CASES OF JUSTICE PERLAS-

BERNABE
CIVIL LAW
 CIVIL LAW
I. GENERAL PRINCIPLES
A. Effect and application of laws
B. Conflict of laws (Private International Law)
C. Human relations (Articles 19-22)

II. PERSONS AND FAMILY RELATIONS

A. Persons
1. Civil personality
2. Use of surnames
3. Entries in the Civil Registry and Clerical Error Law (RA 9048, as amended)
4. Absence
a. Civil code provisions
b. Presumptive death of absent spouse under the Family Code

REPUBLIC OF PHILIPPINES –versus- NILDA B. TAMPUS

GR No. 214243, FIRST DIVISION, March 16, 2016, PERLAS-BERNABE, J.

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

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

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

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

Both RTC and CA ruled in favor of Nilda.

ISSUE:
Whether the CA erred in upholding the RTC Decision declaring Dante as presumptively dead. (YES)

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

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

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

B. Marriage
1. Requisites of marriage
2. Exemption from license requirement
3. Marriages solemnized abroad and foreign divorce

LUZVIMINDA DELA CRUZ MORISONO, Petitioner, -versus- RYOJI MORISONO and LOCAL CIVIL
REGISTRAR OF QUEZON CITY, Respondents.
G.R. No. 226013, SECOND DIVISION, July 02, 2018, PERLAS-BERNABE, J.

It had been ruled in Republic vs. Manalo that foreign divorce decrees obtained to nullify marriages
between a Filipino and an alien citizen may already be recognized in this jurisdiction, regardless of
who between the spouses initiated the divorce; provided, of course, that the party petitioning for the
recognition of such foreign divorce decree – presumably the Filipino citizen – must prove the divorce
as a fact and demonstrate its conformity to the foreign law allowing it.
In this case, a plain reading of the RTC ruling shows that the denial of Luzviminda's petition to have
her foreign divorce decree recognized in this jurisdiction was anchored on the sole ground that she
admittedly initiated the divorce proceedings which she, as a Filipino citizen, was not allowed to do. In
light of the doctrine laid down in Manalo, such ground relied upon by the RTC had been rendered
nugatory.

FACTS:

Luzviminda was married to Ryoji Morisono in Quezon City on December 8, 2009. Thereafter, they
lived together in Japan for 1 year and 3 months but were not blessed with a child. During their
married life, they would quarrel mainly due to Ryoji’s philandering ways, in addition to the fact that
he was much older than Luzviminda.

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As such, the two of them submitted a “Divorce by Agreement” before the City Hall of Mizuho-ku in
Nagoya, Japan, which was approved and duly recorded. In view of this, Luzviminda filed a petition
for recognition of foreign divorce decree obtained by her and Ryoji before the RTC so that she could
cancel the surname of her husband and be able to marry again.

The RTC denied Luzviminda’s petition, holding that while a divorce decree held that while a divorce
obtained abroad by an alien spouse may be recognized in the Philippines – provided that such
decree is valid according to the national law of the alien – the same does not find application when
it was the Filipino spouse, i.e., petitioner, who procured the same. Invoking the nationality principle
provided under Article 15 of the Civil Code, in relation to Article 26 (2) of the Family Code, the RTC
opined that since petitioner is a Filipino citizen whose national laws do not allow divorce, the
foreign divorce decree she herself obtained in Japan is not binding in the Philippines.

ISSUE:

Whether the RTC correctly deny Luzviminda’s petition for recognition of divorce decree she
procured. (NO)

RULING:

It had been ruled in Republic vs. Manalo that foreign divorce decrees obtained to nullify marriages
between a Filipino and an alien citizen may already be recognized in this jurisdiction, regardless of
who between the spouses initiated the divorce; provided, of course, that the party petitioning for
the recognition of such foreign divorce decree – presumably the Filipino citizen – must prove the
divorce as a fact and demonstrate its conformity to the foreign law allowing it.
In this case, a plain reading of the RTC ruling shows that the denial of Luzviminda's petition to have
her foreign divorce decree recognized in this jurisdiction was anchored on the sole ground that she
admittedly initiated the divorce proceedings which she, as a Filipino citizen, was not allowed to do.
In light of the doctrine laid down in Manalo, such ground relied upon by the RTC had been rendered
nugatory. However, the Court cannot just order the grant of Luzviminda's petition for recognition of
the foreign divorce decree, as Luzviminda has yet to prove the fact of her "Divorce by Agreement"
obtained in Nagoya City, Japan and its conformity with prevailing Japanese laws on divorce.
Notably, the RTC did not rule on such issues. Since these are questions which require an
examination of various factual matters, a remand to the court a quo is warranted.

4. Void and voidable marriages

REPUBLIC OF PHILIPPINES –versus- REGHIS M. ROMERO II

GR No. 209180, FIRST DIVISION, February 24, 2016, PERLAS-BERNABE, J.

It has consistently been held that psychological incapacity, as a ground to nullify a marriage under
Article 36 of the Family Code, should refer to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage.

In this case, the requirements for psychological incapacity do not concur. Reghis’ testimony shows that
he was able to comply with his marital obligations which, therefore, negates the existence of a grave

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and serious psychological incapacity on his part.

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

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

ISSUE:
Whether the marriage should be declared null and void on the ground of psychological incapacity.
(NO)

RULING:
It has consistently been held that psychological incapacity, as a ground to nullify a marriage under
Article 36 of the Family Code, should refer to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage.

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

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

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RACHEL A. DEL ROSARIO, Petitioner, -versus- JOSE O. DEL ROSARIO and COURT OF APPEALS,
Respondents.
G.R. No. 222541, FIRST DIVISION, February 15, 2017, PERLAS-BERNABE, J.

Following the case of Republic v. Molina, the totality of evidence must show that psychological
incapacity exists and its gravity, juridical antecedence, and incurability must be duly established.

It should be pointed out that Dr. Tayag's Report does not explain in detail how Jose's APD [Antisocial
Personality Disorder] could be characterized as grave, deeply rooted in his childhood, and incurable
within the jurisprudential parameters for establishing psychological incapacity. Particularly, the
Report did not discuss the concept of APD which Jose allegedly suffers from, i.e., its classification, cause,
symptoms, and cure, or show how and to what extent Jose exhibited this disorder or how and to what
extent his alleged actions and behavior correlate with his APD, sufficiently clear to conclude that Jose's
condition has no definite treatment, making it incurable within the law's conception. Neither did the
Report specify the reasons why and to what extent Jose's APD is serious and grave, and how it
incapacitated him to understand and comply with his marital obligations. Lastly, the Report hastily
concluded that Jose had a "deprived childhood" and "poor home condition" that automatically resulted
in his APD equivalent to psychological incapacity without, however, specifically identifying the history
of Jose's condition antedating the marriage, i.e., specific behavior or habits during his adolescent years
that could explain his behavior during the marriage.

Psychological incapacity must be more than just a "difficulty," "refusal" or "neglect" in the
performance of the marital obligations; it is not enough that a party prove that the other failed to
meet the responsibility and duty of a married person. There must be proof of a natal or supervening
disabling factor in the person - an adverse integral element in the personality structure that effectively
incapacitates the person from really accepting and thereby complying with the obligations essential to
marriage - which must be linked with the manifestations of the psychological incapacity.

FACTS:

Rachel worked as a domestic helper in Hong Kong to provide for the needs of Juan, the love of her
life. Eventually, the couple got married and settled in a house they acquired. The married life ran
smoothly up until Rachel filed a petition for declaration of nullity of marriage.

Her petition was anchored on the ground that Jose was psychologically incapacitated to fulfill his
essential marital obligations. She alleged that Jose was a violent man who used to physically abuse
her. She added that Jose was a drunkard and always had sexual relations with different women
aside from Rachel.

Rachel presented the testimony of Dr. Tayag who prepared the psychological report stating that
Jose suffered from Antisocial Personality Disorder (APD) characterized by: (a) his lack of empathy
and concern for Rachel; (b) his irresponsibility and his pleasure-seeking attitude that catered only
to his own fancies and comfort; (c) his selfishness marked by his lack of depth when it comes to his
marital commitments; and (d) his lack of remorse for his shortcomings.

The RTC declared the marriage between Jose and Rachel void on the ground of psychological
incapacity. It relied on the findings and testimony of Dr. Tayag, declaring that Jose's APD interferes

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with his capacity to perform his marital and paternal duties, as he in fact even refused to take
responsibility for his actions, notwithstanding the overwhelming evidence against him.

ISSUE:

Whether respondent is psychologically incapacitated. (NO)

RULING:

For psychological incapacity to exist, it should refer to no less than a mental and not merely
physical incapacity that causes a party to be truly incognitive of the basic marital covenants as
provided for under Article 68 of the Family Code. In other words, it must be a malady that is so
grave and permanent as to deprive one of awareness of the duties and responsibilities of the
matrimonial bond one is about to assume.
Following the case of Republic v. Molina, the totality of evidence must show that psychological
incapacity exists and its gravity, juridical antecedence, and incurability must be duly established.
It should be pointed out that Dr. Tayag's Report does not explain in detail how Jose's APD could be
characterized as grave, deeply rooted in his childhood, and incurable within the jurisprudential
parameters for establishing psychological incapacity. Particularly, the Report did not discuss the
concept of APD which Jose allegedly suffers from, i.e., its classification, cause, symptoms, and cure,
or show how and to what extent Jose exhibited this disorder or how and to what extent his alleged
actions and behavior correlate with his APD, sufficiently clear to conclude that Jose's condition has
no definite treatment, making it incurable within the law's conception. Neither did the Report
specify the reasons why and to what extent Jose's APD is serious and grave, and how it
incapacitated him to understand and comply with his marital obligations. Lastly, the Report hastily
concluded that Jose had a "deprived childhood" and "poor home condition" that automatically
resulted in his APD equivalent to psychological incapacity without, however, specifically identifying
the history of Jose's condition antedating the marriage, i.e., specific behavior or habits during his
adolescent years that could explain his behavior during the marriage.
Psychological incapacity must be more than just a "difficulty," "refusal" or "neglect" in the
performance of the marital obligations; it is not enough that a party prove that the other failed to
meet the responsibility and duty of a married person. There must be proof of a natal or supervening
disabling factor in the person - an adverse integral element in the personality structure that
effectively incapacitates the person from really accepting and thereby complying with the
obligations essential to marriage - which must be linked with the manifestations of the
psychological incapacity.
REPUBLIC OF THE PHILIPPINES, Petitioner, -versus- GINA P. TECAG, Respondent.
G.R. No. 229272, SECOND DIVISION, November 19, 2018, PERLAS-BERNABE, J.

As it may be readily observed, the courts' conclusion was mainly grounded on the expert opinion of
Prof. Sanchez whose findings are embodied in a Case Analysis Report. This report, which was borne out
of Prof. Sanchez's interviews with Gina, the latter's sister, and brother-in-law, concludes that Gina is
suffering from Anxious and Fearful Personality Disorder with traces of Dependent Personality
Disorder. Specifically, Prof. Sanchez pointed out that Gina has many apprehensions, a tendency to be
depressive, fears of abandonment and rejection, and passivity.

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However, as petitioner aptly pointed out, the said report failed to show that these traits existed prior
to Gina's marriage and that her alleged personality disorder is incurable or that the cure is beyond her
means. There was simply no discernible explanation on the juridical antecedence or incurability of
Gina's supposed condition. More significantly, the relation of such condition to Gina's inability to
perform her essential marital obligations was not sufficiently shown. To reiterate, the psychological
condition ought to pertain to personality disorders that are grave and serious such that the party
would be incapable of carrying out the ordinary duties required in a marriage. Unfortunately, the Case
Analysis Report fails to demonstrate this crucial point.
In determining the existence of psychological incapacity, a clear and understandable causation
between the party's condition and the party's inability to perform the essential marital covenants
must be shown. A psychological report that is essentially comprised of mere platitudes, however
speckled with technical jargon, would not cut the marriage tie.
FACTS:

After living together as husband and wife for two years, Gina and Marjune formalized their marital
union through civil rites. As a means of livelihood, they engaged in vegetable farming until Gina
found employment in Macau, where she likewise searched for job opportunities for Marjune.

As months passed, the communication between Gina and Marjune became less frequent until it
ceased altogether. During the rare times when Gina would call, they would only end up arguing, as
Marjune would be too drunk to talk. Thus, Gina filed a petitionto declare her marriage with Marjune
null and void on the basis of the latter's psychological incapacity. Summons was served upon
Marjune, but the latter failed to answer. Thereafter, the attending prosecutor conducted an
investigation and declared that there was no collusion between the parties.

During trial, Gina presented the findings of Professor Emma Astudillo-Sanchez (Prof. Sanchez), the
psychologist who conducted a psychological examination of the parties. She concluded that Gina
and Marjune's personality disorders "affected their behaviors even before they contracted marriage
and, in the presence of situational factors, became more evident during the time they were together
during the marriage.

ISSUE:

Whether the expert opinion of the psychologist sufficient proof of the presence of psychological
incapacity. (NO)

RULING:

Under Article 36 of the Family Code, as amended, psychological incapacity is a valid ground to
nullify a marriage. However, in deference to the State's policy on marriage, psychological incapacity
does not merely pertain to any psychological condition; otherwise, it would be fairly easy to
circumvent our laws on marriage so much so that we would be practically condoning a legal
subterfuge for divorce.
Psychological incapacity has a specific and peculiar denotation. It ought to pertain to only the most
serious cases of personality disorders that clearly demonstrate the party's/parties' utter
insensitivity or inability to give meaning and significance to the marriage. It should refer to no less
than a mental- not merely physical incapacity that causes a party to be truly incognitive of the basic

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marital covenants that concomitantly must be assumed and discharged by the parties to the
marriage, which, as provided under Article of the Family Code, among others, include their mutual
obligations to live together, observe love, respect and fidelity, and render help and support.
The requirements for proving psychological incapacity can be traced in a long line of cases.
In Santos v. CA, the SC emphasized "that psychological incapacity must be characterized by:
(a) gravity (i.e., it must be grave and serious such that the party would be incapable of carrying out
the ordinary duties required in a marriage); (b) juridical antecedence (i.e., it must be rooted in the
history of the party antedating the marriage, although the overt manifestations may emerge only
after the marriage); and (c) incurability (i.e., it must be incurable, or even if it were otherwise, the
cure would be beyond the means of the party involved)."

As it may be readily observed, the courts' conclusion was mainly grounded on the expert opinion of
Prof. Sanchez whose findings are embodied in a Case Analysis Report. This report, which was borne
out of Prof. Sanchez's interviews with Gina, the latter's sister, and brother-in-law, concludes that
Gina is suffering from Anxious and Fearful Personality Disorder with traces of Dependent
Personality Disorder. Specifically, Prof. Sanchez pointed out that Gina has many apprehensions, a
tendency to be depressive, fears of abandonment and rejection, and passivity.
However, as petitioner aptly pointed out, the said report failed to show that these traits existed
prior to Gina's marriage and that her alleged personality disorder is incurable or that the cure is
beyond her means. There was simply no discernible explanation on the juridical antecedence or
incurability of Gina's supposed condition. More significantly, the relation of such condition to Gina's
inability to perform her essential marital obligations was not sufficiently shown. To reiterate, the
psychological condition ought to pertain to personality disorders that are grave and serious such
that the party would be incapable of carrying out the ordinary duties required in a marriage.
Unfortunately, the Case Analysis Report fails to demonstrate this crucial point.
In determining the existence of psychological incapacity, a clear and understandable causation
between the party's condition and the party's inability to perform the essential marital covenants
must be shown. A psychological report that is essentially comprised of mere platitudes, however
speckled with technical jargon, would not cut the marriage tie.

C. Legal separation
D. Rights and obligations between husband and wife
E. Property relations between husband and wife
1. General provisions
2. Donations by reason of marriage
3. Absolute Community of Property
4. Conjugal Partnership of Gains

WILLEM BEUMER v AVELINA AMORES

G.R. No. 195670. SECOND DIVISION. December 3, 2012. PERLAS-BERNABE, J.

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

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In any event, the Court cannot, even on the grounds of equity, grant reimbursement to petitioner given
that he acquired no right whatsoever over the subject properties by virtue of its unconstitutional
purchase. It is well-established that equity as a rule will follow the law and will not permit that
to be done indirectly which, because of public policy, cannot be done directly. Surely, a contract
that violates the Constitution and the law is null and void, vests no rights, creates no obligations
and produces no legal effect at all.

FACTS:

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

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

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

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

ISSUE:

Whether or not the petitioner is entitled to reimbursement. (NO)

RULING:

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

In any event, the Court cannot, even on the grounds of equity, grant reimbursement to petitioner
given that he acquired no right whatsoever over the subject properties by virtue of its
unconstitutional purchase. It is well-established that equity as a rule will follow the law and
will not permit that to be done indirectly which, because of public policy, cannot be done
directly. Surely, a contract that violates the Constitution and the law is null and void, vests no
rights, creates no obligations and produces no legal effect at all.

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Corollary thereto, under Article 1412 of the Civil Code, petitioner cannot have the subject
properties deeded to him or allow him to recover the money he had spent for the purchase
thereof. The law will not aid either party to an illegal contract or agreement; it leaves the parties
where it finds them. Indeed, one cannot salvage any rights from an unconstitutional transaction
knowingly entered into.

BOBBY TAN v GRACE ANDRADE

G.R. No. 171904. SECOND DIVISION. August 7, 2013. PERLAS-BERNABE, J.

Article 126 of The Family Code provides that one cause for the termination of the conjugal
partnership is upon the death of either spouse. Vda. Rosario was already a widow when she sold
the subjected lands to Bobby Tan. Therefore, at the time of the sale, Vda. Rosario, a widow, can now
dispose the properties on her own volition.

FACTS:

Vda. Rosario is the registered owner of four parcels of land in Cebu City, which she mortgaged to
and subsequently foreclosed by Simon Dy. When it the redemption period was about to expire, she
asked for the assistance of Bobby Tan who agreed to redeem the properties. Thereafter, she sold
the lands to Bobby and his son Proceso, Jr. for P100,000.00 as evidence by a Deed of Absolute Sale.

Proceso, Jr. executed a Deed of Assignment ceding to Bobby his rights and interest over the
properties for P50,000.00. However, Bobby extended an option to buy the subject properties in
favor of Proceso, Jr., giving him a period where he can purchase the same for P310,000.00. When
Proceso, Jr. failed to do so, Bobby consolidated his ownership over the properties.

The children of Vda. Rosario filed a complaint for reconveyance and annulment of deeds of
conveyance and damages against Bobby before the RTC; alleging that the transaction between them
was actually an equitable mortgage entered into to secure Vda. Rosario’s indebtedness to Bobby,
and not one of a sale. Bobby contended otherwise. He contended that the properties were solely
owned by Vda. Rosario and that he acquired them when Proceso, Jr. failed to exercise his option to
buy back the subjected properties.

RTC ruled that the transaction was a bona fide sale. On appeal, CA affirmed RTC’s finding that the
transaction was a bona fide sale. However, they ruled that by virtue of conjugal partnership, the
children of Vda. Rosario are her co-owners of the subjected lands. CA ordered Bobby to
reconvey to the children (Andrades) their share in the subject properties.

ISSUE:

Whether or not the properties are conjugal in nature, thus making the children of Vda. Rosario co-
owners of them. (NO)

RULING:

Article 126 of The Family Code provides that one cause for the termination of the conjugal
partnership is upon the death of either spouse. Vda. Rosario was already a widow when she

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sold the subjected lands to Bobby Tan. Therefore, at the time of the sale, Vda. Rosario, a widow, can
now dispose the properties on her own volition.

ERLINDA DINGLASAN DELOS SANTOS and HER DAUGHTERS, NAMELY, VIRGINIA, AUREA, and
BINGBING, ALL SURNAMED DELOS SANTOS, Petitioners, -versus- ALBERTO ABEJON and THE
ESTATE OF TERESITA DINGLASAN ABEJON, Respondents.
G.R. No. 215820, FIRST DIVISION, March 20, 2017, PERLAS-BERNABE, J.

It must be pointed out that such loan was contracted by Erlinda, who is only one out of the four herein
petitioners, and her deceased husband, Pedro, during the latter's lifetime and while their marriage
was still subsisting. As they were married before the effectivity of the Family Code of the
Philippines and absent any showing of any pre-nuptial agreement between Erlinda and Pedro, it is safe
to conclude that their property relations were governed by the system of conjugal partnership of gains.
Hence, pursuant to Article 121 of the Family Code, the ₱l00,000 loan obligation, including interest, if
any, is chargeable to Erlinda and Pedro's conjugal partnership as it was a debt contracted by the both
of them during their marriage; and should the conjugal partnership be insufficient to cover the same,
then Erlinda and Pedro (more particularly, his estate as he is already deceased) shall be solidarily
liable for the unpaid balance with their separate properties.

FACTS:

The instant case arose from a Complaint for Cancellation of Title with collection of sum of
money filed by respondents against petitioners. The complaint alleged that petitioner Erlinda and
her late husband Pedro Delos Santos (Pedro) borrowed the amount of ₱l00,000 from the former's
sister, Teresita, as evidenced by a Promissory Note. As security for the loan, Erlinda and Pedro
mortgaged their property covered by a TCT (subject land) which mortgage was annotated on the
title. After Pedro died, Erlinda ended up being unable to pay the loan, and as such, agreed to sell the
subject land to Teresita for ₱l50,000, or for the amount of the loan plus an additional ₱50,000. They
executed a Deed of Sale and a Release of Mortgage, and eventually, the TCT was cancelled and a new
TCT was issued in the name of Teresita. Thereafter, respondents constructed a three-storey
building worth ₱2,000,000 on the subject land. Despite the foregoing, petitioners refused to
acknowledge the sale. As such, respondents demanded from petitioners the amounts of ₱l50,000
representing the consideration for the sale of the subject land and ₱2,000,000 representing the
construction cost of the three-storey building, but to no avail. Thus, respondents filed the instant
case.

During the pre-trial proceedings, the parties admitted and/or stipulated that: (a) the subject land
was previously covered by a TCT in the name of Erlinda and Pedro, but such title was cancelled and
replaced by a TCT in the name of Teresita; (b) the Deed of Sale and Release of Mortgage were
forged, and thus, should be cancelled; (c) in view of said cancellations, the subsequent should be
cancelled and the prior TCT reinstated; (d) from the time when the spurious Deed of Sale was
executed until the present, petitioners have been the actual occupants of the subject land as well as
all improvements therein, including the three-storey building constructed by respondents;
and (e) the ₱l00,000 loan still subsists and that respondents paid for the improvements being
currently occupied by petitioners.

ISSUE:

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Whether petitioners should be held liable to respondents in the aggregate amount of ₱2,200,000,
consisting of the loan obligation of ₱l00,000, the construction cost of the three storey building in the
amount of ₱2,000,000, and attorney's fees and costs of suit amounting to ₱l00,000. (NO)

RULING:

In view of the foregoing admissions and/or stipulations, there is now a need to properly determine
to whom the following liabilities should devolve: (a) the ₱l00,000 loan obligation; (b) the ₱50,000
extra consideration Teresita paid for the sale of the subject land, which was already declared void
and (c) the ₱2,000,000 construction cost of the three-storey building that was built on the subject
land.
It must be pointed out that such loan was contracted by Erlinda, who is only one out of the four
herein petitioners, and her deceased husband, Pedro, during the latter's lifetime and while their
marriage was still subsisting. As they were married before the effectivity of the Family Code of the
Philippines and absent any showing of any pre-nuptial agreement between Erlinda and Pedro, it is
safe to conclude that their property relations were governed by the system of conjugal partnership
of gains. Hence, pursuant to Article 121 of the Family Code, the ₱l00,000 loan obligation, including
interest, if any, is chargeable to Erlinda and Pedro's conjugal partnership as it was a debt contracted
by the both of them during their marriage; and should the conjugal partnership be insufficient to
cover the same, then Erlinda and Pedro (more particularly, his estate as he is already deceased)
shall be solidarily liable for the unpaid balance with their separate properties.

5. Separation of property and administration of common property by one

spouse during the marriage
6. Regime of separation of property
7. Property regime of unions without marriage
F. Family home
G. Paternity and filiation
1. Legitimate children
2. Proof of filiation
3. Illegitimate children
4. Legitimated children
H. Adoption
1. Domestic adoption (RA 8552)
a. Who may adopt
b. Who may be adopted
c. Rights of an adopted child
d. Instances and effects of rescission
2. Inter-country adoption (RA 8043, as amended)
a. When allowed
b. Who may adopt
c. Who may be adopted

I. Support
J. Parental authority

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RENALYN A. MASBATE and SPOUSES RENATO MASBATE AND MARLYN MASBATE, Petitioners,
-versus- RICKY JAMES RELUCIO, Respondent.
G.R. No. 235498, SECOND DIVISION, July 30, 2018, PERLAS-BERNABE, J.

Indeed, it may be argued that Article 176 of the Family Code has effectively disqualified the father of
an illegitimate child from exercising substitute parental authority under Article 216 even if he were
the actual custodian of the child under the premise that no one is allowed to do indirectly what he is
prohibited to do directly. However, the Court cannot adopt a rigid view, without running afoul to the
overarching consideration in custody cases, which is the best interest of the minor. Even way back,
Article 363 of the Civil Code provides that in all questions relating to the care, custody, education and
property of the children, the latter's welfare is paramount. Under present rules, A.M. No. 03-04-04-SC
explicitly states that "[i]n awarding custody, the court shall consider the best interests of the minor
and shall give paramount consideration to [her] material and moral welfare. The best interests of the
minor refer to the totality of the circumstances and conditions as are most congenial to the survival,
protection, and feelings of security of the minor encouraging to [her] physical, psychological and
emotional development. It also means the least detrimental available alternative for safeguarding the
growth and development of the minor."
In light of the foregoing, the Court finds that Queenie's best interest demands that a proper trial be
conducted to determine if she had, indeed, been neglected and abandoned by her mother, rendering
the latter unfit to exercise parental authority over her, and in the event that Renalyn is found
unsuitable, whether it is in Queenie's best interest that she be in the custody of her father rather than
her grandparents upon whom the law accords a far superior right to exercise substitute parental
authority. In the case of Bagtas v. Santos, which was a tug-of-war between the maternal grandparents
of the illegitimate minor child and the actual custodians of the latter, the Court faulted the trial court
for hastily dismissing the petition for habeas corpus and awarding the custody of the minor to the
grandparents without conducting any trial. The import of such decision is that the preference
accorded by Article 216 of the Family Code does not automatically attach to the grandparents, and is
conditioned upon the determination of their fitness to take care of their grandchild. In ruling as it did,
the Court ratiocinated that the child's welfare being the most important consideration, it is not
bound by any legal right of a person over the child.

FACTS:

Queenie was born in 2012 to Renalyn and Ricky James, who had been living together with
Renalyn's parents without the benefit of marriage. Three years later, the relationship ended.
Renalyn went to Manila, supposedly leaving Queenie behind in the care and custody of her father,
Ricky James.

Ricky James alleged that on November 7, 2015, Spouses Renata and Marlyn Masbate (Renalyn's
parents) took Queenie from the school where he had enrolled her. When asked to give Queenie
back, Renalyn's parents refused and instead showed a copy of a Special Power of Attorney (SPA)
executed by Renalyn granting full parental rights, authority, and custody over Queenie to them.
Consequently, Ricky James filed a petition for habeas corpus and child custody before the RTC
(petition a quo).

The RTC ruled that the custody of three-year-old Queenie rightfully belongs to Renalyn, citing the
second paragraph of Article 213 of the Family Code, which states that "[n]o child under seven [(7)]
years of age shall be separated from the mother x x x."

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The CA however set aside the assailed RTC Orders and remanded the case to the lower court for
determination of who should exercise custody over Queenie. The CA found that the RTC hastily
dismissed the petition a quo upon Queenie's production in court, when the objective of the case was
to establish the allegation that Renalyn had been neglecting Queenie, which was a question of fact
that must be resolved by trial. Citing Section 18 of A.M. No. 03-04-04-SC, which states that, "[a]fter
trial, the court shall render judgment awarding the custody of the minor to the proper party
considering the best interests of the minor," the CA declared that the dismissal by the RTC of the
petition a quo was not supported by the Rules.

ISSUE:

Whether the CA correctly remanded the case a quo for determination of who should exercise
custody over Queenie. (YES)

RULING:

It was not disputed that Ricky James was in actual physical custody of Queenie when Renalyn left
for Manila to pursue her studies until the instant controversy took place. As such, Ricky James had
already assumed obligations and enjoyed privileges of a custodial character, giving him a cause of
action to file a case of habeas corpus to regain custody of Queenie as her actual custodian.
Indeed, it may be argued that Article 176 of the Family Code has effectively disqualified the father
of an illegitimate child from exercising substitute parental authority under Article 216 even if he
were the actual custodian of the child under the premise that no one is allowed to do indirectly
what he is prohibited to do directly. However, the Court cannot adopt a rigid view, without running
afoul to the overarching consideration in custody cases, which is the best interest of the minor.
Even way back, Article 363 of the Civil Code provides that in all questions relating to the care,
custody, education and property of the children, the latter's welfare is paramount. Under present
rules, A.M. No. 03-04-04-SC explicitly states that "[i]n awarding custody, the court shall consider the
best interests of the minor and shall give paramount consideration to [her] material and moral
welfare. The best interests of the minor refer to the totality of the circumstances and conditions as
are most congenial to the survival, protection, and feelings of security of the minor encouraging to
[her] physical, psychological and emotional development. It also means the least detrimental
available alternative for safeguarding the growth and development of the minor."
In light of the foregoing, the Court finds that Queenie's best interest demands that a proper trial be
conducted to determine if she had, indeed, been neglected and abandoned by her mother, rendering
the latter unfit to exercise parental authority over her, and in the event that Renalyn is found
unsuitable, whether it is in Queenie's best interest that she be in the custody of her father rather
than her grandparents upon whom the law accords a far superior right to exercise substitute
parental authority. In the case of Bagtas v. Santos, which was a tug-of-war between the maternal
grandparents of the illegitimate minor child and the actual custodians of the latter, the Court faulted
the trial court for hastily dismissing the petition for habeas corpus and awarding the custody of the
minor to the grandparents without conducting any trial. The import of such decision is that the
preference accorded by Article 216 of the Family Code does not automatically attach to the
grandparents, and is conditioned upon the determination of their fitness to take care of their
grandchild. In ruling as it did, the Court ratiocinated that the child's welfare being the most

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important consideration, it is not bound by any legal right of a person over the child.
Reiterating its pronouncement in the early case of Sombong v. CA, the Court held that
[I]n passing on the writ in a child custody case, the court deals with a matter of an equitable
nature. Not bound by any mere legal right of parent or guardian, the court gives his or her
claim to the custody of the child due weight as a claim founded on human nature and
considered generally equitable and just Therefore, these cases are decided, not on the legal
right of the petitioner to be relieved from unlawful imprisonment or detention, as in the
case of adults, but on the court's view of the best interests of those whose welfare requires
that they be in custody of one person or another. Hence, the court is not bound to deliver a
child into the custody of any claimant or of any person, but should, in the consideration of
the facts, leave it in such custody as its welfare at the time appears to require. In short, the
child's welfare is the supreme consideration.
Considering that the child's welfare is an all-important factor in custody cases, the Child and
Youth Welfare Code unequivocally provides that in all questions regarding the care and
custody, among others, of the child, his welfare shall be the paramount consideration. In the
same vein, the Family Code authorizes the courts to, if the welfare of the child so demands,
deprive the parents concerned of parental authority over the child or adopt such measures
as may be proper under the circumstances.
The Court cannot close its eyes to the sad reality that not all fathers, especially those who
have sired children out of wedlock, have risen to the full height of a parent's responsibility towards
his offspring. Yet, here is a father of an illegitimate child who is very much willing to take on the
whole gamut of parenting. He, thus, deserves, at the very least, to be given his day in court to prove
that he is entitled to regain custody of his daughter. As such, the CA's order to remand the case is
proper.

K. Emancipation
L. Retroactivity of the Family Code

III. PROPERTY
A. Classification of property
B. Ownership
1. In general
2. Rules on accession

HEIRS OF FRANCISCO I. NARVASA, SR., ANDHEIRS OF PETRA IMBORNAL AND PEDRO

FERRER,REPRESENTED BY THEIR ATTORNEY-IN-FACT, MRS. REMEDIOS B. NARVASA-
REGACHO, PETITIONERS, VS. EMILIANA, VICTORIANO, FELIPE, MATEO, RAYMUNDO,
MARIA,AND EDUARDO, ALL SURNAMED IMBORNAL, RESPONDENTS.
G.R. No. 182908, August 6, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

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FACTS:

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

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

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

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which was, however denied by the CA in a Resolution dated May 7, 2008, hence, this petition taken
by the latter’s heirs as their successors-in-interest.

ISSUE:

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

RULING:

No. The main thrust of Francisco, et al.’s Amended Complaint is that an implied trust had arisen
between the Imbornal sisters, on the one hand, and Ciriaco, on the other, with respect to the
Motherland.

A homestead patent award requires proof that the applicant meets the stringent conditions set
forth under Commonwealth Act No. 141, as amended, which includes actual possession, cultivation,
and improvement of the homestead. It must be presumed, therefore, that Ciriaco underwent the
rigid process and duly satisfied the strict conditions necessary for the grant of his homestead patent
application. As such, it is highly implausible that the Motherland had been acquired and registered
by mistake or through fraud as would create an implied trust between the Imbornal sisters and
Ciriaco. Hence, when OCT No. 1462 covering the Motherland was issued in his name pursuant to
Homestead Patent No. 24991 on December 15, 1933, Ciriaco’s title to the Motherland had become
indefeasible. It bears to stress that the proceedings for land registration that led to the issuance of
Homestead Patent No. 24991 and eventually, OCT No. 1462 in Ciriaco’s name are presumptively
regular and proper, which presumption has not been overcome by the evidence presented by
Francisco, et al. Consequently, as Francisco, et al. failed to prove their ownership rights over the
Motherland, their cause of action with respect to the First Accretion and, necessarily, the Second
Accretion, must likewise fail.

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

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

Therefore, whether through accretion or, independently, through prescription, the discernible
conclusion is that Francisco et al. and/or petitioners' claim of title over the First and Second
Accretions had not been substantiated, and, as a result, said properties cannot be reconveyed in
their favor. This is especially so since on the other end of the fray lie respondents armed with a

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certificate of title in their names covering the First and Second Accretions coupled with their
possession thereof, both of which give rise to the superior credibility of their own claim.

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

3. Quieting of title
BERNADETTE S. BILAG, ERLINDA BILAG-SANTILLAN, DIXON BILAG, REYNALDO B. SUELLO,
HEIRS OF LOURDES S. BILAG, HEIRS OF LETICIA BILAG-HANAOKA, and HEIRS OF NELLIE
BILAG, Petitioners, -versus- ESTELA AY-AY, ANDRES ACOP, JR., FELICITAS AP-AP, SERGIO AP-
AP, JOHN NAPOLEON A. RAMIREZ, JR., and MA. TERESA A. RAMIREZ, Respondents.
G.R. No. 189950, FIRST DIVISION, April 24, 2017, PERLAS-BERNABE, J.

In a catena of cases, and more importantly, in PD 1271, it was expressly declared that all orders and
decisions issued by the Court of First Instance of Baguio and Benguet in connection with the
proceedings for the reopening of Civil Reservation Case No. 1, GLRO Record 211, covering lands within
the Baguio Townsite Reservation are null and void and without force and effect. While PD 1271
provides for a means to validate ownership over lands forming part of the Baguio Townsite
Reservation, it requires, among others, that a Certificate of Title be issued on such lands on or before
July 31, 1973. In this case, records reveal that the subject lands are unregistered and untitled, as
petitioners' assertion to that effect was not seriously disputed by respondents. In view of the foregoing,
it is only reasonable to conclude that the subject lands should be properly classified as lands of the
public domain as well.

FACTS:

The instant case stemmed from a Complaint dated August 12, 2004 for Quieting of Title with Prayer
for Preliminary Injunction filed by respondents Estela Ay-Ay, Andres Acop, Jr., Felicitas Ap-Ap,
Sergio Ap-Ap, John Napoleon A. Ramirez, Jr., and Ma. Teresa A. Ramirez (respondents) against
petitioners Bernadette S. Bilag, Erlinda Bilag-Santillan, Dixon Bilag, Reynaldo B. Suello, Heirs of
Lourdes S. Bilag, Heirs of Leticia Bilag-Hanaoka, and Heirs of Nellie Bilag before the RTC Br. 61,
docketed as Civil Case No. 5881-R. Essentially, respondents alleged that Iloc Bilag, petitioners'
predecessor-in-interest, sold to them separately various portions of a 159,496-square meter parcel
of land designated by the Bureau of Lands as Approved Plan No. 544367, Psu 189147 situated at
Sitio Benin, Baguio City (subject lands), and that they registered the corresponding Deeds of
Sale with the Register of Deeds of Baguio City. Respondents further alleged that they have been in
continuous possession of the said lands since 1976 when they were delivered to them and that they
have already introduced various improvements thereon. Despite the foregoing, petitioners refused
to honor the foregoing, continued to harass respondents, and even threatened to demolish their
improvements and dispossess them thereof. Hence, they filed the instant complaint to quiet their
respective titles over the subject lands and remove the cloud cast upon their ownership as a result
of petitioners' refusal to recognize the sales.

Petitioners filed a Motion to Dismiss dated November 4, 2004 on the grounds of lack of jurisdiction,
prescription/laches/estoppel, and res judicata. Anent the first ground, petitioners averred that the
subject lands are untitled, unregistered, and form part of the Baguio Townsite Reservation which
were long classified as lands of the public domain. As such, the RTC has no jurisdiction over the case

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as it is the Land Management Bureau (formerly the Bureau of Lands) which is vested with the
authority to determine issues of ownership over unregistered public lands.

In an Order dated October 10, 2005, the RTC Br. 61 ruled in petitioners' favor, and consequently,
ordered the dismissal of Civil Case No. 5881-R on the ground, among others, that it had no authority
to do so. Aggrieved, respondents appeal to the CA. In a Decision dated March 19, 2009, the CA set
aside the dismissal of Civil Case No. 5881-R, and accordingly, remanded the case to the court a
quo for trial. The CA only tackled the issues with respect to the prescription/laches/estoppel and
res judicata.

ISSUE:

Whether the CA correctly set aside the dismissal of Civil Case No. 5881-R, and accordingly,
remanded the case to the court a quo for trial. (NO)

RULING:

The CA notably omitted from its discussion the first ground relied upon by petitioners, which is lack
of jurisdiction. A review of the records shows that the subject lands form part of a 159,496-square
meter parcel of land designated by the Bureau of Lands as Approved Plan No. 544367, Psu 189147
situated at Sitio Benin, Baguio City. Such parcel of land forms part of the Baguio Townsite
Reservation, a portion of which, or 146, 428 square meters, was awarded to Iloc Bilag due to the
reopening of Civil Reservation Case No. 1, GLRO Record No. 211.
In a catena of cases, and more importantly, in PD 1271, it was expressly declared that all orders and
decisions issued by the Court of First Instance of Baguio and Benguet in connection with the
proceedings for the reopening of Civil Reservation Case No. 1, GLRO Record 211, covering lands
within the Baguio Townsite Reservation are null and void and without force and effect. While PD
1271 provides for a means to validate ownership over lands forming part of the Baguio Townsite
Reservation, it requires, among others, that a Certificate of Title be issued on such lands on or
before July 31, 1973. In this case, records reveal that the subject lands are unregistered and
untitled, as petitioners' assertion to that effect was not seriously disputed by respondents. In view
of the foregoing, it is only reasonable to conclude that the subject lands should be properly
classified as lands of the public domain as well.
Therefore, since the subject lands are untitled and unregistered public lands, then petitioners
correctly argued that it is the Director of Lands who has the authority to award their
ownership. Thus, the RTC Br. 61 correctly recognized its lack of power or authority to hear and
resolve respondents' action for quieting of title.
HEIRS OF VICTOR AMISTOSO, NAMELY: VENEZUELA A. DELA CRUZ, FLORA A. TULIO,
WILFREDO D. AMISTOSO, RUFINO D. AMISTOSO, VICENTE D. AMISTOSO, MAXIMO D.
AMISTOSO, and ZENAIDA D. AMISTOSO, Petitioners, -versus- V. ELMER T. VALLECER,
REPRESENTED BY EDGAR VALLECER, Respondent.
G.R. No. 227124, SECOND DIVISION, December 06, 2017, PERLAS-BERNABE, J.

At this point, it is apt to clarify that the CA erroneously classified Civil Case No. S-606 as an accion
reivindicatoria, or a suit which has for its object the recovery of possession of real property as owner
and that it involves recovery of ownership and possession based on the said ownership. As plaintiff in

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Civil Case No. S-606, respondent never asked that he be declared the owner of the land in question, but
only prayed that he be allowed to recover possession thereof from petitioners. As such, Civil Case No. S-
606 should have instead, been properly classified as an accion publiciana, or a plenary action to
recover the right of possession of land. Hence, while petitioners were acknowledged by the DAR as
"deemed owners" of the land in Civil Case No. S-606, such declaration was merely provisional as it was
only for the purpose of determining possession.

On the other hand, in Civil Case No. L-298, respondent asserted his ownership over the property by
virtue of his Torrens title, and alleged that petitioners' tenancy relationship actually pertains to the
portion of the adjacent land that belongs to Maria Kho Young with whom petitioners admittedly have
the tenancy relationship. Respondent also claimed that petitioners' CLT does not contain the technical
description of the property which it purportedly covers and therefore does not show that their alleged
tenancy right falls on his property. Thus, the October 17, 2003 CA Decision stemming from Civil Case
No. S-606 and petitioners' unlawful possession and claim of ownership constitute a cloud on his title
over the property. Accordingly, respondent prayed for the court to declare him as the absolute owner
of the property, and restrain and prohibit petitioners from performing and/or continuing to perform
act/s that affect his possession and enjoyment thereof as owner.
Clearly, the complaint in Civil Case No. L-298 is, as indicated herein, one for quieting of title pursuant
to Article 476 of the Civil Code.

Based on the foregoing, it is clear that the causes of action in Civil Case Nos. S-606 and L-298 are
different from each other.

FACTS:

Sometime in March 1996, respondent Elmer T. Vallecer (respondent), through his brother Dr. Jose
Benjy T. Vallecer (Benjy), filed a Complaint for recovery of possession and damages against
petitioners, docketed as Civil Case No. S-606, involving a 2,265-square meter parcel of land, located
in Labason, Zamboanga del Norte, described as Lot C-7-A and covered by Transfer Certificate of
Title No. T-44214 (TCT T-44214) and Tax Declaration No. 93-7329 under respondent's name. He
claimed that he purchased the property sometime in June 1990 after confirming with the
Department of Agrarian Reform (DAR) that the property was not tenanted. When he started making
preparations for the construction of a commercial building on the property, petitioners, with the aid
of their workers, agents, representatives, and/or employees, stopped or barred him by force,
threats, and intimidation. Despite repeated demands and explanations made by the Municipal
Agrarian Reform Officer (MARO) of the DAR during a pre-litigation conference that no landlord-
tenancy relationship ever existed between them as regards the property, petitioners continued to
refuse him from entering and enjoying possession of his property. Thus, he prayed for the court to,
among others, order petitioners, with their representatives, agents, employees, and assigns, to
vacate the property and pay damages.

On January 8, 2001, the RTC declared respondent as the absolute owner of the subject property
under his name. On appeal, the CA rendered a Decision dated October 17, 2003 in CA-G.R. CV No.
70128 (October 17, 2003 CA Decision) reversing the RTC ruling. It found that Benjy failed to show
proof of his capacity to sue on respondent's behalf and that the CLT issued by the DAR
acknowledges petitioners as "deemed owner" of the land after full payment of its value. Having
proven full compliance for the grant of title, petitioners have a right to the land which must be

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respected. This CA Decision became final and executory on November 4, 2003, and consequently, a
Writ of Execution was issued on May 9, 2005

Thereafter, or on July 18, 2012, respondent filed a Complaint for quieting of title, ownership,
possession, and damages with preliminary injunction against petitioners, docketed as Civil Case No.
L-298, subject of the present case. Asserting ownership over the property under TCT No. T-44214
and tax declarations, and citing petitioners' unlawful possession and occupation thereof despite
repeated demands to vacate, respondent claimed that: petitioners' CLT does not contain the
technical description of the property which it purportedly covers; the tenancy relationship from
which petitioners anchor their possession pertains to the portion of the adjacent land that belongs
to Maria Kho Young with whom they admittedly have the tenancy relationship; and the October 17,
2003 CA Decision involving Civil Case No. S-606, annotated on his TCT No. T-44214, constitutes a
cloud on his title.

ISSUE:

Whether Civil Civil Case No. S-606 bars the filing of Civil Case No. L-298 on the ground of res judicata.
(NO)

RULING:

In this case, a reading of the material allegations of respondent's complaint in Civil Case No. L-298
and even petitioners' admissions readily reveals that there is neither a tenancy relationship
between petitioners and respondent, nor had petitioners been the tenant of respondent's
predecessors-in-interest. In fact, respondent did not even question the validity of petitioners' CLT
nor sought for its cancellation. Rather, what respondent sought was for a declaration that the
property covered by his Torrens title is different from the property covered by petitioners' CLT in
order to quiet his title and remove all adverse claims against it. Clearly, this is not an agrarian
dispute that falls within the DARAB's jurisdiction.
In particular, in Civil Case No. S-606, respondent alleged that he purchased the property after
confirming with the DAR that it was not tenanted; that petitioners, with their workers and/or
representatives, stopped or barred him by force, threats, and intimidation from entering and
occupying the property; and that despite repeated demands and explanations made by the MARO
that no landlord-tenant relationship ever existed between them as regards the property, petitioners
continued to prohibit him from entering and enjoying possession of his property. He thus prayed
for the court to order petitioners, with their representatives, et al., to vacate the property and pay
damages.
At this point, it is apt to clarify that the CA erroneously classified Civil Case No. S-606 as an accion
reivindicatoria, or a suit which has for its object the recovery of possession of real property as
owner and that it involves recovery of ownership and possession based on the said ownership. As
plaintiff in Civil Case No. S-606, respondent never asked that he be declared the owner of the land in
question, but only prayed that he be allowed to recover possession thereof from petitioners. As
such, Civil Case No. S-606 should have instead, been properly classified as an accion publiciana, or a
plenary action to recover the right of possession of land. Hence, while petitioners were
acknowledged by the DAR as "deemed owners" of the land in Civil Case No. S-606, such declaration
was merely provisional as it was only for the purpose of determining possession. In Gabriel, Jr. v.
Crisologo, the Court thoroughly discussed the nature and purpose of an accion publiciana:

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 Also known as accion plenaria de posesion, accion publiciana is an ordinary civil proceeding
to determine the better right of possession of realty independently of title. It refers to an
ejectment suit filed after the expiration of one year from the accrual of the cause of action or
from the unlawful withholding of possession of the realty.
The objective of the plaintiffs in accion publiciana is to recover possession only, not
ownership. When parties, however, raise the issue of ownership, the court may pass upon
the issue to determine who between the parties has the right to possess the property. This
adjudication, nonetheless, is not a final and binding determination of the issue of
ownership; it is only for the purpose of resolving the issue of possession, where the issue of
ownership is inseparably linked to the issue of possession. The adjudication of the issue of
ownership, being provisional, is not a bar to an action between the same parties involving
title to the property. The adjudication, in short, is not conclusive on the issue of ownership.
On the other hand, in Civil Case No. L-298, respondent asserted his ownership over the property by
virtue of his Torrens title, and alleged that petitioners' tenancy relationship actually pertains to the
portion of the adjacent land that belongs to Maria Kho Young with whom petitioners admittedly
have the tenancy relationship. Respondent also claimed that petitioners' CLT does not contain the
technical description of the property which it purportedly covers and therefore does not show that
their alleged tenancy right falls on his property. Thus, the October 17, 2003 CA Decision stemming
from Civil Case No. S-606 and petitioners' unlawful possession and claim of ownership constitute a
cloud on his title over the property. Accordingly, respondent prayed for the court to declare him as
the absolute owner of the property, and restrain and prohibit petitioners from performing and/or
continuing to perform act/s that affect his possession and enjoyment thereof as owner.
Clearly, the complaint in Civil Case No. L-298 is, as indicated herein, one for quieting of title
pursuant to Article 476 of the Civil Code. In Green Acres Holdings, Inc. v. Cabral, the Court
discussed: Quieting of title is a common law remedy for the removal of any cloud upon, doubt, or
uncertainty affecting title to real property. Whenever there is a cloud on title to real property or any
interest in real property by reason of any instrument, record, claim, encumbrance, or proceeding
that is apparently valid or effective, but is in truth and in fact, invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud
or to quiet the title. In such action, the competent court is tasked to determine the respective rights
of the complainant and the other claimants, not only to place things in their proper places, and
make the claimant, who has no rights to said immovable, respect and not disturb the one so
entitled, but also for the benefit of both, so that whoever has the right will see every cloud of doubt
over the property dissipated, and he can thereafter fearlessly introduce any desired improvements,
as well as use, and even abuse the property.
For an action to quiet title to prosper, two indispensable requisites must concur: (1) the plaintiff or
complainant has a legal or equitable title or interest in the real property subject of the action; and
(2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on his title must be
shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.
Based on the foregoing, it is clear that the causes of action in Civil Case Nos. S-606 and L-298 are
different from each other.
Moreover, it should be pointed out that petitioners' attack on the validity of respondent's Torrens
title in Civil Case No. S-606 by claiming that their father Victor became the owner of the subject
property by virtue of the CLT issued to him in 1978 constitutes a collateral attack on said title. It is

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an attack incidental to their quest to defend their possession of the property in an accion
publiciana, not in a direct action aimed at impugning the validity of the judgment granting the title.
Time and again, it has been held that a certificate of title shall not be subject to a collateral attack
and that the issue of the validity of title can only be assailed in an action expressly instituted for
such purpose.

C. Co-ownership

NAPOLEON D. NERI et. al v HEIRS OF HADJI YUSOP UY

G.R. No. 194366. SECOND DIVISION. October 10, 2012. PERLAS-BERNABE, J.

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person
in its enjoyment, except when personal rights are involved. But the effect of the alienation or the
mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to
him in the division upon the termination of the co-ownership.

Hence, in the execution of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale in
favor of spouses Uy, all the heirs of Anunciacion should have participated. Considering that Eutropia
and Victoria were admittedly excluded and that then minors Rosa and Douglas were not properly
represented therein, the settlement was not valid and binding upon them and consequently, a total
nullity.

FACTS:

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

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

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

ISSUE:

Whether or not the sale of the subject property to spouses Uy was valid. (YES)

RULING:

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It is valid but only to the respective shares of Enrique, Napoleon, Alicia, Visminda and Rosa.

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

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or mortgage it, and even substitute another
person in its enjoyment, except when personal rights are involved. But the effect of the alienation
or the mortgage, with respect to the co-owners, shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership.

DOMINADOR M. APIQUE, -versus- EVANGELINE APIQUE FAHNENSTICH

G.R. No. 205705, FIRST DIVISION, August 05, 2015, PERLAS-BERNABE, J.

A joint account is one that is held jointly by two or more natural persons, or by two or more juridical
persons or entities. Under such setup, the depositors are joint owners or co-owners of the said account,
and their share in the deposits shall be presumed equal, unless the contrary is proved.
In this case, there is no dispute that the account opened by Evangeline and Dominador under Savings
Account No. 1189-02819-5 with EPCIB was a joint "OR" account. It is also admitted that: (a) the
account was opened for a specific purpose, i.e., to facilitate the transfer of needed funds for
Evangeline's business projects; and (b) Dominador may withdraw funds therefrom "if" there is a need
to meet Evangeline's financial obligations arising from said projects. Hence, while Dominador is a co-
owner of the subject account as far as the bank is concerned — and may, thus, validly deposit and/or
withdraw funds without the consent of his co-depositor, Evangeline — as between him and
Evangeline, his authority to withdraw, as well as the amount to be withdrawn, is circumscribed by the
purpose for which the subject account was opened.
FACTS:
Dominador and Evangeline are siblings. Evangeline left for Germany to work sometime in 1979.
Evangeline executed General and Special Powers of Attorney constituting Dominador as her
attorney-in-fact to purchase real property for her, and to manage or supervise her business affairs
in the Philippines.

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

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account.

Evangeline demanded the return of the amount withdrawn from the joint account, but to no avail.
Hence, she filed a complaint for sum of money, damages, and attorney's fees, with prayer for
preliminary mandatory and prohibitory injunction and temporary restraining order (TRO) against
Dominador before the RTC, docketed as Civil Case No. 29,122-02, impleading EPCIB as a party
defendant.
In his answer, Dominador asserted, among others, that he was authorized to withdraw funds from
the subject account to answer for the expenses of Evangeline's projects, considering: (a) that it was
a joint account, and (b) the general and special powers of attorney executed by Evangeline in his
favor. By way of counterclaim, he sought payment of moral and exemplary damages, attorney's fees,
litigation expenses, and costs of suit. EPCIB, for its part, denied having violated its own banking
rules and regulations, contending that the account in question was an "OR" account such that any of
the account holders may transact without the signature of the other. It also pointed out that "no
passbook" transactions were allowed if the following could be verified, namely: (a) technicalities of
documents, (b) identity of payee, (c) authenticity of signature/s, and (d) sufficiency of funds.
RTC ruled in favor of Dominador, however, CA reversed. Hence, this petition.
ISSUE:
Whether Evangeline is entitled to the return of the amount of P980,000.00 Dominador withdrew
from their joint savings account with EPCIB, plus legal interest thereon. (YES)
RULING:
A joint account is one that is held jointly by two or more natural persons, or by two or more
juridical persons or entities. Under such setup, the depositors are joint owners or co-owners of the
said account, and their share in the deposits shall be presumed equal, unless the contrary is proved,
pursuant to Article 485 of the Civil Code, which provides:
Art. 485. The share of the co-owners, in the benefits as well as in the charges, shall be proportional
to their respective interests. Any stipulation in a contract to the contrary shall be void.
The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless the
contrary is proved. (Emphasis supplied)
The common banking practice is that regardless of who puts the money into the account, each of
the named account holder has an undivided right to the entire balance, and any of them may
deposit and/or withdraw, partially or wholly, the funds without the need or consent of the other,
during their lifetime. Nevertheless, as between the account holders, their right against each other
may depend on what they have agreed upon, and the purpose for which the account was opened
and how it will be operated.
In this case, there is no dispute that the account opened by Evangeline and Dominador under
Savings Account No. 1189-02819-5 with EPCIB was a joint "OR" account. It is also admitted that: (a)
the account was opened for a specific purpose, i.e., to facilitate the transfer of needed funds for
Evangeline's business projects;37 and (b) Dominador may withdraw funds therefrom "if"38 there is

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a need to meet Evangeline's financial obligations arising from said projects.39 Hence, while
Dominador is a co-owner of the subject account as far as the bank is concerned — and may, thus,
validly deposit and/or withdraw funds without the consent of his co-depositor, Evangeline — as
between him and Evangeline, his authority to withdraw, as well as the amount to be withdrawn, is
circumscribed by the purpose for which the subject account was opened.
Under the foregoing circumstances, Dominador's right to obtain funds from the subject account
was, thus, conditioned on the necessity of funds for Evangeline's projects. Admittedly, at the time he
withdrew the amount of P980,000.00 from the subject account, there was no project being
undertaken for Evangeline. Moreover, his claim that the said amount belonged to him, as part of the
compensation promised by Holgar for his services as administrator of the business affairs of
Evangeline, was correctly rejected by the CA, considering the dearth of competent evidence
showing that Holgar: (a) undertook to pay Dominador the amount of P1,000,000.00 for his services
as administrator of Evangeline's various projects; and (b) remitted such amount to the subject
account for the benefit of Dominador. Having failed to justify his right over the amount withdrawn,
Dominador is liable for its return, as correctly adjudged by the CA.
NORMA C. MAGSANO, et. al. –versus- PANGASINAN SAVINGS & LOAN BANK
GR No. 215038, FIRST DIVISION, October 17, 2016, PERLAS-BERNABE, J.

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

In this case, the validity of the Mortgage in favor of PSLD should be limited only to the Susana’s
portion. At the time the Mortgage was constituted, Roque was already deceased. Upon Roque’s death,
the conjugal partnership between him and Susana was dissolved. Thus, an implied co-ownership arose
among Susana and the other heirs of Roque with respect to his share in the assets of the conjugal
partnership pending liquidation

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

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

ISSUE:
1. Whether or not the Real Estate Mortgage was void. (NO)
2. Whether or not Sps. Manuel were purchasers in good faith. (NO)

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

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

2. No. While the rule is that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go
beyond the certificate to determine the condition of the property, where the land sold is in the
possession of a person other than the vendor, as in this case, the purchaser must go beyond the
certificate of title and make inquiries concerning the actual possessor.
Here, petitioners were in possession of the subject property when Sps. Manuel bought the same.
There is no showing that Sps. Manuel inspected the property and inquired into the nature of
petitioners' possession and/or the extent of their possessory rights as a measure of precaution.

D. Possession
1. Kinds of possession

SPOUSES JANET URI FAHRENBACH and DIRK FAHRENBACH, Petitioners, -versus- JOSEFINA R.
PANGILINAN, Respondent.
G.R. No. 224549, FIRST DIVISION, August 07, 2017, PERLAS-BERNABE, J.

In this case, respondent had sufficiently proven her prior possession de facto of the subject lot. Records
disclose that respondent occasionally visited the subject lot since she acquired the same from Abid in
September 1995. She even paid the lot's realty taxes, as well as requested for a survey authority
thereon. In fact, she submitted old photographs showing herself on the subject lot, the identity of which
petitioners did not contend. Notably, jurisprudence states that the law does not require a person to
have his feet on every square meter of the ground before it can be said that he is in possession
thereof. In Bunyi v. Factor, the Court held that "visiting the property on weekends and holidays is
evidence of actual or physical possession. The fact of her residence somewhere else, by itself, does not
result in loss of possession of the subject property." In contrast, petitioners themselves claim that they
began occupying the subject lot only in August 2005, after Alvarez executed the corresponding Deed of
Sale in their favor. Hence, in light of the foregoing, there is no doubt that respondent had prior de
facto possession.

FACTS:

On September 6, 1995, respondent acquired a parcel of unregistered land (subject lot) from her
aunt, Felomina Abid (Abid), through a Waiver of Rights. The said lot measured 5.78 hectares and
was covered by Tax Declaration No. 0056. However, unknown to respondent, Abid also executed a

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Deed of Sale on July 15, 1995 in favor of Columbino Alvarez (Alvarez) covering the same piece of
land.

On August 2, 2005, after purportedly learning that the description of the property he bought under
the Deed of Sale was erroneous, Alvarez executed a handwritten letter stating that the subject lot,
with an area of 5.78 hectares and covered by Tax Declaration No. 0056, belonged to respondent. He
also executed a Sinumpaang salaysay stating that the said land is not the property he had intended
to buy from Abid but the one with an area of eight (8) hectares under Tax Declaration No. 019-
0233-A.

September 2005, respondent learned that petitioners were occupying the 5.78-hectare subject lot
she acquired from Abid and built structures thereon without respondent's consent. Despite
demands, petitioners refused to vacate the premises. Respondent filed a complaint for forcible
entry against petitioners.

According to petitioners, the area they were occupying is the eight (8)-hectare property covered by
Tax Declaration No. 0052, which they allegedly acquired from Alvarez in 2005 by virtue of a Deed of
Sale. Petitioners further averred that Alvarez had been in possession of the same parcel of land
since 1974 after Abid allowed him to cultivate it. On the other hand, respondent neither physically
possessed the said property nor introduced improvements thereon.

In a Decision dated November 6, 2012, the MCTC dismissed respondent's complaint and upheld
petitioners' possession.

Anent the casual visits to the property respondent allegedly made, the MCTC ruled that the same
was not sufficient to constitute actual possession contemplated by law in ejectment cases. Thus,
respondent's action for forcible entry cannot prevail over petitioners whose possession can be
traced to their predecessor-in-interest.

The RTC reversed the ruling of the MCTC and ordered petitioners to vacate the subject lot. the RTC
observed that based on the Deed of Sale, it would appear that petitioners purchased an eight (8)-
hectare lot bounded by the seashore on the east; however, the relevant tax declaration, i.e., Tax
Declaration No. 0052, did not include "seashore" as a boundary. Thus, since the word "seashore"
was somehow inserted in the Deed of Sale, it would appear that what the property petitioners
bought and were occupying was the lot that was previously occupied by Alvarez and covered by
Tax Declaration No. 019-0233-A. However, in truth, the RTC found out that petitioners were
actually occupying respondent's property covered by Tax Declaration No. 0056. Notably, the lot
covered by Tax Declaration No. 0056 was also bounded by the seashore. the CA affirmed the RTCs
findings insofar as it held that respondent was the prior possessor of the subject lot. It ruled that
respondent's prior possession de facto thereof has been proven as she occasionally visited the
same, paid realty taxes, and even requested for a survey authority thereon.

ISSUE:

Whether the CA erred in holding that respondent was in prior possession of the subject lot. (YES)

RULING:

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It is well-settled that the only question that the courts must resolve in forcible entry or unlawful
detainer cases is who between the parties is entitled to the physical or material possession of the
property in dispute. In forcible entry, the plaintiff must prove that it was in prior physical
possession of the premises until it was deprived thereof by the defendant.
In this case, respondent had sufficiently proven her prior possession de facto of the subject lot.
Records disclose that respondent occasionally visited the subject lot since she acquired the same
from Abid in September 1995. She even paid the lot's realty taxes, as well as requested for a survey
authority thereon. In fact, she submitted old photographs showing herself on the subject lot, the
identity of which petitioners did not contend. Notably, jurisprudence states that the law does not
require a person to have his feet on every square meter of the ground before it can be said that he is
in possession thereof. In Bunyi v. Factor, the Court held that "visiting the property on weekends and
holidays is evidence of actual or physical possession. The fact of her residence somewhere else, by
itself, does not result in loss of possession of the subject property." In contrast, petitioners
themselves claim that they began occupying the subject lot only in August 2005, after Alvarez
executed the corresponding Deed of Sale in their favor. Hence, in light of the foregoing, there is no
doubt that respondent had prior de facto possession.
At this juncture, the Court finds it proper to dispel petitioners' mistaken notion that their
possession should be tacked onto that of Alvarez who allegedly occupied the property since 1974.
In Nenita Quality Foods Corporation v. Galabo, the Court clarified that tacking of possession only
applies to possession de jure, or that possession which has for its purpose the claim of ownership.
Possession de jure is irrelevant because the only question in forcible entry - as it is here - is prior
physical possession or possession de facto.
2. Acquisition of possession
3. Effects of possession
E. Usufruct
1. In general
2. Rights and obligations of the usufructuary
3. Extinguishment
F. Easements
1. Modes of acquiring easements
2. Rights and obligations of the owners of the dominant and servient estates
3. Modes of extinguishment
4. Legal vs. voluntary easements
5. Kinds of legal easement
a. Relating to waters
b. Right of way
c. Light and view
G. Nuisance
H. Modes of acquiring ownership

1. Occupation
2. Donation
a. Nature
b. Persons who may give or receive a donation
c. Effects and limitations of donation
d. Revocation and reduction
3. Prescription

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 a. General provisions
b. Prescription of ownership and other real rights
c. Prescription of actions

MAYBANK PHILIPPINES, INC. (FORMERLY PNB-REPUBLIC BANK) –versus- SPOUSES OSCAR

AND NENITA TARROSA
G.R. No. 213014, FIRST DIVISION, October 14, 2015, PERLAS-BERNABE, J.

An action to enforce a right arising from a mortgage should be enforced within ten (10) years from the
time the right of action accrues, i.e., when the mortgagor defaults in the payment of his obligation to
the mortgagee; otherwise, it will be barred by prescription and the mortgagee will lose his rights
under the mortgage. However, mere delinquency in payment does not necessarily mean delay in the
legal concept.
In this case, the provision in the Real Estate Mortgage between the parties merely articulated
Maybank's right to elect foreclosure upon Sps. Tarrosa's failure or refusal to comply with the
obligation secured, which is one of the rights duly accorded to mortgagees in a similar situation. In no
way did it affect the general parameters of default, particularly the need of prior demand under
Article 1169 of the Civil Code, considering that it did not expressly declare: (a) that demand shall not
be necessary in order that the mortgagor may be in default; or (b) that default shall commence upon
mere failure to pay on the maturity date of the loan. Hence, the CA erred in construing the above
provision as one through which the parties had dispensed with demand as a condition sine qua non for
the accrual of Maybank's right to foreclose the real estate mortgage over the subject property, and
thereby, mistakenly reckoned such right from the maturity date of the loan on March 11, 1984.
FACTS:
Respondents-spouses Oscar and Nenita Tarrosa (Sps. Tarrosa) obtained from then PNB-Republic
Bank, now petitioner Maybank Philippines, Inc. (Maybank), a loan in the amount of P91,000.00. The
loan was secured by a Real Estate Mortgage over a 500-square meter parcel of land situated in San
Carlos City, Negros Occidental and the improvements thereon.
After payment of said loan, the respondents again obtained another loan from Maybank in the
amount of P60,000.00 payable on March 11, 1984. Respondents failed to pay upon maturity.
Sometime in April 1998, a Final Demand Letter was sent by petitioner bank to respondents
requiring the latter to settle their loan obligation which already amounted to P564,679.91 inclusive
of principal, interest, and penalty charges.
The spouses offered to settle it in a lesser amount to which the bank refused. On June 25, 1998,
Maybank instituted an extrajudicial foreclosure proceeding and the subject property was
eventually sold in a public auction to Philmay Property Inc. (PPI). The spouses then filed a
complaint for declaration of nullity and invalidity of the foreclosure sale averring among others that
the second loan is an unsecured loan and that, Maybank’s right to foreclose had already prescribed.
On the other hand, Maybank and PPI countered that: (a) the second loan was secured by the same
real estate mortgage under a continuing security provision therein; (b) when the loan became past
due, Sps. Tarrosa promised to pay and negotiated for a restructuring of their loan, but failed to pay

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despite demands; and (c) Sps. Tarrosa's positive acknowledgment and admission of their
indebtedness controverts the defense of prescription.
RTC held that the second loan was subject to the continuing security provision in the real estate
mortgage. However, it ruled that Maybank's right to foreclose, reckoned from the time the
mortgage indebtedness became due and payable on March 11, 1984, had already prescribed,
considering the lack of any timely judicial action, written extrajudicial demand or written
acknowledgment by the debtor of his debt that could interrupt the prescriptive period. Accordingly,
it declared the extrajudicial foreclosure proceedings affecting the subject property as null and void,
and ordered Maybank to pay Sps. Tarrosa moral and exemplary damages, as well as attorney's fees
and litigation expenses. CA affirmed.
ISSUE:
Whether the CA committed reversible error in finding that Maybank's right to foreclose the real
estate mortgage over the subject property was barred by prescription (YES)
RULING:
Yes. An action to enforce a right arising from a mortgage should be enforced within ten (10) years
from the time the right of action accrues, i.e., when the mortgagor defaults in the payment of his
obligation to the mortgagee; otherwise, it will be barred by prescription and the mortgagee will lose
his rights under the mortgage. However, mere delinquency in payment does not necessarily mean
delay in the legal concept.
In order that the debtor may be in default, it is necessary that: (a) the obligation be demandable and
already liquidated; (b) the debtor delays performance; and (c) the creditor requires the
performance judicially or extrajudicially, unless demand is not necessary. – i.e., when there is an
express stipulation to that effect; where the law so provides; when the period is the controlling
motive or the principal inducement for the creation of the obligation; and where demand would be
useless. Moreover, it is not sufficient that the law or obligation fixes a date for performance; it must
further state expressly that after the period lapses, default will commence. Thus, it is only when
demand to pay is unnecessary in case of the aforementioned circumstances, or when required, such
demand is made and subsequently refused that the mortgagor can be considered in default and the
mortgagee obtains the right to file an action to collect the debt or foreclose the mortgage.
In this case, the provision in the Real Estate Mortgage between the parties merely articulated
Maybank's right to elect foreclosure upon Sps. Tarrosa's failure or refusal to comply with the
obligation secured, which is one of the rights duly accorded to mortgagees in a similar situation. In
no way did it affect the general parameters of default, particularly the need of prior demand under
Article 1169 of the Civil Code, considering that it did not expressly declare: (a) that demand shall
not be necessary in order that the mortgagor may be in default; or (b) that default shall commence
upon mere failure to pay on the maturity date of the loan.
Hence, the CA erred in construing the above provision as one through which the parties had
dispensed with demand as a condition sine qua non for the accrual of Maybank's right to foreclose
the real estate mortgage over the subject property, and thereby, mistakenly reckoned such right
from the maturity date of the loan on March 11, 1984. In the absence of showing that demand is

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unnecessary for the loan obligation to become due and demandable, Maybank's right to foreclose
the real estate mortgage accrued only after the lapse of the period indicated in its final demand
letter for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days from receipt of the final demand
letter dated March 4, 1998. Consequently, both the CA and the RTC committed reversible error in
declaring that Maybank's right to foreclose the real estate mortgage had already prescribed.
Considering that the existence of the loan had been admitted, the default on the part of the debtors-
mortgagors had been duly established, and the foreclosure proceedings had been initiated within
the prescriptive period as afore-discussed, the Court finds no reason to nullify the extrajudicial
foreclosure sale of the subject property.

IV. SUCCESSION
A. General provision
B. Testamentary succession
1. Wills

IN THE MATTER OF THE PETITION FOR THE PROBATE OF THE LAST WILL AND TESTAMENT
OF ENRIQUE S. LOPEZ RICHARD B. LOPEZ, v DIANA JEANNE LOPEZ et. al
G.R. No. 189984|November 12, 2012. PERLAS-BERNABE, J.

ART. 805. Provides that “The attestation shall state the number of pages used upon which the will is
written, and the fact that the testator signed the will and every page thereof, or caused some other
person to write his name, under his express direction, in the presence of the instrumental witnesses,
and that the latter witnessed and signed the will and all the pages thereof in the presence of the
testator and of one another.”

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

FACTS:

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

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

After submitting proofs of compliance with jurisdictional requirements, Richard presented the
attesting witnesses including the notary public who notarized the will. They testified that the late
Enrique read and signed the will on each and every page, they also read and signed the same in the

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latter's presence and of one another. Photographs of the incident were taken and presented during
trial.

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

ISSUE:

Whether or not there was a valid will. (NO)

RULING:

ART. 805. Provides that “The attestation shall state the number of pages used upon which the will is
written, and the fact that the testator signed the will and every page thereof, or caused some other
person to write his name, under his express direction, in the presence of the instrumental witnesses,
and that the latter witnessed and signed the will and all the pages thereof in the presence of the
testator and of one another.”

While on the other hand, ART. 809 provides that “In the absence of bad faith, forgery, or fraud, or
undue and improper pressure and influence, defects and imperfections in the form of attestation or in
the language used therein shall not render the will invalid if it is proved that the will was in fact
executed and attested in substantial compliance with all the requirements of Article 805.”

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

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

2. Institution of heirs
3. Substitution of heirs
4. Conditional testamentary dispositions and those with a term
5. Legitime
6. Disinheritance
7. Legacies and devises
C. Legal or intestate succession
1. General provisions; relationship and right of representation
2. Order of intestate succession
D. Provisions common to testate and intestate succession
1. Right of accretion
2. Capacity to succeed by will or by intestacy
3. Acceptance and repudiation of inheritance
4. Partition and distribution of the estate

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V. OBLIGATIONS AND CONTRACTS
A. Obligations
1. General provisions

FORT BONIFACIO DEVELOPMENT CORPORATION vs. VALENTIN L. FONG

G.R. No. 209370, FIRST DIVISION, March 25, 2015, PERLAS-BERNABE, J.

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

The Court finds that MS Maxco, as the Trade Contractor, cannot assign or transfer any of its rights,
obligations, or liabilities under the Trade Contract without the written consent of FBDC, the Client, in
view of Clause 19.0 on "Assignment and Sub-letting" of the Trade Contract between FBDC and MS
Maxco.

FACTS:
FBDC entered into a Trade Contract with MS Maxco Company, Inc. (MS Maxco) for the execution of
the structural and partial architectural works of one of its condominium projects.
Under the Trade Contract, FBDC had the option to hire other contractors to rectify any errors
committed by MS Maxco by reason of its negligence, act, omission, or default, as well as to deduct or
set-off any amount from the contract price in such cases. Hence, when MS Maxco incurred delays
and failed to comply with the terms of the Trade Contract, FBDC took over and hired other
contractors to complete the unfinished construction. Unfortunately, corrective work had to likewise
be done on the numerous defects and irregularities caused by MS Maxco. Pursuant to the Trade
Contract, FBDC deducted the said amount from MS Maxco’s retention money.
The Trade Contract likewise provided that MS Maxco is prohibited from assigning or transferring
any of its rights, obligations, or liabilities under the said Contract without the written consent of
FBDC. FBDC received a letter from the counsel of Fong informing it that MS Maxco had already
assigned its receivables from FBDC to him. Despite Fong’s repeated requests, FBDC refused to
deliver to Fong the amount assigned by MS Maxco.
FBDC averred that it was not bound by the Deed of Assignment between Fong and MS Maxco, not
being a party thereto. However, Fong, being a mere substitute or assignee of MS Maxco, was bound
to observe the terms and conditions of the Trade Contract. FBDC also stressed that it paid the
creditors of MS Maxco in compliance with valid court orders. The RTC found FBDC liable to pay
Fong. It was affirmed by CA.
ISSUES:
Whether or not the CA erred in ruling that FBDC was bound by the Deed of Assignment between MS
Maxco and Fong. (NO)
RULING:

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Obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith. The Court finds that MS Maxco, as the Trade Contractor, cannot
assign or transfer any of its rights, obligations, or liabilities under the Trade Contract without the
written consent of FBDC, the Client, in view of Clause 19.0 on "Assignment and Sub-letting" of the
Trade Contract between FBDC and MS Maxco. Fong, as mere assignee of MS Maxco’s rights under
the Trade Contract it had previously entered with FBDC, i.e., the right to recover any credit owing to
any unutilized retention money, is equally bound by the foregoing provision and hence, cannot
validly enforce the same without FBDC’s consent.
PEOPLE –versus- ARIEL LAYAG
GR No. 214875, FIRST DIVISION, October 17, 2016, PERLAS-BERNABE, J.

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

Thus, upon Layag's death pending appeal of his conviction, the criminal action is extinguished
inasmuch as there is no longer a defendant to stand as the accused; the civil action instituted therein
for the recovery of the civil liability ex delicto is ipso facto extinguished, grounded as it is on the
criminal action. However, Layag's civil liability in connection with his acts against the victim may be
based on sources other than delicts; in which case, the victim may file a separate civil action against
the estate of Layag, as may be warranted by law and procedural rules.

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

ISSUE:
Whether or not Layag’s death prior to the finality of judgment in a criminal case against him
extinguishes all his liabilities arising from the acts constituting the crimes. (NO)

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

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

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

2. Nature and effect

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 ABOITIZ TRANSPORT SYSTEM CORPORATION AND ABOITIZ SHIPPING CORPORATION,
PETITIONERS, VS. CARLOS A. GOTHONG LINES, INC. AND VICTOR S. CHIONGBIAN,
RESPONDENTS.

ABOITIZ TRANSPORT SYSTEM CORPORATION, PETITIONER, VS. CARLOS A. GOTHONG LINES,

INC. AND VICTOR S. CHIONGBIAN, RESPONDENTS.
G.R. No. 198226 & 198228, July 18, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

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

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

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

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

ISSUE:

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

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RULING:

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

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

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

3. Kinds

LIVING v. MALAYAN INSURANCE COMPANY

GR No. 193753. SECOND DIVISION. September 26, 2012. PERLAS-BERNABE, J.

Records show that when DMI secured the surety and performance bonds from respondent in
compliance with petitioner's requirement, respondent bound itself "jointly and severally" with DMI
for the damages and actual loss that petitioner may suffer should DMI fail to perform its obligations
under the Agreement, as follows:

“That we, DOU MAC INC. as Principal, and MALAYAN INSURANCE CO., INC., x xx are held firmly
bound unto LIVING @ SENSE INC. in the sum of FIVE MILLION ONE HUNDRED SEVENTY ONE
THOUSAND FOUR HUNDRED EIGHTY EIGHT AND 00/100 PESOS ONLY (PHP ***5,171,488.00),
PHILIPPINE Currency, for the payment of which sum, well and truly to be made, we bind
ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally,
firmly by these presents xxx.”

The term "jointly and severally" expresses a solidary obligation granting petitioner, as creditor,
the right to proceed against its debtors, i.e., respondent or DMI. The nature of the solidary
obligation under the surety does not make one an indispensable party.

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FACTS:

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

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

Seeking the dismissal of the complaint, respondent claimed that DMI is an indispensable party that
should be impleaded and whose liability should first be determined before respondent can be held
liable. On the other hand, petitioner asserted that respondent is a surety who is directly and
primarily liable to indemnify petitioner, and that the bond is "callable on demand"[12] in the event
DMI fails to perform its obligations under the Agreement.

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

ISSUE:

Whether DMI is an indispensable party in this case. (NO)

RULING:

Records show that when DMI secured the surety and performance bonds from respondent in
compliance with petitioner's requirement, respondent bound itself "jointly and severally" with
DMI for the damages and actual loss that petitioner may suffer should DMI fail to perform its
obligations under the Agreement, as follows:

“That we, DOU MAC INC. as Principal, and MALAYAN INSURANCE CO., INC., x xx are held
firmly bound unto LIVING @ SENSE INC. in the sum of FIVE MILLION ONE HUNDRED
SEVENTY ONE THOUSAND FOUR HUNDRED EIGHTY EIGHT AND 00/100 PESOS ONLY (PHP
***5,171,488.00), PHILIPPINE Currency, for the payment of which sum, well and truly to be

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 made, we bind ourselves, our heirs, executors, administrators, successors and assigns,
jointly and severally, firmly by these presents xxx.”

The term "jointly and severally" expresses a solidary obligation granting petitioner, as
creditor, the right to proceed against its debtors, i.e., respondent or DMI. The nature of the
solidary obligation under the surety does not make one an indispensable party.

An indispensable party is a party-in-interest without whom no final determination can be had of an

action, and who shall be joined mandatorily either as plaintiffs or defendants. The presence of
indispensable parties is necessary to vest the court with jurisdiction, thus, without their presence to
a suit or proceeding, the judgment of a court cannot attain real finality. The absence of an
indispensable party renders all subsequent actions of the court null and void for want of authority
to act, not only as to the absent parties but even as to those present.

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

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

GOTESCO PROPERTIES v. SPS. EUGENIO AND ANGELINA FAJARDO

G.R. No. 201167. SECOND DIVISION. February 27, 2013. PERLAS-BERNABE, J.

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

A perusal of the records show that GPI acquired the subject property on March 10, 1992 through a
Deed of Partition and Exchange executed between it and Andres Pacheco, the former registered
owner of the property. GPI was issued TCT No. 244220 on March 16, 1992 but the same did not bear
any technical description. However, no plausible explanation was advanced by the petitioners as to
why the petition for inscription dated January 6, 2000, was filed only after almost eight (8) years from
the acquisition of the subject property.

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

FACTS:

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

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

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

ISSUES

1. Whether or not there was a substantial breach of contract from the side of GPI that may be a
ground to rescind the contract. (YES)

2. Whether or not mutual restitution under Art. 1385 of the Civil Code is applicable to cases
involving rescission under Article 1191. (YES)

RULING

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

A perusal of the records show that GPI acquired the subject property on March 10, 1992
through a Deed of Partition and Exchange executed between it and Andres Pacheco, the
former registered owner of the property. GPI was issued TCT No. 244220 on March 16, 1992
but the same did not bear any technical description. However, no plausible explanation was
advanced by the petitioners as to why the petition for inscription dated January 6, 2000, was
filed only after almost eight (8) years from the acquisition of the subject property.

Neither did petitioners sufficiently explain why GPI took no positive action to cause the
immediate filing of a new petition for inscription within a reasonable time from notice of
the CA Decision which dismissed GPI’s earlier petition based on technical defects, this

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 notwithstanding Sps. Fajardo's full payment of the purchase price and prior demand for
delivery of title. GPI filed the petition before the RTC-Caloocan (LRC Case No. C-5026) only on
November 23, 2006, following receipt of the letter dated February 10, 2006 and the filing of the
complaint on May 3, 2006, alternatively seeking refund of payments.

While the court a quo decided the latter petition for inscription in its favor, there is no showing
that the same had attained finality or that the approved technical description had in fact been
annotated on TCT No. 244220, or even that the subdivision plan had already been approved.

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

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

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

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

ROGELIO S. NOLASCO –versus- CELERINO S. CUERPO

GR No. 210215, FIRST DIVISION, December 9, 2015, PERLAS-BERNABE, J.

Under Article 1191, the rescission (or resolution) of a contract will not be permitted for a slight or
casual breach, but only for such substantial and fundamental violations as would defeat the very
object of the parties in making the agreement.

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

FACTS:
Petitioners and respondents entered into a Contract to Sell (subject contract) over the subject
land. The subject contract provides, inter alia, that: (a) the consideration for the sale is

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

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

ISSUE:
Whether or not the CA correctly affirmed the ruling of the RTC. (NO)

RULING:
Under Article 1191, the rescission (or resolution) of a contract will not be permitted for a slight or
casual breach, but only for such substantial and fundamental violations as would defeat the very
object of the parties in making the agreement.

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

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

DR. RESTITUTO C. BUENVIAJE –versus- SPOUSES JOVITO R. & LYDIA B. SALONGA

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 GR No. 216023, FIRST DIVISION, October 05, 2016, PERLAS-BERNABE, J.:

Specific performance and "rescission" (more accurately referred to as resolution) are alternative
remedies available to a party who is aggrieved by a counter-party's breach of a reciprocal
obligation||.|

In this case, as between the two remedies made available to him, Buenviaje, had, in fact, chosen the
remedy of specific performance and therefore, ought to be bound by the choice he had made.
Buenviaje's alternative prayer for resolution is textually consistent with that portion of Article 1191 of
the Civil Code which states that an injured party "may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible." Nevertheless, the impossibility of fulfillment was
not sufficiently demonstrated in the proceedings conducted in this case.

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

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

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

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

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

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

ISSUE(s):
1. Whether or not the grant of the remedy of specific performance in Buenviaje's favor was
proper. (YES)
2. Whether or not Sps. Salonga are not solidarily liable with Jebson to Buenviaje for the
completion of the construction and delivery of the unit. (YES)

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 3. Whether or not the "swapping arrangement" was invalid entitling it to be rescinded. (NO)

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

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

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

The joint or solidary nature of an obligation is an aspect of demandability; it pertains to the extent
of a creditor's entitlement to demand fulfillment against any or all of his debtors under one
particular obligation. A solidary obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation
from any or all of the debtors. On the other hand, a joint obligation is one in which each debtors is
liable only for a proportionate part of the debt, and the creditor is entitled to demand only a
proportionate part of the credit from each debtor.

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

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

4. Extinguishment

METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO AND TIUOH YAN,
SPOUSES GUILLERMO AND MERCEDES DYCHIAO, AND SPOUSES VICENTE AND FILOMENA
DYCHIAO vs. ALLIED BANK CORPORATION

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 G.R. No. 177921. SECOND DIVISION. December 4, 2013. PERLAS-BERNABE, J.

At the outset, the Court must dispel the notion that the MoA would have any relevance to the
performance of petitioners’ obligations to Allied Bank. The MoA is a sale of assets contract, while
petitioners’ obligations to Allied Bank arose from various loan transactions.

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

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

FACTS:

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

By way of security, the individual petitioners executed several Continuing Guaranty/

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

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

In 2002, Peakstar Oil Corporation (Peakstar), represented by one Crisanta Camiling (Camiling),
expressed interest in buying the scrap metal. Petitioners claimed that Atty. Peter Saw (Atty. Saw), a
member of Allied Bank’s legal department, acted as the latter’s agent. Eventually, with the alleged
conformity of Allied Bank, through Atty. Saw, a Memorandum of Agreement dated November 8,

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2002 (MoA) was drawn between Metro Concast, represented by petitioner Jose Dychiao, and
Peakstar, through Camiling, under which Peakstar obligated itself to purchase the scrap metal
for a total consideration of ₱34,000,000.00. Unfortunately, Peakstar reneged on all its obligations
under the MoA. In this regard, petitioners asseverated that their failure to pay their outstanding
loan obligations to Allied Bank must be considered as force majeure, and since Allied Bank was the
party that accepted the terms and conditions of payment proposed by Peakstar, petitioners must
therefore be deemed to have settled their obligations to Allied Bank.

After trial on the merits, the RTC dismissed the subject complaint, holding that the "causes of action
sued upon had been paid or otherwise extinguished.” The appellate court reversed and set aside the
ruling of the RTC, ratiocinating that there was "no legal basis in fact and in law to declare that when
Bankwise reneged its guarantee under the [MoA], herein [petitioners] should be deemed to be
discharged from their obligations lawfully incurred in favor of [Allied Bank]."

ISSUE:

Whether or not the loan obligations incurred by the petitioners under the subject promissory note
and various trust receipts have already been extinguished. (NO)

RULING:

Article 1231 of the Civil Code states that obligations are extinguished either by payment or
performance, the loss of the thing due, the condonation or remission of the debt, the confusion or
merger of the rights of creditor and debtor, compensation or novation.

At the outset, the Court must dispel the notion that the MoA would have any relevance to the
performance of petitioners’ obligations to Allied Bank. The MoA is a sale of assets contract, while
petitioners’ obligations to Allied Bank arose from various loan transactions.

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

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

UNION BANK OF THE PHILIPPINES, PETITIONER, VS. DEVELOPMENT BANK OF THE

PHILIPPINES, RESPONDENT.
G.R. No. 191555, January 20, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

Compensation is defined as a mode of extinguishing obligations whereby two persons in their capacity
as principals are mutual debtors and creditors of each other with respect to equally liquidated and
demandable obligations to which no retention or controversy has been timely commenced and
communicated by third parties.

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FACTS:

Foodmasters, Inc. (FI) had outstanding loan obligations to both Union Bank’s predecessor-in-
interest, Bancom Development Corporation (Bancom), and to Development Bank of the Philippines
(DBP).

FI and DBP entered into a Deed of Cession of Property In Payment of Debt (dacion en pago)
whereby the former ceded in favor of the latter certain properties (including a processing plant) in
consideration of the following:

(a) The full and complete satisfaction of FI’s loan obligations to DBP; and
(b) The direct assumption by DBP of FI’s obligations to Bancom in the amount of P17,000,000.00
(Assumed Obligations).

DBP, as the new owner of the processing plant, leased back for 20 years the said property to FI
(Lease Agreement) which was, in turn, obliged to pay monthly rentals to be shared by DBP and
Bancom.

DBP also entered into a separate agreement with Bancom (Assumption Agreement) whereby the
former:

(a) Confirmed its assumption of FI’s obligations to Bancom; and

(b) Undertook to remit up to 30% of any and all rentals due from FI to Bancom which would serve
as payment of the assumed obligations, to be paid in monthly installments.

On May 23, 1979, FI assigned its leasehold rights under the Lease Agreement to Foodmasters
Worldwide, Inc. (FW). On May 9, 1984, Bancom conveyed all its receivables, including DBP’s
assumed obligations, to Union Bank. Claiming that the subject rentals have not been duly remitted
despite its repeated demands, Union Bank filed a collection case against DBP before the RTC.

DBP countered that the obligations it assumed were payable only out of the rental payments made
by FI. Since, FI had yet to pay the same, DBP’s obligation to Union Bank had not arisen.

RTC: Finding the complaint to be meritorious, RTC ordered:

(a) DBP to pay Union Bank the sum of P4,019,033.59, representing the amount of the subject
rentals (which constitutes 30% of FI’s [now FW’s] total rental debt), including interest until fully
paid; and
(b) FW, as third-party defendant, to indemnify DBP, as third- party plaintiff, for its payments of the
subject rentals to Union Bank.

RTC ruled that when DBP failed to remit the subject rentals to Union Bank, it defaulted on its
assumed obligations.

On May 27, 1994, CA Set aside the RTC’s ruling, and consequently ordered:

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(a) FW to pay DBP the amount of P32,441,401.85 representing the total rental debt incurred under
the Lease Agreement, and
(b) DBP, after having been paid by FW its unpaid rentals, to remit 30% thereof to Union Bank.
CA ruled that DBP did not default in its obligations to remit the subject rentals to Union Bank
precisely because it had yet to receive the rental payments of FW.

Union Bank and DBP filed separate petitions for review on certiorari before the Supreme Court.

The SC denied both petitions in a Resolution. SC upheld the CA’s finding that while DBP directly
assumed FI’s obligations to Union Bank, DBP was only obliged to remit to the latter 30% of the
lease rentals collected from FW, from which any deficiency was to be settled by DBP not later than
December 29, 1998.

On May 16, 2001, Union Bank filed a motion for execution before the RTC, praying that DBP be
directed to pay the amount of P9,732,420.555 which represents the amount of the subject rentals
(i.e., 30% of the FW’s total rental debt in the amount of P32,441,401.85). DBP opposed Union
Bank’s motion.

On September 12, 2001, DBP filed its own motion for execution against FW.

The RTC granted both motions for execution of Union Bank and DBP on October 15, 2001 (Order of
Execution). As a result, a notice of garnishment against DBP were issued.

DBP filed a motion for reconsideration averring that the RTC prematurely ordered DBP to pay the
assumed obligations to Union Bank before FW’s payment. The motion was denied. Thus, DBP’s
deposits were eventually garnished. DBP then filed a petition for certiorari before the CA.

The CA dismissed DBP’s petition, finding that the RTC did not abuse its discretion when it issued
the October 15, 2001 Writ of Execution. DBP appealed the CA’s ruling before the SC.

On January 13, 2004, SC granted DBP’s appeal, and thereby reversed and set aside the CA’s ruling.
SC acknowledged that DBP’s obligation to Union Bank for remittance of the lease payments is
contingent on FW’s prior payment to DBP, and that any deficiency DBP had to pay by December 29,
1998 as per the Assumption Agreement cannot be determined until after the satisfaction of FW’s
own rental obligations to DBP.

Union Bank moved for reconsideration which was denied by the SC.

DBP moved for the execution of the said decision before the RTC. The RTC then issued a writ of
execution (September 6, 2005 Writ of Execution), ordering Union Bank to return to DBP all funds it
received pursuant to the October 15, 2001 Writ of Execution.

On September 13, 2005, Union Bank filed a Manifestation and Motion to Affirm Legal Compensation
to the RTC, praying that the RTC apply legal compensation between itself and DBP in order to offset
the return of the funds it previously received from DBP.

Union Bank anchored its motion on two grounds, namely:

(a) on December 29, 1998, DBP’s assumed obligations became due and demandable; and

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(b) considering that FW became non-operational and non-existent, DBP became primarily liable to
the balance of its assumed obligation, which as of Union Bank’s computation after its claimed set-
off, amounted to P1,849,391.87.

The RTC denied the above-mentioned motion for lack of merit. With Union Bank’s motion for
reconsideration having been denied, Union Bank filed a petition for certiorari with the CA. Pending
resolution, Union Bank issued a Manager’s Check amounting to P52,427,250.00 in favor of DBP, in
satisfaction of the Writ of Execution dated September 6, 2005.

The CA dismissed Union Bank’s petition, finding no grave abuse of discretion on the RTC’s part. CA
affirmed the denial of its motion to affirm legal compensation considering that:

(a) the RTC only implemented the Supreme Court’s January 13, 2004 Decision which by then had
already attained finality;
(b) DBP is not a debtor of Union Bank; and
(c) there is neither a demandable nor liquidated debt from DBP to Union Bank.

Union Bank moved for reconsideration which was denied in a Resolution dated February 26, 2010;
hence, the instant petition.

ISSUE:

Whether or not the CA correct in upholding the denial of Union Bank’s motion to affirm legal
compensation?

RULING:

Yes. The petition is bereft of merit. Compensation is defined as a mode of extinguishing obligations
whereby two persons in their capacity as principals are mutual debtors and creditors of each other
with respect to equally liquidated and demandable obligations to which no retention or
controversy has been timely commenced and communicated by third parties. The requisites
therefor are provided under Article 1279 of the Civil Code which reads as follows:

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.

The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that
"when all the requisites mentioned in Article 1279 are present, compensation takes effect by
operation of law, and extinguishes both debts to the concurrent amount, even though the creditors
and debtors are not aware of the compensation."

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Therefore, compensation could not have taken place between these debts for the apparent reason
that requisites 3 and 4 under Article 1279 of the Civil Code are not present. Since DBP’s assumed
obligations to Union Bank for remittance of the lease payments are – in the Court’s words –
"contingent on the prior payment thereof by FW to DBP," it cannot be said that both debts are due
(requisite 3 of Article 1279 of the Civil Code). Also, the Court observed that any deficiency that DBP
had to make up for the full satisfaction of the assumed obligations "cannot be determined until after
the satisfaction of FW’s obligation to DBP." In this regard, it cannot be concluded that the same debt
had already been liquidated, and thereby became demandable (requisite 4 of Article 1279 of the
Civil Code). Thus, CA correctly upheld the denial of Union Bank’s motion to affirm legal
compensation.

GOLDEN VALLEY EXPLORATION, INC., PETITIONER, VS. PINKIAN MINING COMPANY AND
COPPER VALLEY, INC., RESPONDENTS.
G.R. No. 190080, June 11, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

As a general rule, the power to rescind an obligation must be invoked judicially and cannot be
exercised solely on a party’s own judgment that the other has committed a breach of the
obligation. This is so because rescission of a contract will not be permitted for a slight or casual
breach, but only for such substantial and fundamental violations as would defeat the very object of the
parties in making the agreement. As a well-established exception, however, an injured party need not
resort to court action in order to rescind a contract when the contract itself provides that it may be
revoked or cancelled upon violation of its terms and conditions.

FACTS:

Pikian Mining Company (PMI) is the owner of 81 mining, 15 of which are covered by Mining Lease
Contracts, the remaining 66 had pending applications for lease. It entered into an Operating
Agreement (OA) with Golden Valley Exploration, Inc. (GVEI), granting the latter "full, exclusive and
irrevocable possession, use, occupancy, and control over the [mining claims], and every matter
pertaining to the examination, exploration, development and mining of the [mining claims] and the
processing and marketing of the products for a period of 25 years. Later, PMC extra-judicially
rescinded the OA upon GVEI’s violation of Section 5.01, Article V thereof.

GVEI contested PMC’s extra-judicial rescission of the OA averring therein that its obligation to pay
royalties to PMC arises only when the mining claims are placed in commercial production which
condition has not yet taken place. PMC no longer responded to GVEI’s letter. It also reminded PMC
of its prior payment of the amount of P185,000.00 as future royalties in exchange for PMC’s express
waiver of any breach or default on the part of GVEI. Instead, it entered into a Memorandum of
Agreement with Copper Valley Inc., (CVI), whereby the latter was granted the right to "enter,
possess, occupy and control the mining claims" and "to explore and develop the mining claims,
mine or extract the ores, mill, process and beneficiate and/or dispose the mineral products in any
method or process," among others, for a period of 25 years.

ISSUE:

Whether or not there was a valid rescission of the Operating Agreement?

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RULING:

Yes. The rescission is valid. As a general rule, the power to rescind an obligation must be invoked
judicially and cannot be exercised solely on a party’s own judgment that the other has committed a
breach of the obligation. This is so because rescission of a contract will not be permitted for a slight
or casual breach, but only for such substantial and fundamental violations as would defeat the very
object of the parties in making the agreement. As a well-established exception, however, an injured
party need not resort to court action in order to rescind a contract when the contract itself provides
that it may be revoked or cancelled upon violation of its terms and conditions.

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

SPOUSES FRANCISCO SIERRA (SUBSTITUTED BY DONATO, TERESITA, TEODORA, LORENZA,

LUCINA, IMELDA, VILMA, AND MILAGROS SIERRA) AND ANTONINA SANTOS, SPOUSES
ROSARIO SIERRA AND EUSEBIO CALUMA LEYVA, AND SPOUSES SALOME SIERRA AND FELIX
GATLABAYAN (SUBSTITUTED BY BUENAVENTURA, ELPIDIO, PAULINO, CATALINA,
GREGORIO, AND EDGARDO GATLABAYAN, LORETO REILLO, FERMINA PEREGRINA, AND NIDA
HASHIMOTO), PETITIONERS, VS. PAIC SAVINGS AND MORTGAGE BANK, INC., RESPONDENT.
G.R. No. 197857, September 10, 2014, FIRST DIVISION, PERLAS-BERNABE, J:

Laches operates not really to penalize neglect or sleeping on one's rights, but rather to avoid
recognizing a right when to do so would result in a clearly inequitable situation.

FACTS:

Goldstar Conglomerates, Inc. (GCI), represented by Guillermo Zaldaga (Zaldaga), obtained from
First Summa Savings and Mortgage Bank (Summa Bank), now respondent Paic Savings and
Mortgage Bank, Inc. (PSMB), a loan in the amount of ₱1,500,000.00 as evidenced by a Loan
Agreement. As security therefor, GCI executed in favor of PSMB six (6) promissory notes in the
aggregate amount of ₱1,500,000.00 as well as a Deed of Real Estate Mortgage over a parcel of land
covered by Transfer Certificate of Title (TCT) No. 308475. As additional security, petitioners
Francisco Sierra, Rosario Sierra, and Spouses Felix Gatlabayan and Salome Sierra mortgaged four
(4) parcels of land in Antipolo City, covered by TCT Nos. 308476, 308477, 308478, and 308479, and
respectively registered in their names (subject properties). Records show that after the signing of
the mortgage deed, Zaldaga gave petitioner Francisco Sierra four (4) manager’s checks with an
aggregate amount of ₱200,000.00, which were later successfully encashed, as well as several post-
dated checks.

Eventually, GCI defaulted in the payment of its loan to PSMB, thereby prompting the latter to
extrajudicially foreclose the mortgage on the subject properties in accordance with Act No. 3135, as
amended, with due notice to petitioners. In the process, PSMB emerged as the highest bidder in the
public auction sale held on June 27, 1984 for a total bid price of ₱2,467,272.66. Since petitioners
failed to redeem the subject properties within the redemption period, their certificates of title were
cancelled and new ones were issued in PSMB’s name.

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On September 16, 1991, petitioners filed a complaint for the declaration of nullity of the real estate
mortgage and its extrajudicial foreclosure, and damages against PSMB and Summa Bank before the
RTC, docketed as Civil Case No. 91-2153. In the said complaint, petitioners averred that under
pressing need of money, with very limited education and lacking proper instructions, they fell prey
to a group who misrepresented to have connections with Summa Bank and, thus, could help them
secure a loan. They were made to believe that they applied for a loan, the proceeds of which would
be released through checks drawn against Summa Bank. Relying in good faith on the checks issued
to them, petitioners unsuspectingly signed a document denominated as Deed of Real Estate
Mortgage (subject deed), couched in highly technical legal terms, which was not interpreted in a
language/dialect known to them, and which was not accompanied by the loan documents.
However, when they presented for payment the earliest-dated checks to the drawee bank, the same
were dishonored for the reason "Account Closed."

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

ISSUE:

Whether or not laches applies.

RULING:

Yes. The Court holds that laches applies. As the records disclose, despite notice of the scheduled
foreclosure sale, petitioners, for unexplained reasons, failed to impugn the real estate mortgage and
oppose the public auction sale for a period of more than seven (7) years from said notice. As such,
petitioners' action is already barred by laches, which, as case law holds, operates not really to
penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so
would result in a clearly inequitable situation. As mortgagors desiring to attack a mortgage as
invalid, petitioners should act with reasonable promptness, else its unreasonable delay may
amount to ratification. Verily, to allow petitioners to assert their right to the subject properties now
after their unjustified failure to act within a reasonable time would be grossly unfair to PSMB, and
perforce should not be sanctioned.

ELIZA ZUÑIGA-SANTOS, REPRESENTED BY HER ATTORNEY-IN FACT, NYMPHA Z. SALES,

PETITIONERS, VS. MARIA DIVINA GRACIA SANTOS-GRAN AND REGISTER OF DEEDS OF
MARIKINA CITY, RESPONDENTS.
G.R. No. 197380, October 8, 2014, FIRST DIVISION, PERLAS-BERNABE, J:

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

FACTS:

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Eliza Zuñ iga-Santos (petitioner), through her authorized representative, Nympha Z. Sales, filed a
Complaint or annulment of sale and revocation of title against respondents Maria Divina Gracia
Santos-Gran (Gran) and the Register of Deeds of Marikina City before the RTC.
The said complaint was later amended. petitioner alleged, among others, that: (a) she was the
registered owner of three (3) parcels of land located in the Municipality of Montalban, Province of
Rizal, prior to their transfer in the name of private respondent Gran; (b) she has a second husband
by the name of Lamberto C. Santos (Lamberto), with whom she did not have any children; (c) she
was forced to take care of Lamberto’s alleged daughter, Gran, whose birth certificate was forged to
make it appear that the latter was petitioner’s daughter; (d) pursuant to void and voidable
documents Sale, Lamberto succeeded in transferring the subject properties in favor of and in the
name of Gran; (e) despite diligent efforts, said Deed of Sale could not be located; and (f) she
discovered that the subject properties were transferred to Gran. Accordingly, petitioner prayed,
inter alia, that Gran surrender to her the subject properties and pay damages, including costs of suit.
Gran filed a Motion to Dismiss, contending, inter alia, that (a) the action filed by petitioner had
prescribed since an action upon a written contract must be brought within ten (10) years from the
time the cause of action accrues, or in this case, from the time of registration of the questioned
documents before the Registry of Deeds; and (b) the Amended Complaint failed to state a cause of
action as the void and voidable documents sought to be nullified were not properly identified nor
the substance thereof set forth.
RTC granted Gran’s motion and dismissed the Amended Complaint for its failure to state a cause of
action, considering that the deed of sale sought to be nullified an “essential and indispensable part
of (petitioner’s) cause of action” was not attached. It likewise held that the certificates of title
covering the subject properties cannot be collaterally attacked and that since the action was based
on a written contract, the same had already prescribed under Article 1144 of the Civil Code.
The CA sustained the dismissal of petitioner’s Amended Complaint but on the ground of
insufficiency of factual basis.
ISSUE:
Whether or not the action for the reconveyance of the title had already prescribed?
HELD:
Yes. The Court finds the Amended Complaint’s dismissal to be in order considering that petitioner’s
cause of action had already prescribed.
It is evident that petitioner ultimately seeks for the reconveyance to her of the subject properties
through the nullification of their supposed sale to Gran. An action for reconveyance is one that seeks
to transfer property, wrongfully registered by another, to its rightful and legal owner. Having alleged
the commission of fraud by Gran in the transfer and registration of the subject properties in her
name, there was, in effect, an implied trust created by operation of law pursuant to Article 1456 of
the Civil Code which provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property

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comes.
To determine when the prescriptive period commenced in an action for reconveyance, the plaintiff ’s
possession of the disputed property is material. If there is an actual need to reconvey the property
as when the plaintiff is not in possession, the action for reconveyance based on implied trust
prescribes in ten (10) years, the reference point being the date of registration of the deed or the
issuance of the title. On the other hand, if the real owner of the property remains in possession of
the property, the prescriptive period to recover title and possession of the property does not run
against him and in such case, the action for reconveyance would be in the nature of a suit for
quieting of title which is imprescriptible.
On the other hand, if the real owner of the property remains in possession of the property, the
prescriptive period to recover title and possession of the property does not run against him and in
such case, the action for reconveyance would be in the nature of a suit for quieting of title which is
imprescriptible
In the case at bar, a reading of the allegations of the Amended Complaint failed to show that
petitioner remained in possession of the subject properties in dispute. On the contrary, it can be
reasonably deduced that it was Gran who was in possession of the subject properties, there being
an admission by the petitioner that the property covered by TCT No. 224174 was being used by
Gran’s mother-in-law. In fact, petitioner’s relief in the Amended Complaint for the “surrender” of
three (3) properties to her bolsters such stance. And since the new titles to the subject properties in
the name of Gran were issued by the Registry of Deeds of Marikina on the following dates: TCT No.
224174 on July 27, 1992, TCT No. N-5500 on January 29, 1976, and TCT No. N-4234 on November
26, 1975, the filing of the petitioner’s complaint before the RTC on January 9, 2006 was obviously
beyond the ten-year prescriptive period, warranting the Amended Complaint’s dismissal all the
same.

B. Contracts
1. General provisions

ROBERT AND NENITA DE LEON, PETITIONERS, VS. GILBERT AND ANALYN DELA LLANA,
RESPONDENTS.
G.R. No. 212277, February 11, 2015, FIRST DIVISION, PERLAS-BERNABE, J:

Simulation of a contract may be absolute or relative. The former takes place when the parties do not
intend to be bound at all; the latter, when the parties conceal their true agreement. The fact of
executing the contract to comply with the requirement to put up a lottery stall makes the contract
absolutely simulated as there was no intention between the parties to enter into the contract of lease.
FACTS:
This case stemmed from an unlawful detainer complaint (first ejectment complaint) filed by
respondent Gilbert dela Llana (Gilbert) against petitioner Robert de Leon (Robert) and a certain Gil

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

In their defense, Robert and Gil posited that the aforementioned lease contract was simulated and,
hence, not binding on the parties as there was no demand to pay the rentals on the part of the
complainants and that such contract was only executed as a requirement to be able to put up a
lottery stall. The MCTC-Nabunturan-Mawab dismissed the first ejectment complaint, holding that
the undated lease contract was a relatively simulated contract and, as such, non-binding.
Gilbert, together with his spouse Analyn dela Llana (respondents), filed a second complaint for
unlawful detainer. The MTCC-Davao City found that the undated lease contract was not a simulated
contract for the reason that the requisites for simulation have not been shown in the case at bar.
The RTC reversed and set aside the MTCC-Davao City ruling, and ordered the dismissal of the
second ejectment complaint since the venue was improperly laid. The CA reversed and set aside the
RTC issuances.
ISSUE:
Whether or not the contract is simulated
RULING:
Yes. Simulation of a contract may be absolute or relative. The former takes place when the parties
do not intend to be bound at all; the latter, when the parties conceal their true agreement. It is quite
apparent that the MCTC-Nabunturan-Mawab actually intended to mean that the undated lease
contract subject of this case was absolutely simulated. Its pronouncement that the parties did not
intend to be bound by their agreement is simply inconsistent with relative simulation. With the
undated lease contract definitely settled as absolutely simulated, and hence, void, there can be no
invocation of the exclusive venue stipulation on the part of either party; thus, the general rule on
the filing of real actions in the court where the property is situated – as in the filing of the first
ejectment complaint before the MCTC-Nabunturan-Mawab located in Compostela Valley same as
the subject property of this case – prevails.
2. Essential requisites

RENEE B. TANCHULING –versus- SOTERO C. CANTELA

GR No. 209284, FIRST DIVISION, November 10, 2015, PERLAS-BERNABE, J.

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

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

FACTS:

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

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

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

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

ISSUE:
Whether the subject deed is simulated, hence, null and void (YES)

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

In this case, the Court agrees with the RTC that the subject deed was absolutely simulated. The
parties never intended to be bound by any sale agreement. Instead, the subject deed was executed

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merely as a front to show the public that Sps. Tanchuling were the owners of the properties in
order to deter the group of John Mercado from illegally selling the same.

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

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

3. Reformation of instruments
4. Interpretation of contracts

ENCARNACION CONSTRUCTION & INDUSTRIAL CORPORATION, Petitioner, -versus- PHOENIX

READY MIX CONCRETE DEVELOPMENT & CONSTRUCTION, INC., Respondent.
G.R. No. 225402, SECOND DIVISION, September 04, 2017, PERLAS-BERNABE, J.

A contract of adhesion is one wherein one party imposes a ready-made form of contract on the other.
It is a contract whereby almost all of its provisions are drafted by one party, with the participation of
the other party being limited to affixing his or her signature or "adhesion" to the contract. However,
contracts of adhesion are not invalid per se as they are binding as ordinary contracts. While the Court
has occasionally struck down contracts of adhesion as void, it did so when the weaker party has been
imposed upon in dealing with the dominant bargaining party and reduced to the alternative of taking
it or leaving it, completely deprived of the opportunity to bargain on equal footing. Thus, the validity
or enforceability of the impugned contracts will have to be determined by the peculiar circumstances
obtained in each case and the situation of the parties concerned.

In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing with
Phoenix. There were likewise no allegations and proof that its representative (and owner/proprietor)
Ramon Encarnacion (Encarnacion) was uneducated, or under duress or force when he signed the
Agreement on its behalf. In fact, Encarnacion is presumably an astute businessman who signed the
Agreement with full knowledge of its import. Case law states that the natural presumption is that one
does not sign a document without first informing himself of its contents and consequences. This
presumption has not been debunked.

FACTS:

On January 27 and March 25, 2009, Phoenix entered into two (2) separate Contract Proposals and
Agreements (Agreement) with ECIC for the delivery of various quantities of ready-mix concrete.
The Agreement was made in connection with the construction of the Valenzuela National High
School (VNHS) Marulas Building. ECIC received the ready-mix concrete delivery in due course.
However, despite written demands from Phoenix, ECIC refused to pay. Hence, Phoenix led before
the RTC the Complaint for Sum of Money against ECIC for the payment of P982,240.35, plus interest
and attorney's fees.

In its Answer with Counterclaim, ECIC claimed that it opted to suspend payment since Phoenix
delivered substandard ready-mix concrete, such that the City Engineer's Office of Valenzuela (City

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Engineer's Office) required the demolition and reconstruction of the VNHS building's 3rd floor. It
contended that since the samples taken from the 3rd floor slab failed to reach the comprehensive
strength of 6,015 psi in 100 days, the City Engineer's Office ordered the dismantling of the VNHS
building's 3rd floor, and thus, incurred additional expenses amounting to P3,858,587.84 for the
dismantling and reconstruction.

ISSUE:

Whether ECIC is entitled to counterclaim for damages. (NO)

RULING:

A contract of adhesion is one wherein one party imposes a ready-made form of contract on the
other. It is a contract whereby almost all of its provisions are drafted by one party, with the
participation of the other party being limited to affixing his or her signature or "adhesion" to the
contract. However, contracts of adhesion are not invalid per se as they are binding as ordinary
contracts. While the Court has occasionally struck down contracts of adhesion as void, it did so
when the weaker party has been imposed upon in dealing with the dominant bargaining party and
reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing. Thus, the validity or enforceability of the impugned contracts will have to
be determined by the peculiar circumstances obtained in each case and the situation of the parties
concerned.In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in
dealing with Phoenix. There were likewise no allegations and proof that its representative (and
owner/proprietor) Ramon Encarnacion (Encarnacion) was uneducated, or under duress or force
when he signed the Agreement on its behalf. In fact, Encarnacion is presumably an astute
businessman who signed the Agreement with full knowledge of its import. Case law states that the
natural presumption is that one does not sign a document without first informing himself of its
contents and consequences. This presumption has not been debunked.
Further, the Court finds that the terms and conditions of the parties' Agreement are plain, clear, and
unambiguous and thus could not have caused any confusion.
Based on these terms, it is apparent that any claim that ECIC may have had as regards the quality or
strength of the delivered ready-mix concrete should have been made at the time of delivery.
However, it failed to make a claim on the quality of the delivered concrete at the stipulated time,
and thus, said claim is deemed to have been waived.
In this relation, the Court clarifies that the absence of the signature of Encarnacion on the second
page of the Agreement did not render these terms inoperative. This is because the first page of the
Agreement — on which the signature of Encarnacion appears — categorically provides that the
terms and conditions stipulated on the Agreement's reverse side form part of their contract and are
equally binding on them.
Thus, by having its representative affix his signature on the first page of the Agreement and thereby
accepting Phoenix's proposed contract, ECIC likewise signified its conformity to the entirety of the
stipulated terms and conditions, including the stipulations on the Agreement's reverse side. Verily,
ECIC positively and voluntarily bound itself to these terms and conditions and cannot now claim
otherwise.

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Finally, it should be noted that ECIC failed to raise the alleged defect in the delivered concrete well
within a reasonable time from its discovery of the hairline cracks, as it notified Phoenix thereof only
48 days after the last delivery date on April 29, 2009, and days after it was already notified thereof
by the City Engineer's Office. The lack of justifiable explanation for this delay all the more bolsters
the conclusion that ECIC indeed waived its right to make its claim.
In any event, the evidence on record do not support ECIC's claim that the hairline cracks that
appeared on the 3rd floor slab of the VNHS building resulted from the substandard quality of the
delivered ready-mix concrete. While it was shown that the City Engineer's Office inspected the site
and approved the structural design before the delivered concrete for the 3rd floor slab was poured,
and that the results of the test conducted by the Philippine Geoanalytics Testing Center from the
samples taken showed that the hardened concrete failed to reach the required comprehensive
strength days after the pouring, ECIC, however, failed to account for the period that intervened
from the time the delivered concrete was poured to the time the hairline cracks were observed. As
the claiming party, it was incumbent upon ECIC to prove that the hairline cracks were truly caused
by the inferior quality of the delivered concrete.
Besides, Phoenix offered a more plausible explanation, i.e., that ECIC failed to observe the proper
procedure for applying and curing the delivered concrete during the intervening period. This
resulted in what Phoenix's witness described as "plastic (cement) shrinkage caused by the rapid
evaporation of the water component and other factors."
All told, ECIC failed to convincingly prove its counterclaim against Phoenix.
ENCARNACION CONSTRUCTION & INDUSTRIAL CORPORATION, Petitioner, -versus- PHOENIX
READY MIX CONCRETE DEVELOPMENT & CONSTRUCTION, INC., Respondent.
G.R. No. 225402, SECOND DIVISION, September 04, 2017, PERLAS-BERNABE, J.

A contract of adhesion is one wherein one party imposes a ready-made form of contract on the other.
It is a contract whereby almost all of its provisions are drafted by one party, with the participation of
the other party being limited to affixing his or her signature or "adhesion" to the contract. However,
contracts of adhesion are not invalid per se as they are binding as ordinary contracts. While the Court
has occasionally struck down contracts of adhesion as void, it did so when the weaker party has been
imposed upon in dealing with the dominant bargaining party and reduced to the alternative of taking
it or leaving it, completely deprived of the opportunity to bargain on equal footing. Thus, the validity
or enforceability of the impugned contracts will have to be determined by the peculiar circumstances
obtained in each case and the situation of the parties concerned.

In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing with
Phoenix. There were likewise no allegations and proof that its representative (and owner/proprietor)
Ramon Encarnacion (Encarnacion) was uneducated, or under duress or force when he signed the
Agreement on its behalf. In fact, Encarnacion is presumably an astute businessman who signed the
Agreement with full knowledge of its import. Case law states that the natural presumption is that one
does not sign a document without first informing himself of its contents and consequences. This
presumption has not been debunked.

FACTS:

On January 27 and March 25, 2009, Phoenix entered into two (2) separate Contract Proposals and
Agreements (Agreement) with ECIC for the delivery of various quantities of ready-mix concrete.

59 of 140
The Agreement was made in connection with the construction of the Valenzuela National High
School (VNHS) Marulas Building. ECIC received the ready-mix concrete delivery in due course.
However, despite written demands from Phoenix, ECIC refused to pay. Hence, Phoenix led before
the RTC the Complaint for Sum of Money against ECIC for the payment of P982,240.35, plus interest
and attorney's fees.

In its Answer with Counterclaim, ECIC claimed that it opted to suspend payment since Phoenix
delivered substandard ready-mix concrete, such that the City Engineer's Office of Valenzuela (City
Engineer's Office) required the demolition and reconstruction of the VNHS building's 3rd floor. It
contended that since the samples taken from the 3rd floor slab failed to reach the comprehensive
strength of 6,015 psi in 100 days, the City Engineer's Office ordered the dismantling of the VNHS
building's 3rd floor, and thus, incurred additional expenses amounting to P3,858,587.84 for the
dismantling and reconstruction.

ISSUE:

Whether ECIC is entitled to counterclaim for damages. (NO)

RULING:

A contract of adhesion is one wherein one party imposes a ready-made form of contract on the
other. It is a contract whereby almost all of its provisions are drafted by one party, with the
participation of the other party being limited to affixing his or her signature or "adhesion" to the
contract. However, contracts of adhesion are not invalid per se as they are binding as ordinary
contracts. While the Court has occasionally struck down contracts of adhesion as void, it did so
when the weaker party has been imposed upon in dealing with the dominant bargaining party and
reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing. Thus, the validity or enforceability of the impugned contracts will have to
be determined by the peculiar circumstances obtained in each case and the situation of the parties
concerned.In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in
dealing with Phoenix. There were likewise no allegations and proof that its representative (and
owner/proprietor) Ramon Encarnacion (Encarnacion) was uneducated, or under duress or force
when he signed the Agreement on its behalf. In fact, Encarnacion is presumably an astute
businessman who signed the Agreement with full knowledge of its import. Case law states that the
natural presumption is that one does not sign a document without first informing himself of its
contents and consequences. This presumption has not been debunked.
Further, the Court finds that the terms and conditions of the parties' Agreement are plain, clear, and
unambiguous and thus could not have caused any confusion.
Based on these terms, it is apparent that any claim that ECIC may have had as regards the quality or
strength of the delivered ready-mix concrete should have been made at the time of delivery.
However, it failed to make a claim on the quality of the delivered concrete at the stipulated time,
and thus, said claim is deemed to have been waived.
In this relation, the Court clarifies that the absence of the signature of Encarnacion on the second
page of the Agreement did not render these terms inoperative. This is because the first page of the
Agreement — on which the signature of Encarnacion appears — categorically provides that the
terms and conditions stipulated on the Agreement's reverse side form part of their contract and are
equally binding on them.

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Thus, by having its representative affix his signature on the first page of the Agreement and thereby
accepting Phoenix's proposed contract, ECIC likewise signified its conformity to the entirety of the
stipulated terms and conditions, including the stipulations on the Agreement's reverse side. Verily,
ECIC positively and voluntarily bound itself to these terms and conditions and cannot now claim
otherwise.
Finally, it should be noted that ECIC failed to raise the alleged defect in the delivered concrete well
within a reasonable time from its discovery of the hairline cracks, as it notified Phoenix thereof only
48 days after the last delivery date on April 29, 2009, and days after it was already notified thereof
by the City Engineer's Office. The lack of justifiable explanation for this delay all the more bolsters
the conclusion that ECIC indeed waived its right to make its claim.
In any event, the evidence on record do not support ECIC's claim that the hairline cracks that
appeared on the 3rd floor slab of the VNHS building resulted from the substandard quality of the
delivered ready-mix concrete. While it was shown that the City Engineer's Office inspected the site
and approved the structural design before the delivered concrete for the 3rd floor slab was poured,
and that the results of the test conducted by the Philippine Geoanalytics Testing Center from the
samples taken showed that the hardened concrete failed to reach the required comprehensive
strength days after the pouring, ECIC, however, failed to account for the period that intervened
from the time the delivered concrete was poured to the time the hairline cracks were observed. As
the claiming party, it was incumbent upon ECIC to prove that the hairline cracks were truly caused
by the inferior quality of the delivered concrete.
Besides, Phoenix offered a more plausible explanation, i.e., that ECIC failed to observe the proper
procedure for applying and curing the delivered concrete during the intervening period. This
resulted in what Phoenix's witness described as "plastic (cement) shrinkage caused by the rapid
evaporation of the water component and other factors."
All told, ECIC failed to convincingly prove its counterclaim against Phoenix.
5. Rescissible contracts
6. Voidable contracts
7. Unenforceable contracts

BANCO FILIPINO SAVINGS v TALA REALTY SERVICES CORPORATION

G.R. No. 158866 | September 9, 2013. PERLAS-BERNABE, J.

The Clean Hands Doctrine is used to deny equitable or legal relief to a party that has engaged in
improper conduct. The Clean Hands Doctrine will not allow the creation or the use of a juridical
relation such as a trust to subvert, directly or indirectly, the law. Neither Banco Filipino nor Tala
Realty came to court with clean hands; neither will obtain relief from the court.

As such, Banco Filipino cannot demand reconveyance of the subject properties in the present cases;
neither can any affirmative relief be accorded to one party against the other since they have
been found to have acted in pari delicto.

FACTS:

In the course of the expansion of its operations, Banco Filipino needs to acquire real properties to
open new branch sites. However, there is a restriction imposed by Sections 25(a) and 34 of RA 337,

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where it limits a bank’s real estate investments to only 50% of its capital assets. So, Banco Filipino,
through its Board of Directors, decided to “warehouse” several of its properties.

Nancy L. Ty, Tomas B. Aguirre (he endorsed his share in Tala to Remedios A. Duspasquier), and
Pedro B. Aguirre, major stockholders of Banco Filipino, organized and incorporated Tala Realty to
purchase and hold the real properties of Banco Filipino in trust.

Banco Filipino and Tala Realty soon entered into a Trust Agreement; where Banco Filipino sold
some of its properties to Tala Realty, and Tala Realty leased these properties to Banco Filipino.
However, sometime later, Tala Realty denied the Trust Agreement, asserted ownership, and
claimed full title over the properties; which prompted Banco Filipino to file 17 complaints for
reconveyance. Respondents moved for the dismissal on the grounds of forum shopping, lack of
cause of action, in pari delicto, and the unenforceability of the trust agreement.

In G.R. No. 158866, which involved 2 parcels of land in La Union, RTC-LU granted the defendants’
motion to dismiss on the ground of forum shopping; saying that all properties are subject to the
Trust Agreement. Thus, filing it in multiple courts constitute to forum shopping. Banco Filipino
countered that it is because the subject properties are in different localities and cities. On appeal,
CA affirmed with RTC-LU, finding that the reconveyance suits filed by Banco Filipino were all based
on the same Trust Agreement with Tala Realty.

In G.R. No. 181933, which involved 12 properties in Parañaque City, RTC-Parañaque denied
defendants’ motion to dismiss the complaint, finding no concurrence of the elements of litis
pendentia, and that Banco Filipino did not commit forum shopping. Nancy Ty contested to this.
However, on appeal, the CA affirmed with the trial court, saying the differences in the property
locations, as well as in the manner by which the trusts were repudiated, gave rise to a distinct cause
of action in all the reconveyance cases.

In G.R. No. 187551, which involved one property in Las Piñas City, RTC-Las Piñas granted the
defendants’ motion to dismiss; finding that all the elements of litis pendentia exists in the same case
before it. On appeal, CA dismissed the petition; not because of forum shopping, but because of lack
of cause of action. Wherein it was pronounced that the implied trust agreement between Banco
Filipino and Tala Realty was “inexistent and void for being contrary to law.”

ISSUE:

Whether or not the reconveyance complaints filed by Banco Filipino before the courts a quo can be
allowed to prosper. (NO)

RULING:

The Clean Hands Doctrine is used to deny equitable or legal relief to a party that has engaged in
improper conduct. The Clean Hands Doctrine will not allow the creation or the use of a juridical
relation such as a trust to subvert, directly or indirectly, the law. Neither Banco Filipino nor Tala
Realty came to court with clean hands; neither will obtain relief from the court.

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As such, Banco Filipino cannot demand reconveyance of the subject properties in the present
cases; neither can any affirmative relief be accorded to one party against the other since they
have been found to have acted in pari delicto.

Banco Filipino “warehoused” its branch site holding to Tala Realty to enable it to pursue its
expansion program and purchase new branch sites, and at the same time avoid the real property
holdings limit under Sections 25(a) and 34 of RA 337, or the General Banking Act, which it had
already reached.

Thus, for G.R. No. 158866 and G.R. No. 187551, wherein Banco Filipino are seeking reversal for the
CA decisions are dismissed. For G.R. No. 181933, the SC granted Nancy Ty’s petition to reverse CA’s
denial of her motions to dismiss the reconveyance cases.

8. Void or inexistent contracts

LAND BANK OF THE PHILIPPINES v. EDUARDO M. CACAYURAN

G.R. No. 191667. SECOND DIVISION. April 17, 2013. PERLAS-BERNABE, J.

Records disclose that the said loans were executed by the Municipality for the purpose of funding the
conversion of the Agoo Plaza into a commercial center pursuant to the Redevelopment Plan.
However, the conversion of the said plaza is beyond the Municipality’s jurisdiction considering the
property’s nature as one for public use and thereby, forming part of the public dominion.
Accordingly, it cannot be the object of appropriation either by the State or by private persons. Nor
can it be the subject of lease or any other contractual undertaking.

In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is contrary
to law, morals, good customs, public order or public policy is considered void and as such,
creates no rights or obligations or any juridical relations. Consequently, given the unlawful purpose
behind the Subject Loans which is to fund the commercialization of the Agoo Plaza pursuant to the
Redevelopment Plan, they are considered as ultra vires in the primary sense thus, rendering them
void and in effect, non-binding on the Municipality.

FACTS:

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

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

On March 7, 2006, the SB passed Resolution No. 58-2006, approving the construction of a
commercial center on the Plaza Lot as part of phase II of the Redevelopment Plan. To finance the
project, Mayor Eriguel was again authorized to obtain a loan from Land Bank, posting as well the
same securities as that of the First Loan.

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All previous representations and warranties of Mayor Eriguel related to the negotiation and
obtention of the new loan were ratified on September 5, 2006 through Resolution No. 128-2006. In
consequence, Land Bank granted a second loan in favor of the Municipality on October 20, 2006 in
the principal amount of P28,000,000.00 (Second Loan).

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

ISSUE:

Whether or not the Subject Loans are ultra vires. (YES)

RULING:

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

Records disclose that the said loans were executed by the Municipality for the purpose of funding
the conversion of the Agoo Plaza into a commercial center pursuant to the Redevelopment Plan.
However, the conversion of the said plaza is beyond the Municipality’s jurisdiction considering
the property’s nature as one for public use and thereby, forming part of the public dominion.
Accordingly, it cannot be the object of appropriation either by the State or by private persons.
Nor can it be the subject of lease or any other contractual undertaking.

In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is
contrary to law, morals, good customs, public order or public policy is considered void and as
such, creates no rights or obligations or any juridical relations. Consequently, given the unlawful
purpose behind the Subject Loans which is to fund the commercialization of the Agoo Plaza
pursuant to the Redevelopment Plan, they are considered as ultra vires in the primary sense thus,
rendering them void and in effect, non-binding on the Municipality.

C. Natural obligations
D. Estoppel

RURAL BANK OF CABADBARAN, INC., PETITIONER, VS. JORGITA A. MELECIO-YAP, LILIA

MELECIO PACIFICO (DECEASED, SUBSTITUTED BY HER ONLY CHILD ERLL ISAAC M. PACIFICO,
JR.), REYNALDO A. MELECIO, ROSIE MELECIO DELOSO, AND SARAH MELECIO PALMA-GIL,
RESPONDENTS.
G.R. No. 178451, July 30, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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Under Article 1431 of the Civil Code, an essential element of estoppel is that the person invoking it has
been influenced and has relied on the representations or conduct of the person sought to be estopped

FACTS:

The Melecio Heirs inherited a residential lot, ancestral house and two other structures erected
thereon, the administration and management of which were left to the care of Erna who was then
residing in their ancestral home. The Melecio Heirs purportedly executed a notarized Special Power
of Attorney (SPA) authorizing Erna to apply for a loan with RBCI and mortgage the subject
properties. Erna applied for and was granted a commercial loan, secured by a Real Estate Mortgage
over the subject properties, by RBCI amounting to 200,000.00 with 27% interest rate per annum.

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

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

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

ISSUE:

Whether or not the entire property was validly mortgaged?

RULING:

No. Erna did not validly mortgage the entire property. While Erna, as herself a co-owner, by virtue
of Article 493 of the Civil Code, had the right to mortgage or even sell her undivided interest in the
said properties, she, could not, however, dispose of or mortgage the subject properties in their
entirety without the consent of the other co-owners.

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

The forged status of the subject SPA alone is already enough for the Court to declare the real estate
mortgage contract null and void but only with respect to the shares of the other co-owners whose
consent thereto was not actually procured by Erna. Accordingly, the validity of the subject real
estate mortgage and the subsequent foreclosure proceedings therefore conducted in favor of RBCI,

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as the successor-in-interest of Erna, should be limited only to the portion which may be allotted to
it in the event of partition. Hence, Erna did not validly mortgage the entire property.

E. Trusts

WILSON GO and PETER GO –versus- THE ESTATE OF THE LATE FELISA TAMIO DE BUENA
VENTURA
G.R. No. 211972, FIRST DIVISION, July 22, 2015, PERLAS-BERNABE, J.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It
is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or implied. An express trust is
created by the intention of the trustor or of the parties, while an implied trust comes into being by
operation of law. Express trusts are created by direct and positive acts of the parties, by some writing
or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust.
From the letter executed by Felisa, it unequivocally and absolutely declared her intention of
transferring the title over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely
accommodate them in securing a loan from the GSIS. She likewise stated clearly that she was
retaining her ownership over the subject property and articulated her wish to have her heirs share
equally therein. Hence, while in the beginning, an implied trust was merely created between Felisa, as
trustor, and Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries, the execution of the
September 21, 1970 letter settled, once and for all, the nature of the trust established between them
as an express one, their true intention irrefutably extant thereon.
FACTS: In 1960, Felisa, as owner of the subject property, transferred the same to her daughter
Bella, married to Delfin, Sr., and Felimon, Sr. to assist them in procuring a loan from the GSIS. In
view thereof, her title over the property, TCT No. 45951/T-233, was cancelled and a new one, TCT
No. 49869, was issued in the names of Bella, married to Delfin, Sr., and Felimon, Sr. After it was lost,
TCT No. 49869 was reconstituted and TCT No. RT-74910 (49869) was issued in their names.
Upon Felisa's death in 1994, the Bihis Family, Felisa's other heirs who have long been occupying the
subject property, caused the annotation of their adverse claim over the same on TCT No. RT-74910
(49869). Subsequently, however, or on January 22, 1997, the said annotation was cancelled, and the
next day, the Heirs of Felimon, Sr. executed an Extrajudicial Settlement of his estate and caused its
annotation on said title. TCT No. RT-74910 (49869) was then cancelled and TCT No. N-170416 was
issued in the names of Bella, et al. Finally, by virtue of a Deed of Sale dated January 23, 1997, the
subject property was sold to Wilson and Peter, in whose names TCT No. 170475 currently exists.
Months later, or on October 17, 1997, the complaint for reconveyance and damages was instituted.
ISSUES:
1. Whether a trust was established between Felisa and Bella, Delfin,Sr., and Felimon, Sr. (YES)
2. Whether or not the action for reconveyance has prescribed. (NO)
3. Whether Wilson and Peter are purchasers in good faith. (NO)
RULING:

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1. An express trust was created.
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary. Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties, while an implied trust
comes into being by operation of law.
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or
will, or by words either expressly or impliedly evincing an intention to create a trust.
From the letter executed by Felisa, it unequivocally and absolutely declared her intention of
transferring the title over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to
merely accommodate them in securing a loan from the GSIS. She likewise stated clearly that she
was retaining her ownership over the subject property and articulated her wish to have her heirs
share equally therein. Hence, while in the beginning, an implied trust was merely created between
Felisa, as trustor, and Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries, the
execution of the September 21, 1970 letter settled, once and for all, the nature of the trust
established between them as an express one, their true intention irrefutably extant thereon.
2. Anent the issue of prescription, the Court finds that the action for reconveyance instituted by
respondents has not yet prescribed, following the jurisprudential rule that express trusts prescribe
in ten (10) years from the time the trust is repudiated.
In this case, there was a repudiation of the express trust when Bella, as the remaining trustee, sold
the subject property to Wilson and Peter on January 23, 1997. As the complaint for reconveyance
and damages was filed by respondents on October 17, 1997, or only a few months after the sale of
the subject property to Wilson and Peter, it cannot be said that the same has prescribed.
3. Wilson and Peter are not purchasers in good faith.
A purchaser in good faith is one who buys the property of another without notice that some other
person has a right to, or an interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of some other person 's claim or interest
in the property. Corollary thereto, when a piece of land is in the actual possession of persons other
than the seller, the buyer must be wary and should investigate the rights of those in possession.
Without making such inquiry, one cannot claim that he is a buyer in good faith.
The existence of an annotation on the title covering the subject property and of the occupation
thereof by individuals other than the sellers negates any presumption of good faith on the part of
Wilson and Peter when they purchased the subject property. A person who deliberately ignores a
significant fact which would create suspicion in an otherwise reasonable man is not an innocent
purchaser for value.

BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. TALA REALTY SERVICES CORPORATION,
et. al.,
GR No. 158866 | Sept. 09, 2013

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DOCTRINE OF THE CASE:
An implied trust could not have been formed between the Bank and Tala as this Court has held that
“where the purchase is made in violation of an existing statute and in evasion of its express provision,
no trust can result in favor of the party who is guilty of the fraud.

PERLAS-BERNABE, J.:
FACTS:
In view of the restriction imposed by Sections 25(a) and 3413 of Republic Act No. 337 limiting a
bank’s real estate investments to only 50% of its capital assets, Banco Filipino, decided to
“warehouse” several of its properties. Banco Filipino entered into and proceeded to implement a
certain trust agreement with Tala Realty by selling to the latter some of its properties located in
various cities and provinces nationwide. In turn, Tala Realty leased these properties to Banco
Filipino. However, Tala Realty repudiated the trust agreement, asserted ownership and claimed full
title over the properties prompting Banco Filipino to institute a total of 17 complaints for the
reconveyance of the said properties against Tala Realty and Add International.
ISSUE:
Whether the reconveyance complaints filed by Banco Filipino before the courts a quo can be
allowed to prosper.
HELD:
No.
The Court applied the earlier case of Tala Realty Services Corporation v. Banco Filipino Savings &
Mortgage Bank, docketed as G.R. No. 137533,57 wherein it declared, in no uncertain terms, that the
implied trust agreement between Banco Filipino and Tala Realty is “inexistent and void for being
contrary to law.” As such, Banco Filipino cannot demand the reconveyance of the subject properties
in the present cases; neither can any affirmative relief be accorded to one party against the other
since they have been found to have acted in pari delicto.
As admitted by the Bank, it “warehoused” its branch site holdings to Tala to enable it to pursue its
expansion program and purchase new branch sites including its main branch in Makati, and at the
same time avoid the real property holdings limit under Sections 25(a) and 34 of the General
Banking Act which it had already reached. This arrangement which the Bank claims to be an
implied trust is contrary to law.
Dictated by the principle of stare decisis et non quieta movere, which enjoins adherence to judicial
precedents, the Court therefore enforces its ruling in G.R. No. 137533, as duly applied in the
succeeding cases, i.e., G.R. Nos. 130088, 131469, 155171, 155201, and 166608; and G.R. No.188302,
as the controlling and binding doctrine in the resolution of these consolidated petitions. In view of
the nullity of the trust agreement, Banco Filipino has no cause of action against Tala Realty, thereby
validating the dismissal of the former’s reconveyance complaints filed before the courts aquo. For
these reasons, the Court denies the petitions in G.R. Nos. 158866and 187551 given that they both
seek the reversal of the CA’s Decision granting defendants’ motions to dismiss. On the contrary, the

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Court grants the petition in G.R. No. 181933 since it properly seeks to reverse the CA’s denial of
Nancy’s motions to dismiss the reconveyance cases.

VI. SALES
A. Nature and form
1. Essential requisites
2. Perfection
3. Contract of sale vs. contract to sell

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, WITH DECEASED JOSE C. ROQUE
REPRESENTED BY HIS SUBSTITUTE HEIR JOVETTE ROQUE-LIBREA, PETITIONERS, VS. MA.
PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE
PHILIPPINES (NCCP), REPRESENTED BY ITS SECRETARY GENERAL SHARON ROSE JOY RUIZ-
DUREMDES, LAND BANK OF THE PHILIPPINES (LBP), REPRESENTED BY BRANCH MANAGER
EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, IN HIS OFFICIAL CAPACITY AS REGISTER OF
DEEDS FOR RIZAL, MORONG BRANCH, AND CECILIO U. PULAN, IN HIS OFFICIAL CAPACITY AS
SHERIFF, OFFICE OF THE CLERK OF COURT, REGIONAL TRIAL COURT, BINANGONAN, RIZAL,
RESPONDENTS.
G.R. No. 193787, April 7, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

In contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of
the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the
existence of the contract of sale that the seller becomes obligated to transfer the ownership of the
thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to
transfer the ownership to the buyer, even if there is a contract to sell between them.

FACTS:

On July 21, 1977, petitioners-spouses Roque and the original owners of the then unregistered Lot
18089 – namely, Rivero, et al. executed the 1977 Deed of Conditional Sale over a 1,231-sq. m.
portion of Lot 18089 for a consideration of P30,775.00. The parties agreed that Spouses Roque shall
make an initial payment of P15,387.50 upon signing, while the remaining balance of the purchase
price shall be payable upon the registration of Lot 18089, as well as the segregation and the
concomitant issuance of a separate title over the subject portion in their names. After the deed’s
execution, Spouses Roque took possession and introduced improvements on the subject portion
which they utilized as a balut factory.

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

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

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

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

ISSUE:

Whether or not the action for reconveyance shall prosper.

RULING:

No. This case involves a contract to sell. The Court held that where the seller promises to execute
a deed of absolute sale upon the completion by the buyer of the payment of the purchase price, the
contract is only a contract to sell even if their agreement is denominated as a Deed of Conditional
Sale, as in this case. This treatment stems from the legal characterization of a contract to sell, that is,
a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds himself to sell the subject
property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such
as, the full payment of the purchase price. Elsewise stated, in a contract to sell, ownership is
retained by the vendor and is not to pass to the vendee until full payment of the purchase price.

In contracts to sell the obligation of the seller to sell becomes demandable only upon the happening
of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only
upon the existence of the contract of sale that the seller becomes obligated to transfer the
ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is
not obligated to transfer the ownership to the buyer, even if there is a contract to sell between
them.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with,
but to a third person, as in the case at bench.

In a contract to sell, there being no previous sale of the property, a third person buying such
property despite the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property. The action for reconveyance shall fail.

ACE FOODS, INC., PETITIONER, VS. MICRO PACIFIC TECHNOLOGIES CO., LTD., RESPONDENT.
G.R. No. 200602, December 11, 2013, SECOND DIVISION, PERLAS-BERNABE, J:

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or
promised. This may be gleaned from Article 1458 of the Civil Code which defines a contract of sale. A
contract of sale is classified as a consensual contract, which means that the sale is perfected by mere

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consent. No particular form is required for its validity. Upon perfection of the contract, the parties may
reciprocally demand performance, i.e., the vendee may compel transfer of ownership of the object of
the sale, and the vendor may require the vendee to pay the thing sold.

FACTS:

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

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

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

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

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

ISSUE:

Whether or not ACE Foods should pay MTCL the purchase price for the subject products.

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RULING:

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

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

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

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

B. Capacity to buy or sell

ASSOCIATED MARINE OFFICERS AND SEAMEN'S UNION OF THE PHILIPPINES PTGWO-ITF v

NORIEL DECENA
G.R. No. 178584. SECOND DIVISION. October 8, 2012. PERLAS-BERNABE, J.

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

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It is basic that a contract is what the law defines it to be, and not what it is called by the contracting
parties. The Shelter Contract Award granted to respondent expressly stipulates that "upon
completion of payment of the full payment, the UNION shall execute a Deed of Transfer and shall
cause the issuance of the corresponding Transfer Certificate of Title in favor of and in the name of the
AWARDEE."

It cannot be denied, therefore, that the parties herein entered into a contract to sell in the guise of a
reimbursement scheme requiring respondent to make monthly reimbursement payments which are,
in actuality, installment payments for the value of the subject house and lot.

FACTS:

PTGWO-ITF (petitioner) is a duly registered labor organization engaged in an on-going Shelter

Program, which offers residential lots and fully-furnished houses to its members-seafarers under a
reimbursement scheme requiring no downpayment and no interest on the principal sum
advanced for the acquisition and development of the land and the construction of the house.

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

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

ISSUE:

Whether or not the contract entered into by the parties is a contract to sell. (YES)

RULING:

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

It is basic that a contract is what the law defines it to be, and not what it is called by the contracting
parties. The Shelter Contract Award granted to respondent expressly stipulates that "upon
completion of payment of the full payment, the UNION shall execute a Deed of Transfer and
shall cause the issuance of the corresponding Transfer Certificate of Title in favor of and in the
name of the AWARDEE."

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It cannot be denied, therefore, that the parties herein entered into a contract to sell in the guise of
a reimbursement scheme requiring respondent to make monthly reimbursement payments
which are, in actuality, installment payments for the value of the subject house and lot.

However, with regard to the case of Unlawful detainer, the case will not prosper for the failure of
the petitioner to prove that the contract was rescinded in accordance with R.A. No. 6552 which
requires notarial act of rescission and refund to the buyer, which would have been the basis for the
illegality of respondents possession of the subject premises.

FREDERICK VENTURA v. HEIRS OF SPS. EUSTACIO T. ENDAYA AND TRINIDAD L. ENDAYA

G.R. No. 190016. SECOND DIVISION. October 02, 2013. PERLAS-BERNABE, J.

Spouses Endaya had no obligation to petitioners to execute a deed of sale over the subject properties. A
contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the latter upon his fulfillment of the
conditions agreed upon, i.e., the full payment of the purchase price and/or compliance with the other
obligations stated in the contract to sell.

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

FACTS:

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

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

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

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payment of the stipulated consideration, Sps. Endaya undertook to execute a final deed of sale and
transfer ownership over the same in favor of Dolores.

On November 28, 1996, Dolores’ children, Frederick Ventura, Marites Ventura-Roxas, and Philip
Ventura filed before the RTC a Complaint and, thereafter, an Amended Complaint for specific
performance, seeking to compel Sps. Endaya to execute a deed of sale over the subject properties.
They averred that due to the close friendship between their parents and Sps. Endaya, the latter did
not require the then widowed Dolores to pay the downpayment stated in the contract to sell and,
instead, allowed her to pay amounts as her means would permit. The payments were made in cash
as well as in kind, and the same were recorded by respondent Trinidad herself in a passbook given
to Dolores to evidence the receipt of said payments.

As of June 15, 1996, the total payments made by Dolores and petitioners amounted to P952,152.00,
which is more than the agreed purchase price of P347,760.00, including the 12% interest per
annum thereon computed on the outstanding balance. However, when petitioners demanded the
execution of the corresponding deed of sale, Sps. Endaya refused.

ISSUE

Whether or not Spouses Endaya should execute a deed of sale over the subject properties in favor
of petitioners. (NO)

RULING

Spouses Endaya had no obligation to petitioners to execute a deed of sale over the subject
properties. A contract to sell is defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the latter upon his
fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or
compliance with the other obligations stated in the contract to sell.

Given its contingent nature, the failure of the prospective buyer to make full payment and/or abide
by his commitments stated in the contract to sell prevents the obligation of the prospective seller to
execute the corresponding deed of sale to effect the transfer of ownership to the buyer from arising.

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

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Consequently, there lies no error on the part of the CA in reversing the RTC Decision and dismissing
petitioners’ complaint for specific performance seeking to compel respondents to execute a deed of
sale over the subject properties.

C. Effects of the contract when the thing sold has been lost
D. Obligations of the vendor
E. Obligations of the vendee
F. Breach of contract
1. Remedies
2. Recto Law and Maceda Law

OPTIMUM DEVELOPMENT BANK vs. SPOUSES BENIGNO V. JOVELLANOS and LOURDES R.

JOVELLANOS
G.R. No. 189145. SECOND DIVISION. December 4, 2013. PERLAS-BERNABE, J.

Since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the MeTC, the
Court examines Optimum’s compliance with Section 4 of RA 6552 which is the provision applicable to
buyers who have paid less than two (2) years-worth of installments. Essentially, the said provision
provides for three (3) requisites before the seller may actually cancel the subject contract: first, the
seller shall give the buyer a 60-day grace period to be reckoned from the date the installment became
due; second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial
act if the buyer fails to pay the installments due at the expiration of the said grace period; and third,
the seller may actually cancel the contract only after thirty (30) days from the buyer’s receipt of the
said notice of cancellation/demand for rescission by notarial act.

In the present case, the 60-day grace period automatically operated in favor of the buyers, Sps.
Jovellanos, and took effect from the time that the maturity dates of the installment payments lapsed.
With the said grace period having expired bereft of any installment payment on the part of Sps.
Jovellanos, Optimum then issued a notarized Notice of Delinquency and Cancellation of Contract
on April 10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell, Optimum
gave Sps. Jovellanos an additional thirty (30) days within which to settle their arrears and
reinstate the contract, or sell or assign their rights to another. It was only after the expiration of the
thirty day (30) period did Optimum treat the contract to sell as effectively cancelled – making as it did
a final demand upon Sps. Jovellanos to vacate the subject property only on May 25, 2006.

Thus, based on the foregoing, the Court finds that there was a valid and effective cancellation of the
Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos had already lost
their right to retain possession of the subject property as a consequence of such cancellation, their
refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful detainer as
properly adjudged by the MeTC.

FACTS:

On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell with Palmera Homes, Inc.
(Palmera Homes) for the purchase of a residential house and lot situated in Block 3, Lot 14, Villa
Alegria Subdivision, Caloocan City (subject property) for a total consideration of ₱1,015,000.00.
Pursuant to the contract, Sps. Jovellanos took possession of the subject property upon a down

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payment of ₱91,500.00, undertaking to pay the remaining balance of the contract price in equal
monthly installments of ₱13,107.00 for a period of 10 years starting June 12, 2005.

On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the Contract to Sell
in favor of petitioner Optimum Development Bank (Optimum) through a Deed of Assignment of
even date. On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of Contract
to Sell for Sps. Jovellanos’s failure to pay their monthly installments despite several written and
verbal notices. In a final Demand Letter dated May 25, 2006, Optimum required Sps. Jovellanos to
vacate and deliver possession of the subject property within seven (7) days which, however,
remained unheeded. Hence, Optimum filed, on November 3, 2006, a complaint for unlawful
detainer before the MeTC.

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

On appeal, the RTC affirmed the MeTC’s judgment, holding that the latter did not err in refusing to
admit Sps. Jovellanos’ s belatedly filed answer considering the mandatory period for its filing. It also
affirmed the MeTC’s finding that the action does not involve the rights of the respective parties
under the contract but merely the recovery of possession by Optimum of the subject property after
the spouses’ default. The CA reversed and set aside the RTC’s decision, ruling to dismiss the
complaint for lack of jurisdiction. It found that the controversy does not only involve the issue of
possession but also the validity of the cancellation of the Contract to Sell and the determination
of the rights of the parties thereunder as well as the governing law, among others, RA 6552.

ISSUE:

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

RULING:

Further, it is significant to note that given that the Contract to Sell in this case is one which has for
its object real property to be sold on an installment basis, the said contract is especially
governed by – and thus, must be examined under the provisions of – RA 6552, or the "Realty
Installment Buyer Protection Act", which provides for the rights of the buyer in case of his
default in the payment of succeeding installments. Known as the Maceda Law, R.A. No. 6552
recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the
right of the seller to cancel the contract upon non-payment of an installment by the buyer,
which is simply an event that prevents the obligation of the vendor to convey title from
acquiring binding force. It also provides the right of the buyer on installments in case he defaults
in the payment of succeeding installments.

Since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the MeTC,
the Court examines Optimum’s compliance with Section 4 of RA 6552 which is the provision
applicable to buyers who have paid less than two (2) years-worth of installments. Essentially, the
said provision provides for three (3) requisites before the seller may actually cancel the subject
contract: first, the seller shall give the buyer a 60-day grace period to be reckoned from the date the
installment became due; second, the seller must give the buyer a notice of cancellation/demand for

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rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said
grace period; and third, the seller may actually cancel the contract only after thirty (30) days from
the buyer’s receipt of the said notice of cancellation/demand for rescission by notarial act.

In the present case, the 60-day grace period automatically operated in favor of the buyers, Sps.
Jovellanos, and took effect from the time that the maturity dates of the installment payments
lapsed. With the said grace period having expired bereft of any installment payment on the part of
Sps. Jovellanos, Optimum then issued a notarized Notice of Delinquency and Cancellation of
Contract on April 10, 2006. Finally, in proceeding with the actual cancellation of the contract to sell,
Optimum gave Sps. Jovellanos an additional thirty (30) days within which to settle their arrears
and reinstate the contract, or sell or assign their rights to another. It was only after the expiration of
the thirty day (30) period did Optimum treat the contract to sell as effectively cancelled – making as
it did a final demand upon Sps. Jovellanos to vacate the subject property only on May 25, 2006.

Thus, based on the foregoing, the Court finds that there was a valid and effective cancellation of
the Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos had already
lost their right to retain possession of the subject property as a consequence of such cancellation,
their refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful
detainer as properly adjudged by the MeTC.

EQUITABLE SAVINGS BANK –versus- ROSALINDA C. PALCES

GR No. 214752, FIRST DIVISION. March 09, 2016, PERLAS-BERNABE, J

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

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

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

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

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

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

ISSUE:
Whether the CA correctly applied Art. 1484 by ordered petitioner to return to Palces the March
2007 payments (i.e. amount representing the latter's late installment payments). (NO)

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

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

G. Extinguishment
1. In general
2. Pacto de retro sale
3. Equitable mortgage

AURELIA GUA-AN et. Al v GERTRUDES QUIRINO

G.R. No. 198770. SECOND DIVISION. November 12, 2012. PERLAS-BERNABE, J.

A perusal of the Deed of Conditional Sale reveals the real intention of the parties not to enter into a
contract of sale but merely to secure the payment of the P40,000.00 loan of Prisco. This is evident
from the fact that the latter was given the right to repurchase the subject property even beyond the
12-year (original and extended) period, allowing in the meantime the continued possession of
Ernesto pending payment of the consideration. Under these conditions and in accordance with
Article 1602 of the Civil Code, the CA did not err in adjudging the pacto de retro sale to be in reality
an equitable mortgage.

FACTS:

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

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

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

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

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

ISSUES:

Whether or not Prisco has lost the rights over the said property and has no right to redeem the said
property. (YES)

RULING:

A perusal of the Deed of Conditional Sale reveals the real intention of the parties not to enter into a
contract of sale but merely to secure the payment of the P40,000.00 loan of Prisco. This is
evident from the fact that the latter was given the right to repurchase the subject property even
beyond the 12-year (original and extended) period, allowing in the meantime the continued
possession of Ernesto pending payment of the consideration. Under these conditions and in
accordance with Article 1602 of the Civil Code, the CA did not err in adjudging the pacto de retro
sale to be in reality an equitable mortgage.

However, contrary to the finding of the CA, the subject transaction is covered by the prohibition
under P.D. No. 27 and R.A. No. 6657 which include transfer of possession of the landholding to
the vendee a retro, Ernesto, who, not being a qualified beneficiary, remained in possession thereof
for a period of eleven (11) years.

The fact that Prisco surrendered possession and cultivation of the subject land to Ernesto, not for a
mere temporary period, but for a period of 11 years without any justifiable reason. Such act
constituted abandonment despite his avowed intent to resume possession of the land upon
payment of the loan. It is a ground for cancellation by the DARAB of an award to the agrarian
reform beneficiary. Consequently, respondent and/or Prisco's heirs had lost any right to redeem
the subject landholding.

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 H. Assignment of credits

VII. LEASE
A. General provisions

FILINVEST ALABANG v. CENTURY IRON WORKS

GR No. 213229, FIRST DIVISION, December 9, 2015, PERLAS-BERNABE, J.

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

These requisites are present in this case. As the construction of an additional scenic elevator enclosure
was covered by a valid extra work order to the subject contract, respondent is entitled to recover from
petitioner the cost of the same.

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

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

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

ISSUE
Whether the CA correctly ordered petitioner to pay the following amounts to respondent: (a)
balance of the retention fee; (b) additional deduction of P227,500.00 due to purported substandard
work of the latter; and (c) the cost of an additional scenic elevator enclosure. (YES)

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

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petitioner remit to respondent the amounts of P40,880.00 and P227,500.00 it withheld from the
latter.

In a fixed lump sum contract, the project owner agrees to pay the contractor a specified amount for
completing a scope of work involving a variety of unspecified items of work without requiring a
cost breakdown. The project owner's liability to the contractor is generally limited to what is
stipulated therein. However, it must be clarified that Article 1724 of the Civil Code does not
preclude the parties from stipulating on additional works to the project covered by said fixed lump
sum contract which would entail added liabilities on the part of the project owner provided that
there exists: (a) a written authority from the developer or project owner ordering or allowing the
written changes in work; and (b) written agreement of the parties with regard to the increase in
price or cost due to the change in work or design modification.

These requisites are present in this case. As the construction of an additional scenic elevator
enclosure was covered by a valid extra work order to the subject contract, respondent is entitled to
recover from petitioner the cost of the same. On a final note, all the amounts due to respondent
should be subject to legal interest at the rate of twelve percent (12%) per annum from extrajudicial
demand until June 30, 2013 and six percent (6%) per annum thereafter until full payment, in
accordance with recent jurisprudence.

B. Rights and obligations of lessor

C. Rights and obligations of lessee

THE PRESIDENT OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, PETITIONER, VS.
BTL CONSTRUCTION CORPORATION, RESPONDENT.

BTL CONSTRUCTION CORPORATION, PETITIONER, VS. THE PRESIDENT OF THE MANILA

MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS AND BPI-MS INSURANCE
CORPORATION, RESPONDENTS.
G.R. No. 176439 & 176718, January 15, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

FACTS:

On January 10, 2000, COJCOLDS and BTL entered into a Construction Contract (Contract) for the
latter’s construction of the former’s meetinghouse facility at Barangay Cabug, Medina, Misamis
Oriental (Medina Project). However, due to bad weather conditions, power failures, and revisions in

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the construction plans (as per Change Order Nos. 1 to 12 agreed upon by the parties), among
others, the completion date of the Medina Project was extended.

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

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

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

ISSUE:

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

RULING:

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

There is neither a written authorization nor agreement covering the additional price to be paid for
the concrete retaining wall. This confirms the CA’s finding that the construction of the perimeter
wall of the Medina Project, which is included in the original plans and specifications for the same,
already subsumes the construction of the concrete retaining wall. Accordingly, COJCOLDS should
not pay the amount of P804,460.89 claimed by BTL as additional cost for the same.

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

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 EUFROCINA NIEVES, AS REPRESENTED BY HER ATTORNEY-IN-FACT, LAZARO
VILLAROSA, JR., PETITIONER, VS. ERNESTO DULDULAO AND FELIPE PAJARILLO,
RESPONDENTS.
G.R. No. 190276, April 2, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

FACTS:

Petitioner is the owner of a piece of agricultural rice land with an area of six (6) hectares, more or
less, located at Dulong Bayan, Quezon, Nueva Ecija (subject land). Ernesto and Felipe (respondents)
are tenants and cultivators of the subject landwho are obligated to each pay leasehold rentals of 45
cavans of palay for each cropping season, one in May and the other in December.

Claiming that Ernesto and Felipe failed to pay their leasehold rentals since 1985 which had
accumulated to 446.5 and 327 cavans of palay, respectively, petitioner filed a petition on March 8,
2006 before the DARAB Office of the Provincial Adjudicator (PARAD), seeking the ejectment of
respondents from the subject land for non-payment of rentals.

Prior to the filing of the case, a mediation was conducted before the Office of the Municipal Agrarian
Reform Officer and Legal Division in 2005 where respondents admitted being in default in the
payment of leasehold rentals equivalent to 200 and 327 cavans of palay, respectively, and promised
to pay the same. Subsequently, however, in his answer to the petition, Ernesto claimed that he
merely inherited a portion of the back leasehold rentals from his deceased father, Eugenio
Duldulao, but proposed to pay the arrearages in four (4) installments beginning the dayatan
cropping season in May 2006. On the other hand, Felipe denied incurring any back leasehold
rentals, but at the same time proposed to pay whatever there may be in six (6) installments, also
beginning the dayatan cropping season in May 2006. Both respondents manifested their lack of
intention to renege on their obligations to pay the leasehold rentals due, explaining that the
supervening calamities, such as the flashfloods and typhoons that affected the area prevented them
from complying.

In a Decision dated July 6, 2006, the PARAD declared that the tenancy relations between the parties
had been severed by respondents’ failure to pay their back leasehold rentals, thereby ordering
them to vacate the subject land and fulfill their rent obligations.

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

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

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

ISSUE:

Whether or not the CA correctly reversed the DARAB’s ruling ejecting respondents from the subject
land.

RULING:

NO. The CA incorrectly reversed the DARAB’s ruling ejecting respondents from the subject land.

To eject the agricultural lessee for failure to pay the leasehold rentals, jurisprudence instructs that
the same must be willful and deliberate in order to warrant the agricultural lessee’s dispossession
of the land that he tills. In the present case, petitioner seeks the dispossession of respondents from
the subject land on the ground of non-payment of leasehold rentals based on item 6, Section 36 of
RA 3844. While respondents indeed admit that they failed to pay the full amount of their respective
leasehold rentals as they become due, they claim that their default was on account of the
debilitating effects of calamities like flashfloods and typhoons. This latter assertion is a defense
provided under the same provision which, if successfully established, allows the agricultural lessee
to retain possession of his landholding. The records of this case are, however, bereft of any showing
that the aforestated claim was substantiated by any evidence tending to prove the same. Keeping in
mind that bare allegations, unsubstantiated by evidence, are not equivalent to proof the Court
cannot therefore lend any credence to respondents’ fortuitous event defense.

Respondents’ failure to pay leasehold rentals to the landowner also appears to have been willful
and deliberate. They, in fact, do not deny – and therefore admit the landowner’s assertion that their
rental arrearages have accumulated over a considerable length of time, i.e., from 1985 to 2005 but
rely on the fortuitous event defense, which as above-mentioned, cannot herein be sustained. In the
case of Antonio v. Manahan (Antonio), the Court, notwithstanding the tenants’ failure to prove their
own fortuitous event theory, pronounced that their failure to pay the leasehold rentals was not
willful and deliberate. The records in said case showed that the landowner actually rejected the
rentals, which amounted only to 2 years-worth of arrearages, i.e., 1993 and 2001, tendered by the
tenants therein due to their supposed poor quality. This circumstance was taken by the Court
together with the fact that said tenants even exerted efforts to make up for the rejected rentals
through the payments made for the other years. In another case, i.e., Roxas v. Cabatuando (Roxas),
the Court similarly held that the tenants therein did not willfully and deliberately fail to pay their
leasehold rentals since they had serious doubts as to the legality of their contract with respect to
their non-sharing in the coconut produce, which thus prompted them to withhold their remittances
in good faith. In contrast to Antonio and Roxas, the landowner in this case never rejected any rental
payment duly tendered by respondents or their predecessors-in-interest. Neither was the legality
of their agricultural leasehold contract with the landowner ever put into issue so as to intimate that
they merely withheld their remittances in good faith. Thus, with the fortuitous event defense taken
out of the equation, and considering the examples in Antonio and Roxas whereby the elements of
willfulness and deliberateness were not found to have been established, the Court is impelled to
agree with the DARAB that respondents herein willfully and deliberately chose not to pay their
leasehold rentals to the landowner when they fell due. The term "willful" means "voluntary and
intentional, but not necessarily malicious," while the term "deliberate" means that the act or
omission is "intentional," "premeditated" or "fully considered." These qualities the landowner

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herein had successfully established in relation to respondents’ default in this case. Accordingly,
their dispossession from the subject land is warranted under the law.

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

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

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

VIII. PARTNERSHIP
A. General provisions
B. Obligations of the partners
C. Dissolution and winding up D. Limited partnership

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IX. AGENCY
A. Nature, form, and kinds
B. Obligations of the agent
C. Obligations of the principal
D. Modes of extinguishment

X. CREDIT TRANSACTIONS
A. Loan

NYMPHA S. ODIAMAR, Petitioner, -versus- LINDA ODIAMAR VALENCIA, Respondent.

G.R. No. 213582, SECOND DIVISION, September 12, 2018, PERLAS-BERNABE, J.

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 12% per annum but will now be 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 12% per annum legal interest shall apply only until June 30,
2013. Come July 1, 2013 the new rate of 6% per annum shall be the prevailing rate of
interest when applicable.
Applying the foregoing parameters to this case, petitioner's loan obligation to respondent shall be
subjected to compensatory interest at the legal rate of 12% per annum from the date of judicial
demand, i.e., August 20, 2003, until June 30, 2013, and thereafter at the legal rate of 6% per annum
from July 1, 2013 until finality of this ruling. Moreover, all monetary awards due to respondent shall
earn legal interest of 6% per annum from finality of this ruling until fully paid.

FACTS:

The court ordered petitioner Nympha S. Odiamar to pay respondent the amount of P1,010,049.00
representing the remaining balance of petitioner's debt to the latter in the original amount of
P1,400,000.00. In said motion, respondent prays for the imposition of legal interest on the
monetary award due her. She likewise insists that petitioner's loan obligation to her is not just
P1,400,000.00 but P2,100,000.00 and, as such, she should be made to pay the latter amount.

ISSUE:

Whether a prayer for the imposition of legal interest on the monetary award due is proper. (YES)

RULING:

The SC notes that there are two (2) types of interest, namely, monetary interest and compensatory
interest. Monetary interest is the compensation fixed by the parties for the use or forbearance of
money. On the other hand, compensatory interest is that imposed by law or by the courts as penalty
or indemnity for damages. In other words, the right to recover interest arises only either by virtue
of a contract (monetary interest) or as damages for the delay or failure to pay the principal loan on
which the interest is demanded (compensatory interest).

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Anent monetary interest, it is an elementary rule that no interest shall be due unless it has been
expressly stipulated in writing. In this case, no monetary interest may be imposed on the loan
obligation, considering that there was no written agreement expressly providing for such.
This notwithstanding, such loan obligation may still be subjected to compensatory interest.
Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that
would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or
credits and the rate allowed in judgments shall no longer be 12% per annum but will now be 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 12% per annum legal interest
shall apply only until June 30, 2013. Come July 1, 2013 the new rate of 6% per annum shall
be the prevailing rate of interest when applicable.
Applying the foregoing parameters to this case, petitioner's loan obligation to respondent shall be
subjected to compensatory interest at the legal rate of 12% per annum from the date of judicial
demand, i.e., August 20, 2003, until June 30, 2013, and thereafter at the legal rate of 6% per annum
from July 1, 2013 until finality of this ruling. Moreover, all monetary awards due to respondent shall
earn legal interest of 6% per annum from finality of this ruling until fully paid.

CATALINA F. ISLA, ELIZABETH ISLA, and GILBERT F. ISLA, Petitioners, -versus- GENEVIRAP.
ESTORGA, Respondent.
G.R. No. 233974, SECOND DIVISION, July 02, 2018, PERLAS-BERNABE, J.

Anent monetary interest, the parties are free to stipulate their preferred rate. However, courts are
allowed to equitably temper interest rates that are found to be excessive, iniquitous, unconscionable,
and/or exorbitant, such as stipulated interest rates of three percent (3%) per month or higher. In such
instances, it is well to clarify that only the unconscionable interest rate is nullified and deemed not
written in the contract; whereas the parties' agreement on the payment of interest on the principal
loan obligation subsists. It is as if the parties failed to specify the interest rate to be imposed on the
principal amount, in which case the legal rate of interest prevailing at the time the agreement was
entered into is applied by the Court. This is because, according to jurisprudence, the legal rate of
interest is the presumptive reasonable compensation for borrowed money.
In this case, petitioners and respondent entered into a loan obligation and clearly stipulated for the
payment of monetary interest. However, the stipulated interest of ten percent (10%) per month was
found to be unconscionable, and thus, the courts a quo struck down the same and pegged a new
monetary interest of twelve percent (12%) per annum, which was the prevailing legal rate of interest
for loans and forbearances of money at the time the loan was contracted on December 6, 2004.
FACTS:

Petitioners Isla obtained a loan in the amount of P100,000 from respondent, payable anytime from
six months to one year and subject to interest at the rate of ten percent (10%) per month, payable
on or before the end of each month. When petitioners failed to pay the said loan, respondent sought
assistance from the barangay, and consequently, a Kasulatan ng Pautang dated December 8, 2005
was executed. Petitioners, however, failed to comply with its terms, prompting respondent to send
a demand letter. Once more, petitioners failed to comply with the demand, causing respondent to
file a Petition for Judicial Foreclosure against them before the RTC.

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For their part, petitioners maintained that the stipulated interest of ten percent (10%) per month
was exorbitant and grossly unconscionable. The RTC directed petitioners to pay respondent the
amounts of P100,000.00 with twelve percent (12%) interest per annum from December 2007 until
fully paid and P20,000.00 as attorney's fees, which the CA affirmed with modification, ordering
petitioners to pay respondent the following sums: (a) P100,000 representing the principal of the
loan obligation; (b) an amount equivalent to 12% of P100,000 computed per year from November
16, 2006 until full payment, representing interest on the loan; (c) an amount equivalent to 6% of
the sums due in (a) and (b) per annum computed from the finality of the CA Decision until full
payment, representing legal interest; and (d) P20,000 as attorney's fees. Hence, the petition.

ISSUE:

Whether the 12% per annum interest imposed by the Court is valid. (YES)

RULING:

Case law states that there are two types of interest, namely, monetary interest and compensatory
interest. Monetary interest is the compensation fixed by the parties for the use or forbearance of
money. On the other hand, compensatory interest is that imposed by law or by the courts as penalty
or indemnity for damages. Accordingly, the right to recover interest arises only either by virtue of a
contract (monetary interest) or as damages for delay or failure to pay the principal loan on which
the interest is demanded (compensatory interest).
Anent monetary interest, the parties are free to stipulate their preferred rate. However, courts are
allowed to equitably temper interest rates that are found to be excessive, iniquitous,
unconscionable, and/or exorbitant, such as stipulated interest rates of three percent (3%) per
month or higher. In such instances, it is well to clarify that only the unconscionable interest rate is
nullified and deemed not written in the contract; whereas the parties' agreement on the payment of
interest on the principal loan obligation subsists. It is as if the parties failed to specify the interest
rate to be imposed on the principal amount, in which case the legal rate of interest prevailing at the
time the agreement was entered into is applied by the Court. This is because, according to
jurisprudence, the legal rate of interest is the presumptive reasonable compensation for borrowed
money.
In this case, petitioners and respondent entered into a loan obligation and clearly stipulated for the
payment of monetary interest. However, the stipulated interest of ten percent (10%) per month
was found to be unconscionable, and thus, the courts a quo struck down the same and pegged a new
monetary interest of twelve percent (12%) per annum, which was the prevailing legal rate of
interest for loans and forbearances of money at the time the loan was contracted on December 6,
2004.

WT CONSTRUCTION, INC. –versus- THE PROVINCE OF CEBU

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

In Estores v. Supangan, the Court explained that forbearance of money, goods, or credit refers to
arrangements other than loan agreements where a person acquiesces to the temporary use of his
money, goods or credits pending the happening of certain events or fulfilment of certain conditions
such that if these conditions are breached, the said person is entitled not only to the return of the

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principal amount given, but also to compensation for the use of his money equivalent to the legal
interest since the use or deprivation of funds is akin to a loan.
Applying the standards to the case at hand, the Court finds that the liability of the Province of Cebu to
WTCI is not in the nature of a forbearance of money as it does not involve an acquiescence to the
temporary use of WTCI's money, goods or credits. Rather, this case involves WTCI's performance of a
particular service, i.e., the performance of additional works on CICC, consisting of site development,
additional structural, architectural, plumbing, and electrical works thereon.
FACTS:
Province of Cebu was chosen by former President Gloria Macapagal-Arroyo to host the
12th Association of Southeast Asian Nations (ASEAN) Summit. To cater to the event, it decided to
construct the Cebu International Convention Center (CICC or the project) at the New Mandaue
Reclamation Area, Mandaue City, Cebu, which would serve as venue for the ASEAN Summit.
Province of Cebu conducted a public bidding for the project and WTCI emerged as the winning
bidder for the construction of Phase I. After completing Phase I and receiving payment therefor,
WTCI again won the bidding for Phase II of the project involving the adjacent works on CICC.
As Phase II neared completion, the Province of Cebu caused WTCI to perform additional works on
the project which included site development, and additional structural, architectural, electric, and
plumbing works (additional works). Cognizant of the need to complete the project in time for the
ASEAN Summit, and with the repeated assurances that it would be promptly paid, WTCI agreed to
perform the additional works notwithstanding the lack of public bidding. Weeks before the
scheduled ASEAN Summit, WTCI completed the project, including the additional works and,
accordingly, demanded payment therefor.
In a letter dated February 8, 2007, WTCI billed the Province of Cebu the amount of P175,951,478.69
corresponding to the added cost for the site development and extended structural and architectural
works. In a separate letter dated February 12, 2007, WTCI billed the Province of Cebu the amount
of P85,266,407.97 representing the cost for the additional electrical and plumbing works. The
Province of Cebu, however, refused to pay, thereby prompting WTCI to send a Final Billing dated
February 21, 2007 where it demanded payment of the aggregate sum of P261,217,886.66.

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

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

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2. Whether or not the interest due should be computed from the time extrajudicial demand was
made. (YES)
RULING:
1. There is no question that the present case does not involve an obligation arising from a loan;
what is at issue is whether the liability of the Province of Cebu involves a forbearance of money,
based on WTCI's claim that it merely advanced the cost of the additional works. In Sunga-Chan v.
CA, the Court characterized a transaction involving forbearance of money as follows:
The term "forbearance," within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable.
In Estores v. Supangan, the Court explained that forbearance of money, goods, or credit refers to
arrangements other than loan agreements where a person acquiesces to the temporary use of his
money, goods or credits pending the happening of certain events or fulfilment of certain conditions
such that if these conditions are breached, the said person is entitled not only to the return of the
principal amount given, but also to compensation for the use of his money equivalent to the legal
interest since the use or deprivation of funds is akin to a loan.

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

Verily, the Court has repeatedly recognized that liabilities arising from construction contracts do
not partake of loans or forbearance of money but are in the nature of contracts of service. In Federal
Builders, Inc. v. Foundation Specialists, Inc., the Court ruled that the liability arising from the non-
payment for the construction works, specifically the construction of a diaphragm wall, capping
beam, and guide walls of the Trafalgar Plaza in Makati City, do not partake of a loan or forbearance
of money but is more in the nature of a contract of service. The Court, therefore, sustains the CA's
ruling that the rate of legal interest imposable on the liability of the Province of Cebu to WTCI is 6%
per annum, in accordance with the guidelines laid down in Eastern Shipping Lines, Inc. v. Court of
Appeals.
The foregoing guidelines have been updated in Nacar v. Gallery Frames (Nacar), pursuant to Bangko
Sentral ng Pilipinas (BSP) Circular No. 799, series of 2013, which reduced the rate of legal interest
for loans or transactions involving forbearance of money, goods, or credit from 12% to 6% per
annum. Nevertheless, the rate of legal interest for obligations not constituting loans or forbearance
such as the one subject of this case remains unchanged at 6% per annum.
2. Court finds merit in WTCI's argument that the same should be reckoned from the time WTCI
made the extrajudicial demand for the payment of the principal, i.e., upon receipt of the Province of
Cebu of WTCI's February 8, 2007 and February 12, 2007 letters demanding payment for the
additional structural and architectural works, and additional electrical and plumbing works,
respectively.
The Court observes, however, that WTCI neither appealed from nor sought a reconsideration of
the May 20, 2009 Judgment of the RTC which awarded interest to it computed from the time of

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the filing of the complaint on January 22, 2008. Accordingly, the RTC's determination of the
interest's reckoning point had already become final as against WTCI since it was not one of the
assigned errors considered on appeal. It is settled that a decision becomes final as against a party
who does not appeal the same. Consequently, the present petition of WTCI questioning the RTC's
determination on the reckoning point of the legal interest awarded can no longer be given due
course. The Court is, therefore, constrained to uphold the rulings of the RTC and the CA that the
legal interest shall be computed from the time of the filing of the complaint.
DOLORES DIAZ –versus- PEOPLE
GR No. 208113, FIRST DIVISION, December 2, 2015, PERLAS-BERNABE, J.

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

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

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

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

ISSUE:
Whether the CA committed reversible error in finding petitioner civilly liable to respondent. (NO)

RULING:
The extinction of the penal action does not carry with it the extinction of the civil liability where the
acquittal is based on reasonable doubt as only preponderance of evidence, or "greater weight of the
credible evidence," is required. Thus, an accused acquitted of estafa may still be held civilly liable
where the facts established by the evidence so warrant, as in this case.

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

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

LAND BANK OF PHILIPPINES –versus- EDGARDO L. SANTOS

GR No. 213863, FIRST DIVISION, January 27, 2016, PERLAS-BERNABE, J.

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

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

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

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

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

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ISSUE:
Whether the CA erred in reckoning the award of twelve percent (12%) interest from January 1,
2010 until full payment of the just compensation (YES)

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

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

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

B. Deposit
C. Guaranty and Suretyship

TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES

(FORMERLY PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION.), PETITIONER, VS. ASIA PACES CORPORATION, PACES
INDUSTRIAL CORPORATION, NICOLAS C. BALDERRAMA, SIDDCOR INSURANCE
CORPORATION (NOW MEGA PACIFIC INSURANCE CORPORATION), PHILIPPINE
PHOENIX SURETY AND INSURANCE, INC., PARAMOUNT INSURANCE
CORPORATION, AND FORTUNE LIFE AND GENERAL INSURANCE COMPANY,
RESPONDENTS.
G.R. No. 187403, February 12, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

FACTS:

Asia Paces Corporation (ASPAC) and Paces Industrial Corporation (PICO) entered into a sub-
contracting agreement with the Electrical Projects Company of Libya (ELPCO for the construction
and erection of a double circuit bundle phase conductor transmission line in the country of Libya.
To finance its working capital requirements, ASPAC obtained loans from foreign banks Banque
Indosuez and PCI Capital (Hong Kong) Limited (PCI Capital) which were secured by several Letters

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of Guarantee issued by Trade and Investment Development Corporation of the Philippines
(TIDCORP), then Philippine Export and Foreign Loan Guarantee Corp. Under the Letters of
Guarantee, TIDCORP irrevocably and unconditionally guaranteed full payment of ASPAC’s loan
obligations to Banque Indosuez and PCI Capital in the event of default by the latter.

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

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

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

ISSUE:

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

RULING:

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

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respective coverage periods and amounts. No payment extension was, however, granted by
TIDCORP in favor of ASPAC in this regard; hence, Article 2079 of the Civil Code should not be
applied with respect to the bonding companies’ liabilities to TIDCORP under the Surety Bonds.

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

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

CENTENNIAL GUARANTEE ASSURANCE CORPORATION, PETITIONER, VS. UNIVERSAL

MOTORS CORPORATION, RODRIGO T. JANEO, JR., GERARDO GELLE, NISSAN CAGAYAN DE ORO
DISTRIBUTORS, INC., JEFFERSON U. ROLIDA, AND PETER YAP, RESPONDENTS.
G.R. 189358, October 8, 2014, FIRST DIVISION, PERLAS-BERNABE, J:

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

FACTS: The instant petition originated from a Complaint for Breach of Contract with Damages and
Prayer for Preliminary Injunction and Temporary Restraining Order filed by Nissan Specialist Sales
Corporation (NSSC) and its President and General Manager, Reynaldo A. Orimaco (Orimaco), against
herein respondents Universal Motors Corporation (UMC), Rodrigo T. Janeo, Jr. (Janeo, Jr.), Gerardo
Gelle (Gelle), Nissan Cagayan de Oro Distributors, Inc. (NCOD), Jefferson U. Rolida (Rolida), and
Peter Yap (Yap). The case was raffled to the RTC and docketed as Civil Case No. 2002-058.6.
The temporary restraining order (TRO) prayed for was eventually issued by the RTC upon the
posting by NSSC and Orimaco of a P1,000,000.00 injunction bond issued by their surety, CGAC. The
TRO enjoined respondents UMC, Rolida, Gelle, Janeo, Jr., NCOD, and Yap (respondents) from selling,
dealing, and marketing all models of motor vehicles and spare parts of Nissan, and from terminating

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the dealer agreement between UMC and NSSC and restrained UMC from supplying and doing
trading transactions with NCOD, which, in turn, was enjoined from entering and doing business on
Nissan Products within the dealership territory of NSSC as defined in the Dealer Agreement. The
TRO was eventually converted into a writ of preliminary injunction.
Respondents filed a petition for certiorari and prohibition before the CA, docketed as CA-G.R. SP No.
70236, to assail the issuance of the aforesaid injunctive writ. The CA rendered a Decision holding
that the RTC committed grave abuse of discretion in issuing the writ absent a clear legal right
thereto on the part of NSSC and Orimaco. Consequently, the Writ of Preliminary Injunction issued by
the RTC was ordered dissolved. Respondents filed an application for damages against the injunction
bond issued by CGAC in the amount of P1,000,000.00.
The RTC rendered a Decision dismissing the complaint for breach of contract with damages for lack
of merit. Upon respondents' motion, the RTC granted Execution Pending Appeal. It ruled that there
exists good reasons to justify the immediate execution of the Decision, namely: (a) that NSSC is in
imminent danger of insolvency being admittedly in a state of rehabilitation under the supervision of
the Regional Trial Court of Misamis Oriental, Branch 40 through Special Proceeding No. 2002-095;
(b) that it has ceased its business operation as the authorized dealer of Nissan Motor Philippines,
Inc.; (c) that Orimaco, NSSC's President and General Manager, has migrated abroad with his family;
and (d) that NSSC failed to file the necessary supersedeas bond to forestall the immediate execution
of the Decision pending appeal. The RTC thereupon issued the corresponding writ.
The CA affirmed in part the assailed order by allowing the execution pending appeal of the RTC's
October 31, 2007 Decision but limiting the amount of CGAC's liability to only P1,000,000.00.
ISSUES:
(a) whether or not good reasons exist to justify execution pending appeal against CGAC which is a
mere surety; and
(b) whether or not CGAC’s liability on the bond should be limited to P500,000.00.
HELD:
(a) Yes. That CGAC’s financial standing differs from that of NSSC does not negate the order of
execution pending appeal. As the latter’s surety, CGAC is considered by law as being the same party
as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their
liabilities are interwoven as to be inseparable. Verily, in a contract of suretyship, one lends his credit
by joining in the principal debtor’s obligation so as to render himself directly and primarily
responsible with him, and without reference to the solvency of the principal. Thus, execution
pending appeal against NSSC means that the same course of action is warranted against its surety,
CGAC. The same reason stands for CGAC’s other principal, Orimaco, who was determined to have
permanently left the country with his family to evade execution of any judgment against him.
(b) No. The Court resolves that CGAC’s lability should as the CA correctly ruled be confined to the
amount of P1,000,000.00, and not P500,000.00 as the latter purports.
Section 4(b), Rule 58 of the Rules provides that the injunction bond is answerable for all damages
that may be occasioned by the improper issuance of a writ of preliminary injunction.

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 D. Antichresis

ANICETO BANGIS SUBSTITUTED BY HIS HEIRS v. ADOLFO

GR No. 190875. THIRD DIVISION. June 13, 2012. PERLAS-BERNABE, J.

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

In this case, the Heirs of Adolfo were indisputably unable to produce any document in support of
their claim that the contract between Adolfo and Bangis was an antichresis, hence, the CA properly
held that no such relationship existed between the parties.

FACTS:

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

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

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

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

ISSUE

Whether or not the transaction between the parties was one of mortgage or antichresis. (NO)

RULING

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

In this case, the Heirs of Adolfo were indisputably unable to produce any document in support of
their claim that the contract between Adolfo and Bangis was an antichresis, hence, the CA properly
held that no such relationship existed between the parties.

On the other hand, the Heirs of Bangis presented an Extra-Judicial Settlement with Absolute Deed of
Sale to justify their claimed ownership and possession of the subject land. However,
notwithstanding that the subject of inquiry is the very contents of the said document, only its
photocopy was presented at the trial without providing sufficient justification for the production of
secondary evidence, in violation of the best evidence rule embodied under Section 3 in relation to
Section 5 of Rule 130 of the Rules of Court.

In sum, the Heirs of Bangis failed to establish the existence and due execution of the subject deed on
which their claim of ownership was founded. Consequently, the RTC and CA were correct in
affording no probative value to the said document.

E. Real estate mortgage

PHILIPPINE BANKING CORPORATION v ARTURO DY et al.

G.R. No. 183774|November 14, 2012. PERLAS-BERNABE, J.

The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with property
covered by a Torrens Certificate of Title are not required to go beyond what appears on the face of
the title. In the case of banks and other financial institutions, however, greater care and due
diligence are required since they are imbued with public interest, failing which renders the
mortgagees in bad faith.

In this case, while Philbank failed to exercise greater care in conducting the ocular inspection of
the properties offered for mortgage, its omission did not prejudice any innocent third parties. In
particular, the buyer did not pursue her cause and abandoned her claim on the property.

FACTS:

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

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

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the filing of the Complaint for annulment of certificate of title, specific performance and/or
reconveyance with damages against Sps. Delgado, the Dys and Philbank.

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

For their part Dys denied knowledge of the sale between the buyer and Sps Delgado and contended
that they had validly acquired the said property. On the other hand, the Phil Bank claimed that it is
an innocent mortgagee.

ISSUE:

Whether or not Phil Bank is a mortgagee in good faith. (YES)

RULING:

The doctrine of "mortgagee in good faith" is based on the rule that all persons dealing with property
covered by a Torrens Certificate of Title are not required to go beyond what appears on the face
of the title. In the case of banks and other financial institutions, however, greater care and due
diligence are required since they are imbued with public interest, failing which renders the
mortgagees in bad faith.

Thus, before approving a loan application, it is a standard operating practice for these institutions
to conduct an ocular inspection of the property offered for mortgage and to verify the
genuineness of the title to determine the real owner(s) thereof.

In this case, while Philbank failed to exercise greater care in conducting the ocular inspection
of the properties offered for mortgage, its omission did not prejudice any innocent third parties.
In particular, the buyer did not pursue her cause and abandoned her claim on the property.

On the other hand, Sps. Delgado were parties to the simulated sale in favor of the Dys which was
intended to mislead Philbank into granting the loan application. Thus, no amount of diligence in
the conduct of the ocular inspection could have led to the discovery of the complicity between
the ostensible mortgagors (the Dys) and the true owners (Sps. Delgado).

RURAL BANK OF STA. BARBARA, INC. v. GERRY CENTENO

GR No. 200667. SECOND DIVISION. March 11, 2013. PERLAS-BERNABE, J.

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

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

FACTS:

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

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

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

ISSUE

Whether or not Rural Bank of Sta. Barbara, Inc. is entitled to a writ of possession over the subject
lots. (YES)

RULING

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

Section 33, Rule 39 of the Rules of Court provides that “upon the expiration of the right of
redemption, the purchaser or redemptioner shall be substituted to and acquire all the rights, title,
interest and claim of the judgment obligor to the property as of the time of the levy. The
possession of the property shall be given to the purchaser or last redemptioner by the same

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officer unless a third party is actually holding the property adversely to the judgment
obligor.”

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

HEIRS OF LATE SPS. FLAVIANO MAGLASANG AND SALUD ADAZA-MAGLASANG v. MANILA

BANKING CORPORATION
GR No. 171206. SECOND DIVISION. September 23, 2013. PERLAS-BERNABE, J.

Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured creditor
has three remedies/options that he may alternatively adopt for the satisfaction of his indebtedness.
In particular, he may choose to: (a) waive the mortgage and claim the entire debt from the estate
of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and prove the
deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other security and
foreclose the same before it is barred by prescription, without the right to file a claim for any
deficiency. It must, however, be emphasized that these remedies are distinct, independent and
mutually exclusive from each other; thus, the election of one effectively bars the exercise of the
others.

FACTS:

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

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

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

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

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

ISSUE:

Whether or not the award of the deficiency amount in favor of respondent proper. (NO)

RULING:

Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that the secured
creditor has three remedies/options that he may alternatively adopt for the satisfaction of his
indebtedness. In particular, he may choose to: (a) waive the mortgage and claim the entire debt
from the estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and
prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or other
security and foreclose the same before it is barred by prescription, without the right to file a claim
for any deficiency. It must, however, be emphasized that these remedies are distinct, independent
and mutually exclusive from each other; thus, the election of one effectively bars the exercise of
the others.

With respect to real properties, the Court in Bank of America v. American Realty Corporation
pronounced:

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative
and not cumulative. Notably, an election of one remedy operates as a waiver of the other.
For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or
upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the
provision of Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure,
such remedy is deemed elected by the mortgage creditor upon filing of the petition not with
any court of justice but with the Office of the Sheriff of the province where the sale is to be
made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118.

HEIRS OF JOSE PEÑAFLOR, NAMELY: JOSE PEÑAFLOR, JR. and VIRGINIA P. AGATEP,
REPRESENTED BY JESSICA P. AGATEP, Petitioners, -versus- HEIRS OF ARTEMIO AND LYDIA
DELA CRUZ, NAMELY: MARILOU, JULIET, ROMEO, RYAN, and ARIEL, ALL SURNAMED DELA
CRUZ, Respondents.
G.R. No. 197797, FIRST DIVISION, August 09, 2017, PERLAS-BERNABE, J.

As a final word, it should be clarified that the purpose of a petition for the issuance of a writ of
possession under Act No. 3135, as amended by Act No. 4118, is to expeditiously accord the mortgagee
who has already shown a prima facie right of ownership over the subject property (based on his

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consolidated title over the same) his incidental right to possess the foreclosed property. To reiterate, "
[p]ossession being an essential right of the owner with which he is able to exercise the other attendant
rights of ownership, after consolidation of title[,] the purchaser in a foreclosure sale may demand
possession as a matter of right."

Thus, it is only upon a credible showing by a third party claimant of his independent right over the
foreclosed property that the law's prima facie deference to the mortgagee's consolidated title should
not prevail. Verily, a mere claim of ownership would not suffice. As jurisprudence prescribes, the
demonstration by the third party-claimant should be made within the context of an adversarial
hearing, where the basic principles of Evidence and Civil Procedure ought to be followed, such as: (1) it
is the claimant who has the burden of proving his claim; (2) the claim must be established through a
preponderance of evidence; and (3) evidence not presented or formally offered cannot be admitted
against the opposing party. In this case, none of these principles were followed for the CA considered
evidence that were not only submitted in a totally different case against an entirely different party, but
are also innately inadequate to — at least — prima facie show the source of the third party claimant's
independent title, all to the detriment of the mortgagee who had already consolidated his title to the
contested property.

FACTS:

Respondents are the successors-in-interest of the late Artemio dela Cruz (Artemio), who is the son
of Nicolasa dela Cruz, the original owner of a parcel of land situated at No. 11, Ifugao St., Brgy.
Barretto, Olongapo City, including a two-storey building erected thereon (subject property).

On April 15, 1991, Nicolasa authorized her daughter, Carmelita C. Guanga (Carmelita), Artemio's
sister, to mortgage the subject property to Jose R. Peñaor (Peñaor), the predecessor-in-interest of
herein petitioners, Jose Peñaor, Jr. and Virginia P. Agatep (represented by Jessica P. Agatep;
collectively, petitioners) in order to secure a loan in the amount of P112,000.00. As Nicolasa failed
to settle her loan obligation when it fell due, Peñaor led an application for extra-judicial foreclosure
of mortgage before the Regional Trial Court of Olongapo City, Branch 72 (RTC), docketed as Case
No. 07-0-91. After the requirements of posting, notices, and publication were complied with, the
subject property was sold at a public auction, where Peñaor emerged as the highest bidder. A
Certificate of Sale was thus issued in his favor. The period of redemption expired without the
subject property being redeemed; hence, a Final Bill of Sale was issued and registered in Peñaor's
name. Thereafter, the latter executed an Affidavit of Consolidation of Ownership. This
notwithstanding, Nicolasa persisted in her occupancy of the subject property and refused to deliver
possession to Peñaflor.

ISSUE:

Whether the Writ of Possession and Notice to Vacate issued by the RTC is valid. (YES)

RULING:

"It is well-settled that the purchaser in an extrajudicial foreclosure of real property becomes the
absolute owner of the property if no redemption is made within one [(1)] year from the registration
of the certificate of sale by those entitled to redeem. As absolute owner, he is entitled to all the

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rights of ownership over a property recognized in Article 428 of the New Civil Code, not least of
which is possession, or jus possidendi[.]"
In Acap v. CA (Acap) it was ruled that "[u]nder Article 712 of the Civil Code, the modes of acquiring
ownership are generally classified into two (2) classes, namely, the original mode (i.e., through
occupation, acquisitive prescription, law or intellectual creation) and the derivative mode (i.e.,
through succession mortis causa or tradition as a result of certain contracts, such as sale, barter,
donation, assignment or mutuum).
By its terms, the May 3, 1989 Waiver cannot be classified as any of these kinds of contracts from
which Artemio could derive ownership of the subject property. It cannot be classified as a sale
(because there is no price certain in money or its equivalent); as a barter (because of the lack of any
other thing given as consideration); a donation (because of the lack of animus donandi and even a
formal acceptance); an assignment (because of the lack of price); and/or a mutuum (because it is
not a loan). Neither can it be considered as an assignment either by onerous or gratuitous title so as
to conclude that Nicolasa had already lost her right to possess the subject property to Artemio prior
to its mortgage.
Taken together, these events would show that: (a) Artemio's claim over the subject property is
riddled with material inconsistencies; and (b) Nicolasa's children (among others, Artemio) appear
to have been taking several steps to prevent Peñaor from taking possession of the subject property
and defeating his consolidated ownership rights thereto, thus further casting doubt on Artemio's
claim of ownership. In fact, it deserves mentioning that Artemio led the ejectment suit in Civil Case
No. 4065 only in April 1998, or seven (7) long years after the property had already been mortgaged
to Peñaor in April 1991; thus, it is equally doubtful that he even had possession of the subject
property at the time it was mortgaged to Peñaor. In addition, the RTC had already granted the
petition for the issuance of writ of possession in favor of Peñaor on November 19, 1993, or almost
five (5) years prior to the ling of the ejectment suit in April 1998, which decision therein
respondents. Nicolasa and Carmelita did not appeal.
Hence, for all these reasons, Artemio cannot be considered as a "third party who is actually holding
the property adversely to the judgment obligor," i.e., Nicolasa, so as to defeat Peñaor's right to
possess the subject property, which is but an incident to the consolidation of his ownership over
the same.
As a final word, it should be clarified that the purpose of a petition for the issuance of a writ of
possession under Act No. 3135, as amended by Act No. 4118, is to expeditiously accord the
mortgagee who has already shown a prima facie right of ownership over the subject property
(based on his consolidated title over the same) his incidental right to possess the foreclosed
property. To reiterate, " [p]ossession being an essential right of the owner with which he is able to
exercise the other attendant rights of ownership, after consolidation of title[,] the purchaser in a
foreclosure sale may demand possession as a matter of right."
Thus, it is only upon a credible showing by a third party claimant of his independent right
over the foreclosed property that the law's prima facie deference to the mortgagee's
consolidated title should not prevail. Verily, a mere claim of ownership would not suffice. As
jurisprudence prescribes, the demonstration by the third party-claimant should be made
within the context of an adversarial hearing, where the basic principles of Evidence and
Civil Procedure ought to be followed, such as: (1) it is the claimant who has the burden of
proving his claim; (2) the claim must be established through a preponderance of evidence;
and (3) evidence not presented or formally offered cannot be admitted against the opposing

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 party. In this case, none of these principles were followed for the CA considered evidence
that were not only submitted in a totally different case against an entirely different party,
but are also innately inadequate to — at least — prima facie show the source of the third
party claimant's independent title, all to the detriment of the mortgagee who had already
consolidated his title to the contested property.

XI. LAND TITLES AND DEEDS

A. Torrens system; general principles

LAURA E. PARAGUYA vs. SPOUSES ALMA ESCUREL-CRUCILLO and EMETRIO CRUCILLO,* and
the REGISTER OF DEEDS OF SORSOGON
G.R. No. 200265. SECOND DIVISION. December 2, 2013. PERLAS-BERNABE, J.

Even if the barring effect of Section 32 and the prescriptive period for reconveyance are discounted,
Paraguya’s complaint for annulment of title should be dismissed altogether since she merely relied on
the titulo posesorio issued in favor Estabillo sometime in 1983 or 1985. Based on Section 1 of PD 892,
entitled "Discontinuance of the Spanish Mortgage System of Registration and of the Use of Spanish
Titles as Evidence in Land Registration Proceedings," Spanish titles can no longer be used as
evidence of ownership after six (6) months from the effectivity of the law, or starting August 16,
1976. Hence, since Paraguya only presented the titulo posesorio during the pendency of the instant
case, or during the 1990’s onwards, the CA was correct in not giving any credence to it at all.

FACTS:

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

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

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

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

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

ISSUE:

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

RULING:

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

In this relation, Section 32 of PD 1529 provides that the period to contest a decree of registration
shall be one (1) year from the date of its entry and that, after the lapse of the said period, The
Torrens certificate of title issued thereon becomes incontrovertible and indefeasible.

The Court is impelled to sustain the CA’s dismissal of Paraguya’s complaint for annulment of CT No.
P-17729 since it was filed only on December 19, 1990, or more than eleven (11) years from the
title’s date of entry on August 24, 1979. Based on Section 32 of PD 1529, said title had become
inconvertible and indefeasible after the lapse of one (1) year from the date of its entry, thus
barring Paraguya’s action for annulment of title.

Even if the barring effect of Section 32 and the prescriptive period for reconveyance are discounted,
Paraguya’s complaint for annulment of title should be dismissed altogether since she merely relied
on the titulo posesorio issued in favor Estabillo sometime in 1983 or 1985. Based on Section 1 of PD
892, entitled "Discontinuance of the Spanish Mortgage System of Registration and of the Use of
Spanish Titles as Evidence in Land Registration Proceedings," Spanish titles can no longer be
used as evidence of ownership after six (6) months from the effectivity of the law, or starting
August 16, 1976. Hence, since Paraguya only presented the titulo posesorio during the pendency
of the instant case, or during the 1990’s onwards, the CA was correct in not giving any credence to it
at all.

B. Original registration
1. Ordinary registration
a. Who may apply
b. Decree of registration

HEIRS OF ALEJANDRA DELFIN v AVELINA RABADON

G.R. No. 165014. SECOND DIVISION. July 31, 2013. PERLAS-BERNABE, J.

It is an elemental rule that a decree of registration bars all claims and rights which arose or may
have existed prior to the decree of registration. By the issuance of the decree, the land is bound and
title thereto quieted, subject only to certain exceptions under the property registration decree.

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Accordingly, respondents’ Decree No. 98992 for which an original certificate of title was issued should
be accorded greater weight as against the tax declarations and tax receipts presented by
petitioners in this case.

FACTS:

According to the respondents, the subject property was owned by their predecessor-in-interest,
Emiliana Bacalso, by virtue to Decree No. 98992. Although it was lost during World War II, there is
still evidence that they are the rightful owners by virtue of an LRA certification, and a certified
copy from daybook entry. After the death of Emiliana, respondents took over possession of the
property until 1989; which they soon discovered that it was already in the possession of Alejandra
Delfin, where her families had already constructed houses thereon. Heirs of Alejandra Delfin
countered that the subject land was previously bought by Remegio Navares, their predecessor-in-
interest. However, when they asked to see a copy of the deed of sale, she could not produce the
same.

Petitioners countered that they inherited the property from their predecessor-in-interest, Remegio
Navares, who bought it but soon later, lost the certificate of title. Alejandra inherited the subject
property by virtue of an extra-judicial settlement and after its execution, her family took over the
possession of the same. To evidence their ownership, petitioners presented receipts of their
payment of realty taxes. They also contended that respondents are already barred by laches since
they filed their complaint 55 years after.

RTC ruled in favor of the Heirs of Alejandra Delfin as they were able to prove their ownership
through their payment of realty taxes. When on the other hand, respondents failed to prove so. On
appeal, CA reversed the decision saying that it is the respondents who had better right.

ISSUE:

Whether or not respondents have the better right to the ownership and possession of the subject
property. (YES)

HELD:

As may be gleaned from the records, the probative value of petitioners’ evidence, which consist of
tax declarations and tax receipts, pales in comparison to that of respondents’ evidence which
consists of a decree of ownership, i.e., Decree No. 98992, under the name of their predecessor-in-
interest, Emiliana. While the actual copy of the said decree was lost, the existence of the said decree
was actually proven by the LRA certification and the daybook entry. Likewise, the RTC itself
observed that it is undisputable that the subject property has been issued Decree No. 98992, for
which an original certificate of title was issued to Emiliana.

It is an elemental rule that a decree of registration bars all claims and rights which arose or
may have existed prior to the decree of registration. By the issuance of the decree, the land is
bound and title thereto quieted, subject only to certain exceptions under the property registration
decree.

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Accordingly, respondents’ Decree No. 98992 for which an original certificate of title was issued
should be accorded greater weight as against the tax declarations and tax receipts presented
by petitioners in this case.

In this case, records are bereft of any showing that petitioners, or any of their predecessors-in-
interest, have been in actual possession of the subject property prior to 1989 as they claim. The
tax declarations and tax receipts are insufficient to prove their proffered theory that their
predecessor-in-interest, Remegio, was the lawful possessor and owner of the foregoing property
even before the last World War. In fact, petitioners altogether failed to prove the legitimacy of
Remegio's possession and ownership since they failed to present the pe1iinent deed of sale or any
other evidence of the latter's title.

On the contrary, aside from the LRA certification and daybook entry which prove the existence of
Decree No. 98992, respondents' possession of the subject property prior to petitioners' entry in
1989 was attested to by one Marcelina Tabora who. as the CA notes, appears to be an unbiased
witness.

All told, by sheer preponderance of evidence, respondents have shown a better right to the
ownership and possession of the subject property and hence, must be awarded the same.

c. Review of decree of registration; innocent purchaser for value

C. Certificate of title

HILARIA BAGAYAS v ROGELIO BAGAYAS

G.R. Nos 187308 & 187517. SECOND DIVISION. September 18, 2013. PERLAS-BERNABE, J.

Proceedings under Section 108 of Presidential Decree No. 1529, or the Property Registration Decree,
are in summary in nature, contemplating corrections or insertions of mistakes which are only
clerical but certainly not controversial issues.

As regards to her citing of Section 108 of PD No. 1529, it was improper; as her intent for using it is as
a mode of directly attacking the certificates of title issued to the Bagayas brothers. It was ruled
that it was not a direct attack, therefore cannot be used. The complaint is not covered by the
intention of the decree.

FACTS:

Hilaria Bagayas filed a complaint against respondents for excluding her from inheriting from the
estate of her legally adoptive parents by falsifying a deed of absolute sale purportedly executed by
the deceased spouses transferring two parcels of land registered in their names to the defendants.

Respondents said, after the death of their parents, they executed a document denominated as Deed
of Extrajudicial Succession over the subject lands to effect the transfer of titles thereof to their
names. However, before they could register it, they found a Deed of Absolute sale transferring the
subject lands to them from the father’s old files, which they used by “reason of convenience” to
acquire title to the said lands.

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RTC dismissed the complaint of the petitioner. Although she was able to prove that she is a
legally adoptive child of the deceased spouses, she failed to prove any of the instances that would
invalidate the deed of absolute sale.

She then filed actions to include her as registered owner to the extent of one-third of the lands
covered therein, by virtue of Section 108 of PD No. 1529 or the “Property Registration Decree”. Her
basis are, that she is a legally adoptive child and, the signature of the mother to the absolute sale
was falsified by the respondents (it was found by RTC that the signature was a mere surplusage, as
the subject lands belonged exclusively to the father). The petitions were dismissed because of the
principle of res judicata.

ISSUE:

Whether or not the dismissal of the earlier complaint on the ground that it in the nature of a
collateral attack on the certificates of title constitute a bar to a subsequent petition under Section
108 of PD 1529 or the “Property Registration Decree”. (NO)

RULING:

Proceedings under Section 108 of Presidential Decree No. 1529, or the Property Registration
Decree, are in summary in nature, contemplating corrections or insertions of mistakes which
are only clerical but certainly not controversial issues.

Although Hilaria Bagayas was able to prove that she is a legally adoptive child, the action is not
proper. As her petition was of an annulment of sale and partition. She must first prove that she is
a co-owner of the estate and conveyance of her lawful shares. However, she failed to do so.

As regards to her citing of Section 108 of PD No. 1529, it was improper; as her intent for using it is
as a mode of directly attacking the certificates of title issued to the Bagayas brothers. It was
ruled that it was not a direct attack, therefore cannot be used. The complaint is not covered by the
intention of the decree.

REPUBLIC OF THE PHILIPPINES v RICORDITO N. DE ASIS, JR.

G.R. No. 193874. SECOND DIVISION. July 24, 2013. PERLAS-BERNABE, J.

Reconstitution of Titles requires that (a) notice of the petition should be published in two successive
issues of the Official Gazette; and (b) publication should be made at least 30 days prior to the date of
hearing. While it is true that the 30-day period in the case was short of only 3 days, the principle of
substantial compliance cannot apply, as the law requires strict compliance, without which the
Court is devoid of authority to pass upon and resolve the petition. As the Court has declared in the
case of Castillo v. Republic:

In all cases where the authority of the courts to proceed is conferred by a statute, the mode
of proceeding is mandatory, and must be strictly complied with, or the proceeding will be
utterly void. When the trial court lacks jurisdiction to take cognizance of a case, it lacks
authority over the whole case and all its aspects. All the proceedings before the trial court,
including its order granting the petition for reconstitution, are void for lack of jurisdiction.

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FACTS:

Respondent De Asis filed a verified amended Petition of Reconstitution of TCT No. 8240 in the
name of his uncle, Lauriano De Asis. Respondent De Asis said he purchased the property from his
uncle through a Deed of Absolute Sale and the same is free from any encumbrances. However, the
original copy was destroyed by the fire in Quezon City Hall; hence, the amended petition is based on
the owner’s duplicate copy, which was in his possession.

RTC found merits on the case and requested LRA to furnished a copy of the title; likewise ordered it
be published in the Official Gazette at least 30 days prior to the scheduled hearing. The OSG filed a
notice of appearance and deputized the City Prosecutor of QC to be as counsel for the Republic.

RTC granted the petition of Respondent De Asis. However, on appeal to the CA, Republic said RTC
erred in granting the amended petition because the issue was publish less than 30 days as
required by law; and, that the LRA’s report that the technical description of the subject property
overlaps with other properties, rendering doubtful the authenticity of the title sought to be
reconstituted. Nonetheless, CA affirmed the RTC ruling.

ISSUE:

Whether or not compliance with Sections 9 and 10 of RA 26 requiring publication of the notice of
hearing in two consecutive issues of the Official Gazette at least 30 days prior to the date of hearing,
a jurisdictional requisite. (YES)

HELD:

Reconstitution of Titles requires that (a) notice of the petition should be published in two
successive issues of the Official Gazette; and (b) publication should be made at least 30 days prior
to the date of hearing. While it is true that the 30-day period in the case was short of only 3 days,
the principle of substantial compliance cannot apply, as the law requires strict compliance,
without which the Court is devoid of authority to pass upon and resolve the petition. As the Court
has declared in the case of Castillo v. Republic:

In all cases where the authority of the courts to proceed is conferred by a statute, the
mode of proceeding is mandatory, and must be strictly complied with, or the proceeding
will be utterly void. When the trial court lacks jurisdiction to take cognizance of a case, it
lacks authority over the whole case and all its aspects. All the proceedings before the trial
court, including its order granting the petition for reconstitution, are void for lack of
jurisdiction.

THE HEIRS OF VICTORINO SARILI, NAMELY: ISABEL A. SARILI, MELENCIA S. MAXIMO,

ALBERTO A. SARILI, IMELDA S. HIDALGO, ALL HEREIN REPRESENTED BY CELSO A. SARILI,
PETITIONERS, VS. PEDRO F. LAGROSA, REPRESENTED IN THIS ACT BY HIS ATTORNEY-IN-
FACT, LOURDES LABIOS MOJICA, RESPONDENT.
G.R. No. 193517, January 15, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

FACTS:

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

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

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

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

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

ISSUE:

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

RULING:

No. The general rule is that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go

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beyond the certificate to determine the condition of the property. Where there is nothing in the
certificate of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title
upon its face indicates in quest for any hidden defects or inchoate right that may subsequently
defeat his right thereto.

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

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

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

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

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

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

Since Sps. Sarili’s claim over the subject property is based on forged documents, no valid title had
been transferred to them (and, in turn, to petitioners). Verily, when the instrument presented is
forged, even if accompanied by the owner’s duplicate certificate of title, the registered owner does

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not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title
to the property.

NICOMEDES J. LOZADA, PETITIONER, VS. EULALIA BRACEWELL, EDDIE

BRACEWELL, ESTELLITA BRACEWELL, JAMES BRACEWELL, JOHN BRACEWELL,
EDWIN BRACEWELL, ERIC BRACEWELL, AND HEIRS OF GEORGE BRACEWELL,
RESPONDENTS.
G.R. No. 179155, April 2, 2014, SECOND DIVISION, PERLAS-BERNABE, J:

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

FACTS:

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

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

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

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

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

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

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

ISSUE:

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

RULING:

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

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

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

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

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

As such, case law instructs that for “as long as a final decree has not been entered by the [LRA] and
the period of one (1) year has not elapsed from the date of entry of such decree, the title is not

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finally adjudicated and the decision in the registration proceeding continues to be under the control
and sound discretion of the court rendering it.

REPUBLIC OF THE PHILIPPINES –versus- HOMER AND MA. SUSANA DAGONDON

GR No. 210540, FIRST DIVISION, April 19, 2016, PERLAS-BERNABE, J.

The purpose of the reconstitution of title is to have, after observing the procedures prescribed by law,
the title reproduced in exactly the same way it has been when the loss or destruction occurred. RA 26
presupposes that the property whose title is sought to be reconstituted has already been brought
under the provisions of the Torrens System.

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

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

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

ISSUE:
Whether the RTC correctly ordered the reconstitution of the OCT of Lot 84. (NO)

RULING:
Verily, case law provides that the reconstitution of a certificate of title denotes restoration in the
original form and condition of a lost or destroyed instrument attesting the title of a person to a
piece of land. The purpose of the reconstitution of title is to have, after observing the procedures
prescribed by law, the title reproduced in exactly the same way it has been when the loss or
destruction occurred. RA 26 presupposes that the property whose title is sought to be reconstituted
has already been brought under the provisions of the Torrens System.

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

REPUBLIC –versus- GERTRUDES V. SUSI

G.R. No. 213209, FIRST DIVISION, January 16, 2017, PERLAS-BERNABE, J.

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

It is well to point out that the trial courts hearing reconstitution petitions under RA 26 are duty-bound
to take into account the LRA's report. Notably, since the serial number of the owner's duplicate did not
bear a similar serial number from the subject lot, the same should have been denied by the trial court
for failure to comply with the requirements of law. Since the petition for reconstitution failed to
comply with the applicable procedures and requirements, it follows that the RTC never acquired
jurisdiction over the case, and all proceedings held thereon are null and void.

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

ISSUE:
Whether the petition for reconstitution be granted. (NO)

RULING:
It is well to point out that the trial courts hearing reconstitution petitions under RA 26 are duty-
bound to take into account the LRA's report. Notably, since the serial number of the owner's
duplicate did not bear a similar serial number from the subject lot, the same should have been
denied by the trial court for failure to comply with the requirements of law. Since the petition for
reconstitution failed to comply with the applicable procedures and requirements, it follows that the
RTC never acquired jurisdiction over the case, and all proceedings held thereon are null and void.

REPUBLIC –versus- CARMEN SANTORIO GALENO

G.R. No. 215009, FIRST DIVISION, January 23, 2017, PERLAS-BERNABE, J.

The certifications issued by the Regional Technical Director cannot be considered prima facie evidence
for a petition for correction of title. At best, they may be considered only as prima facie evidence of
their due execution and date of issuance but not the former.

The certifications issued by the Regional Technical Director are not the certified copies nor
authenticated reproductions of original records in the legal custody of government service.
Considering this, the documentary evidence are not sufficient to warrant the correction prayed for.

FACTS:
Carmen Galeno, a co-owner of the subject property applied for a petition for correction of the land
area. She alleged that there was a discrepancy as the title reflects only 20,498 square meters while
the certification issued by the DENR Office of the Regional Technical Director shows an area of
21,298 square meters.

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The trial court, in allowing the evidence to be presented ex parte, granted the petition on the basis
of the Certification. It was only after the decision of the trial court that the Office of the Solicitor
General filed a motion for reconsideration opposing the petition for correction on the ground that
the no competent evidence was given to warrant a correction.

ISSUE:
1. Whether the Office of the Solicitor General still question the propriety of the petition even after
judgment. (YES)
2. Whether the petition for correction be granted. (NO)

RULING:
1. The Republic cannot be barred from assailing the petition granting the correction of title, if on
the basis of the law and evidence of record, such petition has no merit. Thus, the court can admit
motion for reconsideration even after judgment of the trial court.

2. The certifications issued by the Regional Technical Director cannot be considered prima facie
evidence for a petition for correction of title. At best, they may be considered only as prima facie
evidence of their due execution and date of issuance but not the former. The certifications issued by
the Regional Technical Director are not the certified copies nor authenticated reproductions of
original records in the legal custody of government service. Considering this, the documentary
evidence are not sufficient to warrant the correction prayed for.

JOY VANESSA M. SEBASTIAN, Petitioner, -versus- SPOUSES NELSON C. CRUZ AND

CRISTINA P. CRUZ and THE REGISTER OF DEEDS FOR THE PROVINCE OF PANGASINAN,
Respondents.
G.R. No. 220940, FIRST DIVISION, March 20, 2017, PERLAS-BERNABE, J.

Indubitably, the fact of loss or destruction of the owner's duplicate certificate of title is crucial in
clothing the RTC with jurisdiction over the judicial reconstitution proceedings.

In Spouses Paulino v. CA, the Court reiterated the rule that when the owner's duplicate certificate of
title was not actually lost or destroyed, but is in fact in the possession of another person, the
reconstituted title is void because the court that rendered the order of reconstitution had no
jurisdiction over the subject matter of the case.

In this case, Sebastian's petition for annulment of judgment clearly alleged that, contrary to the claim
of Spouses Cruz, the owner's duplicate copy of the OCT was not really lost, as the same was
surrendered to her by Lamberto, Nelson's father and attorney-in-fact, and was in her possession all
along.Should such allegation be proven following the conduct of further proceedings, then there would
be no other conclusion than that the RTC had no jurisdiction over the subject matter of LRC Case. As a
consequence, the Decision dated of the RTC in the said case would then be annulled on the ground of
lack of jurisdiction.

FACTS:

Spouses Nelson and Cristina Cruz were registered owners of a parcel of land. Nelson Cruz, through
his father, Lamberto, sold the subject lot in favor of Joy Sebastian. After Sebastian paid all the
corresponding tax and capital gains, the Register of Deeds required her to present a Special Power

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of Attorney executed by Nelson which authorized the agent, Lamberto, to sell the property to
former.

When Sebastian requested for the document, Nelson did not comply. It was only when Joy inquired
with the Register of Deeds that she discovered a) that Nelson executed an Affidavit of Loss of the
owner’s duplicate copy of the OCT, b) that the Spouses Cruz filed before the RTC a petition for the
issuance of a second owner's copy of the OCT, that the RTC promulgated granted Spouses Cruz's
petition and, consequently, ordered the issuance of a new owner's duplicate copy of OCT.

Sebastian thus filed a petition for annulment of judgment before the CA on the ground of lack of
jurisdiction. Essentially, she contended that the RTC had no jurisdiction to take cognizance of case
as the duplicate copy of the OCT which was declared to have no further force in effect was never
lost, and in fact, is in her possession all along.

The CA did not give due course to Sebastian's petition and, consequently, dismissed the same
outright.

ISSUE:

Whether the petition for annulment of judgment should be granted. (YES)

RULING:

Under RA 26, Section 15 of which provides when reconstitution of a title should be allowed:
If the court, after hearing, finds that the documents presented, as supported by parole
evidence or otherwise, are sufficient and proper to warrant the reconstitution of the lost or
destroyed certificate of title, and that petitioner is the registered owner of the
property or has an interest therein, that the said certificate of title was in force at the
time it was lost or destroyed, and that the description, area and boundaries of the
property are substantially the same as those contained in the lost or destroyed
certificate of title, an order of reconstitution shall be issued. The clerk of court shall
forward to the register of deeds a certified copy of said order and all the documents which,
pursuant to said order, are to be used as the basis of the reconstitution. If the court finds
that there is no sufficient evidence or basis to justify the reconstitution, the petition shall be
dismissed, but such dismissal shall not preclude the right of the party or parties entitled
thereto to file an application for confirmation of his or their title under the provisions of the
Land Registration Act.
From the foregoing, it appears that the following requisites must be complied with for an order for
reconstitution to be issued: (a) that the certificate of title had been lost or destroyed; (b) that the
documents presented by petitioner are sufficient and proper to warrant reconstitution of the lost or
destroyed certificate of title; (c) that the petitioner is the registered owner of the property or had an
interest therein; (d) that the certificate of title was in force at the time it was lost and destroyed;
and (e) that the description, area and boundaries of the property are substantially the same as
those contained in the lost or destroyed certificate of title.
Indubitably, the fact of loss or destruction of the owner's duplicate certificate of title is crucial in
clothing the RTC with jurisdiction over the judicial reconstitution proceedings.

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In Spouses Paulino v. CA, the Court reiterated the rule that when the owner's duplicate certificate of
title was not actually lost or destroyed, but is in fact in the possession of another person, the
reconstituted title is void because the court that rendered the order of reconstitution had no
jurisdiction over the subject matter of the case
In this case, Sebastian's petition for annulment of judgment clearly alleged that, contrary to the
claim of Spouses Cruz, the owner's duplicate copy of the OCT was not really lost, as the same was
surrendered to her by Lamberto, Nelson's father and attorney-in-fact, and was in her possession all
along.Should such allegation be proven following the conduct of further proceedings, then there
would be no other conclusion than that the RTC had no jurisdiction over the subject matter of LRC
Case. As a consequence, the Decision dated of the RTC in the said case would then be annulled on
the ground of lack of jurisdiction.
Thus, the Court finds prima facie merit in Sebastian's petition for annulment of judgment before the
CA. As such, the latter erred in denying it due course and in dismissing the same outright.

D. Subsequent registration
1. Voluntary dealings; general provisions

REMEDIOS V. GEÑORGA, Petitioner, -versus- HEIRS OF JULIAN MELITON, REPRESENTED BY

ROBERTO MELITON AS ATTORNEY-IN-FACT, IRENE MELITON, HENRY MELITON, ROBERTO
MELITON, HAIDE MELITON, and MARIA FE MELITON ESPINOSA, Respondents.
G.R. No. 224515, FIRST DIVISION, July 03, 2017, PERLAS-BERNABE, J.

Notably, from the time petitioner received possession of the subject owner's duplicate title in 2009, a
considerable amount of time had passed until she submitted the same to the RD-Naga on September
13, 2013. But even up to the time she filed the instant petition before the Court on May 6, 2016, she
failed to show any sufficient justification for the continued failure of the concerned buyers to comply
with the requirements for the registration of their respective deeds of sale and the issuance of
certificates of title in their names to warrant a preferential right to the possession of the subject
owner's duplicate title as against respondents who undisputedly own the bigger portion of the subject
land. Consequently, the Court finds no reversible error on the part of the CA in affirming the RTC
Decision directing petitioner or the RD-Naga to deliver or surrender the subject owner's duplicate title
to respondents.

Moreover, it bears to stress that the function of a Register of Deeds with reference to the registration
of deeds is only ministerial in nature. Thus, the RD-Naga cannot be expected to retain possession of the
subject owner's duplicate title longer than what is reasonable to perform its duty. In the absence of a
verified and approved subdivision plan and technical description duly submitted for registration on
TCT No. 8027, it must return the same to the presenter, in this case, petitioner who, as aforesaid, failed
to establish a better right to the possession of the said owner's duplicate title as against respondents.

FACTS:

Julian Meliton (Julian), Isabel Meliton, and respondents Irene, Henry, Roberto, Haide, all surnamed
Meliton, and Ma. Fe Meliton Espinosa (Ma. Fe; respondents) are the registered owners of a 227,270-
square meter parcel of land, covered by TCT No. 8027 (subject land). Julian owns 8/14 portion of
the land.. During his lifetime, Julian sold portions of the subject land to various persons, among
others, to petitioner Remedios V. Geñorga's husband, Gaspar Geñorga, who took possession and

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introduced improvements on the portions respectively sold to them.However, Julian failed to
surrender the owner's duplicate copy of TCT No. 8027 to enable the buyers to register their
respective deeds of sale, which eventually led to the filing of a Petition for the surrender of the
owner's duplicate copy of TCT No. 8027 and/or annulment thereof, and the issuance of new titles.

In a Decision dated July 17, 1998, the RTC of Naga City decided in favor of the buyers. Accordingly,
it ordered, among others, to surrender possession of TCT No. 8027 to the RD-Naga. It further held
that should the holder fail or refuse to comply with the court's directive: (a) TCT No. 8027 shall be
declared null and void; and (b) the RD-Naga shall issue a new certificate of title in lieu thereof, enter
the deeds of sale, and issue certificates of title in favor of the buyers.
The said decision became final and executory but remained unexecuted. Thus, in an Order, the RTC
declared TCT No. 8027 null and void, resulting in the issuance of a new one, bearing annotations of
the buyers' adverse claims. The new owner's duplicate copy of TCT No. 8027 (subject owner's
duplicate title) was given to petitioner in 2009.

On April 22, 2013, respondents filed a Complaint against petitioner before the court a quo, seeking
the surrender of the subject owner's duplicate title with damages. They claimed that they are
entitled to the possession thereof as registered owners, and suffered damages as a consequence of
its unlawful withholding, compelling them to secure the services of counsel to protect their
interests.

In her Answer, petitioner averred that their possession of the subject owner's duplicate title was by
virtue of a court decision, and for the legitimate purpose of registering the sales in their favor and
the issuance of titles in their names, they should be allowed to retain possession until the
completion of the requirements therefor. The said title was eventually submitted to the RD-Naga on
September 13, 2013.

The RTC granted respondents' petition, and ordered petitioner and/or the RD-Naga to
deliver or surrender possession of the subject owner's duplicate title to respondents. The petitioner
appealed to the CA. However, the CA affirmed the RTC ruling. . It noted the long length of time that
had lapsed for the annotation of the buyers' deeds of sale and the issuance of the corresponding
certificates of title, and found no valid and plausible reason to further withhold custody and
possession of the subject owner's duplicate title from respondents.

ISSUE:

Whether the CA correctly affirmed the court a quo's Decision directing the surrender and delivery
of possession of the subject owner's duplicate title to respondents. (YES)

RULING:

Section 58 of PD 1529, otherwise known as the "Property Registration Decree," provides the
procedure for the registration of deeds or conveyances, and the issuance of new certificates of titles
involving only certain portions of a registered land, as in this case. Said provision reads:
Section 58. Procedure Where Conveyance Involves Portion of Land. - If a deed or conveyance
is for a part only of the land described in a certificate of title, the Register of Deeds shall not
enter any transfer certificate to the grantee until a plan of such land showing all the
portions or lots into which it has been subdivided and the corresponding technical

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 descriptions shall have been verified and approved pursuant to Section 50 of this
Decree. Meanwhile, such deed may only be annotated by way of memorandum upon
the grantor's certificate of title, original and duplicate, said memorandum to serve as
a notice to third persons of the fact that certain unsegregated portion of the land
described therein has been conveyed, and every certificate with such memorandum
shall be effectual for the purpose of showing the grantee's title to the portion
conveyed to him, pending the actual issuance of the corresponding certificate in his
name.
Upon the approval of the plan and technical descriptions, the original of the plan, together
with a certified copy of the technical descriptions shall be filed with the Register of Deeds
for annotation in the corresponding certificate of title and thereupon said officer shall issue
a new certificate of title to the grantee for the portion conveyed, and at the same time cancel
the grantor's certificate partially with respect only to said portion conveyed, or, if the
grantor so desires, his certificate may be cancelled totally and a new one issued to him
describing therein the remaining portion: Provided, however, that pending approval of
said plan, no further registration or annotation of any subsequent deed or other
voluntary instrument involving the unsegregated portion conveyed shall be effected
by the Register of Deeds, except where such unsegregated portion was purchased from
the Government or any of its instrumentalities. If the land has been subdivided into several
lots, designated by numbers or letters, the Register of Deeds may, if desired by the grantor,
instead of cancelling the latter's certificate and issuing a new one to the same for the
remaining unconveyed lots, enter on said certificate and on its owner's duplicate a
memorandum of such deed of conveyance and of the issuance of the transfer certificate to
the grantee for the lot or lots thus conveyed, and that the grantor's certificate is canceled as
to such lot or lots.
Records show that the subject owner's duplicate title had already been surrendered to the RD-Naga
on September 13, 2013, and some of the buyers had secured Certificates Authorizing Registration
and paid the corresponding fees for the registration of the sales in their favor. Nonetheless, while
the rights of the buyers over the portions respectively sold to them had already been recognized by
the RTC of Naga City in its July 17, 1998 Decision in Civil Case No. RTC '96-3526 which had attained
finality on September 10, 2006, there is no showing that the other affected buyers have similarly
complied with the necessary registration requirements.
Notably, from the time petitioner received possession of the subject owner's duplicate title in 2009,
a considerable amount of time had passed until she submitted the same to the RD-Naga on
September 13, 2013. But even up to the time she filed the instant petition before the Court on May
6, 2016, she failed to show any sufficient justification for the continued failure of the concerned
buyers to comply with the requirements for the registration of their respective deeds of sale and
the issuance of certificates of title in their names to warrant a preferential right to the possession of
the subject owner's duplicate title as against respondents who undisputedly own the bigger portion
of the subject land. Consequently, the Court finds no reversible error on the part of the CA in
affirming the RTC Decision directing petitioner or the RD-Naga to deliver or surrender the subject
owner's duplicate title to respondents.
Moreover, it bears to stress that the function of a Register of Deeds with reference to the
registration of deeds is only ministerial in nature. Thus, the RD-Naga cannot be expected to retain
possession of the subject owner's duplicate title longer than what is reasonable to perform its duty.
In the absence of a verified and approved subdivision plan and technical description duly submitted

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for registration on TCT No. 8027, it must return the same to the presenter, in this case, petitioner
who, as aforesaid, failed to establish a better right to the possession of the said owner's duplicate
title as against respondents.
2. Involuntary dealings
a. Adverse claim
b. Notice of lis pendens
E. Assurance Fund
1. Action of compensation from funds
2. Limitation of action

XII. TORTS AND DAMAGES

A. Torts
1. Elements
2. Culpa aquiliana vs. culpa contractual vs. culpa criminal
3. Vicarious liability
4. Res ipsa loquitur
5. Last clear chance
6. Damnum absque injuria
B. Proximate cause

SPS. FERNANDO VERGARA and HERMINIA VERGARA –versus- ERLINDA TORRECAMPO

SONKIN
G.R. No. 193659, FIRST DIVISION, June 15, 2015, PERLAS-BERNABE, J.

When the complainant is guilty of contributory negligence, the award of damages shall be mitigated.
Attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than an erroneous conviction of the righteousness of his cause.
The CA correctly held that while the proximate cause of the damage sustained by the house of Sps.
Sonkin was the act of Sps. Vergara in dumping gravel and soil onto their property, thus, pushing the
perimeter wall back and causing cracks thereon, as well as water seepage, the former is nevertheless
guilty of contributory negligence for not only failing to observe the two (2)-meter setback rule under
the National Building Code, but also for disregarding the legal easement constituted over their
property. As such, Sps. Sonkin must necessarily and equally bear their own loss. In view of Sps. Sonkin’s
contributory negligence, the Court deems it appropriate to delete the award of moral damages in their
favor. Moreover, the Court observes that neither Sps. Sonkin nor Sps. Vergara (thru their compulsory
counterclaim) were shown to have acted in bad faith in pursuing their respective claims against each
other. The existence of bad faith is negated by the fact that both parties have valid contentions against
each other. Thus, absent cogent reason to hold otherwise, the Court deems it inappropriate to award
attorney's fees in favor of either party.
FACTS:
Petitioners-spouses Fernando Vergara and Herminia Vergara (Sps. Vergara) and Spouses Ronald
Mark Sonkin and Erlinda Torrecampo Sonkin (Sps. Sonkin) are adjoining landowners. In view of the
geographical configuration of the adjoining properties, the property owned by Sps. Sonkin (Sonkin
Property) is slightly lower in elevation than that owned by Sps. Vergara (Vergara Property).

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When Sps. Sonkin bought the Sonkin Property sometime, they raised the height of the partition wall
and caused the construction of their house thereon. The house itself was attached to the partition
wall such that a portion thereof became part of the wall of the master’s bedroom and bathroom.
Sps. Vergara levelled the uneven portion of the Vergara Property by filling it with gravel, earth, and
soil. As a result, the level of the Vergara Property became even higher than that of the Sonkin
Property by a third of a meter. Eventually, Sps. Sonkin began to complain that water coming from
the Vergara Property was leaking into their bedroom through the partition wall, causing cracks, as
well as damage, to the paint and the wooden parquet floor. Sps. Sonkin repeatedly demanded that
Sps. Vergara build a retaining wall on their property in order to contain the landfill that they had
dumped thereon, but the same went unheeded. Hence, Sps. Sonkin filed the instant complaint for
damages and injunction with prayer for preliminary mandatory injunction and issuance of a
temporary restraining order against Sps. Vergara.
The RTC found Sps. Vergara civilly liable to Sps. Sonkin for damages. The CA reversed and set aside
the assailed RTC Decision. Hence, this petition.
ISSUES:
1. Whether or not the CA erred in upholding the award of moral damages and attorney’s fees. (NO)
2. Whether or not it should have ordered the demolition of the portion of the Sps. Sonkin’s house
that adjoins the partition wall. (YES)
RULING:
1. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause
to the harm he has suffered, which falls below the standard to which he is required to conform for
his own protection.
It is undisputed that the Sonkin property is lower in elevation than the Vergara property, and thus,
it is legally obliged to receive the waters that flow from the latter, pursuant to Article 637 of the
Civil Code. The CA correctly held that while the proximate cause of the damage sustained by the
house of Sps. Sonkin was the act of Sps. Vergara in dumping gravel and soil onto their property,
thus, pushing the perimeter wall back and causing cracks thereon, as well as water seepage, the
former is nevertheless guilty of contributory negligence for not only failing to observe the two (2)-
meter setback rule under the National Building Code, but also for disregarding the legal easement
constituted over their property. As such, Sps. Sonkin must necessarily and equally bear their own
loss. In view of Sps. Sonkin’s contributory negligence, the Court deems it appropriate to delete the
award of moral damages in their favor.
Attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than an erroneous conviction of the righteousness of his cause. In
this case, the Court observes that neither Sps. Sonkin nor Sps. Vergara (thru their compulsory
counterclaim) were shown to have acted in bad faith in pursuing their respective claims against
each other. The existence of bad faith is negated by the fact that both parties have valid contentions
against each other. Thus, absent cogent reason to hold otherwise, the Court deems it inappropriate
to award attorney's fees in favor of either party.

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

C. Negligence
1. Standard of care

CRESENCIO BAÑO v. BACHELOR EXPRESS

GR No. 191703. THIRD DIVISION. March 12, 2012. PERLAS-BERNABE, J.

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

In the present case, records show that when bus driver Salvaña overtook the jeepney in front of him, he
was rounding a blind curve along a descending road. Considering the road condition and that there
was only one lane on each side of the center line for the movement of traffic in opposite directions, it
would have been more prudent for him to confine his bus to its proper place. Having thus encroached
on the opposite lane in the process of overtaking the jeepney, without ascertaining that it was clear
of oncoming traffic that resulted in the collision with the approaching dump truck driven by deceased
Asumbrado, Salvaña was grossly negligent in driving his bus.

FACTS:

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

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

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

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ISSUE:

Whether or not Salvaña was grossly negligent in driving the bus even after he had discovered the
malfunction in its steering wheel. (YES)

RULING:

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

In the present case, records show that when bus driver Salvaña overtook the jeepney in front of
him, he was rounding a blind curve along a descending road. Considering the road condition and
that there was only one lane on each side of the center line for the movement of traffic in opposite
directions, it would have been more prudent for him to confine his bus to its proper place. Having
thus encroached on the opposite lane in the process of overtaking the jeepney, without
ascertaining that it was clear of oncoming traffic that resulted in the collision with the
approaching dump truck driven by deceased Asumbrado, Salvaña was grossly negligent in driving
his bus.

He was remiss in his duty to determine that the road was clear and not to proceed if he could not do
so in safety.

SPS. FERNANDO VERGARA and HERMINIA VERGARA –versus- ERLINDA TORRECAMPO

SONKIN
G.R. No. 193659, FIRST DIVISION, June 15, 2015, PERLAS-BERNABE, J.

When the complainant is guilty of contributory negligence, the award of damages shall be mitigated.
Attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than an erroneous conviction of the righteousness of his cause.
The CA correctly held that while the proximate cause of the damage sustained by the house of Sps.
Sonkin was the act of Sps. Vergara in dumping gravel and soil onto their property, thus, pushing the
perimeter wall back and causing cracks thereon, as well as water seepage, the former is nevertheless
guilty of contributory negligence for not only failing to observe the two (2)-meter setback rule under
the National Building Code, but also for disregarding the legal easement constituted over their
property. As such, Sps. Sonkin must necessarily and equally bear their own loss. In view of Sps. Sonkin’s
contributory negligence, the Court deems it appropriate to delete the award of moral damages in their
favor. Moreover, the Court observes that neither Sps. Sonkin nor Sps. Vergara (thru their compulsory
counterclaim) were shown to have acted in bad faith in pursuing their respective claims against each
other. The existence of bad faith is negated by the fact that both parties have valid contentions against
each other. Thus, absent cogent reason to hold otherwise, the Court deems it inappropriate to award
attorney's fees in favor of either party.
FACTS:

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Petitioners-spouses Fernando Vergara and Herminia Vergara (Sps. Vergara) and Spouses Ronald
Mark Sonkin and Erlinda Torrecampo Sonkin (Sps. Sonkin) are adjoining landowners. In view of the
geographical configuration of the adjoining properties, the property owned by Sps. Sonkin (Sonkin
Property) is slightly lower in elevation than that owned by Sps. Vergara (Vergara Property).
When Sps. Sonkin bought the Sonkin Property sometime, they raised the height of the partition wall
and caused the construction of their house thereon. The house itself was attached to the partition
wall such that a portion thereof became part of the wall of the master’s bedroom and bathroom.
Sps. Vergara levelled the uneven portion of the Vergara Property by filling it with gravel, earth, and
soil. As a result, the level of the Vergara Property became even higher than that of the Sonkin
Property by a third of a meter. Eventually, Sps. Sonkin began to complain that water coming from
the Vergara Property was leaking into their bedroom through the partition wall, causing cracks, as
well as damage, to the paint and the wooden parquet floor. Sps. Sonkin repeatedly demanded that
Sps. Vergara build a retaining wall on their property in order to contain the landfill that they had
dumped thereon, but the same went unheeded. Hence, Sps. Sonkin filed the instant complaint for
damages and injunction with prayer for preliminary mandatory injunction and issuance of a
temporary restraining order against Sps. Vergara.
The RTC found Sps. Vergara civilly liable to Sps. Sonkin for damages. The CA reversed and set aside
the assailed RTC Decision. Hence, this petition.
ISSUES:
1. Whether or not the CA erred in upholding the award of moral damages and attorney’s fees. (NO)
2. Whether or not it should have ordered the demolition of the portion of the Sps. Sonkin’s house
that adjoins the partition wall. (YES)
RULING:
1. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause
to the harm he has suffered, which falls below the standard to which he is required to conform for
his own protection.
It is undisputed that the Sonkin property is lower in elevation than the Vergara property, and thus,
it is legally obliged to receive the waters that flow from the latter, pursuant to Article 637 of the
Civil Code. The CA correctly held that while the proximate cause of the damage sustained by the
house of Sps. Sonkin was the act of Sps. Vergara in dumping gravel and soil onto their property,
thus, pushing the perimeter wall back and causing cracks thereon, as well as water seepage, the
former is nevertheless guilty of contributory negligence for not only failing to observe the two (2)-
meter setback rule under the National Building Code, but also for disregarding the legal easement
constituted over their property. As such, Sps. Sonkin must necessarily and equally bear their own
loss. In view of Sps. Sonkin’s contributory negligence, the Court deems it appropriate to delete the
award of moral damages in their favor.
Attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than an erroneous conviction of the righteousness of his cause. In
this case, the Court observes that neither Sps. Sonkin nor Sps. Vergara (thru their compulsory

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counterclaim) were shown to have acted in bad faith in pursuing their respective claims against
each other. The existence of bad faith is negated by the fact that both parties have valid contentions
against each other. Thus, absent cogent reason to hold otherwise, the Court deems it inappropriate
to award attorney's fees in favor of either party.
2. In view of Sps. Sonkin's undisputed failure to observe the two (2)-meter setback rule under the
National Building Code, and in light of the order of the courts a quo directing Sps. Vergara to
provide an adequate drainage system within their property, the Court likewise deems it proper,
equitable, and necessary to order Erlinda, who is solely impleaded as respondent before the Court,
to comply with the aforesaid rule by the removal of the portion of her house directly abutting the
partition wall. The underlying precept on contributory negligence is that a plaintiff who is partly
responsible for his own injury should not be entitled to recover damages in full but must bear the
consequences of his own negligence.

G.V. FLORIDA TRANSPORT, INC. –versus- HEIRS OF ROMEO L. BATTUNG, JR., REPRESENTED
BY ROMEO BATTUNG, SR.
G.R. No. 208802, FIRST DIVISION, October 14, 2015, PERLAS-BERNABE, J.

In case where the victim’s death was caused by a co-passenger, the applicable provision is Article
1763 of the Civil Code, which states that "a common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission." Notably, for this obligation, the law provides a lesser
degree of diligence, i.e., diligence of a good father of a family, in assessing the existence of any
culpability on the common carrier's part.
In this case, records reveal that when the bus stopped at San Jose City to let four (4) men ride
petitioner's bus (two [2] of which turned out to be Battung's murderers), the bus driver, Duplio, saw
them get on the bus and even took note of what they were wearing. Moreover, Duplio made the bus
conductor, Daraoay, approach these men and have them pay the corresponding fare, which Daraoay
did. During the foregoing, both Duplio and Daraoay observed nothing which would rouse their
suspicion that the men were armed or were to carry out an unlawful activity. With no such indication,
there was no need for them to conduct a more stringent search (i.e., bodily search) on the aforesaid
men. By all accounts, therefore, it cannot be concluded that petitioner or any of its employees failed to
employ the diligence of a good father of a family in relation to its responsibility under Article 1763 of
the Civil Code. As such, petitioner cannot altogether be held civilly liable.
FACTS:
Romeo L. Battung, Jr. (Battung) boarded petitioner's bus in Delfin Albano, Isabela, bound for
Manila. Battung was seated at the first row behind the driver and slept during the ride. When the
bus reached the Philippine Carabao Center in Muñoz, Nueva Ecija, the bus driver, Duplio, stopped
the bus and alighted to check the tires. At this point, a man who was seated at the fourth row of the
bus stood up, shot Battung at his head, and then left with a companion. The bus conductor, Daraoay,
notified Duplio of the incident and thereafter, brought Romeo to the hospital, but the latter was
pronounced dead on arrival. Hence, respondents filed a complaint on July 15, 2008 for damages in
the aggregate amount of P1,826,000.00 based on a breach of contract of carriage against petitioner,

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Duplio, and Baraoay (petitioner, et al.) before the RTC. Respondents contended that as a common
carrier, petitioner and its employees are bound to observe extraordinary diligence in ensuring the
safety of passengers; and in case of injuries and/or death on the part of a passenger, they are
presumed to be at fault and, thus, responsible therefor. As such, petitioner, et al. should be held
civilly liable for Battung's death.
In their defense, petitioner, et al. maintained that they had exercised the extraordinary diligence
required by law from common carriers. In this relation, they claimed that a common carrier is not
an absolute insurer of its passengers and that Battung's death should be properly deemed a
fortuitous event. Thus, they prayed for the dismissal of the complaint, as well as the payment of
their counterclaims for damages and attorney's fees. RTC ruled in respondents' favor. CA affirmed
the ruling of the RTC.
ISSUE:
Whether the CA correctly affirmed the ruling of the RTC finding petitioner liable for damages to
respondent arising from culpa contractual. (NO)
RULING:
The law exacts from common carriers (i.e., those persons, corporations, firms, or associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public) the highest degree of diligence
(i.e., extraordinary diligence) in ensuring the safety of its passengers. Articles 1733 and 1755 of
the Civil Code state:
Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

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

In this relation, Article 1756 of the Civil Code provides that "[i]n case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and
1755." This disputable presumption may also be overcome by a showing that the accident was
caused by a fortuitous event.21
The foregoing provisions notwithstanding, it should be pointed out that the law does not make the
common carrier an insurer of the absolute safety of its passengers.
In this case, Battung's death was neither caused by any defect in the means of transport or in the
method of transporting, or to the negligent or willful acts of petitioner's employees, namely, that of
Duplio and Daraoay, in their capacities as driver and conductor, respectively. Instead, the case
involves the death of Battung wholly caused by the surreptitious act of a co-passenger who, after
consummating such crime, hurriedly alighted from the vehicle. Thus, there is no proper issue on

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petitioner's duty to observe extraordinary diligence in ensuring the safety of the passengers
transported by it, and the presumption of fault/negligence against petitioner under Article 1756 in
relation to Articles 1733 and 1755 of the Civil Code should not apply.
On the other hand, since Battung's death was caused by a co-passenger, the applicable provision is
Article 1763 of the Civil Code, which states that "a common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or negligence of other passengers or of
strangers, if the common carrier's employees through the exercise of the diligence of a good father
of a family could have prevented or stopped the act or omission." Notably, for this obligation, the
law provides a lesser degree of diligence, i.e., diligence of a good father of a family, in assessing the
existence of any culpability on the common carrier's part.
In this case, records reveal that when the bus stopped at San Jose City to let four (4) men ride
petitioner's bus (two [2] of which turned out to be Battung's murderers), the bus driver, Duplio,
saw them get on the bus and even took note of what they were wearing. Moreover, Duplio made the
bus conductor, Daraoay, approach these men and have them pay the corresponding fare, which
Daraoay did. During the foregoing, both Duplio and Daraoay observed nothing which would rouse
their suspicion that the men were armed or were to carry out an unlawful activity. With no such
indication, there was no need for them to conduct a more stringent search (i.e., bodily search) on
the aforesaid men. By all accounts, therefore, it cannot be concluded that petitioner or any of its
employees failed to employ the diligence of a good father of a family in relation to its responsibility
under Article 1763 of the Civil Code. As such, petitioner cannot altogether be held civilly liable.

ST. MARTIN POLYCLINIC, INC. v. LWV CONSTRUCTION CORP.

G.R. No. 217426 | December 4, 2017

DOCTRINE OF THE CASE

Article 2176 covers situations where an injury happens through an act or omission of the
defendant. When it involves a positive act, the intention to commit the outcome is irrelevant. The act
itself must not be a breach of an existing law or a pre-existing contractual obligation. What will be
considered is whether there is "fault or negligence" attending the commission of the act which
necessarily leads to the outcome considered as injurious by the plaintiff. The required degree of
diligence will then be assessed in relation to the circumstances of each and every case.

PERLAS-BERNABE, J.:

FACTS:
Respondent is engaged in the business of recruiting Filipino workers for deployment to
Saudi Arabia. On the other hand, petitioner is an accredited member of the Gulf Cooperative Council
Approved Medical Centers Association (GAMCA) and as such, authorized to conduct medical
examinations of prospective applicants for overseas employment. On January 10, 2008, respondent
referred prospective applicant Jonathan V. Raguindin (Raguindin) to petitioner for a pre-
deployment medical examination in accordance with the instructions from GAMCA. After
undergoing the required examinations, petitioner cleared Raguindin and found him "fit for
employment," as evidenced by a Medical Report 8 dated January 11, 2008 (Medical Report).
Unfortunately, when Raguindin underwent another medical examination with the General
Care Dispensary of Saudi Arabia (General Care Dispensary) on March 24, 2008, he purportedly

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tested positive for HCV or the hepatitis C virus. The Ministry of Health of the Kingdom of Saudi
Arabia (Ministry of Health) required a re-examination of Raguindin, which the General Care
Dispensary conducted on April 28, 2008. However, the results of the re-examination remained the
same, i.e., Raguindin was positive for HCV, which results were reflected in a Certification dated
April 28, 2008 (Certication). An undated HCV Confirmatory Test Report likewise conducted by the
Ministry of Health affirmed such finding, thereby leading to Raguindin's repatriation to the
Philippines.

ISSUE
Whether or not petitioner was negligent in issuing the Medical Report declaring Raguindin "fit
for
employment" and hence, should be held liable for damages.

RULING
Yes. An action for damages due to the negligence of another may be instituted on the
basis of Article 2176 of the Civil Code, which defines a quasi-delict: “Whoever by act or omission
causes damage to another, there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called
a quasi-delict and is governed by the provisions of this Chapter. The elements of a quasi-delict are:
(1) an act or omission; (2) the presence of fault or negligence in the performance or non-
performance of the act; (3) injury; (4) a causal connection between the negligent act and the injury;
and (5) no pre-existing contractual relation.”
As a general rule, any act or omission coming under the purview of Article 2176 gives rise to
a cause of action under quasi-delict. This, in turn, gives the basis for a claim of damages.
Article 2176 covers situations where an injury happens through an act or omission of the
defendant. When it involves a positive act, the intention to commit the outcome is irrelevant. The
act itself must not be a breach of an existing law or a pre-existing contractual obligation. What will
be considered is whether there is "fault or negligence" attending the commission of the act which
necessarily leads to the outcome considered as injurious by the plaintiff. The required degree of
diligence will then be assessed in relation to the circumstances of each and every case.
In this case, the respondent did not proffer (nor have these courts mentioned) any law as
basis for which damages may be recovered due to petitioner's alleged negligent act. In its amended
complaint, respondent mainly avers that had petitioner not issue a "fit for employment" Medical
Report to Raguindin, respondent would not have processed his documents, deployed him to Saudi
Arabia, and later on — in view of the subsequent findings that Raguindin was positive for HCV and
hence, unfit to work — suffered actual damages in the amount of P84,373.41. Thus, as the claimed
negligent act of petitioner was not premised on the breach of any law, and not to mention the
incontestable fact that no pre-existing contractual relation was averred to exist between the parties,
Article 2176 of the Civil Code should govern.

2. Presumptions

D. Damages
1. General provisions
2. Kinds of damages

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 NANITO EVANGELISTA –versus- SPOUSES NERO ANDOLONG III AND ERLINDA ANDOLONG
et.al.
G.R. No. 221770, FIRST DIVISION, November 16, 2016, PERLAS-BERNABE, J.

Under Article 2224 of the Civil Code, temperate or moderate damages may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be provided with certainty.

Under the foregoing circumstances, the Court is convinced that Evangelista can recover damages
although the exact amount of the net profits remained unproven. This comes in the form of temperate
or moderate damages. Consequently, in computing the amount of temperate or moderate damages, it
is usually left to the discretion of the courts, but the amount must be reasonable, bearing in mind that
temperate damages should be more than nominal but less than compensatory.

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

ISSUE:
Whether Evangelista entitled to recover damages. (YES)

RULING:
Since the Andolong waived their right to present evidence, the Court is left with no other option but
to rule that Andolong's failure to present the documents in possession raises the presumption that
the evidenced willfully suppressed would be adverse if produced.

Under the foregoing circumstances, the Court is convinced that Evangelista can recover damages
although the exact amount of the net profits remained unproven. This comes in the form of
temperate or moderate damages. This kind may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided
with certainty. Consequently, in computing the amount of temperate or moderate damages, it is
usually left to the discretion of the courts, but the amount must be reasonable, bearing in mind that
temperate damages should be more than nominal but less than compensatory.

ROSALIE SY AYSON –versus- FIL-ESTATE PROPERTIES, INC. et.al.

G.R. No. 223254, FIRST DIVISION, December 1, 2016, PERLAS-BERNABE, J.

It must be stressed that moral damages are not meant to be punitive but are designed to compensate
and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a person.
Similarly, exemplary damages are imposed by way of example or correction for the public good, in

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addition to the moral, temperate, liquidated or compensatory damages and are awarded only if the
guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

Ayson can recover moral damages as she was made to suffer sleepless nights and mental anguish
because her right as the owner of the subject lot was violated by Fil-Estate in constructing its golf
course in the latter's property. She is also entitled to exemplary damages since despite the notice to
vacate, the latter still proceeded to construct its golf course.

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

ISSUE:
Whether Ayson entitled to damages. (YES)

RULING:
Ayson is entitled to recover moral and exemplary damages.

Moral damages are designed to compensate and alleviate the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar harm unjustly caused to a person. Exemplary damages may be imposed by way of
example or correction for public good if the guilty party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.

Ayson can recover moral damages as she was made to suffer sleepless nights and mental anguish
because her right as the owner of the subject lot was violated by Fil-Estate in constructing its golf
course in the latter's property. She is also entitled to exemplary damages since despite the notice to
vacate, the latter still proceeded to construct its golf course.

ARIEL P. HORLADOR, Petitioner, -versus- PHILIPPINE TRANSMARINE CARRIERS, INC.,

MARINESHIPMANAGEMENT LTD., and CAPTAIN MARLON L. MALANAO, Respondents.
G.R. No. 236576, SECOND DIVISION, September 05, 2018, PERLAS-BERNABE, J.

There are two commonly accepted concepts of attorney's fees - the ordinary and extraordinary. In
its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client
for the legal services the former renders; compensation is paid for the cost and/or results of legal
services per agreement or as may be assessed. In its extraordinary concept, attorney's fees are
deemed indemnity for damages ordered by the court to be paid by the losing party to the winning
party.
The instances when these may be awarded are enumerated in Article 2208 of the Civil Code and is
payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the award
shall accrue to the lawyer as additional or part of compensation. Particularly, Article 2208 of the Civil
Code reads:

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 Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
In labor cases involving employees' wages and other benefits, the Court has consistently held that
when the concerned employee is entitled to the wages/benefits prayed for, he/she is also entitled to
attorney's fees amounting to 10% of the total monetary award due him/her.
In this case, suffice it to say that the CA erred in deleting the award of attorney's fees, considering that
petitioner was found to be entitled to permanent and total disability benefits and was forced to litigate
to protect his valid claim. Thus, the reinstatement of such award is in order.

FACTS:

Philippine Transmarine Carriers, Inc. for and on behalf of its foreign principal, respondent Marine
Shipmanagement Ltd. hired petitioner as a Chief Cook on board the vessel PRAIA for a period of
eight (8) months starting from his deployment on June 19, 2012.On January 3, 2013 and while on
board the vessel, petitioner, while carrying provisions, suddenly felt a severe pain on his waist,
abdomen, and down to his left scrotum. As the pain persisted for a number of days, he was airlifted
to a hospital in Belgium where he was diagnosed with "infection with the need to rule out
Epididymitis and Prostatitis" and advised to undergo repatriation. Upon arrival in the Philippines,
petitioner claimed that he immediately reported to PTCI and asked for referral for further
treatment, but was ignored. As such, he used his health card in order to seek treatment at the
Molino Doctors Hospital where he was diagnosed with hernia. Thus, he filed a complaint for, inter
alia, permanent and total disability benefits against PTCI, Marine, and respondent Captain Marlon L.
Malanao as the crewing manager (respondents).

ISSUE:

Whether the CA correctly deleted the award of attorney's fees in petitioner's favor. (NO)

RULING:

There are two commonly accepted concepts of attorney's fees - the ordinary and extraordinary. In
its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client
for the legal services the former renders; compensation is paid for the cost and/or results of legal
services per agreement or as may be assessed. In its extraordinary concept, attorney's fees are
deemed indemnity for damages ordered by the court to be paid by the losing party to the winning
party.
The instances when these may be awarded are enumerated in Article 2208 of the Civil Code and is
payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the
award shall accrue to the lawyer as additional or part of compensation. Particularly, Article 2208 of
the Civil Code reads:

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 Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
In labor cases involving employees' wages and other benefits, the Court has consistently held that
when the concerned employee is entitled to the wages/benefits prayed for, he/she is also entitled
to attorney's fees amounting to 10% of the total monetary award due him/her.
In this case, suffice it to say that the CA erred in deleting the award of attorney's fees, considering
that petitioner was found to be entitled to permanent and total disability benefits and was forced to
litigate to protect his valid claim. Thus, the reinstatement of such award is in order.

3. In case of death

OTHERS
METRO MANILA SHOPPING MECCA CORP. V. MS. LIBERTY TOLEDO
GR. 190818 | November 10, 2014
DOCTRINE OF THE CASE:
Compromise Agreements; A compromise agreement is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced.
___________________________________________________________________________
PERLAS-BERNABE, J.:
FACTS: The Court hereby resolves the Manifestation and Motion dated August 2, 2013 filed by
petitioners Metro Manila Shopping Mecca Corp., Shoemart, Inc., SM Prime Holdings, Inc., Star
Appliances Center, Super Value, Inc., Ace Hardware Philippines, Inc., Health and Beauty, Inc.,
Jollimart Phils. Corp., and Surplus Marketing Corporation (petitioners), seeking the approval of the
terms and conditions of the parties’ Universal Compromise Agreement (UCA) in lieu of the Court’s
Decision which denied petitioner’s claim for tax refund/credit of their local business taxes paid to
respondent City of Manila.
In their Manifestation and Motion, petitioners alleged that pursuant to the UCA, the parties
agreed to amicably settle all cases between them involving claims for tax refund/credit, including
the instant case. The pertinent portions of the UCA provides:
2.b. It is further agreed that there shall be no refunds/tax credit certificates to be given or issued by
the City of Manila in the following cases:
2.b.1. SC G.R. 190818 (CTA EB No. 480) entitled “Supervalue, Inc., Ace Hardware Philippines, Inc., H
and B, Inc., Metro Manila Shopping Mecca Corp., SM Land, Inc. (formerly Shoemart, Inc.), SM Prime

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Holdings, Inc., Star Appliance Center, Inc., Surplus Marketing Corp. versus The City of Manila and the
City Treasurer [of] Manila,” which emanated from an Order in favour of the SM Group issued by
Branch 47 of the Regional Trial Court of Manila in Civil Case No. 03-108175 entitled “Ace Hardware
Phils., Inc., SM Prime Holdings, Inc., Star Appliance Center, Inc., Supervalue, Inc., Watsons Personal
Care Stores (Phils.), Inc. versus The City of Manila and the City Treasurer of Manila,” and is currently
pending before the Supreme Court.
Respondent City of Manila and Liberty Toledo, in her capacity as Treasurer of the City of Manila
(respondents), confirmed the authenticity and due execution of the UCA. They, however, submitted
that the UCA had no effect on the subject Decision since the taxes paid subject of the instant case
was not included in the agreement.
ISSUE:
Whether or not the instant case is included in the Universal Compromise Agreement (UCA) between
the parties?
HELD:
Yes. The Court adopts the terms and conditions of the UCA pertinent to this case.
A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid
a litigation or put an end to one already commenced. It contemplates mutual concessions and
mutual gains to avoid the expenses of litigation; or when litigation has already begun, to end it
because of the uncertainty of the result. Its validity is dependent upon the fulfillment of the
requisites and principles of contracts dictated by law; and its terms and conditions must not be
contrary to law, morals, good customs, public policy, and public order. When given judicial approval,
a compromise agreement becomes more than a contract binding upon the parties. Having been
sanctioned by the court, it is entered as a determination of a controversy and has the force and
effect of a judgment. It is immediately executory and not appealable, except for vices of consent or
forgery. The nonfulfillment of its terms and conditions justifies the issuance of a writ of execution;
in such an instance, execution becomes a ministerial duty of the court review of the whereas clauses
of the UCA reveals the various court cases filed by petitioners, including this case, for the refund
and/or issuance of tax credit covering the local business taxes payments they paid to respondent
City of Manila pursuant to Section 21 of the latter’s Revenue Code. Thus, contrary to the submission
of respondents, the local business taxes subject of the instant case is clearly covered by the UCA
since they were also paid in accordance with the same provision of the Revenue Code of Manila.

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) vs.

UNITED PLANNERS CONSULTANTS, INC. (UPCI)
G.R. No. 212081| February 23, 2015
DOCTRINE OF THE CASE:
Under Section 17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may be
sought, but any of the parties may file a motion for correction of the final award, which shall interrupt

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the running of the period for appeal. Special ADR rules apply not only to confirmation of the decision,
but as well s its execution.
PERLAS-BERNABE, J.
FACTS:
Petitioner, through the Land Management Bureau (LMB), entered into an Agreement for
Consultancy Services with respondent United Planners Consultants, Inc. (respondent) in connection
with the LMB's Land Resource Management Master Plan Project (LRMMP). Under the Consultancy
Agreement, petitioner committed to pay a total contract price based on a predetermined
percentage corresponding to the particular stage of work accomplished.
Respondent completed the work required, which petitioner formally accepted. However,
petitioner was able to pay only 47% of the total contract price. at the soonest possible time. For
failure to pay its obligation under the Consultancy Agreement despite repeated demands,
respondent instituted a Complaint against petitioner before the RTC.
Upon motion of respondent, the case was subsequently referred to arbitration pursuant to
the arbitration clause of the Consultancy Agreement, which petitioner did not oppose. During the
preliminary conference, the parties agreed to adopt the CIAC Revised Rules Governing Construction
Arbitration (CIAC Rules) to govern the arbitration proceedings. The Arbitral Tribunal rendered its
Award (Arbitral Award) in favor of respondent. Petitioner moved to quash the writ of execution,
positing that respondent was not entitled to its monetary claims. It also claimed that the issuance of
said writ was premature since the RTC should have first resolved its Motion for Reconsideration
and Manifestation and Motion, and not merely noted them, thereby violating its right to due
process. the RTC denied petitioner’s motion to quash. Said decision was affirmed by CA.
ISSUE: Whether or not the CA erred in applying the provisions of the Special q Rules, resulting in
the dismissal of petitioner’s special civil action for certiorari.
RULING:
No. Under Section 17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may
be sought, but any of the parties may file a motion for correction of the final award, which shall
interrupt the running of the period for appeal. In this case, records do not show that any of the
foregoing remedies were availed of by petitioner. Instead, it filed the Motion for Reconsideration of
the Arbitral Award, which was a prohibited pleading under the Section 17.2, Rule 17 of the CIAC
Rules, thus rendering the same final and executory.
Accordingly, the case was remanded to the RTC for confirmation proceedings pursuant to Rule 11
of the Special ADR Rules which requires confirmation by the court of the final arbitral award.
During the confirmation proceedings, petitioners did not oppose the RTC’s confirmation by filing a
petition to vacate the Arbitral Award under Rule 11.2 (D) of the Special ADR Rules. Neither did it
seek reconsideration of the confirmation order in accordance with Rule 19.1 (h) thereof. Thus, for
failing to avail of the foregoing remedies before resorting to certiorari, the CA correctly dismissed
its petition.

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

JOSE Z. MORENO, vs. RENE M. KAHN et. Al

G.R. No. 217744| JULY 30, 2018

DOCTRINE OF THE CASE: Non-compliance with the earnest effort requirement under Article 151 of
the Family Code is not a jurisdictional defect which would authorize the courts to dismiss suits filed
before them motu proprio. Rather, it merely partakes of a condition precedent such that the non-
compliance therewith constitutes a ground for dismissal of a suit should the same be invoked by the
opposing party at the earliest opportunity, as in a motion to dismiss or in the answer. Otherwise, such
ground is deemed waived.

PERLAS-BERNABE, J.

FACTS:
Jose alleged that since May 1998 and in their capacity as lessees, he and his family have been
occupying two (2) parcels of land co-owned by his full-blooded sister, respondent Consuelo et al.
Around April or May 2003, respondents offered to sell to Jose the subject lands which Jose accepted.
Over the next few years, Jose made partial payments to respondents

However, in July 2010, Consuelo decided to "cancel" their agreement, and thereafter, informed Jose
of her intent to convert the earlier partial payment as rental payments instead. In response, Jose
expressed his disapproval to Consuelo's plan and demanded that respondents proceed with the
sale, which the latter ignored. He then claimed without his consent, Consuelo et al sold their shares
over the subject lands to Rene. Upon learning of such sale, Jose sent a demand letter to
Rene asserting his right to the subject lands. As his demands went unheeded, Jose brought the
matter to the barangay upon for conciliation proceedings between him and Rene.As no settlement
was agreed upon, Jose was constrained to file the subject complaint for specific performance and
cancellation of titles with damages.

ISSUE:
Whether or not the CA correctly affirmed the RTC's motu proprio dismissal of Jose's complaint and
if Article 151 of the Family Code is applicable to this case.

RULING:
NO, Article 151. No suit between members of the same family shall prosper unless it should appear
from the verified complaint or petition that earnest efforts toward a compromise have been made,

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but that the same have failed. If it is shown that no such efforts were in fact made, the case must be
dismissed.

Non-compliance with the earnest effort requirement under Article 151 of the Family Code is not a
jurisdictional defect which would authorize the courts to dismiss suits filed before them motu
proprio. Rather, it merely partakes of a condition precedent such that the non-compliance therewith
constitutes a ground for dismissal of a suit should the same be invoked by the opposing party at the
earliest opportunity, as in a motion to dismiss or in the answer. Otherwise, such ground is deemed
waived

The base issue is whether or not the appellate court may dismiss the order of dismissal of the
complaint for failure to allege therein that earnest efforts towards a compromise have been made.
In the case at hand, no motion to dismiss the complaint based on the failure to comply with a
condition precedent was filed in the trial court; neither was such failure assigned as error in the
appeal that respondent brought before the Court of Appeals.

Therefore, the rule on deemed waiver of the non-jurisdictional defense or objection is wholly
applicable to respondent. If the respondents as parties-defendants could not, and did not, after
filing their answer-to-petitioner’s complainant, invoke the objection of absence of the required
allegation on earnest efforts at a compromise, the appellate court unquestionably did not have any
authority or basis to motu propio order the dismissal of petitioner’s complaint

REPUBLIC v. LEONOR MACABAGDAL

G.R. No. 227215| January 10, 2018

DOCTRINE OF THE CASE

Legal interest shall run not from the date of the filing of the complaint but from the date of the
issuance of the Writ of Possession, since it is from this date that the fact of the deprivation of property
can be established.

Perlas-Bernabe, J.:

FACTS:
Petitioner the Republic of the Philippines, represented by the Department of Public Works
and Highways, filed before the RTC a complaint against an unknown owner for the expropriation of
a lot located in Barangay Ugong, Valenzuela City for the construction of the C-5 Northern Link Road
Project, otherwise known as North Luzon Expressway (NLEX) Segment 8.1, traversing from
Mindanao Avenue in Quezon City to the NLEX in Valenzuela City. Petitioner applied for a writ of
possession over the subject lot on May 5, 2008, which was granted, and was required to deposit
with the court the amount of P550,000.00 (i.e., at P2,750.00/sq. m.) as provisional deposit

However, respondent Leonor Macabagdal was substituted as party-defendant upon

sufficient showing that the subject lot is registered in her name under the Transfer Certificate Title
of the lot. Respondent did not oppose the expropriation, and received the provisional deposit. The
RTC appointed a board of commissioners to determine the just compensation for the subject lot,
which thereafter submitted report dated May 23, 2014, recommending a fair market value of
P9,000.00/sq. m. as the just compensation for the subject lot, taking into consideration its location,
neighborhood and land classification, utilities, amenities, physical characteristics, occupancy and

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usage, highest and best usage, current market value offerings, as well as previously decided
expropriation cases of the same RTC involving properties similarly situated in the same barangay.
The Court of Appeals affirmed this decision, which brought up the that the CA did not rule on the
issue of the applicable rate of interest which, in this case, should be at twelve percent (12%) per
annum. from the filing of the complaint until June 30, 2013, and thereafter, at six percent (6%) per
annum until full payment.

ISSUE
1. Is the 12% per annum interest on the unpaid balance, computed from the time of the taking
of the subject lot until full payment, valid?

RULING
No. The value of the landholdings should be equivalent to the principal sum of the just
compensation due, and interest is due and should be paid to compensate for the unpaid balance of
this principal sum after taking has been completed. From the date of the taking of the subject lot on
May 5, 2008 when the RTC issued a writ of possession in favor of petitioner, until the just
compensation therefor was finally fixed at P9,000.00/sq. m., petitioner had only paid a provisional
deposit in the amount of P550,000.00 (i.e., at P2,750.00/sq. m.). Thus, this left an unpaid balance of
the "principal sum of the just compensation," warranting the imposition of interest. It is settled that
the delay in the payment of just compensation amounts to an effective forbearance of money,
entitling the landowner to interest on the difference in the amount between the final amount as
adjudged by the court and the initial payment made by the government.

It bears to clarify that legal interest shall run not from the date of the filing of the complaint
but from the date of the issuance of the Writ of Possession on May 5, 2008, since it is from this date
that the fact of the deprivation of property can be established. As such, it is only proper that accrual
of legal interest should begin from this date.

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