquishing ownership of the properties.

TORTS AND DAMAGES

ROGELIO ROQUE v. PEOPLE OF THE PHILIPPINES

G.R. No. 193169, April 6, 2015, DEL CASTILLO, J.

Absent competent proof on the actual damages suffered, a party still has the
option of claiming temperate damages, which 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.

Facts:

While brothers Reynaldo and Rodolfo Marquez were in the house of Bella
Salvador-Santos in Bulacan, Rodolfo spotted Rogelio dela Cruz and shouted to him to
join them. Believing that the shout was directed at him, Rogelio Roque (accused)
stopped the tricycle he and his wife were in and cursed Rodolfo. Reynaldo apologized
for the misunderstanding but the accused was unyielding. Before leaving, he warned
the Marquez brothers that something bad would happen to them if they continue to
perturb him. Bothered, Rodolfo went to the house of Barangay Chairman Pablo Tayao
(Tayao) to ask for assistance in settling the misunderstanding. Because of this,
Reynaldo, who had already gone home, was fetched by dela Cruz and brought to the
house of Tayao. Since Tayao was then no longer around, Reynaldo just proceeded to
the accuseds house to follow Tayao and Rodolfo who had already gone ahead. Upon
arriving at the accuseds residence, Reynaldo again apologized to petitioner but the
latter did not reply. Instead, the accused entered the house, was already holding a
gun when he came out, and suddenly fired at Reynaldo who was hit in his right ear.
He still shot Reynaldo when the latter hit the ground. Unsatisfied, he kicked the
victim on the face and back. Reynaldo pleaded Tayao for help to no avail, since the
accused warned those around not to get involved. Fortunately, Reynaldo's parents
arrived and took him to a local hospital for emergency medical treatment. Dr. Renato
Raymundo attended to him and issued a medical certificate stating that a bullet

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entered the base of Reynaldo's skull and exited at the back of his right ear. The RTC
found the accused guilty. The CA affirmed the ruling.

Issue:

Whether or not the CA erroneously appreciated the facts and evidence on

record.

Ruling:

The Court noted that while the penalty imposed upon appellant is also proper,
there is a need to modify the assailed CA Decision in that awards of damages must
be made in favor of the victim Reynaldo. The RTC and the CA correctly held that
actual damages cannot be awarded to Reynaldo due to the absence of receipts to
prove the medical expenses he incurred from the incident. Nonetheless, absent
competent proof on the actual damages suffered, a party still has the option of
claiming temperate damages, which 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. Since it was
undisputed that Reynaldo was hospitalized due to the gunshot wounds inflicted by
the accused, albeit as observed by the RTC, there was no evidence offered as to the
expenses he incurred by reason thereof, Reynaldo is entitled to temperate damages
in the amount of P25,000.00. Aside from this, he is also entitled to moral damages
of P25,000.00. These awards of damages are in accordance with settled
jurisprudence. An interest at the legal rate of 6% per annum must also be imposed on
the awarded damages to commence from the date of finality of this Resolution until
fully paid.

DOLORES DIAZ v. PEOPLE OF THE PHILIPPINES and LETICIA S. ARCILLA

G.R. No. 208113, December 2, 2015, PERLAS-BERNABE, J.

The extinction of the penal action does not carry with it the extinction of the
civil liability where the acquittal is based on reasonable doubt.

Facts:

Leticia Arcilla, a businesswoman engaged in the business of selling

goods/merchandise through her agents, consigned in favor of one of her agents,
Dolores Diaz, certain goods for the purpose of selling them. Diaz was supposed to
turn over the proceeds or return the goods to Arcilla if unsold. Thereafter, Diaz filed a
criminal complaint for estafa against Diaz on the ground as Diaz did not remit the full
amount of the goods entrusted to her by Arcilla.

The RTC acquitted Diaz for the criminal charge of estafa, but held her civilly
liable for the amount of the entrusted goods. On appeal, the CA affirmed the decision
of the RTC.

Issue:

Whether or not Diaz is still civilly liable despite her acquittal.

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Ruling:

Yes. The extinction of the penal action does not carry with it the extinction of
the civil liability where the acquittal is based on reasonable doubt, such as in this
case, as only preponderance of evidence, or "greater weight of the credible
evidence," is required. Thus, an accused acquitted of estafa may still be held civilly
liable where the facts established by the evidence so warrant, as in this case.

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