Sps. Marcelian Tapayan and Alice Tapayan Vs. Ponceda M.

Martinez
G.R. No. 207786 | January 30, 2017

FACTS: The parties herein are relatives by affinity. Petitioner Alice Tapayan is the sister
of Clark Martinez's (Clark) wife. Clark is the Respondent's son.

Respondent is the registered owner of a parcel of land situated along Pingol Street,
Ozamiz City, covered by Original Certificate of Title (OCT) No. P-1223 (Pingol Property).
Based on the records, it appears that two (2) mortgages were constituted over this
property - the first in favor of Philippine National Bank (PNB Mortgage ), and the second
in favor of Development Bank of the Philippines (DBP Mortgage).

The records further show that Respondent agreed to constitute the DBP Mortgage
upon Clark's request, and that, in order to release the Pingol Property from the PNB
Mortgage, the Petitioners and Respondent agreed to utilize a portion of the proceeds of
the DBP Loan to settle the remaining balance of Respondent's PNB Loan, then
amounting to Sixty-Five Thousand Three Hundred Twenty Pesos and 55/100
(₱65,320.55).

Subsequently, the parties herein executed a Deed of Undertaking dated August 29,
1998 (Deed of Undertaking) in reference to the DBP Mortgage. The DBP Loan was not
paid when it fell due

On September 14, 1999, Respondent filed a complaint for Specific Performance with
Damages (Complaint) against Petitioners before the RTC. Respondent averred that
Petitioners used the proceeds of the DBP Loan exclusively for their own purposes, and
that since Petitioners failed to pay the DBP Loan, she and her children were constrained
to pay DBP the sum of One Million One Hundred Eighty Thousand Two Hundred Pesos
and 10/100 (₱1,180,200.10) to save the Pingol Property from foreclosure.After trial, the
RTC rendered a decision dated September 28, 2009 in favor of Respondent. CA
rendered the assailed Decision denying the Petitioners' appeal.

ISSUE: Whether the CA erred in affirming the RTC Decision directing Petitioners to
execute a mortgage over the Carangan Property in favor of Respondent.

RULING: As a rule, only questions of law may be raised in petitions filed under Rule
45,36 subject only to recognized exceptions, namely:

(1) when the findings are grounded entirely on speculation, surmises or

conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible;
(3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts;
(5) when the findings of facts are conflicting;
 (6) when in making its findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the appellant and
the appellee;
(7) when the findings are contrary to the trial court;
(8) when the findings are conclusions without citation of specific evidence on
which they are based;
(9) when the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondent;
(10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and
(11) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different
conclusion.

The Court holds that no misapprehension of facts was committed by both the RTC and
the CA so as to justify deviation from their findings, except only as to the RTC's finding
regarding the amount that Petitioners are bound to reimburse to Respondent.
 SAN FRANCISCO INN vs SAN PABLO CITY WATER DISTRICT
G.R. No. 204639 | February 15, 2017

FACTS: The petitioner [SFI] is a hotel business establishment situated at Brgy. San
Francisco Calihan, San Pablo City. In 1996, petitioner caused the construction of two (2)
deep-well pumps for the use of its business. The pumps, which have a production
capacity of four (4) liters per second each, bear the following specification[s]: size of
casing [-] 2.0"; size of column pipe-1.5"; pump setting- 60 feet; and motor HP rating-
1.5 HP.

The respondent [SPCWD] is a local water utility organized under Resolution No. 309,
approved by the Municipal Board of the City of San Pablo, on December 17, 1973,
absorbing the former San Pablo Waterworks System and its facilities. Its operation is
under the National Water Resources Board, formerly Council (NWRB), which is the
national agency vested with authority to control and regulate the utilization,
exploitation, development, conservation and operation of water resources pursuant to
Presidential Decree No. 1067, otherwise known as the "Water Code of the Philippines"
(Water Code) and Presidential Decree No. 198, the "Local Water Utilities Administration
Law". The respondent [SPCWD] is managed by a Board of Directors.

In 1977, the respondent [SPCWD] promulgated the Rules Governing Groundwater

Pumping and Spring Development within the Territorial Jurisdiction of the San Pablo
City Water District. These rules were approved by the NWRB in its 88th meeting held on
January 23, 1978. There was an invitation to all deep-well users in San Pablo City to a
meeting regarding the legality of the imposition of production assessment fees. The
meeting was held on February 19, 1998, where deep-well users attended, including the
petitioners but there was no concrete agreement was reached during the meeting
except for the deep-well users to submit their position paper. On March 26, 1998, the
deep-well users submitted their position paper opposing the imposition of the
production assessment fees. While other deep-well users eventually paid production
assessment fees and signed the MOA on the same, petitioner did not agree and refused
to sign the MOA, the respondent created an Investigating Board to investigate
petitioner for failure to secure water permit. The Investigating Board directed petitioner
to show cause why no cease and desist order be issued for operating a deep well
without a permit then the petitioner submitted a Manifestation and Motion asking for
any specific complaint against it in regard of its operation. The Investigating [Board] set
the incident for hearing on October 2, 2001, but the petitioner did not appear,
prompting the Investigating Board to consider the matter submitted for resolution. On
April 9, 2002, the Investigating Board came out with its Report and Resolution
recommending to the respondent's Board of Directors to issue a cease and desist order
against the petitioner for operating a deep well without a permit, and to demand
payment of the equivalent value of the consumption or underground water "from
October 1999 up to the present". The above Report and Resolution has not yet been
acted upon by the respondent's Board of Directors up to this time.
Before the Regional Trial Court, the petitioner filed a Motion for Reconsideration on May
14, 2002, on the following grounds: a) the authority of the respondent has already
been questioned in the action for injunction; b) that the respondent has not shown
proof that the extraction/drawing of water by the petitioner had caused injury upon the
respondent's financial condition; and c) the petitioner had already filed a water permit
application which is pending before the NWRB. The RTC dismissed the petition.
Respondent SPWCD appealed the RTC Decision before the CA. The CA, in its Decision
dated September 14, 2011, declared "valid the imposition of production charges/fees by
respondent SPCWD on commercial and industrial users/operators of deep wells in San
Pablo City, and upholds the right of [respondent] SPCWD to demand payment of
production charges/fees in accordance with existing rates from [SFI] and for the latter
to pay interest thereon from its imposition starting in 1998. The CA affirmed the
petition.

ISSUE:

Whether or not the CA erred in upholding the right of SPCWD to impose production
assessment in the clear absence of any findings/proof to support compliance that SFI's
use of groundwater is injuring or reducing SPCWD's financial condition and impairing its
ground water source, pursuant to Section 39 of PD 198 and Section 11 of the Rules.

RULING: Yes. Section 39 of PD 198 Production Assessment. - In the event the board
of a district finds, after notice and hearing, that production of ground water by other
entities within the district for commercial or industrial uses in (sic) injuring or reducing
the district's financial condition, the board may adopt and levy a ground water
production assessment to compensate for such loss. In connection therewith, the
district may require necessary reports by the operator of any commercial or industrial
well. Failure to pay said assessment shall constitute an invasion of the waters of the
district and shall entitle this district to an injunction and damages pursuant to Section
32 of this Title.

Section 11 of the Rules: Section 11 - Production Assessment - In the event the Board of
Directors of the District, finds, after notice and hearing, that production of ground water
by other entities within the District for commercial or industrial uses is adversely
affecting the District's financial condition and is impairing its ground water source, the
Board may adopt and levy a ground water production assessment or impose special
charges at fixed rates to compensate for such loss. In connection therewith the District
may require commercial or industrial appropriators to install metering devices
acceptable to the District to measure the actual abstraction or appropriation of water
and which devices shall be regularly inspected by the District.

Under the law and the Rules, the requirements that must be complied with before a
water district entity may impose production assessment on the production of ground
water by commercial or industrial operators/users are:
1. A prior notice and hearing; and
2. A resolution by the Board of Directors of the water district entity: (i) finding that
the production of ground water by such operators/users within the district is
injuring or reducing the water district entity's financial condition and is impairing
its ground water source; and (ii) adopting and levying a groundwater production
assessment at fixed rates to compensate for such loss.
 AMA LAND, INC., vs. WACK WACK RESIDENTS' ASSOCIATION, INC.
G.R. No. 202342 | July 19, 2017

FACTS: A commercial and residential building project located at EDSA corner Fordham
Street in Wack Wack Village, Mandaluyong City, was proposed by AMALI in the mid-
1990s. The latter proceeded to secure the needed licenses and permits for the
construction of the project. On March 18, 1996, AMALI notified WWRAI — a registered
homeowners' association of Wack Wack Village — of its intention to use Fordham Street
as an access road and staging area of the project. As AMALI received no response from
WWRAI, the former temporarily enclosed the job site and set up a field office along
Fordham Street. WWRAI claimed, however, that AMALI already converted part of the
said street as barrack site and staging area even before March 18, 1996. All subsequent
attempts of WWRAI to remove the said field office proved futile.

AMALI then filed a petition before the RTC, wherein it seeks the temporary use of
Fordham Street belonging to WWRAI as an access road to AMALI's construction site of
its AMA Tower project pursuant to Article 656of the Civil Code, and to establish a
permanent easement of right of way in its favor over a portion of Fordham Street
pursuant to Article 649 of the Civil Code. The RTC granted the writ of preliminary
mandatory injunction "directing WWRAI to allow AMALI to use Fordham Street through
a temporary easement of right of way." The CA granted WWRAI's application for a
temporary restraining order, and, accordingly, AMALI was commanded to cease and
desist from further committing the act complained of, which is the construction of the
commercial and residential condominium project located along EDSA corner Fordham
Street in Wack Wack Village.

ISSUES

1. Whether WWRAI is entitled to enjoin the construction of the AMA Tower

pending determination of the original petition for the declaration of temporary
and permanent easements of right of way over a portion of Fordham Street.
2. Whether AMALI, as owner of the dominant estate, may validly claim against
WWRAI a compulsory permanent right of way under Articles 649 and 650 of the
Civil Code, or, a temporary right of way under Article 656 of the Civil Code.

RULING
1. NO. To be entitled to the injunctive writ, the petitioner must show that: (1) there
exists a clear and unmistakable right to be protected; (2) this right is directly
threatened by the act sought to be enjoined; (3) the invasion of the right is material
and substantial; and (4) there is an urgent and paramount necessity for the writ to
prevent serious and irreparable damage.

The grant or denial of the injunctive relief rests on the sound discretion of the court
taking cognizance of the case, since the assessment and evaluation of evidence towards
that end involves findings of fact left to the conclusive determination by such court; and
the exercise of judicial discretion by such court will not be interfered with, except upon
a finding of grave abuse of discretion. In the issuance of the injunctive writ, grave
abuse of discretion implies a capricious and whimsical exercise of judgment equivalent
to lack of jurisdiction; or the exercise of power in an arbitrary or despotic manner by
reason of passion, prejudice or personal aversion amounting to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation
of law.

Guided by the foregoing principles, the CA erred in finding that the RTC committed
grave abuse of discretion in issuing its Orders, denying WWRAI's application for the
issuance of a temporary restraining order and writ of preliminary injunction. WWRAI's
allegation that its members' right to live in a peaceful, quiet and safe environment will
be violated in the event that the condominium project of AMALI will be erected is
untenable. The alleged noise and dust that may be caused by the construction is the
natural consequence thereof. However, this annoyance that may be brought by the
construction is not permanent in nature but is merely temporary and once the building
is completed, said members' right to live in peaceful, quiet and safe environment will
be restored without noise and dust. As to the allegations that said members' privacy
may be invaded for the reason that they may be photographed or videotaped without
their knowledge, these fears are merely speculative and cannot be taken into
consideration. As admitted by WWRAI's witness, the construction activity is suspended,
hence, there is nothing to restrain. There is no urgent and paramount necessity for the
writ to prevent serious damage.

Indeed, WWRAI was unable to convincingly demonstrate a clear and unmistakable right
that must be protected by the injunctive writ. The apprehensions of its members are, as
correctly ruled by the RTC, speculative and insufficient to substantiate the element of
serious and irreparable damage.

2. NO. The denial of WWRAI's application for a writ of preliminary injunction against the
construction of the AMA Tower does not necessarily translate to AMALI's entitlement to
a temporary easement of right of way over a portion of Fordham Street belonging to
WWRAI for use as an access road and staging area of its AMA Tower project before the
resolution of its petition for declaration of easement of right of way (original petition) by
the RTC. WWRAI cannot be compelled at this stage of the proceedings to grant AMALI
a temporary legal easement of right of way over a portion of Fordham Street.

The question of whether or not AMALI, as owner of the dominant estate, may validly
claim against WWRAI a compulsory permanent right of way under Articles 649 and 650
of the Civil Code, will depend on a finding that AMALI has established the existence of
the following requisites, namely: (1) the dominant estate is surrounded by other
immovables; (2) it is without adequate outlet to a public highway; (3) after the proper
indemnity has been paid; (4) the isolation was not due to the proprietor of the
dominant estate's own acts; and (5) the right of way claimed is at a point least
prejudicial to the servient estate. A sixth requisite is that the right of way must be
absolutely necessary for the normal enjoyment of the dominant estate by its owner.
There must be a real, not fictitious or artificial, necessity for the right of way, and the
right cannot be claimed merely for the convenience of the owner of the enclosed
estate. The burden of proving the existence of the foregoing requisites lies on AMALI,
being the owner of the dominant estate. This issue has been correctly recognized by
the CA as still pending determination by the Regional Trial Court of Pasig City assigned
in San Juan (Metropolitan Manila) Branch 264, in Civil Case No. 65668.

In turn, as regards the question of whether AMALI is entitled to a temporary easement

of right of way, Article 656 of the Civil Code provides that this can be granted only after
the payment of the proper indemnity by AMALI, the owner of the dominant estate; and
only if AMALI has established that the easement is indispensable for the construction of
its AMA Tower Project.

The RTC did not even factor in its Order "directing WWRAI to allow AMALI to use
Fordham Street through a temporary easement right of way and set the compensation
for the use of Fordham Street to P50,000.00 per month of use" the fact that the front
portion of AMALI's property where the proposed AMA Tower project is situated is facing
EDSA, which AMALI describes as a main thoroughfare. The said Order also fails to
identify the specific portion of Fordham Street that would be subject to the temporary
easement of right of way. The RTC erred and/or gravely abused its discretion when it
granted AMALI's application for preliminary mandatory injunction because, in so doing,
it prematurely decided disputed facts and disposed of the merits of the case without the
benefit of a fullblown trial wherein testimonial and documentary evidence could be fully
and exhaustively presented, heard and refuted by the parties. As such, the RTC Order
insofar as it granted a temporary easement of right of way over Fordham Street in favor
of AMALI is concerned is declared void and of no force and effect. The RTC lacked
jurisdiction to declare a temporary easement of right of way arising from Article 656 of
the Civil Code without a full-blown trial.

Article 656 requires proof of indispensability and receipt of payment of the proper
indemnity for the damage caused by the owner of the dominant estate before the
owner of the servient estate can be compelled to grant a temporary easement of right
of way. AMALI presented no witnesses to establish these prerequisites. Being
preconditions, they are akin to suspensive conditions that must be fulfilled before the
obligation on the part of WWRAI to allow the easements can arise. Until the
preconditions are met, AMALI has no legal basis to use a portion of Fordham Street as
an access road and staging area of its AMA Tower project. To allow AMALI to do so
would be in contravention of the legal provisions on the establishment and grant of the
legal easement of right of way under the Civil Code.

To stress, the temporary easement of right of way under Article 656 of the Civil Code,
similar to the permanent easement of right of way pursuant to its Articles 649 and 650,
can only be granted after proof of compliance with the prerequisites set forth in the
articles duly adduced during a full-blown trial.
 PRIVATIZATION AND MANAGEMENT OFFICE vs. QUESADA, et. al.
G.R. No. 224507 | September 20, 2017

FACTS: The Quesadas filed a Petition to Surrender TCT No. 27090 pursuant to Section
107 of P.D. No. 1529. The Quesadas are the owners of a parcel of land situated in
Quezon City under TCT No. 27090. TCT No. 27090 was originally registered in the name
of the Quesadas' predecessors-in-interest and it was donated to them sometime in
1997. The original copy of TCT No. 27090, on file with the Register of Deeds of Quezon
City, was destroyed when the interior of the Quezon City Hall was gutted by fire. This
prompted the Quesadas' predecessors-in-interest to file a Petition for Reconstitution of
Title. The said original TCT, which has not been reconstructed, may be reconstituted on
the basis of the owner's copy thereof. However, the said owner's copy of the TCT is
presently in the possession of PMO, the government agency that took over the
functions of the Asset Privatization Trust. PMO got hold of the said owner's copy of the
TCT because it was delivered in 1983 to Golden Country Farms, a defunct private
corporation, to secure the performance by the Quesadas' predecessors-in-interest of
their obligation in a contract designated as Growership Agreement which the Quesadas'
predecessors-in-interest had entered into with Golden Country Farms. Golden Country
Farms, however, was later considered a crony corporation and was sequestered by the
APT.

Several demands were made to PMO to surrender the said title but the same were not
favorably acted upon by the said office. The Quesadas were constrained to file the
instant petition to surrender the withheld duplicate certificates pursuant to Section 107
of P.D. No. 1529, otherwise known as the Property Registration Decree. PMO insists
that the original petition failed to state a cause of action because the allegations therein
do not fall under the two circumstances contemplated in Section 107 of P.D. No. 1529,
and that the summary proceedings under the said Section do not empower the RTC to
resolve the conflicting claims of the parties. The Quesadas take the position that the CA
was correct in declaring that the instant case could be converted into an ordinary action
to avoid multiplicity of suits.

ISSUES:
1. Whether the RTC can take cognizance of the petition to surrender the
duplicate copy of TCT No. 27090 pursuant to Section 107 of P.D. No. 1529.
2. Whether the RTC, as a land registration court, has jurisdiction to hear and
decide contentious and substantial issues over the original petition for surrender
of withheld duplicate certificate of title.

RULING:
1. YES. The jurisdiction of the RTC as a land registration court over all petitions filed
after original registration of title, with power to hear and determine all questions arising
upon such applications or petitions is provided in Section 2 of P.D. No. 1529.

As correctly observed by PMO, Section 107 contemplates ONLY two situations when a
petition for surrender of withheld duplicate certificate of title may be availed of. These
are: (1) where it is necessary to issue a new certificate of title pursuant to any
involuntary instrument which divests the title of the registered owner against his
consent, and (2) where a voluntary instrument cannot be registered by reason of the
refusal or failure of the holder to surrender the owner's duplicate certificate of title.

Clearly, the original petition before the RTC does not allege an involuntary instrument
which intends to divest the title of the registered owner against his consent. TCT No.
27090 is registered in the name of the Quesadas' predecessors-in-interest and the
Quesadas are not divesting the title of their predecessors-in-interest against the latter's
will. Rather, the Quesadas require the surrender of the owner's duplicate of TCT No.
27090 in the possession of PMO based on an alleged deed of donation in their favor.

Inasmuch as the original petition before the RTC seeks the surrender of the owner's
duplicate copy of TCT No. 27090 in the possession of PMO so that a voluntary
instrument — a Deed of Donation — can be registered but the registration cannot be
made by reason of the refusal of PMO, the holder, to surrender the same, a cause of
action under Section 107 of P.D. No. 1529 has been sufficiently alleged in the original
petition. Thus, a dismissal of the said petition on the ground that it fails to state a cause
of action is not warranted. Consequently, the RTC, as a land registration court, has
jurisdiction over the original petition.

2. YES. With respect to the power of the RTC to hear and decide contentious and
substantial issues, such as, whether the obligation of the Quesadas' predecessors-in-
interest under the Growership Agreement had already been extinguished by
prescription and whether the Decision of the RTC of Pasay City declaring that the
Quesadas' predecessors-in-interest had no more liability to Golden Country Farms (now
PMO) or that whatever liability there might be against them could no longer be
enforced, or those that affect the ownership of the property covered by TCT No. 27090,
Section 2 of P.D. No. 1529 confers a broad jurisdiction upon the RTC "with power to
hear and determine all questions arising upon such [petition]." RTCs now have the
power to hear and determine all questions, even contentious and substantial ones,
arising from applications for original registration of titles to lands and petitions filed
after such registration. The matter of whether the RTC resolves an issue in the exercise
of its general jurisdiction or of its limited jurisdiction as a special court is only a matter
of procedure and has nothing to do with the question of jurisdiction. Indeed, the land
registration court can now hear and decide controversial and contentious cases and
those involving substantial issues.

Considering the serious objection raised by PMO on the Quesadas’ claim, the issue
becomes contentious and the RTC albeit sitting as a land registration court, has the
authority not only to take cognizance of the said petition, but also to thresh out the
issue in a full-blown hearing, to receive evidence of both parties and to determine
whether or not the Quesadas are indeed entitled to the relief prayed for. Verily, after
the parties have been duly heard in a full-blown hearing, the RTC, being a court of
general jurisdiction, can squarely address all the issues to be raised by the parties and
resolve their conflicting claims, applying substantive law and jurisprudence. Indeed, this
matter is procedural and not jurisdictional.
 G. HOLDINGS, INC vs. CEPALCO
G.R. No. 226213.| September 27, 2017

DOCTRINE: Under Article 1345 of the Civil Code, simulation of a contract may be
absolute, when the parties do not intend to be bound at all, or relative, when the
parties conceal their true agreement. The characteristic of simulation is the fact that
the apparent contract is not really desired or intended to produce legal effects or in any
way alter the juridical situation of the parties. Thus, where a person, in order to place
his property beyond the reach of his creditors, simulates a transfer of it to another, he
does not really intend to divest himself of his title and control of the property; hence,
the deed of transfer is but a sham. Further, rescissible contracts and void or inexistent
contracts belong to two mutually exclusive groups.

FACTS: From March 1990 CEPALCO, which operates a light and power distribution
system in Cagayan de Oro City, supplied power to the ferro-alloy smelting plant of FPI
at the PHIVIDEC Industrial Estate in Tagoloan, Misamis Oriental. When FPI defaulted in
the payment of its electric power bills, CEPALCO demanded payment thereof. FPI paid
CEPALCO on three separate dates, leaving a balance. FPI failed again to pay its
subsequent electricity bills, thereby increasing its unpaid electric bills. For failure to pay
FPI's outstanding bills, CEPALCO disconnected the electric power supply to FPI in May
1996. CEPALCO filed a collection suit against FPI. RTC-Pasig rendered a Decision in
favor of CEPALCO, ordering FPI to pay CEPALCO. CEPALCO moved for execution
pending appeal, which was granted by RTCPasig. In the meantime, Sheriff Baron of
RTC-Pasig issued notices of levy upon personal and real properties and notices of sale
on execution of personal and real properties.

GHI filed a case against Sheriff Baron, CEPALCO and FPI for Nullification of Sheriff's
Levy on Execution and Auction Sale, Recovery of Possession of Properties and Damages
before the RTC-CDO. GHI claimed that the levied ferro-alloy smelting facility, properties
and equipment are owned by it as evidenced by a Deed of Assignment executed by FPI.
In the unilateral Deed of Assignment, FPI, as the assignor, through its stockholders and
Board of Directors' duly authorized representative and Acting President, Juanito E.
Figueroa, in consideration of obligations conveyed absolutely in favor of GHI, as the
assignee, "all of the [assignor's] properties, equipment and facilities, located in Phividec
Industrial Estate, Tagoloan, Misamis Oriental. Prior to the Deed of Assignment, FPI sent
to GHI a letter dated February 28, 2003 wherein the manner by which the obligation of
FPI amounting to P50,366,926.71 (as of December 31, 2002) would be addressed per
their earlier discussions was confirmed.

CEPALCO filed its answer with compulsory counterclaim and cross-claim. In its
counterclaim, CEPALCO assailed the validity of the Deed of Assignment. CEPALCO
contended that the Deed of Assignment was null and void for being absolutely
simulated and, as a dacion en pago, it did not bear the conformity of the creditor. GHI
and FPI have substantially the same directors. The Deed of Assignment was in fraud of
FPI's creditors as it was made after the RTC-Pasig had already rendered a partial
judgment in favor of CEPALCO and was, therefore, rescissible.
ISSUE:
1. Whether the CA was correct in not dismissing CEPALCO's compulsory
counterclaim for non-payment of docket fees.
2. Whether the Deed of Assignment was absolutely simulated as it was done in
fraud of creditors and badges of fraud accompanied its execution, and is
therefore not rescissible.

RULING:

1. YES. CEPALCO's counterclaim and prayer for rescission of the Deed of Assignment
can only be viewed as a compulsory counterclaim because it "arises out of or is
connected with the transaction or occurrence constituting the subject matter of the
opposing party's claim and does not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction." Being a compulsory
counterclaim, the CA was correct when it ruled that as of the filing of CEPALCO's
Answer with Compulsory Counterclaim and Cross-Claim, it was not liable to pay filing
fees on its compulsory counterclaim. Thus, on the first issue, the CA committed no
reversible error when it did not order the dismissal of CEPALCO's counterclaim, which is
compulsory, for non-payment of docket fees.

2. YES. The Deed of Assignment is being questioned for being both rescissible and, at
the same time, an absolute simulation (void or inexistent contracts).

Rescission and nullity can be distinguished in the following manner: (a) by reason of the
basis — rescission is based on prejudice, while nullity is based on a vice or defect of
one of the essential elements of a contract; (2) by reason of purpose — rescission is a
reparation of damages, while nullity is a sanction; (3) by reason of effects — rescission
affects private interest while nullity affects public interest; (4) by reason of nature of
action — rescission is subsidiary while nullity is a principal action; (5) by reason of the
party who can bring action — rescission can be brought by a third person while nullity
can only be brought by a party; and (6) by reason of susceptibility to ratification —
rescissible contracts need not be ratified while void contracts cannot be ratified.

They can likewise be distinguished as follows: (1) as to defect: In rescissible contracts,

there is damage or injury either to one of the contracting parties or to third persons;
while in void or inexistent contracts, one or some of the essential requisites of a valid
contract are lacking in fact or in law; (2) As to effect: The first are considered valid and
enforceable until they are rescinded by a competent court; while the latter do not, as a
general rule, produce any legal effect; (3) As to prescriptibility of action or defense: In
the first, the action for rescission may prescribe; while in the latter, the action for
declaration of nullity or inexistence or the defense of nullity or inexistence does not
prescribe; (4) As to susceptibility of ratification: The first are not susceptible of
ratification, but are susceptible of convalidation; while the latter are not susceptible of
ratification; (5) As to who may assail contracts: The first may be assailed not only by a
contracting party but even by a third person who is prejudiced or damaged by the
contract; while the latter may be assailed not only by a contracting party but even by a
third party whose interest is directly affected; (6) As to how contracts may be assailed:
the first may be assailed directly, and not collaterally; while the latter may be assailed
directly or collaterally.

The enumerations and distinctions above indicate that rescissible contracts and void or
inexistent contracts belong to two mutually exclusive groups. A void or inexistent
contract cannot at the same time be a rescissible contract, and vice versa. The latter,
being valid and until rescinded, is efficacious while the former is invalid. There is,
however, a distinction between inexistent contracts and void ones as to their effects.
Inexistent contracts produce no legal effect whatsoever in accordance with the principle
"quod nullum est nullum producit effectum." In case of void contracts where the nullity
proceeds from the illegality of the cause of object, when executed (and not merely
executory) they have the effect of barring any action by the guilty to recover what he
has already given under the contract.

Under Article 1345 of the Civil Code, simulation of a contract may be absolute, when
the parties do not intend to be bound at all, or relative, when the parties conceal their
true agreement. The former is known as contracto simulado while the latter is known as
contracto disimulado. An absolutely simulated or fictitious contract is void while a
relatively simulated contract when it does not prejudice a third person and is not
intended for any purpose contrary to law, morals, good customs, public order or public
policy binds the parties to their real agreement. The characteristic of simulation is the
fact that the apparent contract is not really desired or intended to produce legal effects
or in any way alter the juridical situation of the parties. Thus, where a person, in order
to place his property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of the
property; hence, the deed of transfer is but a sham.

In the Deed of Assignment, did FPI intend to divest itself of its title and control of the
properties assigned therein?

The lack of intention on the part of FPI to divest its ownership and control of "all of its
properties, equipment and facilities, located in Phividec Industrial Estate, Tagoloan,
Misamis Oriental" — in spite of the wordings in the Deed of Assignment that FPI
"assigned, transferred, ceded and conveyed them absolutely in favor of GHI" — is
evident from the letter dated February 28, 2003 which reveals the true intention of FPI
and GHI.

In the letter, it is there provided that the right to the work process, "Outokumpo," was
to be retained by FPI and would only be made available to GHI under two options. One
option even gave FPI the option to operate the assigned assets with the obligation to
pay GHI a guaranteed revenue. While GHI was given the first crack to choose which of
the two options to take, such chosen option would only last for three years, and
subsequently, FPI would make the choice and the option chosen by FPI would last for
the next three years. The cycle would then be repeated if the ferro-alloy plant would
not be operated for six years from assignment. What is evident, therefore, in the
delineation of the different options available to FPI and GHI in the settlement of FPI's
obligations to the latter is that FPI did not intend to really assign its assets "absolutely"
to GHI. This letter belies the wordings of the Deed of Assignment that, was executed a
mere 11 days after the letter.

That there was no intention to absolutely assign to GHI all of FPI's assets was
confirmed by the finding of the RTC-CDO that, according to FPI's Acting President,
Juanito E. Figueroa, "GHI cannot operate the [equipment, machinery and smelting
facilities] without the patented 'Outokumpo' process and GHI has not been operating
the same." Moreover, the equipment and machinery remain physically in the plant
premises, slowly depreciating with the passage of time, and, worse, there also appears
to be no effective delivery as the premises on which these are located remain under the
control of FPI which continues to employ the security and skeletal personnel in the
plant premises.

Thus, in executing the Deed of Assignment, FPI's intention was not to transfer
absolutely the assigned assets (admittedly valued at about P280 Million) to GHI in
payment of FPI's obligations to GHI amounting to P50,366,926.71. FPI did not really
intend to divest itself of its title and control of the assigned properties. FPI's real
intention was to place them beyond the reach of its creditor CEPALCO.

As to the presence of badges of fraud, which the RTC-CDO found to have existed and
affirmed by the CA, they do, in fact, confirm the intention of FPI to defraud CEPALCO.
But these findings do not thereby render as rescissible the Deed of Assignment under
Article 1381 (3). Rather, they fortify the finding that the Deed of Assignment was "not
really desired or intended to produce legal effects or in any way alter the juridical
situation of the parties" or, put differently, that the Deed of Assignment was a sham, or
a contracto simulado.

Thus, the Deed of Assignment is declared inexistent for being absolutely simulated or
fictitious. The CA was correct in ruling that the Deed of Assignment was absolutely
simulated, although it was in error in affirming the rescission ordered by the RTC-CDO
because rescissible contracts and void or inexistent contracts belong to two mutually
exclusive groups.
 REPUBLIC OF THE PHILIPPINES, vs. THE HEIRS OF MEYNARDO CABRERA
G.R. No. 218418 | November 8, 2017

DOCTRINE: The classification and reclassification of public lands into alienable or

disposable, mineral or forest land is the exclusive prerogative of the Executive
Department, and is exercised by the latter through the President. Further, owing to the
nature of reversion proceedings and the outcome which a favorable decision therein
entails, the State bears the burden to prove that the land previously decreed or
adjudicated in favor of the defendant constitutes land which cannot be owned by
private individuals.

FACTS: Sometime in 1971, the Bureau of Lands issued Free Patent No. 516197 in favor
of Meynardo, covering two (2) lots. On the basis of said patent, the ROD issued an
Original Certificate of Title covering both lots in Meynardo's name. Thereafter, Lot 1-A
was transferred to Consolacion. Thus, on April 6, 1982, TCT No. 16580 covering Lot 1-A
was issued in Consolacion's name. Later still, Consolacion sold portions of Lot 1-A to
several purchasers. Learning of the issuance of TCT No. 16580, the De Castros,
claiming to be the actual possessors of Lot 1-A, filed before the DENR a petition urging
DENR to conduct an investigation to determine Lot 1-A's land classification status.

Consequently, in the DENR Final Report issued by Erwin D. Talento of the DENR Land
Management Office, Free Patent No. 516197, covering Lots 1, 1-A, and 2 (collectively,
Roxas Properties), was declared null and void for having been issued over land forming
part of the public domain (forest lands).

Later, the Republic filed against the Respondents a complaint for the annulment and/or
cancellation of Free Patent No. 516197, OCT No. RP-132 (P-9193), and TCT No. 16580.
The Complaint also prayed for the reversion of the Roxas Properties in the State's favor.

In this Petition, the Republic maintains that the Court's ruling in Animas did not have
the effect of making a positive executive act a necessary requirement for the purpose of
proving the reclassification of alienable and disposable land. Instead, the Republic
posits that Animas affirms its right to institute reversion proceedings in instances where
portions of forest land are erroneously included within the scope of land patents.
Moreover, the Republic argues that in reversion proceedings, the State should not be
made to bear the burden of proving that the land in question constitutes public domain
(i.e., forest land). In any case, the Republic posits that the documentary and
testimonial evidence it had presented sufficiently proved such fact.

ISSUE: Whether the CA is correct when it held that a positive act of government is
necessary to evince the reclassification of land from alienable and disposable to forest.

RULING: YES. The CA did not err when it affirmed the RTC, as the Republic failed to
establish that the Roxas Properties were classified as forest land at the time Free Patent
No. 516197 was issued.

The power to classify and reclassify land lies solely with the Executive Department.
The Regalian Doctrine has long been recognized as the basic foundation of the State's
property regime, and has been consistently adopted under the 1935, 1973, and 1987
Constitutions; it espouses that all lands of the public domain belong to the State, and
that, as a consequence thereof, any asserted right of ownership over land necessarily
traces back to the State. At present, Section 3, Article XII of the 1987 Constitution
classifies lands of the public domain into five (5) categories — forest lands, agricultural
lands, timber lands, mineral lands, and national parks. In the absence of any prior
classification by the State, unclassified lands of the public domain assume the category
of forest lands not open to disposition.

In turn, the classification of unclassified lands of the public domain, and the
reclassification of those previously classified under any of the categories set forth in the
1987 Constitution (such as the Roxas Properties), are governed by Commonwealth Act
No. 141 otherwise known as the Public Land Act.

The provisions thereof are clear and leave no room for interpretation — the
classification and reclassification of public lands into alienable or disposable, mineral or
forest land is the exclusive prerogative of the Executive Department, and is exercised
by the latter through the President, or such other persons vested with authority to
exercise the same on his behalf. Since the power to classify and reclassify land are
executive in nature, such acts, effected without executive authority, are void, and
essentially ultra vires.

In reversion proceedings, the State bears the burden of proving that the property in
question was inalienable at the time it was decreed or adjudicated in favor of the
defendant.

A land registration proceeding is the manner through which an applicant confirms title
to real property. In this proceeding, the applicant bears the burden of overcoming the
presumption of State ownership. Accordingly, the applicant is bound to establish,
through incontrovertible evidence, that the land sought to be registered had been
declared alienable or disposable through a positive act of the State.
Conversely,reversion proceeding is the manner through which the State seeks to revert
land to the mass of the public domain; it is proper when public land is fraudulently
awarded and disposed of in favor of private individuals or corporations, or when a
person obtains a title under the Public Land Act which includes, by oversight, lands
which cannot be registered under the Torrens system as they form part of the public
domain.

Owing to the nature of reversion proceedings and the outcome which a favorable
decision therein entails, the State bears the burden to prove that the land previously
decreed or adjudicated in favor of the defendant constitutes land which cannot be
owned by private individuals. Hence, to resolve this Petition, the Court must determine
whether the documentary and testimonial evidence offered by the Republic are
sufficient to sustain its cause.

The Complaint sho

uld be dismissed as the Republic failed to show that the Roxas Properties (including Lot
1-A) were classified as forest land at the time Free Patent No. 516197 was issued in
Meynardo's favor.

To recall, the Republic presented the following pieces of evidence to support its
complaint for reversion: (i) DENR Final Report; (ii) NAMRIA certifications; and (iii) LC
Map 209. However, these documents, whether taken individually or collectively, do not
evince a positive act of reclassification by the Executive Department.

The testimonies confirm that the alleged reclassification of the Roxas Properties is
bereft of basis, as it was done by Engineer Mendez on his sole account, without any
prior directive from the President, or a duly authorized officer from the Executive
Department. In fact, the annotation appearing on LC Map 209 upon which the Republic
relies does not even state upon whose authority the alleged reclassification had been
made, placing the annotation's validity, veracity and worth in serious doubt.

Ultimately, the Republic failed to prove that the Roxas Properties (including Lot 1-A)
were classified as forest land when they were decreed in Meynardo's favor in 1971.
 MAKATI WATER, INC. v. AGUA VIDA SYSTEMS, INC.
G.R. No. 205604 | June 26, 2019

DOCTRINE: The Court has previously held that in construing an instrument with
several provisions, a construction must be adopted as will give effect to all. Under
Article 1374 of the Civil Code, contracts cannot be construed by parts, but clauses must
be interpreted in relation to one another to give effect to the whole. The legal effect of
a contract is not determined alone by any particular provision disconnected from all
others, but from the whole read together.

FACTS: Respondent AVSI and petitioner MWI entered into two (2) separate Franchise
Agreements with an initial term of five (5) years from the dates of their execution.
Under these agreements, MWI shall operate two (2) Agua Vida (AV) water refilling
stations under the franchise of respondent AVSI.

With the Franchise Agreement for AV-Pilar expiring on November 11, 2001, while that
of AV-Arnaiz expiring on December 23, 2001, Estaniel, the President of MWI wrote to
AVSI requesting that the terms and conditions of the Franchise Agreements over AV-
Pilar and AVArnaiz be extended until December 31, 2001.

AVSI expressed that it was amenable to the extension of the Franchise Agreements
with a reminder that in the event MWI failed to renew the same, AVSI would enforce
Section IV-4 and IV-5 of both Franchise Agreements.

However, the Franchise Agreements were no longer renewed by the parties. MWI
ceased to operate both water refilling stations under the name of AVSI. However, it
operated said water refilling stations under its own name. Then, AVSI wrote to MWI,
reminding the latter of the termination of the Franchise Agreements and demanded that
it be allowed to repurchase the equipment and for it to cease and desist from operating
the water refilling stations, but MWI failed to heed the demand.

Thus, AVSI filed two (2) separate complaints for Specific Performance and Damages
with Prayer for Writ of Preliminary Attachment against MWI.

The RTC held that, with respect to Sections IV-4 of both Franchise Agreements, the
right to repurchase may only be exercised up to the fourth year from the execution of
the Franchise Agreements. Hence, since more than four years have already elapsed
since the Franchise Agreements were executed in 1996, respondent AVSI cannot invoke
anymore the right to repurchase under Sections IV-4 of the Franchise Agreements.

However, with respect to Sections IV-5 of the Franchise Agreements, the RTC held that,
in the event of termination of the Franchise Agreements, the said provisions imposed an
obligation upon petitioner MWI to not operate water vending businesses within 2
kilometers from the terminated franchise sites for a period of two years from the time
of termination. The RTC found that the aforesaid provisions found on both Franchise
Agreements are not limited to situations wherein there is premature cancellation of the
Franchise Agreements; the clauses should also apply in cases wherein the Franchise
Agreements have expired, which was exactly what occurred in the instant case. The
RTC explicitly found that the two-year prohibitory period shall be counted from the
expiration of the Franchise Agreements. The RTC therefore ordered the closure of AV-
Arnaiz and AV-Pilar, and ordered MWI to pay AVSI damages.

ISSUE: When the Franchise Agreements state that the two-year prohibition clause
apply "in the event of Termination," is it likewise applicable "in the event of Expiration?"

RULING: YES. Termination under Section IV-5 of the Franchise Agreements includes
the expiration of the said agreements. According to Article 1370 of the Civil Code, if 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.

Pursuant to the aforesaid Civil Code provision, "the first and fundamental duty of the
courts is the application of the contract according to its express terms, interpretation
being resorted to only when such literal application is impossible."

The literal, express, and plain meaning of the word termination is end of existence or
conclusion. The expiration of an agreement leads to the end of its existence and
effectivity; an agreement has reached its conclusion upon expiration. Upon close
reading of the Franchise Agreements, there is no provision therein which expressly
limits, restricts, or confines the term termination to the cancellation of the agreements
by the acts of the parties prior to their expiry date. There is no provision in the
Franchise Agreements which shows the parties' alleged intent to exclude the expiration
of the agreements from the coverage of the word termination.

Under Article 1374 of the Civil Code, the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from
all of them taken jointly.

The Court has previously held that in construing an instrument with several provisions,
a construction must be adopted as will give effect to all. Under Article 1374 of the Civil
Code, contracts cannot be construed by parts, but clauses must be interpreted in
relation to one another to give effect to the whole. The legal effect of a contract is not
determined alone by any particular provision disconnected from all others, but from the
whole read together.

Applying the foregoing in the instant case, it is the position of petitioner MWI that the
term termination should be interpreted as excluding expiration if the other provisions of
the Franchise Agreements are considered. Petitioner MWI focuses its sights on select
provisions of Section IV of the Franchise Agreements, which state that: (1) any violation
by either party of the terms and conditions of the agreements shall give the other party
the right to immediately terminate the same by giving a written notice of termination
thirty (30) days before the effectivity of the termination (Section IV-1); (2) the
agreements may also be terminated by respondent AVSI if petitioner MWI is not
operating its franchise to the benefit of the former and is performing any conduct
seriously prejudicial to the interest of respondent AVSI (Section IV-2); and the
agreements shall be automatically terminated in case petitioner MWI ceases operations
and/or becomes insolvent, bankrupt, or undergoes receivership (Section IV-3).

Under the interpretation of petitioner MWI, the aforesaid provisions of Section IV of the
Franchise Agreements supposedly reveal that termination only has three grounds
(which do not include expiration of the agreements), namely: (1) violation of the terms
and conditions of the agreements; (2) conduct seriously prejudicial to the interest of
respondent AVSI; and (3) cessation of operations, insolvency, bankruptcy, and
receivership on the part of petitioner MWI.

The Court does not agree with such an interpretation. There is no provision under the
Franchise Agreements which expressly limits, restricts, or confines the grounds of
termination to the three above mentioned grounds. Section IV of the Franchise
Agreements does not state that these three grounds are the only grounds for
termination, to the exclusion of expiration.
 SACLOLO v. MARQUITO
G.R. No. 229243 | June 26, 2019

DOCTRINE: An equitable mortgage, like any other mortgage, is a mere accessory

contract "constituted to secure the fulfillment of a principal obligation," i.e., the full
payment of the loan. Since the true transaction between the parties was an equitable
mortgage and not a sale with right of repurchase, there is no "redemption" or
"repurchase" to speak of and the periods provided under Article 1606 do not apply.
Instead, the prescriptive period under Article 1144 of the Civil Code is applicable. In
other words, the parties had 10 years from the time the cause of action accrued to file
the appropriate action.

FACTS: Petitioners claimed that they each obtained a loan of ₱3,500.00 from Felipe
Marquito, the father of respondents, with the petitioners’ land as collateral. On said
date, respondents' father began occupying the land. Petitioner Ogatia again borrowed
an additional ₱6,000.00, and again used her aliquot share of the land as collateral for
the loan. Thereafter, petitioner Saclolo also borrowed an additional amount of
₱10,000.00 from respondents, using her aliquot share of the land as collateral.

Petitioners then verbally informed respondents of their intention to "redeem" the

property, and a written offer to redeem the property was made. Respondents, however,
refused. Thus, petitioners were constrained to file a Complaint for redemption of
mortgaged properties, specific performance with damages before the RTC.

Respondents, on the other hand, alleged that in 1984, petitioners sold the subject
property for ₱1,000.00 under a Memorandum of Deed of Sale with Right of Repurchase.
Since then, they have been in actual possession of the property in the concept of owner
and even introduced improvements thereon. They admitted that since 1984, petitioners,
on numerous occasions, borrowed money from them but explained that they extended
said loans on the understanding that petitioners would execute a deed of absolute sale
in their favor.

After trial, the RTC found that the true transaction between the parties was one of
equitable mortgage. However, it held that the period for the redemption of the property
had lapsed as it was filed beyond the four-year period under Article 1606 of the Civil
Code. Thus, it dismissed the complaint.

ISSUE: Whether the action has prescribed.

RULING: NO. In the instant case, the RTC and CA both held that the subject
Memorandum of Deed of Sale with Right of Repurchase, while purporting to be a sale
with right to repurchase, was, in fact, an equitable mortgage. Factual findings of the
lower court, more so when supported by the evidence, as in this case, command not
only respect but even finality and are binding on the Court.

Thus, the only issue for resolution before the Court is whether petitioners' action to
"redeem" the subject property has prescribed. Both the RTC and the CA held that while
the true transaction was one of equitable mortgage under Articles 1602 and 1603 of the
Civil Code, petitioners could no longer "repurchase" or "redeem" the subject property as
the period for redemption under Article 1606 of the Civil Code has lapsed. This is
erroneous.

An equitable mortgage, like any other mortgage, is a mere accessory contract

"constituted to secure the fulfillment of a principal obligation," i.e., the full payment of
the loan. Since the true transaction between the parties was an equitable mortgage and
not a sale with right of repurchase, there is no "redemption" or "repurchase" to speak
of and the periods provided under Article 1606 do not apply. Instead, the prescriptive
period under Article 1144 of the Civil Code is applicable. In other words, the parties had
10 years from the time the cause of action accrued to file the appropriate action.

The release of additional loans on the basis of the same security, coupled with the fact
that respondents never filed an action to consolidate ownership over the subject
property under Article 1607, evidently shows that for 19 years, respondents expressly
recognized: 1) that petitioners continued to own the subject property and 2) that the
loan and equitable mortgage subsisted. Thus, petitioners' cause of action to recover the
subject property can be said to have accrued only in 2004, that is, when respondents
rejected petitioners' offers to pay and extinguish the loan and to recover the mortgaged
property as it was only at this time that respondents manifested their intention not to
comply with the true agreement of the parties. Undoubtedly, the filing of the complaint
in 2005 was made well-within the 10-year prescriptive period. Such treatment is more
in keeping with the principle that:

The provisions of the Civil Code governing equitable mortgages disguised as sale
contracts, like the one herein, are primarily designed to curtail the evils brought about
by contracts of sale with right to repurchase, particularly the circumvention of the usury
law and pactum commissorium. Courts have taken judicial notice of the well-known fact
that contracts of sale with right to repurchase have been frequently resorted to in order
to conceal the true nature of a contract, that is, a loan secured by a mortgage. It is a
reality that grave financial distress renders persons hard-pressed to meet even their
basic needs or to respond to an emergency, leaving no choice to them but to sign
deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain
the much-needed loan from unscrupulous money lenders.

Respondents, for their part, are not without remedy. They are entitled to collect the
outstanding amount of petitioners' loan, plus interest, and to foreclose on the subject
property should the latter fail to pay the same. To allow respondents to appropriate the
subject lot without prior foreclosure would produce the same effect as a pactum
comissorium. Upon full satisfaction of the debt, the mortgage, being a security contract,
shall be extinguished and the property should be returned to herein petitioners.