13. Natividad vs. Natividad (G.R. No.

198434 dated February 29, 2016)

February 29, 2016

G.R. No. 198434

HEIRS OF LEANDRO NATIVIDAD AND JULIANA V. NATIVIDAD, Petitioners,

vs.
JUANA MAURICIO-NATIVIDAD, and SPOUSES JEAN NATIVIDAD CRUZ AND JERRY
CRUZ, Respondents.

The present petition arose from an action for specific performance and/or recovery of sum of money
filed against herein respondents by the spouses Leandro Natividad (Leandro) and Juliana
Natividad (Juliana), who are the predecessors of herein petitioners.

 In their Complaint, Leandro and Juliana alleged that sometime in 1974, Sergio
Natividad (Sergio), husband of respondent Juana Mauricio-Natividad (Juana) and father of
respondent Jean Natividad-Cruz (Jean), obtained a loan from the Development Bank of t.he
Philippines (DBP). As security for the loan, Sergio mortgaged two parcels of land, one of
which is co-owned and registered in his name and that of his siblings namely, Leandro,
Domingo and Adoracion. This property is covered by Original Certificate of Title (OCT) No.
5980. Sergio's siblings executed a Special Power of Attorney authorizing him to mortgage
the said property. The other mortgaged parcel of land, covered by OCT No. 10271, was
registered in the name of Sergio and Juana. Subsequently, Sergio died without being able to
pay his obligations with DBP. Since the loan was nearing its maturity and the mortgaged
properties were in danger of being foreclosed, Leandro paid Sergio's loan obligations.
Considering that respondents were unable to reimburse Leandro for the advances he made
in Sergio's favor, respondents agreed that Sergio's share in the lot which he co-owned with
his siblings and the other parcel of land in the name of Sergio and Juana, shall be assigned
in favor of Leandro ahd Juliana. Leandro's and Sergio's brother, Domingo, was tasked to
facilitate the transfer of ownership of the subject properties in favor of Leandro ·and Juliana.
However, Domingo died without being able to cause such transfer. Subsequently, despite
demands and several follow-ups made by petitioners, respondents failed and refused to
honor their undertaking.

Respondents filed their Answer denying the allegations in the complaint and raising the following
defenses: (1) respondents are not parties to the contract between Sergio and DBP; (2) there is
neither verbal nor written agreement between petitioners and respondents that the latter shall
reimburse whatever payment was made by the former or their predecessor-in-interest; (3) Jean was
only a minor during the execution of the alleged agreement and is not a party thereto; (4) that
whatever liability or obligation of respondents is already barred by prescription, laches and estoppel;
(5) that the complaint states no cause of action as respondents are not duty-bound to reimburse
whatever alleged payments were made by petitioners; and (6) there is no contract between the
parties to the effect that respondents are under obligation to transfer ownership in petitioners' favor
as reimbursement for the alleged payments made by petitioners to DBP.

Respondents waived their right to present evidence arid they merely filed their memorandum. Also,
during pendency" of the trial, Leandro died and was substituted by his heirs, herein petitioners.

On November. 4, 2008, the RTC rendered its Decision in favor of petitioners, the dispositive portion
of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Defendants Juana Mauricio [Vda.] de Natividad and Jean Natividad-Cruz are ordered to
effect the transfer of title in OCT No. 5980 with respect to the undivided share of the late
Sergio Natividad; and in OCT No. 10271 both of the Registry of Deeds of the Province of
Rizal in favor of plaintiff Juliana [V da.] de Natividad and the Heirs of the late Leandro
Natividad.

2. Defendants to pay jointly and severally, attorney's fees in the sum of Thirty Thousand
Pesos (P30,000.00); and cost of suit.

SO ORDERED. 3

Aggrieved by the RTC Decision, respondents filed an Appeal with the CA.

On February 7, 2011, the CA promulgated its questioned Decision, disposing as follows:

WHEREFORE, the appeal is PARTLY GRANTED. The Decision dated November 4, 2008 is

hereby MODIFIED in that defendants-appellants Juana Mauricio-Natividad and Jean Natividad-Cruz
are ordered instead to reimburse plaintiffs-appellees Juliana Natividad and the heirs of the late
Leandro Natividad the amount of P162,514.88 representing the amount of the loan obligation paid to
the Development Bank of the Philippines, plus legal interest of 12% per annum computed from June
23, 2001 until finality of the judgment, the total amount of which shall be to the extent only of
defendants-appellants' successional rights in the mortgaged properties and Juana's conjugal share
in [the] property covered by OCT No. 10271. The award of attorney's fees and cost of suit
are AFFIRMED.

SO ORDERED. 4

Petitioners filed a Motion for Partial Reconsideration, while respondents filed their own Motion for
Reconsideration, both of which, however, were denied by the CA in its assailed Resolution dated
August 25, 2011.

Hence, the instant petition based on the following grounds:

I. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS' RULING THAT THE
VERBAL AGREEMENT TO CONVEY THE PROPERTY SHARES OF SERGIO NATIVIDAD
IN THE PAYMENT OF HIS OBLIGATION IS COVERED BY THE STATUTE OF FRAUDS
DESPITE THE FACT THAT IT HAS BEEN PARTIALLY EXECUTED, IS CONTRARY
TO'EXISTING JURISPRUDENCE.

II. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT THE INTEREST ON THE UNPAID LOAN .OBLIGATION SHOULD BE IMPOSED
ONLY ON JUNE 23, 2001, DATE OF THE DEMAND FOR PAYMENT INSTEAD OF
SEPTEMBER 23, 1994, WHEN THE PARTIES VERBALLY AGREED TO CONVEY THEIR
PROPERTY RIGHTS WITH THE EXECUTION OF THE EXTRAJUDICIAL SETTLEMENT
OF ESTATE OF SERGIO NATIVIDAD. 5

Petitioners, insist that there was a verbal agreement between respondents and Leandro, their
predecessor-in-interest, wherein the subject properties shall be assigned to the latter as
reimbursement for the payments he made in Sergio's favor. To support this contention, petitioners
relied heavily on the Extrajudicial Settlement Among Heirs, which was executed by respondents to
prove that there was indeed such an agreement and that such a Settlement is evidence of the partial
execution of the said agreement. The provisions of the said Settlement are as follows:

EXTRAJUDICIAL SETTLEMENT AMONG HEIRS

KNOW ALL MEN BY THESE PRESENTS:

This EXTRAJUDICIAL SETTLEMENT, made and entered into by and among:

JUAN M. NATIVIDAD, widow; JEAN N. CRUZ, married to JERRY CRUZ; JOSELITO M.

NATIVIDAD, single, all of legal age, Filipino citizens, and residents of Malanday, San Mateo, Rizal

WITNESSETH

That the above-named parties, is the legitimate wife and children and sole heirs of the deceased
SERGIO NATIVIDAD, who died in San Mateo, Rizal on May 31, 1981;

That the said deceased, at the time of his death, left certain real estate properties located at San
Mateo, Rizal, and Montalban, Rizal, more particularly described as follows:

a. A whole portion of a parcel of land (Plan Psu-295655, L.R. Case No. Q-29, L.R.C. Record
No. N-295___ , situated in the Barrio of Malanday, Municipality of San Mateo, Province of
Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or
less, and covered by OCT NO. 10271.

b. A one-fourth (1/4) share in the parcel of land situated in Guinayang, San Mateo, Rizal,
containing an area of 2,742 square meters, covered by OCT No. 10493.

c. A one-fourth (1/4) share in the parcel of land situated in San Jose, Montalban, Rizal,
containing an area of 4,775 square meters, and covered by OCT No. ON-403.

d. A one-fourth (1/4) share in the parcel of land situated in Cambal, San Mateo, Rizal,
containing an area of 13,456 square meters, and covered by OCT No. 5980.

That no other personal properties are involved in this extrajudicial settlement.

That to the best knowledge and information of the parties hereto, the said deceased left certain
obligations amounting to P175,000.00 representing loan obligations with the Development Bank of
the Philippines.

That a notice of this extrajudicial settlement had been published once a week for three consecutive
weeks in ___________ a newspaper of general circulation in_______, as certified by the said
newspaper hereto attached as Annex "A";

That the parties hereto being all of legal age and with full civil capacity to contract, hereby by these
presents agree to divide and adjudicate, as they hereby divide and adjudicate, among themselves
the above-described real estate property in equal shares and interest.

IN WITNESS WHEREOF, the parties have signed this document on this 2nd day of September, 1994
in San Mateo, Rizal, Philippines.
xxx 6

After a careful reading of the abovequoted Extra judicial Settlement Among Heirs, the Court agrees
with the CA that there is nothing in the said document which would indicate that respondents agreed
to the effect that the subject properties shall be transferred in the name of Leandro as
reimbursement for his payment of Syrgio's loan obligations with the DBP. On the contrary, the
second to the last paragraph of the said Settlement clearly shows that herein respondents, as heirs
of Sergio, have divided the subject properties exclusively among themselves.

There is no competent evidence to prove the verbal agreement being claimed by respondents. Aside
from the subject Extrajudicial Settlement Among Heirs, the self-serving claims of Leandro on the
witness stand, as well as the cash voucher,   which supposedly represented payment of P8,000.00
7

given to Atty. Domingo Natividad for the expenses in transferring the title of the subject properties in
Leandro's favor, would hardly count as competent evidence in the eyes of the law. Respondents'
claim of the existence of a verbal agreement between them, on one hand, and petitioners'
predecessors-in-interest, on the other, remains to be mere allegation. It is an age-old rule in civil
cases that he who alleges a fact has the burden of proving it and a mere allegation is not evidence.  8

In relation to petitioners' contention that the subject verbal agreement actually existed, they reiterate
their contention that the conveyance of the subject properties in their favor is not covered by the
Statute of Frauds because they claim that respondents' execution of the Extrajudicial Settlement
Among Heirs constitutes partial execution of their alleged agreement.

The Court does not agree.

Suffice it to say that there is no partial execution of any contract, whatsoever, because petitioners
failed to prove, in the first place, that there was a verbal agreement that was entered into.

Even granting that such an agreement existed, the CA did not commit any en-or in ruling that the
assignment of the shares of Sergio in the subject properties in petitioners' favor as payment of
Sergio's obligation cannot be enforced if there is no written contract to such effect. Under the Statute
of Frauds , an agreement to convey real properties shall be unenforceable by action in the absence
9

of a written note or memorandum thereof and subscribed by the party charged or by his agent. As
earlier discussed, the pieces of evidence presented by petitioners, consisting of respondents'
acknowledgment of Sergio's loan obligations with DBP as embodied in the Extrajudicial Settlement
Among Heirs, as well as the cash voucher which allegedly represents payment for taxes and transfer
of title in petitioners' name do not serve as written notes or memoranda of the alleged verbal
agreement.

The foregoing, notwithstanding, the Court finds it proper to reiterate the CA ruling that, in any case,
since respondents had already acknowledged that Sergio had, in fact, incurred loan obligations with
the DBP, they are liable to reimburse the amount paid by Leandro for the payment of the said
obligation even if such payment was made without their knowledge or consent.

Article 1236 of the Civil Code clearly provides that:

The creditor is not bound to accept payment or performance by a third person who has no interest in
the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor, he can recover only insofar as
the payment has been beneficial to the debtor. (Emphasis supplied)

Neither can respondents evade liability by arguing that they were not parties to the contract between
Sergio and the DBP. As earlier stated, the fact remains that, in the Extrajudicial Settlement Among
Heirs, respondents clearly acknowledged Sergio's loan obligations with the DBP. Being Sergio's
heirs, they succeed not only to the rights of Sergio but also to his obligations.

The following provisions of the Civil Code are clear on this matter, to wit:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations
to the extent of the value of the inheritance, of a person are transmitted through his death to another
or others either by will or by operation of law.

Art. 776. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death.

Art. 781. The inheritance of a person includes not only the property and the transmissible rights and
obligations existing at the time of his death, but also those which have accrued thereto since the
opening of the succession.

In the present case, respondents, being heirs of Sergio, are now liable to settle his transmissible
obligations, which include the amount due to petitioners, prior to the distribution of the remainder
of Sergio's estate to them, in accordance with Section 1, Rule 90 of the Rules of Court.

As to when the interest on the sum due from respondents should be reckoned, the Court finds no
error in the ruling of the CA that such interest should be computed from June 23, 2001, the date
when petitioners made a written demand for the payment of respondents' obligation.   There is no
11

merit in petitioners' contention that the reckoning date should have been September 23, 1994, the
date when respondents executed the Extrajudicial Settlement Among Heirs, because there is
nothing therein to prove that petitioners, at that time, made a demand for reimbursement.

However, the rate of interest should be modified in view of the issuance of Circular No. 799, Series
of 2013 by the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB). The said Circular reduced
the "rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed
in judgments, in the absence of an express contract as to such rate of interest," from twelve percent
(12%) to six percent (6%) per annum. The Circular was made effective on July 1, 2013. Hence,
under the modified guidelines in the imposition of interest, as laid down in the case of Nacar v.
Gallery Frames,   this Court held that:
12

xxxx

II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 6% per annum to be computed from default, i.e., from judicial
 or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

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

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. (Emphasis supplied)

xxx 13

The Court explained that:

[F]rom the foregoing, in the absence of an express stipulation as to the rate of interest that would
govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits
and the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected
in the case of Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations for
Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank
Financial Institutions, before its amendment by BSP-MB Circular No. 799 - but will now be six
percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate
could only be applied prospectively and not retroactively. Consequently, the twelve percent
(12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013, the new rate
of six percent (6%) per annum shall be the prevailing rate of interest when applicable. 14

Thus, in accordance with the above ruling, the rate of interest on the principal amount due to
petitioners shall be 12% from June 23, 2001, the date when petitioners made a demand for
payment, to June 30, 2013. From July 1, 2013, the effective date of BSP-MB Circular No. 799, until
full satisfaction of the monetary award, the rate of interest shall be 6%.

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals,
dated February 7, 2011 and August 25, 2011, respectively, in CA-G.R. CV No. 92840
are AFFIRMED with MODIFICATION by ORDERING respondents to pay petitioners, in addition to
the principal amount of P162,514.88, interest thereon at the rate of twelve percent (12%) per
annum, computed from June 23, 2001 to June 30, 2013, and six percent (6%) per annum from July
1, 2013 until full satisfaction of the judgment award.