Civillaw 2015 Edited

Deans
Circle 2016
University of Santo Tomas
Digested by: DC 2016 Members
Editors:
Tricia Lacuesta
Lorenzo Gayya
Cristopher Reyes
Macky Siazon
Janine Arenas
Ninna Bonsol
Lloyd Javier
CIVIL LAW
Recent Jurisprudence
Civil Law (Recent Jurisprudence) Deans Circle

2016
Table of Contents
Persons and Family Relations ...................................................................................................................... 4
Psychological Incapacity ........................................................................................................................... 4
Filiation ...................................................................................................................................................... 8
Legitimation ............................................................................................................................................... 8
Vested Right ............................................................................................................................................... 9
Obligations and Contracts ......................................................................................................................... 10
Breach of Contract .................................................................................................................................. 10
Payment .................................................................................................................................................. 12
Novation .................................................................................................................................................. 13
Essential Requisites of Contract ............................................................................................................ 14
Consent ................................................................................................................................................... 16
Default ..................................................................................................................................................... 17
Estoppel .................................................................................................................................................. 18
Laches...................................................................................................................................................... 19
Rescission ............................................................................................................................................... 20
Surety ...................................................................................................................................................... 23
Property ...................................................................................................................................................... 25
Real Property .......................................................................................................................................... 25
Ejectment ................................................................................................................................................ 26
Accion Reinvindicatoria ......................................................................................................................... 28
Acquisitive Prescription ........................................................................................................................ 29
Right of Way............................................................................................................................................ 30
Land Titles and Deeds ............................................................................................................................... 31
Property Reserved For Public/Quasi-Public Purpose ......................................................................... 31
Jurisdiction of Courts ............................................................................................................................. 32
Cloud on Title.......................................................................................................................................... 33
Certificate of Titles Covering the Same Land ....................................................................................... 34
Jurisdiction of DAR ................................................................................................................................. 35
Possession and Occupation ................................................................................................................... 36
Where Date of Registration is Reckoned from ..................................................................................... 37
Forgery .................................................................................................................................................... 38
Alienable and Disposable Character of Land ........................................................................................ 39
Exemption from CARP ........................................................................................................................... 41
Amendment and Alteration of Certificates ........................................................................................... 42
Reconstitution ........................................................................................................................................ 43
Proof of Ownership of a Land ................................................................................................................ 45
Proof of Conveyance of Land ................................................................................................................. 46
Free Patent .............................................................................................................................................. 47
Attack on Certificate of Title .................................................................................................................. 48
Action for Reconveyance ....................................................................................................................... 52
Innocent Purchasers for Value .............................................................................................................. 53
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Mortgagee in Good Faith and for Value ................................................................................................ 56
Reversion ................................................................................................................................................ 57
Wills and Successions ................................................................................................................................ 58
Compromise ............................................................................................................................................... 59
Credit Transactions ................................................................................................................................... 62
Chattel Mortgage .................................................................................................................................... 62
Loan/Mutuum ........................................................................................................................................ 63
Mortgage ................................................................................................................................................. 67
Pactum Commissorium .......................................................................................................................... 73
Extrajudicial Foreclosure ....................................................................................................................... 74
Redemption ............................................................................................................................................ 77
Suretyship ............................................................................................................................................... 79
Guaranty.................................................................................................................................................. 80
Sales ............................................................................................................................................................ 81
When Sale is Perfected ........................................................................................................................... 81
Delivery ................................................................................................................................................... 82
Bill Of Lading .......................................................................................................................................... 83
Earnest Money ........................................................................................................................................ 84
Simulated Sale ........................................................................................................................................ 85
Equitable Mortgage ................................................................................................................................ 87
Redemption ............................................................................................................................................ 89
Assignment of Credit .............................................................................................................................. 90
Partnerships, Agencies, and Trusts .......................................................................................................... 91
Agency ..................................................................................................................................................... 91
Trust ........................................................................................................................................................ 94
Special Power of Attorney ..................................................................................................................... 95
Torts and Damages .................................................................................................................................... 97
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CIVIL LAW
PERSONS AND FAMILY RELATIONS
PSYCHOLOGICAL INCAPACITY
VALERIO E. KALAW v. MA. ELENA FERNANDEZ
G.R. No 166357, January 14, 2015, BERSAMIN, J.
Article 36 of the Family Code must not be so strictly and too literally read and applied given the
clear intendment of the drafters to adopt its enacted version of less specificity obviously to enable
some resiliency in its application.
Facts:
This is a motion for reconsideration from the 2011 decision of the Supreme Court which
denied the declaration of nullity based on psychological incapacity of the marriage of Valerio and Ma.
Elena. The Court initially in its 2011 decision denied evidence coming from expert witnesses, and the
utter disregard of Elena to her childs welfare by frequently bringing them to her long hours of
mahjong sessions. The court initially brushed aside the trial courts finding of psychological
incapacity by relying on a stringent rules. Now finding merit, the Court takes a second hard look on
its 2011 decision.
Issue:
Whether or not trial courts finding of psychological incapacity whenever supported by
evidence be accorded respect over strict protectionist and stringent rules guided by Molina and
previous decisions.
Ruling:
Yes. It is not enough reason to ignore the findings and evaluation by the trial court and
substitute Supreme Courts as an appellate tribunal only because the Constitution and the Family
Code regard marriage as an inviolable social institution. There is a need to stress that the fulfillment
of the constitutional mandate for the State to protect marriage as an inviolable social institution only
relates to a valid marriage. No protection can be accorded to a marriage that is null and void ab initio,
because such a marriage has no legal existence. In declaring a marriage null and void ab initio,
therefore, the Courts really assiduously defend and promote the sanctity of marriage as an inviolable
social institution. The foundation of our society is thereby made all the more strong and solid.
Here, the findings and evaluation by the RTC as the trial court deserved credence because it
was in the better position to view and examine the demeanor of the witnesses while they were
testifying. The position and role of the trial judge in the appreciation of the evidence showing the
psychological incapacity were not to be downplayed but should be accorded due importance and
respect.
After a long and hard second look, the Court considers it improper and unwarranted to give
to such expert opinions a merely generalized consideration and treatment, least of all to dismiss their
value as inadequate basis for the declaration of the nullity of the marriage. Instead, the Court holds
that said experts sufficiently and competently described the psychological incapacity of the
respondent within the standards of Article 36 of the Family Code. The SC upholds the conclusions
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reached by the two expert witnesses because they were largely drawn from the case records and
affidavits, and should not anymore be disputed after the RTC itself had accepted the veracity of the
petitioners factual premises.
In hindsight, it may have been inappropriate for the Court to impose a rigid set of rules, as
the one in Molina, in resolving all cases of psychological incapacity. Understandably, the Court was
then alarmed by the deluge of petitions for the dissolution of marital bonds, and was sensitive to the
OSG's exaggeration of Article 36 as the "most liberal divorce procedure in the world." The
unintended consequences of Molina, however, has taken its toll on people who have to live with
deviant behavior, moral insanity and sociopathic personality anomaly, which, like termites, consume
little by little the very foundation of their families, our basic social institutions. Far from what was
intended by the Court, Molina has become a straight-jacket, forcing all sizes to fit into and be bound
by it, wittingly or unwittingly. The Court, in conveniently applying Molina, has allowed diagnosed
sociopaths, schizophrenics, nymphomaniacs, narcissists and the like, to continuously debase and
pervert the sanctity of marriage. Ironically, the Roman Rota has annulled marriages on account of the
personality disorders of the said individuals. The Court need not worry about the possible abuse of
the remedy provided by Article 36, for there are ample safeguards against this contingency, among
which is the intervention by the State, through the public prosecutor, to guard against collusion
between the parties and/or fabrication of evidence. The Court should rather be alarmed by the rising
number of cases involving marital abuse, child abuse, domestic violence and incestuous rape.
ROBERT F. MALLILIN v. LUZ G. JAMESOLAMIN and the REPUBLIC OF THE PHILIPPINES

G.R. No. 192718, February 18, 2015, MENDOZA, J.
The incapacity must be grave or serious such that the party would be incapable of carrying out
the ordinary duties required in marriage. It must be rooted in the history of the party antedating the
marriage, although the overt manifestations may only emerge after the marriage. It must be incurable
or, even if it were otherwise, the cure would be beyond the means of the party involved.
Facts:
Robert F. Mallilin (Robert) filed a petition for declaration of nullity of marriage with Luz G.
Jamesolamin (Luz) whom he has 3 children. Robert alleged that at the time of the celebration of their
marriage, Luz was suffering from psychological and mental incapacity and unpreparedness to enter
into such marital life and to comply with its essential obligations and responsibilities. Such incapacity
became even more apparent during their marriage when Luz exhibited clear manifestation of
immaturity, irresponsibility, deficiency of independent rational judgment, and inability to cope with
the heavy and oftentimes demanding obligation of a parent. Robert disclosed that Luz was already
living in California, USA, and had married an American. He also revealed that when they were still
engaged, Luz continued seeing and dating another boyfriend, a certain Lt. Liwag. He also claimed that
from the outset, Luz had been remiss in her duties both as a wife and as a mother.
The RTC declared the marriage null and void on the ground of psychological incapacity on
the part of Luz as she failed to comply with the essential marital obligations. The OSG interposed an
appeal with the CA stating that the real cause of the marital discord was the sexual infidelity of Luz.
Such ground should not result in the nullification of the marriage under the law, but merely
constituted a ground for legal separation. The CA reversed the RTC decision.
Issue:
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Whether or not the totality of the evidence adduced proves that Luz was psychologically
incapacitated to comply with the essential obligations of marriage.
Ruling:
No. A petition for declaration of nullity of marriage is anchored on Article 36 of the Family
Code. "Psychological incapacity," as a ground to nullify a marriage under Article 36 of the Family
Code, should refer to no less than a mental not merely physical incapacity that causes a party to
be truly incognitive of the basic marital covenants that concomitantly must be assumed and
discharged by the parties to the marriage which, as so expressed in Article 68 of the Family Code,
among others, include their mutual obligations to live together; observe love, respect and fidelity;
and render help and support.
There is hardly a doubt that the intendment of the law has been to confine the meaning of
"psychological incapacity" to the most serious cases of personality disorders clearly demonstrative of
an utter insensitivity or inability to give meaning and significance to the marriage. Psychological
incapacity as required by Article 36 must be characterized by (a) gravity, (b) juridical antecedence
and (c) incurability.
The Court is of the considered view that Roberts evidence failed to establish the
psychological incapacity of Luz. First, the testimony of Robert failed to overcome the burden of proof
to show the nullity of the marriage. He presented no other witnesses to corroborate his allegations
on her behavior. Thus, his testimony was self-serving and had no serious value as evidence.
Second, the root cause of the alleged psychological incapacity of Luz was not medically or
clinically identified, and sufficiently proven during the trial. Based on the records, Robert failed to
prove that her disposition of not cleaning the room, preparing their meal, washing the clothes, and
propensity for dating and receiving different male visitors, was grave, deeply rooted, and incurable
within the parameters of jurisprudence on psychological incapacity.
The alleged failure of Luz to assume her duties as a wife and as a mother, as well as her
emotional immaturity, irresponsibility and infidelity, cannot rise to the level of psychological
incapacity that justifies the nullification of the parties' marriage. The Court has repeatedly stressed
that psychological incapacity contemplates "downright incapacity or inability to take cognizance of
and to assume the basic marital obligations," not merely the refusal, neglect or difficulty, much less ill
will, on the part of the errant spouse. Psychological incapacity refers only to the most serious cases of
personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and
significance to the marriage.
As correctly found by the CA, sexual infidelity or perversion and abandonment do not, by
themselves, constitute grounds for declaring a marriage void based on psychological incapacity.
Robert argues that the series of sexual indiscretion of Luz were external manifestations of the
psychological defect that she was suffering within her person, which could be considered as
nymphomania or "excessive sex hunger." Other than his allegations, however, no other convincing
evidence was adduced to prove that these sexual indiscretions were considered as nymphomania,
and that it was grave, deeply rooted, and incurable within the term of psychological incapacity
embodied in Article 36. To stress, Roberts testimony alone is insufficient to prove the existence of
psychological incapacity.
Third, the psychological report of Villanueva, Guidance Psychologist II of the Northern
Mindanao Medical Center, Cagayan de Oro City, was insufficient to prove the psychological in
capacity of Luz. There was nothing in the records that would indicate that Luz had either been
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interviewed or was subjected to a psychological examination. The finding as to her psychological
incapacity was based entirely on hearsay and the self-serving information provided by Robert.
GLENN VINAS v. MARY GRACE PAREL VINAS

G.R. No. 208790, January 21, 2015, REYES, J.
It was not enough that the spouse alleged to be psychologically incapacitated, had difficulty in
complying with his/her marital obligations, or was unwilling to perform these obligations. Proof of a
natal or supervening disabling factor an adverse integral element in the respondents personality
structure that effectively incapacitated him from complying with his essential marital obligations had
to be shown.
Facts:
Glenn filed a Petition for the declaration of nullity of his marriage with Mary Grace. He
alleged that Mary Grace was insecure, extremely jealous, outgoing and prone to regularly resorting to
any pretext to be able to leave the house. She thoroughly enjoyed the night life, and drank and
smoked heavily even when she was pregnant. Further, Mary Grace refused to perform even the most
essential household chores of cleaning and cooking. When Glenn confronted her about her behavior,
she showed indifference. She eventually left their home without informing Glenn. Glenn later found
out that she left for an overseas employment in Dubai. Dr. Tayag, a clinical psychologist diagnosed
Mary Grace to be suffering from a Narcissistic Personality Disorder with anti-social traits. Dr. Tayag
concluded that Mary Grace and Glenns relationship is not founded on mutual love, trust, respect,
commitment and fidelity to each other. Hence, Dr. Tayag recommended the propriety of declaring the
nullity of the couples marriage.
Issue:
Whether or not Mary Grace is psychologically incapacitated to perform her marital
obligations.
Ruling:
No. In Bier v. Bier (G.R. No. 173294, February 27, 2008), the Court ruled that it was not enough
that respondent, alleged to be psychologically incapacitated, had difficulty in complying with his
marital obligations, or was unwilling to perform these obligations. Proof of a natal or supervening
disabling factor an adverse integral element in the respondents personality structure that
effectively incapacitated him from complying with his essential marital obligations had to be
shown.
It is worth noting that Glenn and Mary Grace live with each other for more or less seven
years from 1999 to 2006. The foregoing established fact shows that living together as spouses under
one roof is not an impossibility. Mary Graces departure from their home in 2006 indicates either a
refusal or mere difficulty, but not absolute inability to comply with her obligation to live with her
husband.
The Court understands the inherent difficulty attendant to obtaining the statements of
witnesses who can attest to the antecedence of a persons psychological incapacity, but such difficulty
does not exempt a petitioner from complying with what the law requires. While the Court also
commiserates with Glenns marital woes, the totality of the evidence presented provides inadequate
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basis for the Court to conclude that Mary Grace is indeed psychologically incapacitated to comply
with her obligations as Glenns spouse.
FILIATION
RODOLFO S. AGUILAR v. EDNA G. SIASAT
G.R. No. 200169, January 28, 2015, DEL CASTILLO, J.
Filiation may be proved by an admission of legitimate filiation in a public document or a
private handwritten instrument and signed by the parent concerned.
Facts:
Rodolfo S. Aguilar alleged that he is the only son and sole surviving heir of the Alfredo and
Candelaria Aguilar spouses and that Respondent Edna Siasat could have stolen the land titles.
Rodolfo presented documents to prove his filiation such as his high school records, Income Tax
Return, Alfredos SSS form, Sheet of Employment, marriage certificate and recommendation letter, all
stating that the deceased Aguilar spouses were his parents. He also presented testimonies from his
aunt, sister and wife. Siasat on the other hand, that petitioner is not the natural nor adoptive son by
the Aguilar spouse. She also asserted that upon the death of Candelaria Siasat-Aguilar, her brothers
and sisters inherited her estate as she had no issue and that the subject titles were not stolen, but
entrusted to her for safekeeping by Candelaria, who is her aunt.
Issue:
Whether or not filiation may still be proved absent the certificate of live birth.
Ruling:
Yes. The filiation of illegitimate children, like legitimate children may also be established an
admission of legitimate filiation in a public document or a private handwritten instrument and
signed by the parent concerned. The due recognition of an illegitimate child in any authentic writing
is, in itself, a consummated act of acknowledgment of the child, and no further court action is
required. In fact, it is treated not just a ground for compulsory recognition as it is in itself a voluntary
recognition. Moreover, following Article 3(1) of the United Nations Convention on the Rights of a
Child, the best interests of the child shall be a primary consideration. It is therefore the policy of the
Family Code to liberalize the rule on the investigation of the paternity and filiation of children,
especially of illegitimate children. Since petitioner has shown that he is the legitimate issue of the
Aguilar spouses, then he is as well heir to the latters estate. Respondent is then left with no right to
inherit from her aunt Candelaria Siasat-Aguilars estate.
LEGITIMATION
BBB* v. AAA*
G.R. No. 193225, February 9, 2015, REYES, J.
Article 177 of the Family Code provides that "only children conceived and born outside of
wedlock of parents who, at the time of the conception of the former, were not disqualified by any
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impediment to marry each other may be legitimated." Article 178 states that "legitimation shall take
place by a subsequent valid marriage between parents."
Facts:
[BBB] and [AAA] had a relationship when the latter was still raising her first child borne
[CCC] from a previous relationship. During the relationship with [BBB], [AAA] bore two more
children namely, [DDD] and [EEE]. To legalize their relationship, [BBB] and [AAA] married in civil
rights and thereafter, the birth certificates of the children, including [CCCs], was amended to change
their civil status to be legitimated by virtue of the said marriage. However, the relationship was not
perfect. There were fights and arguments which caused them to have strained relationship one of
which is the support for [CCC] of [BBB].
Issue:
Whether or not [BBB] should give support to [CCC].
Ruling:
Yes. In the case at bar, the parties do not dispute the fact that BBB is not CCCs biological
father. Such being the case, it was improper to have CCC legitimated after the celebration of BBB and
AAAs marriage. Clearly then, the legal process of legitimation was trifled with BBB voluntarily but
falsely acknowledged CCC as his son. Article 1431 of the New Civil Code pertinently provides:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon.
At least for the purpose of resolving the instant petition, the principle of estoppel finds
application and it now bars BBB from making an assertion contrary to his previous representations.
He should not be allowed to evade a responsibility arising from his own misrepresentations. He is
bound by the effects of the legitimation process. CCC remains to be BBBs son, and pursuant to Article
179 of the Family Code, the former is entitled to the same rights as those of a legitimate child,
including the receipt of his fathers support.
VESTED RIGHT
ADORACION CAROLINO (SPOUSE AND IN SUBSTITUTION OF THE DECEASED JEREMIAS A.
CAROLINO) v. GEN. GENEROSO SENGA, AS CHIEF OF STAFF OF THE ARMED FORCES OF THE
PHILIPPINES (AFP); BRIG. GEN. FERNANDO ZABAT, AS CHIEF OF THE AFP FINANCE CENTER;
COMMO. REYNALDO BASILIO, AS CHIEF OF THE AFP-GHQ MANAGEMENT AND FISCAL OFFICE;
AND COMMO. EMILIO MARAYAG, PENSION AND GRATUITY OFFICER, PENSION AND GRATUITY
MANAGEMENT CENTER, AFP FINANCE CENTER
G.R. No. 189649, April 20, 2015, PERALTA, J.
Vested rights include not only legal or equitable title to the enforcement of a demand, but also
an exemption from new obligations after the right has vested. After a law is amended, the original law
continues to be in force with regard to all rights that had accrued prior to such amendment. After the
right has vested, the state may not impair it by legislative enactment, by the enactment or by the
subsequent repeal of a municipal ordinance, or by a change in the constitution of the State, except in a
legitimate exercise of the police power.
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Facts:
In 1976, Jeremias A. Carolino, petitioner's husband, retired from the AFP under RA No. 340,
and started receiving pension benefits since then until it was terminated in 2005. He was informed
that his loss of Filipino citizenship caused his disqualification from receiving pension benefits
pursuant to the provisions of PD No. 1638 which was issued only in 1979.
Issue:
Whether or not retiree's retirement benefits may be terminated pursuant to a law enacted
subsequent to his retirement.
Ruling:
No. Under Article 4 of the Civil Code, it is provided that laws shall have no retroactive effect,
unless the contrary is provided. It is said that the law looks to the future only and has no retroactive
effect unless the legislator may have formally given that effect to some legal provisions. PD No. 1638
does not contain any provision regarding its retroactive application, nor may the same be implied
from its language. Since PD No. 1638, as amended, is about the new system of retirement and
separation from service of military personnel, it is not applicable to those who retired before its
effectivity in 1979. After an act is amended, the original act continues to be in force with regard to all
rights that had accrued prior to such amendment.
In the present case, petitioner's husband acquired vested right to the payment of his
retirement benefits which must be respected and cannot be affected by the subsequent enactment of
PD No. 1638 which provides that loss of Filipino citizenship terminates retirement benefits. Vested
rights include not only legal or equitable title to the enforcement of a demand, but also an exemption
from new obligations after the right has vested.
OBLIGATIONS AND CONTRACTS

BREACH OF CONTRACT
RICARDO C. HONRADO v. GMA NETWORK FILMS INC.
G.R. No. 204702, January 14, 2015, CARPIO, J.
The agreement is the law between the parties.
Facts:
Respondent GMA Network Films, Inc. (GMA Films) entered into a "TV Rights Agreement"
(Agreement) with petitioner under which petitioner, as licensor of 36 films, granted to GMA Films,
for a fee of P60.75 million, the exclusive right to telecast the 36 films for a period of three years.
Under Paragraph 3 of the Agreement, the parties agreed that all betacam copies of the [films] should
pass through broadcast quality test conducted by GMA-7, the TV station operated by GMA Network,
Inc. (GMA Network), an affiliate of GMA Films. The parties also agreed to submit the films for review
by the Movie and Television Review and Classification Board (MTRCB) and stipulated on the
remedies in the event that MTRCB bans the telecasting of any of the films.
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GMA Films sued petitioner in the RTC of Quezon City alleging that it rejected Evangeline
Katorse because its running time was too short for telecast and petitioner only remitted P900,000
to the owner of Bubot (Juanita Alano [Alano]), keeping for himself the balance of P350,000. Petitioner
denied liability, counter-alleging that after GMA Films rejected Evangeline Katorse, he replaced it with
another film, Winasak na Pangarap, which GMA Films accepted. As proof of such acceptance,
petitioner invoked a certification of GMA Network, dated 30 March 1999, attesting that such film is
of good broadcast quality (Film Certification).
Issue:
Whether or not petitioner is liable for breach of the Agreement and breach of trust.
Ruling:
No. The petitioner did not commit any breach of the agreement because GMAs rejection of
the film finds no basis in the agreement. In terms devoid of any ambiguity, Paragraph 4 of the
Agreement requires the intervention of MTRCB, the state censor, before GMA Films can reject a film
and require its replacement. Specifically, Paragraph 4 requires that MTRCB, after reviewing a film
listed in the Agreement, disapprove or X-rate it for telecasting. GMA Films does not allege, and the
Court found no proof on record indicating that MTRCB reviewed Winasak na Pangarap and X-rated it.
Indeed, GMA Films own witness, Jose Marie Abacan (Abacan), then Vice-President for Program
Management of GMA Network, testified during trial that it was GMA Network which rejected Winasak
na Pangarap because the latter considered the film bomba. In doing so, GMA Network went beyond
its assigned role under the Agreement of screening films to test their broadcast quality and assumed
the function of MTRCB to evaluate the films for the propriety of their content. This runs counter to
the clear terms of Paragraphs 3 and 4 of the Agreement. The Court held that regardless of the import
of the Film Certification, GMA Films rejection of Winasak na Pangarap finds no basis in the
Agreement.
PRISCILO B. PAZ v. NEW INTERNATIONAL ENVIRONMENTAL UNIVERSALITY, INC.

G.R. No. 203993, April 20, 2015, PERLAS-BERNABE, J.
If a party to a contract of lease violates its terms and conditions, the other party should go to
court to make the former refrain from his 'illegal' activities or seek rescission of the contract, rather
than taking the law into his own hands. Otherwise, he is liable for breach of contract for illegally
terminating the same.
Facts:
Paz entered into a MOA with New International Environmental Universality Inc. whereby the
former shall allow the latter to use the aircraft hangar space at the Davao Airport exclusively for
company aircraft. In a letter, Paz complained that the hangar space was being used for trucks and
equipment instead of for aircraft only. He further demanded the company to vacate the premises. In
turn, the company filed a complaint against Paz for breach of contract. It claimed that Paz had
disconnected its electric and telephone lines, security guards prevented its employees from entering
the leased premises, and violated the terms of the MOA when he took over the hangar space without
giving respondent the requisite six 6-month advance notice of termination.
Issue:
Whether or not Paz violated the terms of the MOA.
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Ruling:
Yes. Paz is liable for breach of contract for effectively evicting the company from the leased
premises even before the expiration of the term of the lease. If it were true that the company was
violating the terms and conditions of the lease, he should have gone to court to make the company
refrain from its 'illegal' activities or seek rescission of the MOA, rather than taking the law into his
own hands.
PAYMENT
NATIONAL POWER CORPORATION v. LUCMAN M. IBRAHIM, et al.
G.R. No. 175863, February 18, 2015, PEREZ, J.
Article 1242 of the Civil Code is an exception to the rule that a valid payment of an obligation
can only be made to the person to whom such obligation is rightfully owed. It contemplates a situation
where a debtor pays a "possessor of credit" i.e., someone who is not the real creditor but appears, under
the circumstances, to be the real creditor. In such scenario, the law considers the payment to the
"possessor of credit" as valid even as against the real creditor taking into account the good faith of the
debtor.
Facts:
NPC took possession of the subject land for the purpose of building thereon a hydroelectric
power plant pursuant to its Agus 1 project. The subject lands portion is of a private estate under
Mangondato, was occupied by NPC under the mistaken belief that such land is part of the vast tract of
public land reserved for its use by the government. Mangondato first discovered NPCs occupation of
the subject land in the year that NPC started its construction of the Agus 1 plant. Shortly after such
discovery, Mangondato began demanding compensation for the subject land from NPC. NPC finally
acquiesced to the fact that the subject land is private land and consequently acknowledged
Mangondatos right, as registered owner, to receive compensation therefor. With an agreement
basically out of reach, Mangondato filed a complaint for reconveyance while NPC filed for
expropriation. RTC ruled in favor of NPC. Thereafter, the Ibrahims and Maruhoms filed a
complaint against Mangondato and NPC, disputing Mangondatos claim of ownership. RTC granted
Ibrahims petition for TRO. CA affirmed. They found that the Ibrahims and Maruhoms are the true
owners and not Mangondato.
Issue:
Whether or not it is correct, in view of the facts and circumstances in this case, to hold NPC
liable in favor of the Ibrahims and Maruhoms for the rental fees and expropriation indemnity
adjudged due for the subject land.
Ruling:
No. No "bad faith" may be taken against NPC in paying Mangondato the rental fees and
expropriation indemnity due the subject land. RTC and CA erred in their finding of bad faith because
they have overlooked the utter significance of one important fact: that NPCs payment to Mangondato
of the rental fees and expropriation indemnity adjudged due for the subject land was required by the
final and executory decision in the said two cases and was compelled thru a writ of garnishment
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issued by the court that rendered such decision. In other words, the payment to Mangondato was not
a product of a deliberate choice on the part of the NPC but was made only in compliance to the lawful
orders of a court with jurisdiction. It was not NPC that "allowed" the payment of the rental fees and
expropriation indemnity to Mangondato. Indeed, given the circumstances, the more accurate
rumination would be that it was the RTC that ordered or allowed the payment to Mangondato and
that NPC merely complied with the order or allowance. Since NPC was only acting under the lawful
orders of a court in paying Mangondato, no bad faith can be taken against it.
Without the existence of bad faith, the ruling of the RTC and CA apropos NPCs remaining
liability to the Ibrahims and Maruhoms becomes devoid of legal basis. In fact, NPCs previous
payment to Mangondato of the rental fees and expropriation indemnity due the subject land
pursuant to the final judgment may be considered to have extinguished the formers obligation
regardless of who between Mangondato, on one hand, and the Ibrahims and Maruhoms, on the other,
turns out to be the real owner of the subject land. Either way, NPC cannot be made liable to the
Ibrahims and Maruhoms. Payment made in good faith to any person in possession of the credit shall
release the debtor. Article 1242 of the Civil Code is an exception to the rule that a valid payment of an
obligation can only be made to the person to whom such obligation is rightfully owed. It
contemplates a situation where a debtor pays a "possessor of credit" i.e., someone who is not the real
creditor but appears, under the circumstances, to be the real creditor. In such scenario, the law
considers the payment to the "possessor of credit" as valid even as against the real creditor taking
into account the good faith of the debtor. Borrowing the principles behind Article 1242 of the Civil
Code, we find that Mangondatobeing the judgment creditor as well as the registered owner of the
subject land at the timemay be considered as a "possessor of credit" with respect to the rental fees
and expropriation indemnity adjudged due for the subject land in the two cases, if the Ibrahims and
Maruhoms turn out to be the real owners of the subject land. Hence, NPCs payment to Mangondato
of the fees and indemnity due for the subject land as a consequence of the execution could still validly
extinguish its obligation to pay for the same even as against the Ibrahims and Maruhoms.
NOVATION
BANK OF THE PHILIPPINE ISLANDS v. AMADOR DOMINGO
G.R. No. 169407, March 25, 2015, LEONARDO-DE CASTRO, J.
Article 1293 of the New Civil Code provides that novation which consists in substituting a new
debtor in the place of the original one, may be made even without the knowledge or against the will of
the latter, but not without the consent of the creditor.
Facts:
Spouses Domingo executed a Promissory Note secured by a chattel mortgage over a Mazda
car in favor of Makati Auto Center, Inc. Later, Makati Auto Center, Inc. assigned all its rights and
interests over the said Promissory Note and chattel mortgage to Far East Bank and Trust Company
(FEBTC). However, by virtue of a merger, all the assets and liabilities of FEBTC were transferred to
and absorbed by BPI. When Spouses Domingo defaulted, BPI demanded the payment of balance of
the Promissory Note. When the spouses Domingo still failed to comply with its demands, BPI filed a
Complaint for Replevin and Damages. The Spouses Domingo contended that they made payments by
issuing postdated checks and that since the subject vehicle was sold to Carmelita Gonzales, the latter
assumed the payment of the balance of the mortgaged loan. The MeTC ruled in favor of BPI. It held
that there was no novation because the Spouses Domingo were not expressly released from their
obligations. The RTC dismissed the complaint and held that in novation, consent of the creditor to
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the substitution of the debtor need not be by express agreement as it can be merely implied. The CA
affirmed the finding of the RTC that novation took place. It held that consent of the creditor to the
substitution of debtors need not always be express and may be inferred from the acts of the creditor.
Issue:
Whether or not there had been a novation of the loan obligation with chattel mortgage of the
spouses Domingo to BPI so that the spouses Domingo were released from said obligation and
Carmelita was substituted as debtor.
Ruling:
No. Novation is the extinguishment of an obligation by the substitution or change of the
obligation by a subsequent one which extinguishes or modifies the first, either by changing the object
or principal conditions, or by substituting the person of the debtor, or by subrogating a third person
to the rights of the creditor. Article 1293 of the New Civil Code provides that novation which consists
in substituting a new debtor in the place of the original one, may be made even without the
knowledge or against the will of the latter, but not without the consent of the creditor. Under this
provision, there are two forms of novation by substituting the person of the debtor, and they are: (1)
expromision and (2) delegacion. In the former, the initiative for the change does not come from the
debtor and may even be made without his knowledge, since it consists in a third person assuming the
obligation. As such, it logically requires the consent of the third person and the creditor. In the latter,
the debtor offers and the creditor accepts a third person who consents to the substitution and
assumes the obligation, so that the intervention and the consent of these three persons are
necessary. In these two modes of substitution, the consent of the creditor is an indispensable
requirement.
The burden of establishing a novation is on the party who asserts its existence. Contrary to
the findings of the Court of Appeals and the RTC, Amador failed to discharge such burden as he was
unable to present proof of the clear and unmistakable consent of BPI to the substitution of debtors.
The consent of BPI to the substitution of debtors cannot be deduced from its acceptance of
payments from Carmelita, absent proof of its clear and unmistakable consent to release the spouses
Domingo from their obligation. The acceptance by a creditor of payments from a third person, who
has assumed the obligation, will result merely to the addition of debtors and not novation. The
creditor may therefore enforce the obligation against both debtors. Absent proof that BPI gave its
clear and unmistakable consent to release the spouses Domingo from the obligation to pay the car
loan, Carmelita is simply considered an additional debtor.
ESSENTIAL REQUISITES OF CONTRACT

SM LAND, INC., v. BASES CONVERSION AND DEVELOPMENT AUTHORITY AND ARNEL PACIANO
D. CASANOVA, ESQ., IN HIS OFFICIAL CAPACITY AS PRESIDENT AND CEO OF BCDA
G.R. No. 203655, March 18, 2015, VELASCO JR., J.
The following are the essential requisites of contracts: (a) consent; (b) object or subject matter;
and (c) cause or consideration.
Facts:
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SM Land submitted to Bases and Conversion Development Authority a proposal for the
development of the lot through public-private joint venture agreement. Upon arriving at mutually
acceptable terms and conditions, a Certification of Successful Negotiations was issued by the BCDA
and signed by both parties. Through the said Certification, the BCDA undertook to "subject SMLIs
Original Proposal to Competitive Challenge and committed itself to "commence the activities for the
solicitation for comparative proposals."
Instead of proceeding with the Competitive Challenge, the BCDA addressed a letter to Jose T.
Gabionza, Vice President of SMLI, stating that it will welcome any "voluntary and unconditional
proposal" to improve the original offer, with the assurance that the BCDA will nonetheless respect
any right which may have accrued in favor of SMLI. Without responding to SMLIs new proposal, the
BCDA sent a memorandum to the Office of the President, categorically recommending the
termination of the Competitive Challenge.
Alarmed by this development, SMLI, urged the BCDA to proceed with the Competitive
Challenge as agreed upon. However, the BCDA, via the assailed Supplemental Notice No. 5,
terminated the Competitive Challenge altogether. Thereafter, the BCDA informed SMLI of the OPs
decision to subject the development of the subject property to public bidding.
The Court in its Decision directed BCDA to subject SMLIs duly accepted unsolicited proposal
for the development of the Bonifacio South Property to a competitive challenge. On Motion for
Reconsideration, BCDA claims that BCDA and SMLI do not have a contract that would bestow upon
the latter the right to demand that its unsolicited proposal be subjected to a competitive challenge.
Assuming arguendo the existence of such an agreement between the parties, respondents contend
that the same may be terminated by reasons of public interest.
Issue:
Whether or not BCDA and SMLI have entered into a contract that would bestow upon SMLI
the right to demand competitive challenge.
Ruling:
Yes, there exists a valid agreement between SMLI and BCDA. In the case at bar, there is,
between BCDA and SMLI, a perfected contracta source of rights and reciprocal obligations on the
part of both parties. Consequently, a breach thereof may give rise to a cause of action against the
erring party.
The first requisite, consent, is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. In the case at bar, when SMLI
submitted the first Unsolicited Proposal to BCDA on December 14, 2009, the submission constituted
an offer to undertake the development of the subject property. BCDA then entered into negotiations
with SMLI until the BCDA finally accepted the terms of the final unsolicited proposal. Their
agreement was thereafter reduced into writing through the issuance of the Certification of Successful
Negotiations where the meeting of the parties minds was reflected.
Then, to manifest their assent to the terms thereof and their respective obligations, both
partiesBCDA and SMLI, represented by Gen. Narciso L. Abaya and Ms. Ana Bess Pingol,
respectivelyaffixed their signatures on the Certification of Successful Negotiations and had it
notarized on August 6, 2010.
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Cause, on the other hand, is the essential reason which moves the parties to enter into the
contract. It is the immediate, direct and proximate reason which justifies the creation of an obligation
through the will of the contracting parties. Complementing this is Article 1350 of the New Civil Code
which provides that [i]n onerous contracts the cause is understood to be, for each contracting party,
the prestation or promise of a thing or service by the other. As such, the cause of the agreement in
the case at hand is their interest in the sale or acquisition and development of the property and their
undertaking to perform their respective obligations, among others, as reflected in the Certificate of
Successful Negotiations and in the Terms of Reference (TOR) issued by BCDA.
Lastly, object certain refers to the subject matter of the contract. It is the thing to be
delivered or the service to be performed. Here, when the BCDA Board issued, on August 6, 2010, the
Certification of Successful Negotiations, it not only accepted SMLIs Unsolicited Proposal and
declared SMLI eligible to enter into the proposed JV activity. It also agreed to subject [SMLI]s
Original Proposal to Competitive Challenge pursuant to Annex C [of the NEDA JV Guidelines], which
competitive challenge process shall be immediately implemented following the [TOR] Volumes 1 and
2. Moreover, said Certification provides that the BCDA shall, thus, commence the activities for the
solicitation for comparative proposals xxx starting on August 10, 2010, on which date [SMLI] shall
post the required Proposal Security xxx.
The elements of a valid contract being present, there thus exists between SMLI and BCDA a
perfected contract, embodied in the Certification of Successful Negotiations, upon which certain
rights and obligations spring forth, including the commencement of activities for the solicitation for
comparative proposals.
This agreement is the law between the contracting parties with which they are required to
comply in good faith. Verily, it is BCDAs subsequent unilateral cancellation of this perfected contract
which the Court deemed to have been tainted with grave abuse of discretion. BCDA could not validly
renege on its obligation to subject the unsolicited proposal to a competitive challenge in view of this
perfected contract, and especially so after BCDA gave its assurance that it would respect the rights
that accrued in SMLIs favor arising from the same.
CONSENT
ANGEL V. TALAMPAS, Jr. v. MOLDEX REALTY, INC.
G.R. No. 170134, June 17, 2015, BRION, J.
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain, and the acceptance, whether
express or implied, must be absolute. An acceptance is considered absolute and unqualified when it is
identical in all respects with that of the offer so as to produce consent or a meeting of the minds.
Facts:
Angel V. Talampas, Jr. (Talampas, Jr.) herein petitioner, owner and general manager of Angel
V. Talampas Jr. Construction (AVTJC) entered into a contract with Moldex Realty Corp. (Moldex)
wherein AVTJC would develop a residential subdivision on a land owned by Moldex located
somewhere in Cavite. Thereafter construction began, however, Moldex later on, sent a letter to
Talampas, Jr. unilaterally terminating the contract entered into it with AVTJC on the ground that
Moldex had decided to suspend the implementation of the site development. Thereafter, Moldex
offered to pay AVTJC billings for accomplished works, unrecouped costs of equipment mobilization
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and demobilization, unrecouped payment of insurance bond, and the release of all retention fees
payments that Talampas, Jr. accepted or received. Later on, Talampas Jr. sued Moldex for breach of
contract before the RTC and prayed for payment of equipment rentals, cost of opportunity lost, and
damages, among others.
The RTC held in favor of Talampas, Jr. and ordered Moldex to pay Talampas, Jr. On appeal
with the CA, the CA reversed the decision of the RTC and held that the acceptance by AVTJC of the
aforementioned billings constitutes ratification of the termination unilaterally done by Moldex.
Hence, this petition.
Issue:
Whether or not there has been ratification by Talampas, Jr. over the unilateral termination of
the contract undertaken by Moldex.
Ruling:
None. There has been no ratification nor consent given by Talampas, Jr. over the unilateral
termination undertaken by Moldex. The Court found no such meeting of the minds between the
parties on the matter of termination because the petitioners acceptance of the respondents offer to
terminate was not absolute.
To terminate their contract, the respondent offered to pay the petitioner billings for
accomplished works, unrecouped costs of equipment mobilization and demobilization, unrecouped
payment of insurance bond, and the release of all retention fees payments that the petitioner
accepted or received.
Nevertheless, despite receipt of payments, no absolute acceptance of the respondents offer
took place because the petitioner still demanded the payment of equipment rentals, cost of
opportunity lost, among others. In fact, the payments received were for finished or delivered works
and for expenses incurred for the respondents account. By making the additional demands, the
petitioner effectively made a qualified acceptance or a counteroffer, which the respondent did not
accept. Under these circumstances, there is no full consent.
DEFAULT
RODRIGO RIVERA v. SPOUSES SALVADOR CHUA and VIOLETA CHUA
G.R. No. 184458, January 14, 2015, PEREZ, J.
There are four instances when demand is not necessary to constitute the debtor in default: (1)
when there is an express stipulation to that effect; (2) where the law so provides; (3) when the period is
the controlling motive or the principal inducement for the creation of the obligation; and (4) where
demand would be useless. In the first two paragraphs, it is not sufficient that the law or obligation fixes
a date for performance; it must further state expressly that after the period lapses, default will
commence.
Facts:
Rivera contracted a loan to spouses Chua as evidenced by the promissory note (not a
negotiable instrument though) which provides the following:
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It is agreed and understood that failure on my part to pay the amount of (120,000.00) One
Hundred Twenty Thousand Pesos on December 31, 1995. I agree to pay the sum equivalent to FIVE
PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.
Based on the above, Rivera is on the position that demand is still required for his liability.
Further, the rate of interest was also in dispute.
Issues:
1. Whether or not a prior demand is still needed to hold Rivera liable based on the note.
2. Whether or not the interest rate of 5% per month is valid.
Ruling:
1. No. Art. 1169 provides that the demand by the creditor shall not be necessary in order that
delay may exist: (1) When the obligation or the law expressly so declare. We refer to the clause in the
Promissory Note containing the stipulation of interest which expressly requires the debtor (Rivera)
to pay a 5% monthly interest from the date of default until the entire obligation is fully paid for. The
parties evidently agreed that the maturity of the obligation at a date certain, 31 December 1995, will
give rise to the obligation to pay interest. The Promissory Note expressly provided that after 31
December 1995, default commences and the stipulation on payment of interest starts.
2. No. As observed by [Rivera], the stipulated interest of 5% per month or 60% per annum in
addition to legal interests and attorneys fees is, indeed, highly iniquitous and unreasonable.
Stipulated interest rates are illegal if they are unconscionable and the Court is allowed to temper
interest rates when necessary. Since the interest rate agreed upon is void, the parties are considered
to have no stipulation regarding the interest rate, thus, the rate of interest should be 12% per annum
computed from the date of judicial or extrajudicial demand.
ESTOPPEL
JOSE C. GO, et al. v. BANGKO SENTRAL NG PILIPINAS and REGISTER OF DEEDS OF NASUGBU,
BATANGAS
G.R. No. 202262, July 8, 2015, BERSAMIN, J.
Under estoppel by deed, a party to a deed and his privies are precluded from denying any
material fact stated in the deed as against the other party and his privies.
Facts:
Orient Commercial Banking Corporation (OCBC) was placed under receivership and the
PDIC, as designated Receiver, took over all the assets, properties, obligations and operations of OCBC.
Jose C. Go, the principal and biggest stockholder of OCBC, with his affiliate companies, challenged the
said action of the PDIC before the RTC of Manila, which was dismissed. Pending appeal to the CA, the
PDIC proceeded with the liquidation of OCBC pursuant to a Monetary Board Resolution. The BSP filed
with the RTC of Manila a complaint for sum of money with preliminary attachment against Go et al. to
recover deficiency obligations owed by OCBC. The writ of preliminary attachment was granted and
upon posting of bond, the real and personal properties of Go et al. were attached. The controversy
reached the Court and during the pendency of the appeal, the parties entered into a compromise
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agreement. Said agreement, which was approved by the court, contained a provision that "failure on
the part of the defendants to fully settle their outstanding obligations and to comply with any of the
terms of this Compromise Agreement shall entitle the plaintiff to immediately ask for a Writ of
Execution against all assets of the Ever Crest Golf Club Resort, Inc., and Mega Heights, Inc., now or
hereafter arising upon the signing of this Compromise Agreement."
Due to Gos non-compliance with the compromise agreement, BSP moved for the execution
of the said agreement against the properties of Ever Crest Golf Club Resort, Inc. and Mega Heights,
Inc. which were levied upon by the sheriff. The motion to execute was initially denied but on
reconsideration, it was granted. The petitioners and Ever Crest filed a petition for certiorari before
the CA and a 60-day TRO was issued. However, upon the lapse of the period of 60 days, the public
auction proceeded, and the properties of Ever Crest were sold to BSP as the highest bidder.
Eventually, the CA dismissed the petition for certiorari. Petitioners motion for reconsideration was
denied. The petitioners argued that the issuance of the order of execution was tainted with grave
abuse of discretion because the execution was directed against the properties of Ever Crest despite
Ever Crest being neither a defendant in the cases between BSP and Go, nor a signatory to the
compromise agreement.
Issue:
Whether or not the petitioners are estopped from claiming that the subject properties
cannot be subject of levy pursuant to a writ of execution.
Ruling:
Yes. There are three kinds of estoppels, to wit: (1) estoppel in pais; (2) estoppel by deed; and
(3) estoppel by laches. Under the first kind, a person is considered in estoppel if by his conduct,
representations, admissions or silence when he ought to speak out, whether intentionally or through
culpable negligence, "causes another to believe certain facts to exist and such other rightfully relies
and acts on such belief, as a consequence of which he would be prejudiced if the former is permitted
to deny the existence of such facts." Under estoppel by deed, a party to a deed and his privies are
precluded from denying any material fact stated in the deed as against the other party and his
privies. Under estoppel by laches, an equitable estoppel, a person who has failed or neglected to
assert a right for an unreasonable and unexplained length of time is presumed to have abandoned or
otherwise declined to assert such right and cannot later on seek to enforce the same, to the prejudice
of the other party, who has no notice or knowledge that the former would assert such rights and
whose condition has so changed that the latter cannot, without injury or prejudice, be restored to his
former state.
Here, the petitioners are estopped by deed by virtue of the execution of the compromise
agreement. They were the ones who had offered the properties of Ever Crest to Bangko Sentral, and
who had also assured that all the legalities and formalities for that purpose had been obtained. They
should not now be allowed to escape or to evade their responsibilities under the compromise
agreement just to prevent the levy on execution of Ever Crests properties.
LACHES
PHIL-AIR CONDITIONING CENTER v. RCJ LINES AND ROLANDO ABADILLA, JR.
G.R. No. 193821, November 23, 2015, BRION, J.
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In general, there is no room to apply the concept of laches when the law provides the period
within which to enforce a claim or file an action in court.
Facts:
Phil-Air sold to RCJ Lines 4 Carrier Paris 240 air-conditioning units for buses (units). The
units included compressors, condensers, evaporators, switches, wiring, circuit boards, brackets, and
fittings. RCJ Lines accepted the delivery of the units, which Phil-Air then installed after they were
inspected by RCJ Lines president Rolando Abadilla, Sr. RCJ Lines issued three post-dated checks in
favor of Phil-Air to partly cover the unpaid balance. All the post-dated checks were dishonored when
Phil-Air subsequently presented them for payment. In view of the failure of RCJ Lines to pay the
balance despite demand, Phil-Air filed a complaint for sum of money with prayer for the issuance of a
writ of preliminary attachment. RCJ Lines admitted that it refused to pay the balance because PhilAir allegedly breached its warranty. RCJ Lines averred that the units did not sufficiently cool the
buses despite repeated repairs. It insists that Phil-Air was guilty of laches because it waited for eight
years to file the collection case.
Issue:
Whether or not the claim of Phil-Air was barred by laches.
Ruling:
No. In general, there is no room to apply the concept of laches when the law provides the
period within which to enforce a claim or file an action in court. Phil-Air's complaint for sum of
money is based on a written contract of sale. The ten-year prescriptive period under Article 1144 of
the Civil Code thus applies. The elements of laches are: 1) conduct on the part of the defendant or one
under whom he claims, giving rise to the situation of which complaint is made and for which the
complainant seeks a remedy; 2) delay in asserting the complainant's right, the complainant having
had knowledge or notice of defendant's conduct and having been afforded an opportunity to institute
a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant would assert
the right on which he bases his claim; and 4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held barred.
Not all the elements of laches are present in the present case. Phil-Air filed the complaint
with the RTC on April 1, 1998. The time elapsed from August 4, 1989 (the date of the price quotation,
which is the earliest possible reckoning point), is eight years and eight months, well within the tenyear prescriptive period. There was simply no delay (second element of laches) where Phil-Air can be
said to have negligently slept on its rights. More significantly, there is no basis for laches as the facts
of the present case do not give rise to an inequitable situation that calls for the application of equity
and the principle of laches.
RESCISSION
THE WELLEX GROUP, INC. v. U-LAND AIRLINES, CO., LTD.
G.R. No. 167519, January 14, 2015, LEONEN, J.
proper.
The absence of fraud in a transaction does not mean that rescission under Article 1191 is not
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Facts:
Wellex and U-Land entered into a Memorandum of Agreement to expand their respective
airline operations in Asia. It stated that within 40 days from its execution date, Wellex and U-Land
would execute a share purchase agreement covering U-Lands acquisition APIC shares PEC shares.
Thereafter they agreed that if they were unable to agree on the terms of the share purchase
agreement and the joint development agreement within 40 days from signing, then the First
Memorandum of Agreement would cease to be effective. In case no agreements were executed, the
parties would be released from their respective undertakings, except that Wellex would be required
to refund the US$3 million given as initial funding by U-Land for the development projects. If Wellex
failed, U-Land would have the right to recover on the 57,000,000 PEC shares. However, the parties
failed to enter into any share purchase agreement. Despite such failure, subsequent transactions still
transpired. U-Land claimed that Wellex had unjustifiably refused to enter into the Share Purchase
Agreement. U-Land filed a Complaint praying for rescission of the First Memorandum of Agreement
and damages against Wellex. RTC ruled for the rescission of the agreement. On appeal, the CA
affirmed such ruling. Hence, the petition.
Issue:
Whether or not the First Memorandum of Agreement may be rescinded.
Ruling:
Yes. U-Land was not defrauded by Wellex to agree to the First Memorandum of Agreement.
U-Land was already aware that APC was not a subsidiary of APIC after the 40-day period. Still, it
agreed to be bound by the First Memorandum of Agreement by making the remittances from June 30
to September 25, 1998. Thus, Wellexs failure to inform respondent U-Land that APC was not a
subsidiary of APIC when the agreement was being executed did not constitute fraud.
However, the absence of fraud does not mean that Wellex is free of culpability. By failing to
inform U-Land that APC was not yet a subsidiary of APIC at the time of the execution of agreement,
Wellex violated Article 1159 of the Civil Code. It was incumbent upon Wellex to negotiate the terms
of the pending share purchase agreement in good faith. This duty included providing a full disclosure
of the nature of the ownership of APIC in APC. Unilaterally compelling U-Land to remit money to
finalize the transactions indicated in the Second Memorandum of Agreement cannot constitute good
faith. The case is not an action to declare the agreement null and void due to fraud at the inception of
the contract or dolo causante. The case is not an action for fraud based on Article 1381 of the Civil
Code. Rescission or resolution under Article 1191 is predicated on the failure of one of the parties in
a reciprocal obligation to fulfill the prestation as required by that obligation. It is not based on
vitiation of consent through fraudulent misrepresentations.
ROGELIO S. NOLASCO, NICANORA N. GUEVARA, LEONARDA N. ELPEDES, HEIRS OF ARNULFO S.

NOLASCO, AND REMEDIOS M. NOLASCO, REPRESENTED BY ELENITA M. NOLASCO v. CELERINO
S. CUERPO, JOSELITO ENCABO, JOSEPH ASCUTIA, AND DOMILO LUCENARIO
G.R. No. 210215, December 9, 2015, PERLAS-BERNABE, J.
For a contracting party to be entitled to rescission (or resolution) the other contracting party
must be in substantial breach of the terms and conditions of their contract.
Facts:
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Rogelio S. Nolasco et al., as vendors, and Celerino S. Cuerpo et al., as vendee, entered into a
Contract to Sell a parcel of land. They agreed, among others, that the sellers shall transfer the title
over the subject land from a certain Edilberta N. Santos to sellers' names, and, should they fail to do
so, the buyers may cause the said transfer and charge the costs incurred against the monthly
amortizations. Thereafter, the buyers sent the sellers a letter seeking to rescind the subject contract
on the ground of financial difficulties in complying with the same. They also sought the return of the
amount they had paid. As their letter went unheeded, the buyers filed a complaint for rescission
before the RTC. The RTC ruled in favor of the buyers and was, later, upheld by the CA.
Issue:
Whether or not the CA correctly affirmed the RTC's ruling.
Ruling:
No. More accurately referred to as resolution, the right of rescission under Article 1191 is
predicated on a breach of faith that violates the reciprocity between the parties to the contract. This
retaliatory remedy is given to the contracting party who suffers the injurious breach on the premise
that it is 'unjust that a party be held bound to fulfill his promises when the other violates his.'" Note
that the rescission (or resolution) of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental violations as would defeat the very object of the parties in
making the agreement. Ultimately, the question of whether a breach of contract is substantial
depends upon the attending circumstances.
A plain reading of paragraph 7 of the subject contract reveals that while the RTC and the CA
were indeed correct in finding that petitioners failed to perform their obligation to effect the transfer
of the title to the subject land from one Edilberta N. Santos to their names within the prescribed
period, said courts erred in concluding that such failure constituted a substantial breach that would
entitle respondents to rescind (or resolve) the subject contract. To reiterate, for a contracting party
to be entitled to rescission (or resolution) in accordance with Article 1191 of the Civil Code, the other
contracting party must be in substantial breach of the terms and conditions of their contract. A
substantial breach of a contract, unlike slight and casual breaches thereof, is a fundamental breach
that defeats the object of the parties in entering into an agreement. Here, it cannot be said that
petitioners' failure to undertake their obligation under paragraph 7 defeats the object of the parties
in entering into the subject contract, considering that the same paragraph provides respondents
contractual recourse in the event of petitioners' non-performance of the aforesaid obligation, that is,
to cause such transfer themselves in behalf and at the expense of petitioners. Hence, the petition was
partially granted.
ASB REALTY CORPORATION v. ORTIGAS & COMPANY LIMITED PARTNERSHIP

G.R. No. 202947, December 9, 2015, BERSAMIN, J.
The Civil Code uses rescission in two different contexts, namely: (1) rescission on account of
breach of contract under Article 1191; and (2) rescission by reason of lesion or economic prejudice
under Article 1381.
Facts:
Ortigas entered into a Deed of Sale with Amethyst Pearl Corporation involving a land for
P2.024M. The RD issued a new TCT in the name of Amethyst and that the conditions in the Deed of
Sale were annotated as encumbrances. Amethyst assigned the property to ASB under a Deed of
Assignment in Liquidation in consideration of 10,000 shares of the ASB's outstanding capital stock.
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The RD issued a new TCT in the name of ASB with the same encumbrances annotated. Later, Ortigas
filed for specific performance against ASB alleging that ASB violated the terms of the deed. Ortigas
prayed for the reconveyance of the property or the demolition of the structure, payment of penalties,
attorney's fees and costs of suit. The RTC dismissed the complaint stating that Ortigas is guilty of
laches warranting a presumption that the party entitled to assert it either abandoned it and that the
vendee referred to in the deed is Amethyst and not ASB. Initially, the CA affirmed the RTCs decision
but later reversed itself stating that Amethyst failed to finish construction within the stated period in
the deed and that Ortigas has a prescriptive period of 10 years to enforce its remedies and that the
mere assignment of the lot to ASB does not defeat the right of Ortigas to avail the remedies. With
regard to the alleged inaction of Ortigas, it has the discretion to initiate action against the violators
hence, estoppel must fail.
Issue:
Whether or not the action for rescission by Ortigas would prosper.
Ruling:
No. The Civil Code uses rescission in two different contexts, namely: (1) rescission on
account of breach of contract under Article 1191; and (2) rescission by reason of lesion or economic
prejudice under Article 1381. Based on the foregoing, Ortigas' complaint was predicated on Article
1191 of the Civil Code. Rescission under Article 1191 of the Civil Code is proper if one of the parties
to the contract commits a substantial breach of its provisions. It abrogates the contract from its
inception and requires the mutual restitution of the benefits received; hence, it can be carried out
only when the party who demands rescission can return whatever he may be obliged to restore.
Considering the foregoing, Ortigas did not have a cause of action against the petitioner for
the rescission of the Deed of Sale. Under Section 2, Rule 2 of the Rules of Court, a cause of action is the
act or omission by which a party violates a right of another. The essential elements of a cause of
action are: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or
is created; (2) an obligation on the part of the defendant not to violate such right; and (3) an act or
omission on the part of the defendant in violation of the right of the plaintiff or constituting a breach
of the obligation of the defendant to the plaintiff for which the latter may maintain an action for
recovery of damages or other relief. It is only upon the occurrence of the last element that the cause
of action arises, giving the plaintiff the right to file an action in court for the recovery of damages or
other relief.
The second and third elements were absent herein. The petitioner was not privy to the
Deed of Sale because it was not the party obliged thereon. Not having come under the duty not to
violate any covenant in the Deed of Sale when it purchased the subject property despite the
annotation on the title, its failure to comply with the covenants in the Deed of Sale did not constitute
a breach of contract that gave rise to Ortigas' right of rescission. It was rather Amethyst that
defaulted on the covenants under the Deed of Sale; hence, the action to enforce the provisions of the
contract or to rescind the contract should be against Amethyst. In other words, rescission could not
anymore take place against the petitioner once the subject property legally came into the juridical
possession of the petitioner, who was a third party, to the Deed of Sale.
SURETY
ESTANISLAO and AFRICA SINAMBAN v. CHINA BANKING CORPORATION
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G.R. No. 193890, March 11, 2015, REYES, J.
Where there is a concurrence of two or more creditors or of two or more debtors in one and the
same obligation, Article 1207 provides that among them, "[t]here is a solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires solidarity."
Facts:
The Spouses Manalastas executed a REM in favor of China Banking Corporation (Chinabank)
covering two real estate properties. The spouses Manalastas also executed several promissory notes
in favor of Chinabank. In two of the PNs, petitioners Estanislao and Africa Sinamban signed as comakers. Chinabank filed a complaint against the spouses Manalastas and spouses Sinamban alleging
that they reneged on their loan obligations under the PNs. In this petition for review, the spouses
Sinamban seek to be completely relieved of any liability on the PNs interposing among others the
issue/defense that the CA erred in not considering the Spouses Sinambans obligations more onerous
and burdensome on their part as mere sureties (co-maker) compared to the spouses Manalastas.
Issue:
Whether or not the CA erred in not considering the Spouses Sinambans obligations more
onerous and burdensome on their part as mere sureties (co-maker) compared to the spouses
Manalastas.
Ruling:
No. A co-maker of a PN who binds himself with the maker "jointly and severally" renders
himself directly and primarily liable with the maker on the debt, without reference to his solvency.
According to Article 2047 of the Civil Code, if a person binds himself solidarily with the
principal debtor, the provisions of Articles 1207 to 1222 of the Civil Code (Section 4, Chapter 3, Title
I, Book IV) on joint and solidary obligations shall be observed. Thus, where there is a concurrence of
two or more creditors or of two or more debtors in one and the same obligation, Article 1207
provides that among them, "[t]here is a solidary liability only when the obligation expressly so states,
or when the law or the nature of the obligation requires solidarity." It is settled that when the
obligor or obligors undertake to be "jointly and severally" liable, it means that the obligation is
solidary. In this case, the spouses Sinamban expressly bound themselves to be jointly and severally,
or solidarily, liable with the principal makers of the PNs, the spouses Manalastas.
CCC INSURANCE CORPORATION v. KAWASAKI STEEL CORPORATION, et al.

G.R. No. 156162, June 22, 2015, LEONARDO-DE CASTRO, J.
As provided in Article 2047, the surety undertakes to be bound solidarily with the principal
obligor. That undertaking makes a surety agreement an ancillary contract as it presupposes the
existence of a principal contract.
Facts:
Kawasaki, and F.F. Maacop Construction Company, Inc. (FFMCCI) executed a Consortium
Agreement for the purpose of contracting with the Philippine Government for the construction of a
fishing port network in Pangasinan. The Project was awarded to the Kawasaki-FFMCCI Consortium
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(Consortium). Kawasaki, on behalf of the Consortium, secured from the PCIB a Letter of Credit in
favor of DPWH to guarantee the faithful performance by it of its obligation under the Construction
Contract. The Republic then made an advance payment for the project. For the release of its share in
said advance payment and in compliance with the Consortium Agreement, FFMCCI secured a
Performance Bond and a Surety Bond from CCCIC in favor of Kawasaki. FFMCCI eventually received
the amount of advance payment. While the project was ongoing, FFMCCI ceased performing its work
in the Project after suffering financial problems. In line with this, Kawasaki formally demanded that
CCCIC, as surety, to pay it the amounts covered by the Surety and Performance Bonds. CCCIC did not
act upon the demand because allegedly said bonds were mere counter-guarantees, for which CCCIC
could only be held liable upon the filing of a claim by the Republic against the Kawasaki-FFMCCI
Consortium. Kawasaki filed before the RTC a Complaint against CCCIC to collect on the Surety Bond
and the Performance Bond. After trial, the RTC dismissed the complaint. Upon appeal, the CA
reversed the RTC decision. Hence, this petition.
Issue:
Whether or not CCCIC is liable to Kawasaki under the Surety and Performance Bonds.
Ruling:
Yes. The Surety and Performance Bonds do not contain any condition that CCCIC would be
liable only if, in addition to the default on its undertakings by FFMCCI, the Republic also made a claim
against the PCIB Letter of Credit furnished by Kawasaki, on behalf of the Kawasaki-FFMCCI
Consortium. The Court cannot give any additional meaning to the plain language of the undertakings
in the Surety and Performance Bonds. Article 1370 of the Civil Code provides that "[i]f the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control. It is not disputed that FFMCCI, due to financial difficulties,
was unable to repay the advance payment it received from Kawasaki and to finish its scope of work
in the Project, thus, FFMCCI defaulted on its obligations to Kawasaki. Given the default of FFMCCI,
CCCIC as surety became directly, primarily, and absolutely liable to Kawasaki as the obligee under
the Surety and Performance Bonds.
PROPERTY
REAL PROPERTY
MANILA ELECTRIC COMPANY v. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY
G.R. No. 166102, August 5, 2015, LEONARDO-DE CASTRO, J.
Under the Local Government Code, machinery, to be deemed real property subject to real
property tax, need no longer be annexed to the land or building.
Facts:
MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No. 019-6500
covering transformer and electric post, transmission line, electric meter and insulator, located in
Quezon Ave. Ext. Under the Tax Declaration, these electric facilities were subjected to real property
tax as of 1985. MERALCO claimed that its capital investment consisted only of its substation facilities
and that MERALCO was exempted from payment of real property tax on said substation facilities. On
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the other hand, the Assessor claims that MERALCO could no longer claim exemption from real
property tax on its machineries with the enactment of RA 7160, or the Local Government Code.
Issue:
Whether or not the transformer, electric post, transmission line, electric meter and insulator
are real properties.
Ruling:
Yes. The machinery subject to real property tax under Section 199 of the Local Government
Code "may or may not be attached, permanently or temporarily to the real property;" and the
physical facilities for production, installations, and appurtenant service facilities, those which are
mobile, self-powered or self-propelled, or are not permanently attached must (a) be actually, directly,
and exclusively used to meet the needs of the particular industry, business, or activity; and (2) by
their very nature and purpose, be designed for, or necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes. Although the Civil Code under article 415 provides a
definition of real properties, the LGC being a special law prevails.
EJECTMENT
SIO TIAT KING v. VICENTE G. LIM, et al.
G.R. No. 185407, June 22, 2015, REYES, J.
A third party's possession of a property is legally presumed to be based on a just title, a
presumption which may be overcome by the purchaser in a judicial proceeding for recovery of the
property. Through such a judicial proceeding, the nature of the adverse possession by the third party
may be determined, after such third party is accorded due process and the opportunity to be heard. The
third party may be ejected from the property only after he has been given an opportunity to be heard,
conformably with the time-honored principle of due process.
Facts:
Spouses Calidguid executed a Compromise Agreement binding themselves to pay the
amount of P2,520,000.00 to Spouses Lee. However, the former failed to comply with the terms of the
said decision, leading the latter to avail of the remedy of execution. Consequently, a parcel of land
belonging to the Spouses Calidguid was levied on execution. During its sale at a public auction, the
judgment creditor, Jaime Lee, emerged as the highest bidder. As an assignee of the Spouses Calidguid,
Sio Tiat King (King) redeemed the subject property before the expiration of the redemption period.
11 years thereafter, King filed a motion for the issuance of a writ of possession which was granted by
the RTC. A Notice to Vacate was addressed to all persons affected thereby. The Lims, claiming their
right over the property as registered owners of the same, filed an Entry of Appearance with Motion
to Quash Writ of Execution. However, the RTC denied the same. The Lims filed a Petition for
Certiorari before the CA alleging that the RTC erred when it issued a decision ousting them from their
property by virtue of the writ of possession, without a separate and independent action to resolve
the issue of ownership. The CA annulled the order of the RTC. Kings Motion for Reconsideration was
denied by CA. Hence, this petition.
Issue:
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Whether or not the Lims may be evicted from the property by virtue of a writ of possession
issued in favor of King.
Ruling:
No. Under Article 433 of the Civil Code, actual possession under claim of ownership raises a
disputable presumption of ownership. The true owner must resort to judicial process for the
recovery of the property. While King and the Lims are contending for the possession and ownership
of the same property, an ejectment suit should have been filed by King before the Lims could be
evicted from the property. This is due to the existence of their ostensibly conflicting titles coupled
with the Lims' actual possession over the property. "One who claims to be the owner of a property
possessed by another must bring the appropriate judicial action for its physical recovery. The
'judicial process' could mean no less than an ejectment suit or a reivindicatory action, in which the
ownership claims of the contending parties may be properly heard and adjudicated." King took a
procedural shortcut when he applied for the issuance of a writ of possession instead of filing a suit to
recover possession of the property against the Lims. Besides, as the CA had espoused, the issuance of
the writ of possession produced a peculiar situation in which the writ sought by King was directed
against himself as the assignee of the judgment debtors.
TOMASA J. SABELLINA v. DOLORESBURAY, LEDENIA VILLAMOR, ARLENE MAGSAYO, LUDIMA

ROMULO, RAMON CANADELLA, ROBERTO ACIDO, MARIO ESPARGUERA, RODRIGO ACIDO,
RONNIE UBANGAN and CONCEPCION REBUSTO
G.R. No. 187727, September 2, 2015, BRION, J.
In ejectment cases, possession, not ownership, is the central issue.
Facts:
Petitioner Tomasa Sabellina filed a complaint for unlawful detainer against the respondents
before the MCTC of Laguindingan-Gitagum, Misamis Oriental. Tomasa claimed that she is the owner
of a 13, 267- square meter parcel of land in Mauswagon, Laguindingan, Misamis Oriental and that she
inherited the property after her parents death pursuant to a Deed of Extrajudicial Settlement she
executed with her co-heirs. Tomasa further alleged that she allowed the respondents to construct
their houses on the lot on condition that they would vacate the property when she needed it and in
early 2003, she verbally requested the respondents to vacate the lot but they refused.
The respondents denied Tomasas allegations and claimed that the DENR declared the
subject lot alienable and disposable; (2) that they had possessed the subject lot in good faith since the
1970s and had acquired it through acquisitive prescription and that Tomasa did not object when
they constructed a chapel on the lot without her permission.
The MCTC rendered a decision ejecting the respondents. The RTC found no compelling
reason to amend or reverse the findings of the MCTC. The CA reversed the decisions of the lower
courts.
Issue:
Whether or not the CA erred in dismissing the complaint and in ruling that Tomasa had
failed to establish her allegations of tolerance by preponderance of evidence.
Ruling:
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No. The petitioners father, Demetrio Jaramillo, entered the property in 1948 and declared it
in his name under T.D. No. 4343. Demetrio died on 7 November 1953 but his heirs continued to
declare the property for tax purposes in his name until 1994. On 30 April 1990, the heirs of Demetrio
executed a Deed of Extrajudicial Settlement adjudicating the subject lot to Tomasa. Tomasa declared
the property in her name under T.D. No. 944316- P in 1997, T.D. 024034 in 2002, and 027372 in
2005. However, at an uncertain point in time prior to the extrajudicial settlement, the respondents
entered the property and occupied it under undetermined circumstances.
Like the lower courts, the Court is convinced that the petitioner is the rightful owner of the
subject lot. However, this case is an ejectment proceeding where possession, not ownership, is the
central issue. While the petitioners tax declarations are good indicia of her possession in the concept
of an owner, this only refers to possession de jure not possession de facto. Indisputably, the
respondents are in the actual physical possession of the subject lot. The tax declarations do not shed
light on the circumstances of the respondents entry into the property. From the petitioners
evidence, only the affidavits of Tomasa Sabellina and Elena R. Jaramillo, and the promissory
agreement from Roberto Acido are instructive as to the nature of the respondents possession.
The petitioner failed to present convincing proof of her allegation of tolerance. There is no
competent evidence to support her claim other than her own self-serving affidavit repeating her
allegations in the complaint. Allegations are not evidence and without evidence, bare allegations do
not prove facts. The petitioner, however, is not left without a remedy in law. She may still avail of the
plenary actions of accion publiciana or accion reinvindicatoria to recover possession and vindicate
her ownership over the property.
ACCION REINVINDICATORIA
SPOUSES ROMEO and ADORINA JAVIER v. SPOUSES EVANGELINE and VIRGILIO DE GUZMAN,
ARNEL, EDGAR and HENRY PINEDA and REGINO RAMOS
G.R. No. 186204, September 2, 2015, PERALTA, J.
A boundary dispute must be resolved in the context of accion reivindicatoria, not an ejectment
case. A boundary dispute is not about possession, but encroachment.
Facts:
Spouses Javier (plaintiffs) are the absolute owners of a parcel of land and are in prior
physical possession of the entire property. Sps. De Guzman unlawfully entered and arrogated unto
themselves ownership thereof by enclosing the same with concrete hollow blocks fence. Sps. Javier
made a request to conduct a relocation survey so as to prove the metes and bounds of said property
and in the said survey it appears that Sps. De Guzman have encroached an area. Despite demands,
they continued to remain and Sps. Javier suffered. Sps. Javier filed with the MTCC, a Complaint
against Sps. De Guzman for Ejectment. MTCC dismissed the complaint on the ground that such is a
boundary dispute and a plenary action with the RTC is the proper remedy. RTC reversed. CA
reinstated the MTCC decision.
Issue:
Whether or not the remedy of Sps, Javier should be an action for recovery of possession and
not one for ejectment.
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Ruling:
Yes. The MTCC and the CA are correct that the meat of the controversy between herein
parties is the actual boundaries or the metes and bounds of their respective lots. Manalang v. Bacani
(G.R. No. 156995, 2015) is quite instructive: A boundary dispute must be resolved in the context
of accion reivindicatoria, not an ejectment case. The boundary dispute is not about possession, but
encroachment, that is, whether the property claimed by the defendant formed part of the plaintiffs
property. A boundary dispute cannot be settled summarily under Rule 70 of the ROC, the proceedings
under which are limited to unlawful detainer and forcible entry.
Opposing possessory rights over certain areas of adjacent lots, arising from claims of
ownership thereof, cannot be resolved in a summary action such as an ejectment suit. The issues
involved in such a controversy should be fully threshed out in an action like accion
reivindicatoria, especially when plaintiff fails to establish actual prior possession. It was already held
therein that if a party is indeed the owner of the premises subject of this suit and she was unlawfully
deprived of the real right of possession or the ownership thereof, she should present her claim before
the RTC in an accion publiciana or an accion reivindicatoria, and not before the MTC in a summary
proceeding of unlawful detainer or forcible entry.
ACQUISITIVE PRESCRIPTION
ROBERTO STA. ANA DY, et al. v. BONIFACIO A. YU, et al.
G.R. No. 202632, July 08, 2015, PERLAS-BERNABE, J.
Section 41 of the Code of Civil Procedure provides for the applicable prescriptive period to vest
ownership over the subject portion, considering that Article 1116 of the New Civil Code provides that
prescription already running before the effectivity of this Code shall be governed by laws previously in
force.
Facts:
The subject Lot 1519 was inherited by the Dy children, including petitioner Roberto, from
their parents. Since Carlos and Lilia sold their respective shares over the properties to their brother
pursuant to an Extrajudicial Settlement with Sale, Roberto was issued OCT No. 511 over Lot 1519.
Roberto filed a complaint for recovery of possession with damages against Susana and Sixto Tan. He
alleged that the occupation of Rosario, and later Susana, of the property was by mere
accommodation, but Susana contended that Robertos father, Adriano Dy Chiao, donated the subject
land to Rosario. Susana also attacked the validity of the Extrajudicial Settlement with Sale as well as
Robertos OCT No. 511. The RTC dismissed Roberto's complaint and declared Rosario as the lawful
owner of the subject lot. Pending appeal to the CA, Roberto and his wife, executed a Deed of
Donation in favor of their children petitioners over Lot 1519. The CA then reversed the ruling of the
RTC and ruled that Rosario's defenses attacking the validity of OCT No. 511 on the ground of fraud
amounted to a prohibited collateral attack on Roberto's title. Rosario's motion for reconsideration
and petition for review were denied. Thus, the decision attained finality.
Prior to the resolution of Rosario's motion for reconsideration in the Recovery Case, Rosario
filed a complaint for reconveyance with damages against Roberto before the RTC Branch 26, which
was dismissed on the ground of litis pendentia and forum shopping. Rosario also filed a complaint for
the annulment and/or rescission of the Deed of Donation with damages against petitioners before
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the same RTC branch. The RTC-Branch 26 dismissed the Annulment Case on the ground of litis
pendentia and forum shopping. However, on reconsideration, the Annulment Case was reinstated
finding that the controversy principally involved annulment of donation, which is not identical with
the Recovery and Reconveyance Cases. The RTC-Branch 26 ordered the annulment and/or
rescission of the Deed of Donation, as well as the reconveyance of Lot 1519-A, in respondents' favor.
It upheld respondents' claim of ownership over Lot 1519-A not on account of the donation made by
Dy Chiao to Rosario, but by virtue of acquisitive prescription. The CA affirmed the said ruling.
Issue:
Whether or not the respondents are the lawful owners of the subject lot, thus making the
Deed of Donation executed by Roberto in favor of his children null and void.
Ruling:
Yes. While there is no gainsaying that the first deed of donation executed by Dy Chiao in
Rosario's favor is void for failure to comply with the formalities under the old and new Civil Code, it
has not been disputed that Rosario was in actual, open, public, and continuous possession of Lot
1519-A under a claim of ownership since 1938. Section 41 of the Code of Civil Procedure provides
for the applicable prescriptive period (ten years) to vest ownership over the subject portion,
considering that Article 1116 of the New Civil Code provides that "[p]rescription already running
before the effectivity of this Code [(August 30, 1950)] shall be governed by laws previously in force x
x x."
Based on the foregoing, it is then clear that Rosario's actual possession of Lot 1519-A for
more than ten years under Section 41 of the Code of Civil Procedure, had already ripened into
ownership at the time Roberto filed his complaint in the Recovery Case in May 22, 1989, as well as at
the time the Decision ordering the issuance of OCT No. 511 was rendered in October 14, 1986, and
necessarily the issuance of the OCT itself in October 6, 1987. Note that even under the New Civil
Code, Rosario's possession of the said portion still ripened into ownership since she has been in
uninterrupted possession thereof for more than thirty (30) years, even in the absence of good faith
and just title. Hence, there is no denying that Rosario and now, her heirs, i.e., herein respondents, are
the rightful owners of Lot 1519-A by virtue of acquisitive prescription.
As a logical consequence, petitioners did not become owners of the subject property even
after a TCT had been issued in their names. Since Rosario's claim of ownership was limited only to
Lot 1519-A and not the entire Lot 1519, the donation remains to be valid insofar as it involves that
portion rightfully belonging to the Dy children.
EASEMENT OF RIGHT OF WAY

DEMETRIA DE GUZMAN, et al. v. FILINVEST DEVELOPMENT CORPORATION
The easement of right of way shall be established at the point least prejudicial to the
servient estate.
Facts:
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De Guzman, et al. were co-owners in fee simple of a parcel of land. One of its adjoining
properties is Filinvest Home Subdivision Phase IV-A, a subdivision owned and developed by
respondent Filinvest Development Corporation which, coming from petitioners' property, has a
potential direct access to Marcos highway either by foot or vehicle. As such, petitioners filed a
Complaint for Easement of Right of Way against respondent before the RTC, which rendered a
decision granting petitioners the right of way. Upon respondent's appeal, the CA affirmed petitioners'
entitlement to legal easement of right of way. As none of the parties appealed the said CA Decision,
the same became final and executory. Petitioners insisted that the right of way pertains only to Road
Lot 15 where the fence separating their property from respondent's subdivision, which was
supposed to be removed to grant them access thereto, is located. On the other hand, it was
respondent's contention that the right of way covers the whole stretch from petitioners' property all
the way to its subdivision's gate leading to Marcos Highway. In resolving the same, the RTC deduced
that the right of way granted pertains only to Road Lot 15. The CA agreed with respondent and
granted the appeal. Hence, the petition.
Issue:
Whether or not the right of way granted to petitioners covers merely Road Lot 15.
Ruling:
No. The right of way granted to petitioners covers the network of roads within respondent's
subdivision and not merely Road Lot 15. To the Court's mind, the cause of confusion as regards the
extent of the right of way granted to petitioners is the absence in the said RTC Decision of any
categorical statement with respect thereto. Be that as it may, it is not difficult to conclude therefrom
that what was intended to serve as petitioners' right of way consisted of the road network within
respondent's subdivision and not merely of Road Lot 15. As may be recalled, the RTC then in
resolving the complaint for easement of right of way was confronted with the contentious issue as to
which between the two routes from petitioners' property, i.e., the one passing through respondent's
subdivision leading to Marcos Highway or the one passing through another property leading to
Sumulong Highway, is the more adequate and less prejudicial route pursuant to the requirement of
the law. Thus, when it made the following comparison and eventually concluded that the route
passing through respondent's subdivision is the more adequate and the less prejudicial way, what it
obviously had it mind was the road network in respondent's subdivision since the measurement
thereof in meters corresponds with that mentioned by the RTC.
LAND TITLES AND DEEDS

PROPERTY RESERVED FOR PUBLIC/QUASI-PUBLIC PURPOSE
NAVY OFFICERS' VILLAGE ASSOCIATION, INC. (NOVAI) v. REPUBLIC OF THE PHILIPPINES
G.R. No. 177168, August 03, 2015, BRION, J.
Property which has been reserved for public or quasi-public use or purpose are non-alienable
and shall not be subject to sale or other disposition until again declared alienable by law or by
proclamation of the President.
Facts:
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TCT No. T-15387 was issued in NOVAI's name covering a 475,009 square-meter parcel of
land situated inside the former Fort Andres Bonifacio Military Reservation (FBMR). On July 12, 1957,
then President Carlos P. Garcia issued Proclamation No. 423 reserving for military purposes the
subject lot. On September 29, 1965, then Pres. Diosdado Macapagal issued Proclamation No. 461
which excluded the subject lot from Fort McKinley. However, on October 25, 1965, Pres. Macapagal
issued Proclamation No. 478 reserved the subject lot for the Veterans Federation of the Philippines
(VFP). On November 15, 1991, the property was the subject of a Deed of Sale between the Republic,
through former Land Management Bureau (LMB) Director Abelardo G. Palad, Jr. and NOVAI. The
Republic sought to cancel NOVAIs title claiming that the lot is part of a military reservation and that
the title is fictitious. NOVAI counter-argued that the property was no longer part of the public
dominion, as the land had long been segregated from the military reservation pursuant to
Proclamation No. 461.
Issue:
Whether or not the subject property is inalienable.
Ruling:
Yes. NOVAI failed to discharge its burden of proving that the property was withdrawn from
the intended public or quasi-public use. Under CA 141, the President may classify lands of the public
domain as alienable and disposable, mineral or timber land, and transfer such lands from one class to
another at any time. While Proclamation No. 461 withdrew a certain area or parcel of land from the
FBMR and made the covered area available for disposition in favor of the AFPOVAI, Proclamation No.
478 subsequently withdrew the property from the total disposable portion and reserved it for the
use of the VRMTC. With the issuance of Proclamation No. 478, the property was transferred back to
that class of public domain land reserved for public or quasi-public use. Property which are intended
for public or quasi- public use or for some public purpose are public dominion property of the State
and are outside the commerce of man. NOVAI, therefore, could not have validly purchased the
property in 1991.
JURISDICTION OF COURTS
ROSARIO BANGUIS-TAMBUYAT V. WENIFREDA BALCOM-TAMBUYAT
G.R. No. 202805, March 23, 2015, DEL CASTILLO, J.
The active participation of the party against whom the action was brought, coupled with his
failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case
and will bar said party from later on impugning the court or bodys jurisdiction.
Facts:
During the marriage of Adriano and Wenifreda, Adriano acquired a parcel of land in Bulacan.
The deed of sale over the said property was signed by Adriano alone as vendee and one Rosario
Banguis as a witness. When the TCT of the property was issued, it was under the name of Adriano
married to Rosario.
Wenifreda filed a Petition for Cancellation of the title alleging that she was the surviving
spouse of Adriano and that the TCT was erroneously registered and made in the name of Adriano
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married to Rosario. Rosario claimed that she alone bought the property using her personal funds
and that she and Adriano were married.
The trial court held that under the Property Registration Decree, court authorization is
required for any alteration or amendment of a certificate of title when any error, omission or mistake
was made in entering a certificate; that it has been established that Wenifreda is the surviving spouse
of Adriano, and the subject property was acquired during their marriage, but it was erroneously
registered in the name of another.
On appeal, Rosario contends that she is the actual owner and possessor of the property and
by virtue of which, a proper action in a different court exercising general jurisdiction should be filed,
rather than in the current trial court which sits merely as a land registration court.
Issue:
Whether or not the court sitting as a land registration court can resolve the objections raised
by Rosario.
Ruling:
Yes. The trial court in LRC Case No. P-443-99 was not precluded from resolving the
objections raised by Banguis in her opposition to the petition for cancellation; a separate action need
not be filed in a different court exercising general jurisdiction. Banguis should be considered to have
acquiesced and freely submitted the case to the trial court for complete determination on her
opposition, when she went to trial and adduced and submitted all her relevant evidence to the court.
The active participation of the party against whom the action was brought, coupled with his failure
to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the
case and will bar said party from later on impugning the court or bodys jurisdiction.
CLOUD ON TITLE
CLT REALTY DEVELOPMENT CORPORATION v. PHIL-VILLE DEVELOPMENT AND HOUSING
CORPORATION, et al.
Any title that traces its source to an inexistent mother title is void.
Facts:
A complaint for quieting of title, damages and injunction was filed by Phil-Ville Development
and Housing Corporation (PDH) against CLT and the Register of Deeds of Metro Manila before the
RTC of Caloocan City, claiming that it is the registered owner and actual possessor of sixteen (16)
parcels of land in the same city. It also argued that CLTs TCT, although apparently valid or effective,
is in truth and in fact, invalid and ineffective. On the other hand, CLT prayed for the issuance of a writ
of injunction before the same court, claiming its valid right and title over the properties. The RTC
declared PDH the true owner of the properties and declared CLTs title null and void. The CA affirmed
the RTC ruling.
Issue:
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Whether or not CLTs TCT imposes a cloud on PDHs titles to the sixteen (16) parcels of land.
Ruling:
No. Of particular relevance to this present case is the ruling in the 2009 Manotok Resolution
that the certificate of title of CLT, who is also a party to said consolidated cases, is null and void.
Therefore, the cloud on respondent PDHs sixteen (16) titles, subject matter of the complaint, had
already been removed. From its answer in the complaint filed before the RTC to its memorandum
filed before this Court, CLT proudly traces the problematic TCT to its previous owner, Estelita
Hipolito, who acquired said lot from Dimson.
In Manotok, the same title was also the subject matter of one of the consolidated cases.
Hipolito's title emanated from Dimsons TCT, a title issued pursuant to an order of the CFI. Dimsons
title appears to have been sourced from an OCT. In Manotok, it was established that the true date of
OCT No. 994 is May 3, 1917, and that there is only one (1) OCT No. 994. The decree of registration
was issued on April 19, 1917, and actually received for transcription by the Register of Deeds on
May 3, 1917. 51 Thus, all the titles that traced its roots to the spurious OCT No. 994 dated April 19,
1917 were invalidated, including CLTs TCT. It is evident from all three titles CLT's, Hipolitos and
Dimsons that the properties they purport to cover were originally registered on the 19th day
April, in the year nineteen hundred and seventeen in the Registration Book of the Office of the
Register of Deeds of Rizal. Note, as earlier established, there is no such OCT No. 994 originally
registered on 19 April 1917.
Thus, any title that traces its source to OCT No. 994 dated 17 April 1917 is void, for such
mother title is inexistent. The fact that the Dimson and CLT titles made specific reference to an OCT
No. 994 dated 17 April 1917 casts doubt on the validity of such titles since they refer to an inexistent
OCT. This error alone is, in fact, sufficient to invalidate the Dimson and CLT claims over the subject
property if singular reliance is placed by them on the dates appearing on their respective titles. As a
matter of fact, in Alfonso v. Office of the President and Phil-Ville Development and Housing Corporation,
the Court penalized the former register of deeds of Caloocan who acquiesced to the change of the
date and registration of OCT No. 994 from May 3, 1917 to April 19, 1917, which wreaked havoc on
our countrys land titling system, and led to much confusion that continued to rear its ugly head in
many cases pending before the courts. Our findings regarding the titles of Jose Dimson necessarily
affect and even invalidate the claims of all persons who seek to derive ownership from the Dimson
titles. These include CLT, which acquired the properties they laid claim on from Estelita Hipolito who
in turn acquired the same from Jose Dimson.
In view of the foregoing disquisitions, invalidating the titles of Dimson, the title of CLT
should also be declared a nullity inasmuch as the nullity of the titles of Dimson necessarily upended
CLTs propriety claims. As earlier highlighted, CLT had anchored its claim on the strength of
Hipolitos title and that of Dimsons TCT. Remarkably and curiously though, the said TCT was never
presented in evidence for purposes of tracing the validity of titles of CLT. On this basis alone, the
present remand proceedings remain damning to CLTs claim of ownership. Thus, both requisites in
order for an action for quieting of title to prosper have been met in this case: (1) PDH established its
equitable title or interest in the sixteen (16) parcels of land subject of the action; and (2) the TCT
found to overlap titles to said properties of PDH was previously declared invalid.
CERTIFICATE OF TITLES COVERING THE SAME LAND
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JOSE YULO AGRICULTURAL CORPORATION v. SPOUSES PERLA CABAYLO DAVIS AND SCOTT
DAVIS
G.R. No. 197709, August 3, 2015, DEL CASTILLO, J.
The general rule is that where two certificates of title purport to include the same land, the
earlier in date prevails.
Facts:
A lot owned by Jose Yulo was subdivided into lots covered by 2 TCTs. The first lot was
further subdivided. Among these lots are lots 24, 25, 72, 91, 92, and 96. Yulo sold lots 91, 92, and 96
to the Madrinas. Lots 24, 25, 91, 92 and 96 were subsequently mortgaged to Nation Bank, which
eventually foreclosed and became the owner of the lots. Nation Bank sold these lots to Spouses Davis
and 3 TCTs were then issued in their favor over lots 91, 92, and 96. On the other hand, a new TCT
was issued over lot 72 in the name of Jose Yulo Agricultural Corporation (JYAC). Lot 72 was further
subdivided. Among these lots are lots 3 and 5 which were sold to Spouses Trajera. Spouses Davis
then received demand letters from the Trajeras requiring them to remove a portion of the
improvements which they claim encroached upon their respective properties. Spouses Davis then
filed a case for quieting of title against the Trajeras, Yulo and Nation Bank before the RTC. The RTC
ruled in favor of Spouses Davis, and was affirmed by the CA.
Issue:
Whether or not Spouses Davis have better rights than JYAC over lots 91, 92, and 96.
Ruling:
Yes. The Court held in a line of cases that the general rule is that in the case of the two
certificates of title, purporting to include the same land, the earlier in date prevails. In successive
registrations, where more than one certificate is issued in respect of a particular estate or interest in
land, the person claiming under the prior certificate is entitled to the estate or interest and that
person is deemed to hold under the prior certificate who id the holder of, or whose claim is derived
directly or indirectly from the person who was the holder of the earliest certificate issued in respect
thereof.
Given the foregoing facts, Yulo and JYAC knew everything as far as his land is concerned, or
is charged with knowledge at least. Yulo was the sole owner of the properties involved, and he and
his outfit were the sellers of the properties which eventually were acquired by Spouses Davis and the
Trajeras. They cannot claim to be ignorant of everything that went on with the properties they
owned. They cannot be allowed to benefit from their own mistakes at the expense of Spouses Davis.
If there is anybody who must be considered in bad faith, it is they; they should have known
that there was an overlapping of titles in their very own lands. Thus, there is no doubt that Spouses
Davis titles were derived from Yulos and this fact was not even assailed or denied by JYAC in any of
its pleadings.
JURISDICTION OF DAR
THE HON. SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM v. NEMESIO DUMAGPI
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DARABs New Rules of Procedure issued on May 30, 1994 expressly recognized, under Section
1(g), Rule II thereof, that matters involving strictly the administrative implementation of R.A. No. 6657,
otherwise known as the CARL of 1988 and other agrarian laws as enunciated by pertinent rules, shall be
the exclusive prerogative of and cognizable by the Secretary of the DAR.
Facts:
Respondent filed a complaint for Accion Reivindicatoria, Quieting of Title, and Damages
before the RTC against Aguilar, Valencia, Custodio and the Secretary of DAR (herein petitioners),
wherein he alleged that he is the owner of subject land and that due to his open, notorious, adverse
and exclusive possession, occupation and cultivation of the said land in the concept of owner since
July 4, 1945, during which he introduced improvements thereon, the said lot has long been converted
into his private property by operation of law. He applied for a free patent over the land which was
approved but was never released due to the opposition from petitioners. It was, later on, when he
discovered that the titles had been issued to private defendants. The private defendants moved to
dismiss the complaint on September 19, 1997 on the ground that the controversy involved the
implementation of the agrarian reform law, which is outside the courts jurisdiction. DAR in its
answer sought the dismissal of the complaint, arguing that Nemesio did not own or possess the
subject lot and thus has no cause of action to recover title and possession, much less seek the
removal of a cloud over his alleged title, even as the titles issued by DAR can only be attacked directly
and not collaterally.
Issue:
Whether or not DAR has jurisdiction over the controversy.
Ruling:
Yes. As the lead agency in the governments Agrarian Reform Program, DAR issued
Administrative Order No. 09-89, Series of 1989, on May 5, 1989, containing the "Rules and
Procedures Governing Titling and Distribution of Lots in DAR Settlement Projects," intended to
accelerate the issuance of CLOAs to qualified beneficiaries in settlement projects administered by the
DAR; it covers the titling and distribution of agricultural lands within proclaimed settlement projects
under the administration of the DAR, as provided for by existing laws. Moreover, as the lead agency
mandated to implement the government's agrarian reform program, the DAR is the real party in
interest, since at issue is the validity of its actions comprising the determination of the qualified
agrarian reform beneficiaries and the issuance of CLOAs and titles to them. Since, therefore, the
implementation of agrarian law is within the exclusive jurisdiction of the DAR Secretary, and issues
concerning the issuance of the subject titles can only be raised to the DAR Secretary, the RTC has no
jurisdiction to decide Civil Case No. 3985, and its judgment therein is of necessity void and can never
become final.
POSSESSION AND OCCUPATION

REPUBLIC OF THE PHILIPPINES v. CECILIA GRACE L. ROASA, married to GREG AMBROSE
ROASA, as herein represented by her Attorneys-in-Fact, BERNARDO M. NICOLAS, JR. and ALVIN
B. ACAYEN
G.R. No. 176022, February 2, 2015, PERALTA, J.
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Section 14(1) of the Property Registration Decree should be interpreted to include possession
before the declaration of the lands alienability as long as at the time of the application for registration,
the land has already been declared part of the alienable and disposable agricultural public lands.
Facts:
Republic of the Philippines, through the OSG, opposed the application for registration of title
over a parcel of land filed by the respondent. It alleged that the respondent failed to comply with the
required 30-year adverse possession since the subject land was declared alienable and disposable
land of the public domain only on March 15, 1982 per CENRO certification, and the application was
filed only on December 12, 2000. Hence, any period of possession prior to the date when the subject
land was classified as alienable and disposable is inconsequential and should be excluded from the
computation of the 30-year period of possession.
Issue:
Whether or not possession of the lot by respondent and her predecessors-in-interest before
the establishment of alienability of the said land should be excluded in the computation of the period
of possession for purposes of registration.
Ruling:
No. Section 14(1) of the Property Registration Decree should be interpreted to include
possession before the declaration of the lands alienability as long as at the time of the application for
registration, the land has already been declared part of the alienable and disposable agricultural
public lands. There was no other legislative intent that could be associated with the date, June 12,
1945, as written in our registration laws except that it qualifies the requisite period of possession
and occupation. The law imposes no requirement that land should have been declared alienable and
disposable agricultural land as early as June 12, 1945.
Therefore, what is important in computing the period of possession is that the land has
already been declared alienable and disposable at the time of the application for registration. Upon
satisfaction of this requirement, the computation of the period may include the period of adverse
possession prior to the declaration that land is alienable and disposable.
WHERE DATE OF REGISTRATION IS RECKONED FROM

CLT REALTY DEVELOPMENT CORPORATION v. HI-GRADE FEEDS CORPORATION, REPUBLIC OF
THE PHILIPPINES (through OSG), REGISTER OF DEEDS OF METRO MANILA, DISTRICT III,
CALOOCAN CITY, and the COURT OF APPEALS
G.R. No. 160684, September 2,2015, PEREZ, J.
The date of registration is reckoned from the time of the title's transcription in the record book
of the Registry of Deeds (RD). Therefore, the date appearing on the face of a title refers to the date of
issuance of the decree of registration, as provided in Sections 41 and 42 of the Land Registration Act or
Section 40 of the P.D. 1529.
Facts:
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Hi-Grade is the registered owner of two parcels of land under Ruiz and Leuterio, which is a
derivative title of the mother title. It was sold to Gonzales. Upon Gonzalez's death, the land was
subdivided into seven lots. Seven new titles were issued under the children of Gonzalez. The
Government expropriated the seven lots then consolidated the titles and then further subdivided the
property into 77 lots. One of the 77 lots was under Benito which was further subdivided into Lot-A
and 17-B. Lot 17-B was later on under Madulid, Sr., which was later on sold to Hi-Grade. Another lot
is Lot No. 52, which was under Alvarez. Soon after, Alvarez sold it to Madulid, Sr. Afterwards,
Madulid, Sr. sold the lot to Hi-Grade. CLT is the registered owner of the TCT by virtue of a Deed of
Absolute Sale with Real Estate Mortgage executed by the former registered owner, Hipolito. The
conflict arose due to an overlapping of the properties of CLT and Hi-Grade, which prompted CLT to
file a case for Annulment of Transfer Certificates of Title, Recovery of Possession, and Damages. RTC
ruled in favor of CLT because Hi-Grade's title, the older title, cannot prevail over CLT's title because it
suffers from patent defects and infirmities. CA reversed and ruled as baseless the RTCs reliance on
the testimonies of CLTs witnesses.
Issue:
Whether or not CLTs OCT shall prevail over Hi-Grades OCT.
Ruling:
No. CLT's OCT No. 994 is dated 19 April 1917 and Hi-Grade's OCT No. 994 is dated 3 May
1917. A title can only have one date of registration, as there can only be one title covering the same
property. The date of registration is reckoned from the time of the title's transcription in the record
book of the Registry of Deeds (RD). Therefore, the date appearing on the face of a title refers to the
date of issuance of the decree of registration, as provided in Sections 41 and 42 of the Land
Registration Act or Section 40 of the P.D. 1529. Based on the Decree in Land Registration Case (LRC),
the decree registering OCT No. 994, the date of the issuance is 19 April 1917 while on the other hand,
OCT No. 994 was received for transcription by the RD on 3 May 1917. In this case, the date which
should be reckoned as the date of registration of the title is the date when the mother title was
received for transcription, 3 May 1917. Therefore, as the date of transcription in the record book of
the RD is 3 May 1917, it is ruled that the genuine title is the title of Hi-Grade.
Also, as correctly ruled by CA, CLT failed to prove by preponderance of evidence, the alleged
defects and infirmities in TCT No. 4211, the title from whence Hi-Grade's titles were derived. CLT
failed to discharge such burden. CLT's evidence must stand or fall on its own merits and cannot be
allowed to draw strength from the alleged weakness of the evidence of Hi-Grade. As already shown,
such allegation was proven wrong by documents on records. As opposed to CLT's evidence, Hi-Grade
was able to establish the chain of titles linking its titles, TCTs No. 237450 and T-14691, to the
derivative title, TCT No. 4211, to the mother title, OCT No. 994. As the Court has priorly pronounced,
any title that traces its source to a void title, is also void. The spring cannot rise higher than its
source. Nemo potest plus Juris ad alium transferre quam ipse habet. All titles that trace its source to
OCT No. 994 dated 19 April 1917, are therefore void, for such mother title is inexistent. Because CLT
so traces its title to OCT No. 994 dated 19 April 1917, the title of CLT is void.
FORGERY
BETTY GEPULLE-GARBO v. SPOUSES VICTOREY ANTONIO GARABATO and JOSEPHINE S.
GARABATO
G.R. No. 200013, January 14, 2015, VILLARAMA, JR., J.
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As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing
evidence, the burden of proof lies on the party alleging forgery. One who alleges forgery has the burden
to establish his case by a preponderance of evidence, or evidence which is of greater weight or more
convincing than that which is offered in opposition to it.
Facts:
On June 17, 1977, a Deed of Sale7 was executed between Eduviges and Florence whereby the
former sold to the latter a 303-square meter parcel of land, covered by Transfer Certificate of Title
(TCT) No. 17986, in Pasay City. The deed of sale was signed by Nick Garbo. In 1996, respondent
Victorey, married to co-respondent Josephine, registered the subject property in his name by virtue
of a Deed of Sale executed by Florence in his favor. On October 15, 1996, respondent was issued TCT
No. 136900. On August 2, 2001, petitioner filed a petition for cancellation of TCT No. 136900 against
respondents. She impugns the validity of the June 17, 1977 Deed of Sale on the ground that the
signatures of Nick and Eduviges were forged by Florence. Petitioner also assailed the deed of sale
between Florence and Victorey. Petitioner claimed that Nick had previously sought the examination
of his alleged signature on the June 17, 1977 Deed of Sale by the National Bureau of Investigation
(NBI). The NBI examiner allegedly found that the questioned signature and the standard signatures
of Nick were not written by one and the same person.
Issue:
Whether or not the signatures of Nick and Eduviges appearing on the instruments were
forged.
Ruling:
No. Petition is without merit. In any event, Section 1, Rule 131 of the Rules of Court provides
that the burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact in
issue by the amount of evidence required by law. As a rule, forgery cannot be presumed and must be
proved by clear, positive and convincing evidence, the burden of proof lies on the party alleging
forgery. One who alleges forgery has the burden to establish his case by a preponderance of evidence,
or evidence which is of greater weight or more convincing than that which is offered in opposition to
it. The fact of forgery can only be established by a comparison between the alleged forged signature
and the authentic and genuine signature of the person whose signature is theorized to have been
forged. The opinion of handwriting experts are not necessarily binding upon the court, the experts
function being to place before the court data upon which the court can form its own opinion. This
principle holds true especially when the question involved is mere handwriting similarity or
dissimilarity, which can be determined by a visual comparison of specimens of the questioned
signatures with those of the currently existing ones. A finding of forgery does not depend entirely on
the testimonies of handwriting experts, because the judge must conduct an independent examination
of the questioned signature in order to arrive at a reasonable conclusion as to its authenticity.
In this case, both the RTC and CA found that Albacea did not explain the manner of
examination of the specimen signatures in reaching his conclusion. Albacea did not point out
distinguishing marks, characteristics and discrepancies in and between genuine and false specimens
of writing which would ordinarily escape notice or detection by an untrained observer.
ALIENABLE AND DISPOSABLE CHARACTER OF LAND
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REPUBLIC OF THE PHILIPPINES v. SPS. JOSE CASTUERA and PERLA CASTUERA
G.R. No. 203384, January 14, 2015, CARPIO, J.
The advance plan and the CENRO certification are insufficient proofs of the alienable and
disposable character of the property.
Facts:
Andres Valiente owned a 3,135-square meter land in Zambales. In 1978, he sold the property
to respondents Jose and Perla Castuera (Spouses Castuera). On 21 May 2003, the Spouses Castuera
filed with the RTC an application5 for original registration of title over the property. The Spouses
Castuera also presented documentary evidence to support their application. The documents included
tax receipts and an advance plan with a notation, Checked and verified against the cadastral records
on file in this office and is for registration purposes. This survey is within the Alienable and
Disposable land proj. No. 3-H certified by Director of Forestry on June 20, 1927 per LC Map No. 669
Sheet 1. Petitioner Republic of the Philippines (petitioner), through the Office of the Solicitor
General, filed an opposition to the application for original registration.
Issue:
Whether or not the advance plan and the CENRO certification are sufficient proofs of the
alienable and disposable character of the property.
Ruling:
No. The advance plan and the CENRO certification are insufficient proofs of the alienable and
disposable character of the property. The Spouses Castuera, as applicants for registration of title,
must present a certified true copy of the Department of Environment and Natural Resources
Secretarys declaration or classification of the land as alienable and disposable.
HEIRS OF RAFAEL GOZO represented by CASTILLO GOZO and RAFAEL GOZO, JR. v. PHILIPPINE
UNION MISSION CORPORATION OF THE SEVENTH DAY ADVENTIST CHURCH (PUMCO), SOUTH
PHILIPPINE UNION MISSION OF SDA (SPUMCO) and SEVENTH DAY ADVENTIST CHURCH AT
SIMPAK, LALA, LANAO DEL NORTE represented by BETTY PEREZ
G.R. No. 195990, August 05, 2015, PEREZ, J.
Public land not shown to have been reclassified or released as alienable agricultural land or
alienated to a private person cannot be acquired by private persons without any grant, express or
implied, from the government.
Facts:
Respondents took possession of the subject property by introducing improvements thereon,
based on the 28 February 1937 Deed of Donation. Petitioners who were heirs of the Spouses Rafael
and Concepcion Gozo were the original owners of the area. However, Spouses Gozo were not the
registered owners of the property yet by the time of the donation although they were the lawful
possessors thereof. It was only on 5 October 1953 that the Original Certificate of Title was issued
pursuant to the Homestead Patent granted by the President. Nevertheless, when verified with the
Register Deeds, it appeared that the donation was not annotated in the title. A compromise was
initially reached by the parties wherein the petitioners were allowed by respondents to harvest on
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the subject property. After six decades, petitioners filed an action for Declaration of Nullity of
Document, Recovery of Possession and Ownership with Damages against PUMCO-SDA. Petitioners
claimed that the possession of PUMCO-SDA on the subject property was merely tolerated by
petitioners and therefore could not ripen into ownership.
Issue:
Whether or not the contract of donation was void.
Ruling:
Yes. At the time the Deed of Donation was executed by the Spouses Gozo on 28 February
1937, the subject property was part of the inalienable public domain. It was only almost after two
decades later or on 5 October 1953 that the State ceded its right by granting their patent application
and issuing an original certificate of title in their favor. Prior to such conferment of title, the Spouses
Gozo possessed no right to dispose of the land. Under the Regalian doctrine all lands of the public
domain belong to the State. All public lands not shown to have been reclassified or released as
alienable agricultural land or alienated to a private person by the State remain part of the alienable
public domain. No public land can be acquired by private persons without any grant, express or
implied, from the government. It is an established principle that no one can give what one does not
have, nemo dat quod non habet. As a void contract, the Deed of Donation produces no legal effect
whatsoever. Logically, it could not have transferred title to the subject property from the Spouses
Gozo to PUMCO-SDA and there can be no basis for the church's demand for the issuance of title under
its name.
EXEMPTION FROM CARP

NOEL L. ONG, et al., v. NICOLASA O. IMPERIAL, et al.
G.R. No. 197127, July 15, 2015, LEONARDO-DE CASTRO, J.
To be exempt from CARP, all that is needed is one valid reclassification of the land from
agricultural to non-agricultural by a duly authorized government agency before June 15, 1988, when
the CARL took effect.
Facts:
Ong, et. al, are registered owners of a parcel of land. However, the Municipal Agrarian
Reform Officer notified the petitioners that the subject property was covered by CARL. Petitioners
then filed an application for exemption clearance with the DAR, which was however denied. The
petitioners appealed the orders before the Office of the President, which reversed the decision of
DAR. On appeal, the CA however reversed OPs decision and agreed with DAR. Hence, the present
petition.
Issue:
Whether or not the subject landholding of the petitioners is exempted from the coverage of
the government's Comprehensive Agrarian Reform Program.
Ruling:
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Yes. To be exempt from CARP, all that is needed is one valid reclassification of the land from
agricultural to non-agricultural by a duly authorized government agency before June 15, 1988, when
the CARL took effect. As to what is a "duly authorized government agency," the DAR Handbook for
CARP Implementors recognizes and discusses the LGU's authority to reclassify lands under Republic
Act No. 7160 or the Local Government Code. Thus, all lands that already classified as commercial,
industrial or residential before 15 June 1988 no longer need any conversion clearance. Moreover, all
lands previously converted by government agencies to non-agricultural uses prior to the effectivity
of the CARL are outside its coverage. Since the subject property had been reclassified as
residential/commercial land with the enactment of City Ordinance No. 1313 in 1975, it can no longer
be considered as an "agricultural land" within the ambit of RA 6657.
AMENDMENT AND ALTERATION OF CERTIFICATES
ERNESTO OPPEN, INC. v. ALBERTO COMPAS, substituted by his heirs namely, CLIFFORD M.
COMPAS AND JOAN M. COMPAS, and PHILIPPINE MERCHANT MARINE SCHOOL, INC.
G.R. No. 203969, October 21, 2015, MENDOZA, J.
Relief under Sec. 108 of PD No. 1529 can only be granted if there is unanimity among the
parties, or that there is no adverse claim or serious objection on the part of any party in interest.
Facts:
The subject matter of the case involves two parcels of land in Las Pias City previously
registered in the name of PMMSI. The two properties were levied upon pursuant to the writ of
execution issued by MeTC-Branch 7 and a Notice of Levy in favor of MBI was annotated at the back of
the titles. On another case, the MeTC-Branch 16 issued a writ of execution, and pursuant to such, EOI
annotated its lien on one of the lots. Thereafter, the said lot was sold in a public auction where EOI
was the highest bidder. A new title over one of the lots was issued in favor of EOI. Meanwhile, an alias
writ of execution was issued by MeTC-Branch 7 in connection with the case between PMMSI and MBI.
The two lots were then sold to respondent Alberto Compas in a public auction. A final deed of sale
was issued to him and thus, Compas filed a petition to cancel the TCTs and for the issuance of new
titles in his name before RTC- Las Pias. Upon learning that one of the lots was already titled under
EOIs name, he filed his motion to admit amended petition. EOI filed two motions to dismiss. The first
was denied on the ground that Compas could rightfully enforce its lien on the property. EOI filed the
second one arguing that under Section 108 of PD No. 1529 the court with jurisdiction was the court
where the original registration was filed and docketed. RTC-Las Pias issued an order denying EOI's
second motion to dismiss on the ground that Section 108 of P.D. No. 1529 was inapplicable and that it
was vested with jurisdiction under Section 2 thereof. The CA rendered the decision sustaining the
jurisdiction of RTC-Las Pias.
Issue:
Whether or not the RTC- Las Pias has jurisdiction to hear the amended petition.
Ruling:
Yes. The jurisdiction of regional trial courts in land registration cases is conferred by Section
2 of P.D. No. 1529. The CA was correct in stating that EOI's reliance on Section 108 of P.D. No. 1529
was misplaced. The appellate court aptly cited Philippine Veteran's Bank v. Valenzuela where the
Court held that the prevailing rule was that proceedings under Section 108 were summary in nature,
contemplating corrections or insertions of mistakes which were only clerical but certainly not
controversial issues. Relief under the said legal provision can only be granted if there is unanimity
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among the parties, or that there is no adverse claim or serious objection on the part of any party in
interest. Thus, the petition was properly filed with the RTC-Las Pias where it was docketed as LRC
Case No. LP-05-0089, and not before the court which heard the original registration proceeding
under LRC No. N-1238, as the petition involved adversarial issues. EOI cannot insist that the action
should have been filed with the RTC where the original registration was filed and issued considering
that the case involved controversial issues. The parties obviously lacked unanimity as EOI even filed
a motion to dismiss for failure to state a cause of action, claiming that its Torrens Title was
indefeasible and could not be collaterally attacked.
RECONSTITUTION
REPUBLIC OF THE PHILIPPINES v. CESAR C. PASICOLAN and GREGORIO C. PASICOLAN
G.R. No. 198543, April 15, 2015, DEL CASTILLO, J.
The survey plan and technical description are not competent and sufficient sources of
reconstitution when the petition is based on Section 2(f) of RA No. 26. They are mere additional
documentary requirements. Where the RTC ordered reconstitution on the basis of the survey plan and
technical description, the order of reconstitution is void for want of factual support.
Facts:
Cesar and Gregorio filed a petition for reconstitution of OCT No. 8450 before the RTC of
Tuguegarao City. Petitioners presented as evidence, among others, a copy of a report by the LRA
which states that from the Record Book of Cadastral Lots on files, it appears that the Decree was
issued for the Lot. However, the copy of said decree was no longer available. The RTC finding the
petition to be sufficient in form and substance granted the reconstitution of the title. The OSG
appealed to the CA, claiming that petitioners failed to present competent evidence to show that the
alleged lost certificate of title was valid and subsisting at the time of its loss and that a mere copy of
the decree is not a sufficient basis for reconstitution. The CA affirmed the decision of the RTC. The
OSG contends that the certification made by the LRA merely proved the subsequent appearance in
the LRA but can never serve to prove the titles authenticity for purposes of reconstitution.
Issue:
Whether or not the CA erred in affirming the trial courts finding that reconstitution is
justified on the basis of a copy of an unauthenticated decree and evidence on record.
Ruling:
Yes. Respondents failed to present a competent source of reconstitution. Sec. 2 of RA No. 26
enumerates the sources from which reconstitution of lost or destroyed original certificates of title
may be based.
The other pieces of documentary evidence submitted by respondents do not warrant the
reconstitution of their alleged lost title. The pieces of documentary evidence presented are not
similar to those mentioned in paragraphs (a) to (e) of Section 2 of RA No. 26, which all pertain to
documents issued or are on file with the Registry of Deeds. Under the principle of ejusdem generis,
where general words follow an enumeration of persons or things by words of a particular and
specific meaning, such general words are not to be construed in their widest extent but are to be held
as applying only to persons or things of the same kind or class as those specifically mentioned.
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Also, the survey plan and technical description are not competent and sufficient sources of
reconstitution when the petition is based on Section 2 (f) of RA No. 26. They are mere additional
documentary requirements. Where the RTC ordered reconstitution on the basis of the survey plan
and technical description, the order of reconstitution is void for want of factual support.
REPUBLIC OF THE PHILIPPINES v. WILFREDO MANCAO

No petition for the judicial reconstitution of a Torrens title that does not strictly adhere to the
requirements of Republic Act No. 26, albeit unopposed, should be granted even on the pretext that the
reconstitution would not affect the ownership or possession of the property.
Facts:
The respondent filed his petition for judicial reconstitution of OCT No. 11097 and was
granted by the RTC. The Republic appealed the judgment and claimed that the respondent did not
comply with the requirements for judicial reconstitution prescribed in Republic Act No. 26. Hence,
they should have dismissed the petition for judicial reconstitution instead of granting it. The CA
however, dismissed the appeal.
Issue:
Whether or not the reconstitution was wrongfully granted.
Ruling:
Yes. The judicial reconstitution of a Torrens title under Republic Act No. 26 means the
restoration in the original form and condition of a lost or destroyed Torrens certificate attesting the
title of a person to registered land. The purpose of the reconstitution is to enable, after observing the
procedures prescribed by law, the reproduction of the lost or destroyed Torrens certificate in the
same form and in exactly the same way it was at the time of the loss or destruction.
To ensure the reconstitution proceedings from abuse, Republic Act No. 26 has laid down the
mandatory requirements to be followed. It was clear to both the RTC and the CA that the respondent
did not comply with the requirements for judicial reconstitution prescribed in Republic Act No. 26.
Hence, they should have dismissed the petition for judicial reconstitution instead of granting it. The
RTC and the CA thereby unwarrantedly disregarded the respondents abject non-compliance with the
mandatory requirements for judicial reconstitution prescribed in Republic Act No. 26. Accordingly,
they did not exercise the greatest caution in entertaining and processing petitions for judicial
reconstitution of allegedly lost or destroyed Torrens title despite the frequent warning from the
Court for the lower courts to exercise the greatest caution in the interest of preventing the filing of
such petitions after an unusual delay from the time of the alleged loss or destruction. Indeed, they
ought to have been aware that innumerable litigations and controversies have been spawned by the
reckless and hasty grant of such petitions.
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PROOF OF OWNERSHIP OF A LAND
ROSARIO BANGUIS-TAMBUYAT v. WENIFREDA BALCOM-TAMBUYAT
G.R. No. 202805, March 23, 2015, DEL CASTILLO, J.
Where a party has the means in his power of rebutting and explaining the evidence adduced
against him, if it does not tend to the truth, the omission to do so furnishes a strong inference against
him.
Facts:
During the marriage of Adriano and Wenifreda, Adriano acquired a parcel of land in Bulacan.
The deed of sale over the said property was signed by Adriano alone as vendee and one Rosario
Banguis as a witness. When the TCT of the property was issued, it was under the name of Adriano
married to Rosario.
Wenifreda filed a Petition for Cancellation of the title alleging that she was the surviving
spouse of Adriano and that the TCT was erroneously registered and made in the name of Adriano
married to Rosario. Rosario claimed that she alone bought the property using her personal funds
and that she and Adriano were married.
The trial court held that Wenifreda is the surviving spouse of Adriano, and the subject
property was acquired during their marriage, but it was erroneously registered in the name of
another.
Issue:
Whether or not Wenifreda is the surviving spouse of Adriano.
Ruling:
Yes, Wenifreda is the surviving spouse of Adriano. All that is required in resolving this issue
is to determine who between them is Adrianos spouse; it was unnecessary for Banguis to prove that
she is the actual owner of the property. Title to the property is different from the certificate of title to
it.
Nonetheless, if Banguis felt that she had to go so far as to demonstrate that she is the true
owner of the subject property in order to convince the trial court that there is no need to cancel TCT
T-145321, then she was not precluded from presenting evidence to such effect. Understandably, with
the quality of Wenifredas documentary and other evidence, Banguis may have felt obliged to prove
that beyond the certificate of title, she actually owned the property. Unfortunately for her, the
Supreme Court is not convinced of her claimed ownership; the view taken by the CA must be adopted
that she and Adriano could not have been co-owners of the subject property as she failed to present
sufficient proof that she contributed to the purchase of the subject property, while the deed of sale
covering the subject property showed that Adriano alone was the vendee. The Supreme Court is not a
trier of facts, so it must rely on the findings of facts of the Court of Appeals, which are thus considered
conclusive and binding. Moreover, the Court notes that while Banguis claims that she alone paid for
the property using her own funds and money borrowed from her sister, she nonetheless
acknowledges that Adriano is a co-owner thereof, thus implying that he contributed to its acquisition.
Such contradictory statements cast serious doubts on her claim; basically, if she were the sole
purchaser of the property, it would only be logical and natural for her to require that her name be
placed on the deed of sale as the vendee, and not as mere witness which is what actually occurred
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in this case. On the other hand, if Adriano contributed to its purchase, Banguis would have required
that her name be placed on the deed as a co-vendee just the same. Her failure to explain why
despite her claims that she is the purchaser of the property she allowed Adriano to be denominated
as the sole vendee, renders her claim of ownership doubtful. Where a party has the means in his
power of rebutting and explaining the evidence adduced against him, if it does not tend to the truth,
the omission to do so furnishes a strong inference against him. One cannot also ignore the principle
that the rules of evidence in the main are based on experience, logic, and common sense.
PROOF OF CONVEYANCE OF LAND

HEIRS OF DATU DALANDAG KULI, represented by DATU CULOT DALANDAG v. DANIEL R. PIA,
FILOMENA FOLLOSCO, and JOSE FOLLOSCO, SR.
G.R. No. 199777, June 17, 2015, SERENO, C.J.
While the law requires the Register of Deeds to obtain a copy of the Deed of Conveyance before
cancelling the sellers title, its subsequent failure to produce the copy, after a new title had already been
issued is not a sufficient evidence to hold that the claimed sale never actually happened.
Facts:
The parcel of land subject of this case (Lot 2327) was originally owned by Datu Kuli. When
Datu Kuli died, the possession of Lot 2327 was passed on to his heirs, herein petitioners. When the
petitioners sought to have Datu Kulis title reconstituted, they were informed by the Register of
Deeds that a different title had already been issued in the name of respondent Jose Follosco, Sr (Jose).
It appears from the records that Datu Kuli, during his lifetime, sold in favor of respondent Daniel Pia
(Pia), Lot 2327. Thereafter, respondent Pia sold Lot 2327 to respondent Jose.
Claiming that they had always been in possession of the property and that Datu Kuli never
sold the property to any of the respondents, petitioners filed a Complaint for Quieting of Title with
the RTC. Despite the failure of the Register of Deeds to present a copy of the alleged Deed of
Conveyance issued by Datu Kuli in favor of respondent Pia, the RTC still rendered a judgment in favor
of respondents and held that even though the Register of Deeds could no longer produce a copy of
the Deed of Conveyance stating that Datu Kuli had sold Lot 2327 to Pia, it was convinced that there
was indeed a conveyance from Datu Kuli to Pia over Lot 2327. On appeal, the decision of the trial
court was affirmed by the CA. Hence, this petition.
Petitioners argue that the failure of the Register of Deeds to produce a copy of the Deed of
Conveyance used as basis to cancel Datu Kulis OCT proves that the property was never sold to Pia.
Issue:
Whether or not the failure of the Register of Deeds to present a copy of the Deed of
Conveyance proves that the property was never sold to respondent Pia.
Ruling:
No. The Court agrees with the RTC and rule that even though copies of the Deed of Sale and
the OCT of Datu Kuli can no longer be produced now, the evidence presented sufficiently shows that
the deed conveying the property to respondent Pia was presented to the Register of Deeds on 21
December 1940, and that this deed was the basis for the cancellation of Datu Kulis original title. The
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failure on the part of the Register of Deeds to present a copy of the Deed of Sale when required by the
trial court was duly explained by them. It appears that the records containing the Deed of Sale are no
longer readable, because they are "very much mutilated." Nevertheless, the Register of Deeds was
able to certify that the following entry or notation was found in the first volume of its Primary Entry
Book:
Entry No. 7512
Date of Registration:
Nature of Document:
Date of Document:
Executed by:
In favor of:
Amount:
Dec. 21, 1940 at 7:58am

Deed of Sale
(Dilapidated Portion)
Datu Dalandag Kuli
Daniel R. Pia
P390.00
Although the Deed of Sale itself can no longer be located, the Court agrees with the RTCs
conclusion that the above notation proves that "there was at one time in the past such document
recorded in the Register of Deeds but that with the passage of time, the same became tattered,
unreadable, badly dilapidated, and mutilated and could not be found or recognized to boot."
FREE PATENT
ANASTACIO TINGALAN v. SPOUSES RONALDO AND WINONA MELLIZA
G.R. No. 195247, June 29, 2015, VILLARAMA, JR., J.
Section 124 of the Public Land Act is clear and explicit that a contract which purports to
alienate, transfer, convey or encumber any homestead within the prohibitory period is void from its
execution.
Facts:
Anastacio Tingalan was the original owner of the 5-hectare subject property and a free
patent was issued under his name. In a Deed of Absolute Sale, Anastacio sold it to Spouses Melliza
and since then, they have been in possession of the property. The Owners Duplicate Certificate of
Title and Tax Declaration were issued under the spouses names who paid for the taxes. However, 23
years later, Elena Tunanan filed an adverse claim. Anastacio countered and demanded that the
spouses vacate the property, but the latter refused. Anastacio filed for Quieting of Title and Recovery
of Possession claiming that he is the owner of the property since his title was never cancelled and
that the sale was null and void since it was executed within the five-year prohibitory period under
the Public Land Act. The RTC upheld the validity of the sale because the sale executed is not the kind
of violation as contemplated in the law as the transfer was not yet complete with the issuance of a
new TCT. It was affirmed by the CA and it further ruled that the case was barred by laches.
Issue:
Whether or not Anastacio and his heirs are barred by laches from asserting their rights over
the subject property even if the deed of sale was not valid.
Ruling:
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No. The contract of sale entered into between petitioner Anastacio and respondent-spouses
on March 28, 1977 is null and void from inception for being contrary to law and public policy. As a
void contract it is imprescriptible and not susceptible of ratification. Following Section 118 of the
Public Land Act, the subject land could not have been validly alienated or encumbered on March 28,
1977 which was way within five years from the date of the issuance of the free patent under the
name of petitioner Anastacio on October 4, 1976. The legal consequences of such sale clearly made
within the prohibitory period are stated under Section 124 of the Public Land Act. This provision of
law is clear and explicit and a contract which purports to alienate, transfer, convey or encumber any
homestead within the prohibitory period is void from its execution. The Court has held in a number
of cases that such provision of law is mandatory with the purpose of promoting a specific public
policy to preserve and keep in the family of the patentee that portion of the public land which the
State has gratuitously given to them.
A void contract produces no legal effect whatsoever in accordance with the principle quod
nullum est nullum producit effectum. It could not transfer title to the subject property and there
could be no basis for the issuance of a title from petitioner Anastacios name to the names of
respondent-spouses. It is not susceptible of ratification and the action for the declaration of its
absolute nullity is imprescriptible. It was therefore an error for both courts a quo to rule that
petitioners failure to act on such considerable time has already barred him by estoppel and laches.
SPOUSES ALFONSO ALCUITAS, SR. (deceased-represented by his heirs) and ESTELA ALCUITAS
(for herself and as representative of the heirs of the
deceased Alfonso Alcuitas, Sr.) v. MINVILUZ C. VILLANUEVA.
G.R. No. 207964, September 16, 2015, MENDOZA, J.
The right to repurchase under Sec. 119 of CA 141 does not cease once the propertys nature and
classification gets changed. What the law strictly requires is that the repurchase must be for the
purpose of preserving the land for the use of the patentee and his family.
Facts:
Minviluz Villanueva is the registered owner of a parcel of land by virtue of her Free Patent
application. Sps. Alcuitas leased the property and operated a gasoline station on the subject property.
Thereafter, the subject land was reclassified into commercial zone. In 1993, Minviluz mortgaged her
property to a third person to secure her loan. The mortgage was extrajudicially foreclosed after
Minviluz reneged on her obligation. Sps. Alcuitas bought the property during the public auction.
The sheriff executed a Deed of Sale in favor of Sps. Alcuitas after Minviluz failed to redeem
the property within the one-year redemption period. Title was transferred to Sps. Alcuitas thereafter.
Within five years from the date of conveyance to Sps. Alcuitas, Minviluz informed the buyers of her
desire to redeem the subject property for residential purposes, but Sps. Alcuitas refused. Thereafter,
Minviluz filed a complaint for Redemption of Real Property.
Issue:
Whether or not Minviluz may still redeem the subject property from the Sps. Alcuitas.
Ruling:
Yes. Sec. 119 of CA 141, as amended, is clear. Every conveyance of land acquired under free
patent shall be subject to repurchase by the applicant within a period of five (5) years from the date
of conveyance. The law is intended to grant a house for each citizen where his family may settle and
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live beyond the reach of financial misfortune. The law is also intended to conserve the family home
and to promote the spread of small land ownership in favor of the underprivileged.
The right to repurchase under Sec. 119 of CA 141 does not cease once the propertys nature
and classification gets changed. What the law strictly requires is that the repurchase must be for the
purpose of preserving the land for the use of the patentee and his family. The law gives more
importance to the purpose behind the patentee's repurchase than the reclassification or utilization of
the property. In this case, while it is true that a gasoline station has been built on the subject property
and the same has been reclassified into a commercial zone, Minviluzs primary purpose for
repurchasing said property is for residential purposes.
ATTACK ON CERTIFICATE OF TITLE
IMELDA SYJUCO, et al. v. FELISA D. BONIFACIO and VSD REALTY & DEVELOPMENT
CORPORATION
G.R. No. 148748, January 14, 2015, LEONARDO-DE CASTRO, J.
To determine whether an attack on a certificate of title is direct or indirect, the relevance of the
object of the action instituted and the relief sought therein must be examined. The attack is direct when
the object of an action or proceeding is to annul or set aside such judgment, or enjoin its enforcement.
On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an
attack on the judgment is nevertheless made as an incident thereof.
Facts:
Petitioners Syjuco are the registered co-owners of the subject land. They then leased the
property to Manufacturers Bank who was the one who built the improvements on the same with
stipulation that they will become the owners of these improvements after the expiration of the lease.
They also subleased the property to Kalayaan Development Corporation (KDC) and respondent
Bonifacio is a lessee of KDC. One of their tenants informed them that their property was being offered
for sale. Syjuco also discovered the existence of a title in the name of respondent Bonifacio which he
claims to be void as there can be no segregation of a property that was previously segregated. To
protect their rights and interest over the subject land, petitioners lodged a petition for the
declaration of nullity and cancellation of Bonifacios title over the subject land. Subsequently,
petitioners discovered that Bonifacio sold the subject land in favor of VSD Realty. Petitioners alleged
that although the title of petitioners, and the title of Bonifacio and VSD Realty contained different
technical descriptions, said certificates of title actually pertained to one and the same property. RTC
ruled in favor of the respondent. On appeal, the CA dismissed petitioners appeal. Hence the petition.
Issue:
Whether or not the action instituted by petitioners is a prohibited collateral attack on the
certificate of title of respondents over the subject land.
Ruling:
No. The instituted action in this case is clearly a direct attack on a certificate of title to real
property. In their complaint for quieting of title, petitioners specifically pray for the declaration of
nullity and/or cancellation of respondents title over the subject land. The relief sought by petitioners
is certainly feasible since the objective of an action to quiet title, as provided under Article 476 of the
Civil Code of the Philippines, is precisely to quiet, remove, invalidate, annul, and/or nullify "a cloud
on title to real property or any interest therein by reason of any instrument, record, claim,
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encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable, or unenforceable, and may be prejudicial to said title."
Moreover, petitioners have duly established during the trial that they and/or their
predecessors-in-interest have been in uninterrupted possession of the subject land since 1926 and
that it was only in 1994 when they found out that respondent Bonifacio was able to register the said
property in her name in another title. It was also only in 1995 when petitioners learned that
respondent Bonifacio was able to sell and transfer her title over the subject land in favor of
respondent VSD Realty. Also, the rule on the incontrovertibility or indefeasibility of title has no
application in this case given the fact that the contending parties claim ownership over the subject
land based on their respective certificates of title thereon which originated from different sources.
The indefeasibility of a title under the Torrens system could be claimed only if a previous valid title
to the same parcel of land does not exist. Where the issuance of the title was attended by fraud, the
same cannot vest in the titled owner any valid legal title to the land covered by it; and the person in
whose name the title was issued cannot transmit the same, for he has no true title thereto. This ruling
is a mere affirmation of the recognized principle that a certificate is not conclusive evidence of title if
it is shown that the same land had already been registered and that an earlier certificate for the same
land is in existence.
THE HEIRS OF EUGENIO LOPEZ, SR. NAMELY, OSCAR M. LOPEZ, MANUEL M. LOPEZ AND
PRESENTACION L. PSINAKIS v. THE HONORABLE FRANCISCO QUERUBIN, IN HIS CAPACITY AS
PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF ANTIPOLO, BRANCH 74, THE HEIRS OF
ALFONSO SANDOVAL AND HIS WIFE ROSA RUIZ, REPRESENTED BY THEIR ATTORNEY-IN-FACT,
MRS. IMELDA RIVERA
An action is deemed an attack on a title when the object of the action or proceeding is to nullify
the title, and thus challenge the judgment pursuant to which the title was decreed.
Facts:
Sandoval and Ozaeta filed an Application for Registration of Title for two parcels of land
situated in Antipolo. The CFI ordered the registration of the lots in their names. Spouses Sandoval
and Spouses Ozaeta sold the properties to Eugenio Lopez. In the Deed of Absolute Sale, the vendorsapplicants obligated themselves to file in the land registration case the necessary motion in order
that the certificates of title will be issued in the name of Eugenio Lopez. Unfortunately, this obligation
was not complied with for so many years. Upon learning of this fact, the Lopez heirs filed
their Motion dated April 28, 1997 in the land registration case. Said motion contained the Deed of
Absolute Sale and prayed that the decrees of registration over the subject properties be issued in the
names of the Lopez heirs. At that time, LRC No. N-2858, LRC Rec. No. N-18887 was still pending
before the RTC of Pasig City, Branch 152 as the decrees of registration were yet to be issued despite
the Order of the trial court that directed the LRA to proceed with the issuance of the decrees.
While the Motion dated April 28, 1997 was pending before the trial court, Decree Nos. N217643 and N-217644 and OCT Nos. O-1603 and O-1604 were issued in the name of the applicants
Sandoval and Ozaeta and their respective spouses. The Lopez heirs then filed a Motion dated
November 25, 1998, which prayed for the annulment of Decree Nos. N-217643 and N-217644 and
OCT Nos. O-1603 and O-1604. The issuance of said decrees of registration and certificates of title
allegedly preempted the RTC of Pasig City in resolving the Motion dated April 28, 1997 and that the
same were issued by the LRA under dubious circumstances.
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Issue:
Whether or not the Motion dated November 25, 1998 is proper for purposes of impugning
the questioned decrees and the corresponding original certificates of title.
Ruling:
Yes. The Court of Appeals adjudged that the Lopez heirs' Motion dated November 25,
1998 was a collateral attack on the certificates of title covering the subject properties, which is
proscribed by Section 48 of Presidential Decree No. 1529. In Sarmiento v. Court of Appeals, the
Supreme Court differentiated a direct attack from a collateral attack on the title as follows:
An action is deemed an attack on a title when the object of the action or

proceeding is to nullify the title, and thus challenge the judgment pursuant to
which the title was decreed. The attack is direct when the object of the action
is to annul or set aside such judgment, or enjoin its enforcement. On the
other hand, the attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the judgment is nevertheless made as an
incident thereof.
The Court of Appeals, however, overlooked the fact that the Lopez heirs never attacked the
Decision dated May 31, 1966 of the then CFI of Rizal in LRC No. N-2858, LRC Rec. No.N-18887, i.e., the
judgment pursuant to which the decrees of registration were issued. Far from it, the Lopez heirs
actually recognized the validity of said judgment. In filing their first motion to have the Deed of
Absolute Sale recognized prior to the issuance of the decrees, the Lopez heirs do not question the
final judgment of the land registration court that the subject properties were owned by the spouses
Sandoval and the spouses Ozaeta for they derived their own right to the properties from said
applicants. When the decrees of registration were still issued in the names of said original applicants,
due to peculiar circumstances that occurred outside the proceedings in the land registration court,
petitioners were unjustly deprived of the opportunity to enforce the remedy accorded to them under
Section 22 of PD No. 1529.
TERESA D. TUAZON v. SPOUSES ANGEL AND MARCOSA ISAGON

G.R. No. 191432, September 02, 2015, BRION, J.
A person who possesses a title issued under the Torrens system is entitled to all the attributes of
ownership including possession. A certificate of title cannot be subject to a collateral attack in an action
for unlawful detainer.
Facts:
Maria's children, namely Gloria, Angel, Felix, and Flaviano, executed a Deed of Conformity in
which they honored the Deed of Extrajudicial Settlement executed by their grandmother and aunts,
subject to the condition that they would get one-sixth of Lot 103 (subject lot) as their share. Angel
mortgaged his share to petitioner Teresa Tuazon through a Kasulatan ng Sanglaan. Angel Isagon
thereafter refused and failed to redeem the mortgaged property.
Lot 103 is covered by an undated and reconstituted Transfer Certificate of Title (TCT) No.
(N.A.) RT-1925 issued in Teresa's name. Spouses Angel and Marcosa Isagon (respondents) started to
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build a small hut on a portion of Lot 103 without Teresa's knowledge. Then, they started to construct
a house despite Teresa's protest. Teresa sent a final demand letter to respondents to vacate and to
pay rental fees. The respondents did not reply.
Teresa filed a complaint for unlawful detainer against the respondents before the MTCC of
Sta. Rosa, Laguna. She prayed that the respondents be ordered to vacate the subject property and to
pay compensation for its use and occupancy. In their answer, the respondents alleged that they were
occupying the subject property as owners. They also alleged that Teresa fraudulently obtained TCT
No. (N.A.) RT-1925.
The MTCC decided in favor of Teresa and ordered the respondents to vacate the subject
property and to pay reasonable rent and attorney's fees. The RTC affirmed in toto the decision of the
MTCC. The CA reversed the RTC's ruling.
Issue:
Whether or not Teresa has the better right of physical possession against the mortgagor as
shown in the Kasulatan ng Sanglaan.
Ruling:
Yes. While the CA is correct that a mortgage does not transfer ownership, the indefeasibility
of a Torrens title should have been given primary consideration. A person who possesses a title
issued under the Torrens system is entitled to all the attributes of ownership including possession. A
certificate of title cannot be subject to a collateral attack in an action for unlawful detainer. A
collateral attack is made when, in an action to obtain a different relief, the validity of a certificate of
title is questioned.
In the present case, the respondents alleged in their answer that the certificate of title issued
in the name of Teresa was fraudulently obtained. This defense constitutes a collateral attack on the
title and should not therefore be entertained. To directly assail the validity of TCT No. (N.A.) RT1925, a direct action for reconveyance must be filed. In the present case, based on the certificate of
title, Teresa is the owner of the subject property and is entitled to its physical possession.
ACTION FOR RECONVEYANCE

MARIFLOR T. HORTIZUELA, represented by JOVIER TAGUFA v. GREGORIA TAGUFA, ROBERTO
TAGUFA and ROGELIO LUMABAN
An action for reconveyance is a recognized remedy, an action in personam, available to a
person whose property has been wrongfully registered under the Torrens system in anothers name. In
an action for reconveyance, the decree is not sought to be set aside.
Facts:
Runsted Tagufa, husband of Gregoria, bought an unregistered parcel of land using funds sent
by his sister, Mariflor Hortizuela who was in the US, with the agreement that Runsted will reconvey
the property to Hortizuela. However, she discovered that the property was titled in Gregorias name.
She filed an action for recovery of possession and reconveyance of the property before the MCTC. The
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court dismissed the complaint for a wrong cause of action. The RTC reversed. The CA upheld the
MCTC decision holding that the filing of such complaint for reconveyance subjects the certificate of
title to a collateral attack which is prohibited by PD 1529. Hortizuela argues that the action for
reconveyance was not a collateral attack as she was not seeking the nullification of the title, but
merely reconveyance as Gregoria acted as trustee for her benefit as the real owner.
Issue:
Whether or not an action for reconveyance and recovery of possession constitutes a
collateral attack on the validity of the title which is prohibited by law.
Ruling:
No. An action for reconveyance is a recognized remedy, an action in personam, available to a
person whose property has been wrongfully registered under the Torrens system in anothers name.
In an action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the
decree but, respecting it as incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner. Reconveyance is always available
as long as the property has not passed to an innocent third person for value. There is no quibble that
a certificate of title, like in the case at bench, can only be questioned through a direct proceeding. The
MCTC and the CA, however, failed to take into account that in a complaint for reconveyance, the
decree of registration is respected as incontrovertible and is not being questioned. What is being
sought is the transfer of the property wrongfully or erroneously registered in another's name to its
rightful owner or to the one with a better right. If the registration of the land is fraudulent, the person
in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to file
an action for reconveyance of the property.
The fact that Gregoria was able to secure a title in her name does not operate to vest
ownership upon her of the subject land. Registration of a piece of land under the Torrens System
does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is
merely an evidence of ownership or title over the particular property described therein. It cannot be
used to protect a usurper from the true owner; nor can it be used as a shield for the commission of
fraud; neither does it permit one to enrich himself at the expense of others.
INNOCENT PURCHASERS FOR VALUE

RUBY RUTH S. SERRANO MAHILUM v. SPOUSES ILANO
G.R. No. 197923, June 22, 2015, DEL CASTILLO, J.
In order that the holder of a certificate of title issued by virtue of the registration of a voluntary
instrument may be considered a holder in good faith and for value, the instrument registered should not
be forged. Consequently, if there is no new title issued in one s favor, there is no new title to annul and
the issue of good faith or bad faith becomes irrelevant.
Facts:
Petitioner entrusted the original owners duplicate copy of TCT over a parcel of land owned
by her to Teresa Perez a purported real estate broker who claimed that she can assist petitioner in
obtaining a loan with the TCT as collateral. When the petitioner demanded the return of the title,
Perez failed to produce the same. Perez admitted that the title was lost. Consequently, petitioner
executed an Affidavit of Loss and caused the same to be annotated upon the original registry copy of
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the TCT. Petitioner was informed, however, that her TCT was not lost but that it was presented to the
registry by respondent Spouses who claimed that the property covered by the title was sold to them.
The sale, however, was not registered. Thereafter the petitioner filed an action for annulment of
agreement and deed of absolute sale. The respondents filed a Demurrer to Evidence, arguing that the
complaint failed to state a cause of action in that petitioner failed to allege that respondents were
purchasers in bad faith or with notice of a defect in the title; Thus, the presumption that respondents
are purchasers in good faith prevails. The RTC ruled in favor petitioner. On appeal, the CA granted
respondents demurrer to evidence. Hence, this petition.
Issue:
Whether or not the failure to allege bad faith in the complaint is a fatal defect considering
that the subject documents were a forgery and hence, null and void from the beginning.
Ruling:
No. Since a new title was never issued in respondents favor and, instead, title remained in
petitioners name, the former never came within the coverage and protection of the Torrens system,
where the issue of good or bad faith becomes relevant. Since respondents never acquired a new
certificate of title in their name, the issue of their good or bad faith which is central in an annulment
of title case is of no consequence; petitioners case is for annulment of the Agreement and Deed of
Absolute Sale, and not one to annul title since the certificate of title is still in her name. The
jurisprudential bases for the CAs pronouncement that there is a failure to state a cause of action if
there is no allegation in the complaint that respondents were purchasers in bad faith involved
complaints for annulment of new titles issued to the buyers; they cannot apply to petitioners case
where title remains in her name. Petitioners case is to annul the agreement and deed of sale based
on the allegation that they are forgeries, and that respondents were parties to the fraud; since no new
title was issued in respondents favor, there is no new title to annul. Indeed, if the agreement and
deed of sale are forgeries, then they are a nullity and convey no title. The underlying principle is that
no one can give what one does not have. Nemo dat quod non habet.
JOSEFINA C. BILLOTE v. IMELDA SOLIS, et al.

G.R. No. 181057, June 17, 2015, PERALTA, J.
An innocent purchaser for value is defined as one who buys the property of another, without notice that
some other person has a right or interest in such property and pays the full price for the same, at the time of such
purchase or before he has notice of the claims or interest of some other person in the property. An innocent
purchaser for value includes an innocent lessee, mortgagee, or other encumbrancer for value and that their claim
as an innocent purchaser for value must be substantiated by proof.
Facts:
Imelda Solis is one of the heirs of Hilario Solis. On the claim that the owners duplicate was
missing, she filed a petition for issuance of new owners duplicate of title which was granted by the
RTC. She executed a deed of extrajudicial settlement on her favor the disputed lot and thus later on
registered under her name and sold the same to Sps. Badar. Meanwhile, Josefina Billot and William
claimed that they were heirs of Hilario, filed a petition for annulment of decision granting Imeldas
Petition for Issuance of New Owners Duplicate Certificate and contended that William has the
possession of the title. They also prayed that the property be reverted back to them since Sps. Badar
were not innocent purchasers for value because they have knowledge that Imelda was not the real
owner of the property. CA granted the annulment of judgment but did not nullify the title because
Sps. Badar are innocent purchasers for value.
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Issue:
Whether or not Sps. Badar were innocent purchasers for value.
Ruling:
No. An innocent purchaser for value is defined as one who buys the property of another, without
notice that some other person has a right or interest in such property and pays the full price for the same, at
the time of such purchase or before he has notice of the claims or interest of some other person in the
property. An innocent purchaser for value includes an innocent lessee, mortgagee, or other encumbrancer for
value and that their claim as an innocent purchaser for value must be substantiated by proof.
The fact that the subject property was already covered by the title issued under the names of
respondents Imelda and Adelaida, by itself, does not automatically lead to the conclusion that the
spouses Badar had no knowledge of some other party's interest over the property unless it is
substantiated by proof. Thus, since the Court of Appeals only relied on the testimony of the Sps.
Badar that they had no knowledge about Imeldas doing at that they relied only on the title itself with
proof to such claim, they cannot be considered as innocent purchasers for value.
THE REGISTER OF DEEDS OF NEGROS OCCIDENTAL and the NATIONAL TREASURER OF THE
REPUBLIC OF THE PHILIPPINES v. OSCAR ANGLO, SR., and ANGLO AGRICULTURAL
CORPORATION, represented by OSCAR ANGLO, JR.
G.R. No. 171804, August 5, 2015, LEONEN, J.
It is a condition sine qua non that the person who brings an action for damages against the
assurance fund be the registered owner, and, as to holders of transfer certificates of title, that they be
innocent purchasers in good faith and for value.
Facts:
Alfredo de Ocampo filed an application before the Court of First Instance of Negros
Occidental to register two parcels of prime sugar land. The CFI of Negros Occidental ordered the
registration of the lots in favor of de Ocampo. De Ocampo entered into a Deed of Conditional Sale
with Oscar Anglo, Sr. However, the Republic caused the annotations of notices of lis pendens in Anglo
Sr.'s transfer certificate of title. Despite the notices of lis pendens, Anglo, Sr. conveyed the lots to
Anglo Agricultural Corporation in exchange for shares of stock. Thereafter, the CA promulgated a
Decision against de Ocampo and his successors-in-interest. Anglo, Sr. and Anglo Agricultural
Corporation filed a Complaint for Recovery of Damages from the Assurance Fund against the Register
of Deeds of Negros Occidental and the National Treasurer.
Issue:
Whether or not Anglo, Sr. and Anglo Agricultural Corporation are entitled to a claim from the
Assurance Fund.
Ruling:
No. Pecuniary compensation by way of damages paid out of the Assurance Fund are available
to rightfully entitled parties who have interest in land but shut off from obtaining titles thereto. In the
case at hand however, Anglo Sr. no longer had an interest over the lots after he had transferred these
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to respondent Anglo Agricultural Corporation in exchange for shares of stock. Hence, he no longer
has a claim from the Assurance Fund. Respondent Anglo Agricultural Corporation on the other hand,
cannot be considered a transferee in good faith, considering it was aware of the title's notices of lis
pendens. It is a condition sine qua non that the person who brings an action for damages against the
assurance fund be the registered owner, and, as to holders of transfer certificates of title, that they be
innocent purchasers in good faith and for value. Hence, Anglo Agricultural Corporation also has no
right to claim damages from the Assurance Fund.
MORTGAGEE IN GOOD FAITH AND FOR VALUE

LAND BANK OF THE PHILIPPINES v. BELLE CORPORATION
G.R. No. 205271, September 02, 2015, PERALTA, J.
When the purchaser or the mortgagee is a bank, the rule on innocent purchasers or mortgagees
for value is applied more strictly. Since the banking business is impressed with public interest, they are
expected to be more cautious, to exercise a higher degree of diligence, care and prudence, than private
individuals in their dealings, even those involving registered lands. Banks may not simply rely on the
face of the certificate of title.
Facts:
Respondent Belle Corporation filed a Complaint for quieting of title and damages against
Florosa A. Bautista (Bautista) and the Register of Deeds of Tagaytay City alleging that respondent is
the registered owner in possession of four (4) parcels of land known as Lots 1 to 4 located at
Barangay Sungay, Tagaytay City.
During the presentation of evidence by the defense, respondent was informed that Bautista
is no longer the owner of the property covered by TCT No. P-671 as it was already foreclosed by
petitioner Land Bank of the Philippines and that TCT No. P-3663 was issued in the bank's name.
Respondent filed a Motion for Leave to File Amended Petition impleading petitioner as
indispensable party. Bautista mortgaged to petitioner the land covered by TCT No. P-671 in order to
secure a loan amounting to 10,000,000.00. Bautista defaulted in her obligation resulting in the
foreclosure of the property. Upon Bautista's failure to redeem the property and petitioner's
consolidation of ownership, TCT No. P-671 was cancelled and TCT No. P-3663 was registered.
Claiming that it is an innocent mortgagee for value, petitioner asserted that it observed due
diligence and prudence expected of it as a banking institution. It pointed out that prior to the
approval of the loan application, its representative verified the status of the collateral covered by TCT
No. P-671, which revealed t at the subject property was registered in the name of Bautista and that
the same is free and clear of any lien or encumbrance. Also, upon ocular inspection, no adverse
ownership or interest was found.
Issue:
Whether or not respondent Belle Corporation is the registered owner of the lots.
Ruling:
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Yes. The Court agrees with respondent that the entries written in TCT No. T-1863 to T-1867
failed to accurately record the origin of said titles. Having depended on erroneous entries stated on
the face of said titles, the result of the verification survey issued by Engr. Pangyarihan is, as a
consequence, a mistake insofar as it states which between TCT No. T-1863 and TCT No. P-671 has
precedence.
Undoubtedly, the origins of TCT Nos. P-1863 to P-1867 are OCT Nos. 0-216 and 55. Whether
the 7,693 sq. m. overlapping portion is actually located in Lots 1-C and 1-B (LRC) Psd 91 74 or in Lots
1 and 2, Psu-1 09694 is no longer material. Either way, respondent's title over such portion must
prevail since OCT No. 0-216 and OCT No. 55 were registered on March 30, 1959 and July 31, 1941,
respectively. In comparison, OCT No. OP-283, which is the mother title of TCT No. P-671 in the name
of Bautista, was registered much later on February 4, 1977.
Having finally settled that respondent is the rightful owner of the contested 7,693 sq. m.
portion of the lot covered by TCT No. P-1863, the issue of whether petitioner is a mortgagee in good
faith and for value shall be resolved.
In general, the issue of whether a mortgagee is in good faith cannot be entertained in a Rule
45 petition. This is because the ascertainment of good faith or the lack thereof, and the determination
of negligence are factual matters which lay outside the scope of a petition for review on certiorari.
Good faith, or the lack of it, is a question of intention. In ascertaining intention, courts are necessarily
controlled by the evidence as to the conduct and outward acts by which alone the inward motive
may, with safety, be determined. Considering that the RTC was silent on the matter while the CA
ruled against petitioner, this Court shall make its own determination.
It the instant case, petitioner readily admitted that during the appraisal and inspection of the
property on January 11, 1994 it duly noted the observation that the subject property was traversed
by an access road leading to the Tagaytay Highlands Golf Course. However, it concluded, albeit
erroneously, that the access road is still a part of TCT No. P-671 because its existence cannot be
established despite verifications conducted by its property appraisers with the DENR's Land
Management Section Region IV and Tax Mapping Section of the Tagaytay City Assessor's Office due
to lack of records of any survey plan delineating the portion occupied by the said road from the
subject property."
A person who deliberately ignores a significant fact that could create suspicion in an
otherwise reasonable person is not a mortgagee in good faith. A mortgagee cannot close his eyes to
facts which should put a reasonable man on his guard and claim that he acted in good faith under the
belief that there was no defect in the title of the mortgagor. His mere refusal to believe that such
defect exists or the willful closing of his eyes to the possibility of the existence of a defect in the
mortgagor's title will not make him an innocent mortgagee for value if it afterwards develops that the
title was in fact defective, and it appears that he had such notice of the defect as would have led to its
discovery had he acted with that measure of precaution which may reasonably be required of a
prudent man in a like situation.
REVERSION
ELISEO MALTOS and ROSITA P. MALTOS v. HEIRS OF EUSEBIO BORROMEO
G.R. No. 172720, September 14, 2015, LEONEN, J.
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Reversion under Section 101 of the Public Land Act is not automatic. The Office of the Solicitor
General must first file an action for reversion.
Facts:
Eusebio Borromeo (Eusebio) was issued a free patent over a piece of agricultural land. Within
the five-year period, he sold the land to Eliseo Maltos (Eliseo). A title therefore was issued in favor of
Eliseo. Before Eusebio died, he told his wife and children to nullify the sale made to Eliseo and nullify
the title in favor of Eliseo because the sale was within the five-year prohibitory period so the heirs of
Eusebio filed a complaint for Nullity of Title and Reconveyance of Property against Eliseo. Eliseo
contended that the land should revert back to the state automatically and not to the heirs of Eusebio.
Issue:
Whether or not the land sold within the five-year prohibitory period should revert back
automatically to the state.
Ruling:
No. Under Section 101 of the Public Land Act, all actions for the reversion to the Government of
lands of the public domain or improvements thereon shall be instituted by the Solicitor-General or
the officer acting in his stead, in the proper courts, in the name of Commonwealth of the Philippines.
Reversion of lands to the state is not automatic, and the Office of the Solicitor General is the proper
party to file an action for reversion. At the time the free patent was issued, Eusebio already had title
over the property and the sale between Eusebio and Eliseo is void for being made within the fiveyear prohibitory period. Since Eusebio already had the valid title, the land should revert back to the
Heirs of Eusebio without prejudice to an action for reversion by the government.
WILLS AND SUCCESSIONS

ANDY ANG v. SEVERINO PACUNIO, et al.
In the right of representation, representatives will be called to the succession by the law and
not by the person represented; and the representative does not succeed the person represented but the
one whom the person represented would have succeeded.
Facts:
Respondents filed a Complaint for Declaration of Nullity of Sale, Reconveyance, and Damages
against petitioner Andy Ang before the RTC involving a parcel of land originally registered in
Felicisima Udiaan's name. Respondents alleged that they are the grandchildren and successors-ininterest of Udiaan. Ang, on the other hand, allegedly acquired the subject land when an impostor
falsely representing herself as Udiaan sold the land to him, as evidenced by a Deed of Absolute Sale.
Respondents demanded the return of the land, but to no avail. Hence, they filed the aforesaid
complaint, contending that Udiaan could not have validly sold the subject land to petitioner
considering that she was already dead for more than 20 years when the sale occurred.
Ang contended that he is a buyer in good faith and stated that he was initially prevented
from entering the subject land since it was being occupied by the Heirs of Alfredo Gaccion. The RTC
ruled in Ang's favor and dismissed the case for lack of merit. The CA affirmed with modification the
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RTC. It agreed with the RTC's finding that respondents are not real parties in interest to the instant
case, considering that, as mere grandchildren of Udiaan, they have no successional rights to Udiaan's
estate. The CA, however, nullified the Questioned Deed of Absolute Sale and ordered the distribution
of the subject property to different parties.
Issue:
Whether or not the right of representation is available to respondents.
Ruling:
No. In the instant case, respondents claim to be the successors-in-interest of the subject land
just because they are Udiaan's grandchildren. Under the law, however, respondents will only be
deemed to have a material interest over the subject land and the rest of Udiaans estate for that
matter if the right of representation provided under Article 970, in relation to Article 982, of the
Civil Code is available to them. In this situation, representatives will be called to the succession by the
law and not by the person represented; and the representative does not succeed the person
represented but the one whom the person represented would have succeeded.
For such right to be available to respondents, they would have to show first that their
mother: (a) predeceased Udiaan; (b) is incapacitated to inherit; or (c) was disinherited, if Udiaan died
testate. However, as correctly pointed out by the CA, nothing in the records would show that the
right of representation is available to respondents. Hence, the RTC and the CA correctly found that
respondents are not real parties in interest to the instant case.
COMPROMISE
DAVID M. DAVID v. FEDERICO M. PARAGAS, JR.
A compromise agreement is a contract whereby the parties make reciprocal concessions in
order to resolve their differences and, thus, avoid or put an end to a lawsuit, in order to be binding upon
the litigants with the force and effect of a judgment, must have been executed by them
Facts:
David, Paragas, and Lobrin agreed to venture into business and created Olympia International
Ltd. (Olympia) in Hong Kong. In 2002, Lobrin discovered that David failed to remit cash equivalent of
their transaction. The board of directors then stripped David of his position as Director. As a result,
David filed a complaint for Declaratory Relief alleging that he is entitled to hold the 30% cash
equivalent of the bonus points for the benefit of the subscribers in the Pares-Pares program. Paragas
and Lobrin filed their counterclaims against David.
A compromise agreement was entered that they will withdraw their complaint and
counterclaims against each other. The compromise agreement however was entered in the name of
David and Olympia. The RTC approved this compromise agreement. Paragas questioned the
agreement alleging that it was entered in the name of Olympia which was never a party to the case.
The CA reversed the RTCs approval of the compromise agreement saying that it was entered
between David and Olympia, the latter not being a party to the case; the compromise agreement
therefore is invalid.
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Issue:
Whether or not the compromise agreement entered into between David and Olympia is
valid.
Ruling:
No. A compromise agreement is a contract whereby the parties make reciprocal concessions
in order to resolve their differences and, thus, avoid or put an end to a lawsuit. A judicially approved
compromise agreement, in order to be binding upon the litigants with the force and effect of a
judgment, must have been executed by them. In this case, the compromise agreement was signed by
David and Olympia. The terms and conditions were agreed upon by David and Olympia. It must be
noted that Olympia is a separate being, or at least should be treated as one distinct from the
personalities of its owners, partners or even directors. Because Olympias involvement in the
compromise was not the same as that of the other parties who were, in the first place, never part of it,
the compromise agreement could not have the force and effect of a judgment binding upon the
litigants, specifically Lobrin and Paragas. Conversely, the judicially approved withdrawal of the
claims on the basis of that compromise could not be given effect for such agreement did not concern
the parties in the case.
PEOPLES GENERAL INSURANCE CORP. (FORMERLY: PEOPLE'S TRANS-EAST ASIA INSURANCE
CORP.) v. COL. FELIX MATEO A. RUNES
G.R. No. 212092, April 8, 2015, MENDOZA, J.
A Compromise Agreement which is not contrary to law, morals, good customs, public policy and
public order shall be granted.
Facts:
Col. Felix Mateo Runes as the first party filed an action for sum of money with damages
against Peoples General Insurance Corp. (second party), represented by Ernesto Del Rosario and the
Spouses Manuzon. The RTC rendered a decision in favor of Runes, which was affirmed by the CA. it
categorically stated the second party is jointly and severally liable with the Spouses Manuzon to the
extent of the bond worth Php1,470,134.70. The SC affirmed such decision, but the other party moved
for reconsideration. Before there could be an entry of judgment, the parties have mutually decided to
amicably settle the civil case on January 14, 2015 to put an end to expenses and inconvenience of a
prolonged litigation, and not as an admission of any liability. The second party agreed to pay Runes
Php 1,000,000.00 in six monthly installments and to issue twelve checks. If there will be two defaults,
the obligation will become due and demandable and Runes will be entitled to the issuance of a writ of
execution for the payment of the unpaid amount. The parties submitted to the Court the Joint Motion
for Judgment Based on Attached Compromise Agreement.
Issue:
Whether or not the Compromise Agreement should be granted.
Ruling:
Yes. Since the Compromise Agreement appears to be not contrary to law, morals, good
customs, public policy and public order, the Joint Motion for Judgment Based on Attached
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Compromise Agreement shall be granted. The parties are ordered to faithfully comply with the terms
and conditions of the said agreement.
REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY CABARLE, NOELJAMILI, MARITES
HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER BERNAL, AGUSTEV ESTRE, MARILOU
SAGUN, AND ENRIQUE LEDESMA, JR. v. NAPAR CONTRACTING & ALLIED SERVICES, NORMAN
LACSAMANA,*** JONAS INTERNATIONAL, INC., AND PHILIP YOUNG
G.R. No. 195654, November 25, 2015, DEL CASTILLO, J.
A judicially approved compromise agreement has the effect and authority of res judicata. It is
final, binding on the parties, and enforceable through a writ of execution. Article 2041 of the Civil Code,
however, allows the aggrieved party to rescind the compromise agreement and insist upon his original
demand upon failure and refusal of the other party to abide by the compromise agreement.
Facts:
Petitioners are the employees of respondent Napar, a recruitment agency owned and
managed by respondent Lacsamana. Napar assigned petitioners at respondent Jonas. Sometime in
2002, petitioners filed their complaints with the NLRC against respondents for non-payment of
benefits provided under the Labor Code. On January 13, 2003, petitioners and respondents entered
into a Joint Compromise Agreement which provides that Napar will give petitioners new work
assignments. In accordance with the Joint Compromise Agreement, petitioners, on several instances,
reported to Napar. Petitioners were paid P7,000.00 each as part of the agreement but were required
by Napar to submit several documents, attend orientation seminars, undergo interviews and take
and pass qualifying examinations, before they could be posted to their new assignments. Petitioners
failed to comply, thus, were not given new assignments.
Due to the failure of Napar to comply with the Compromise Agreement, petitioners filed with
the LA new four separate complaints against Napar. The LA issued a decision in favor of petitioners.
On appeal, the NLRC reversed the LAs decision and held that the Compromise Agreement operates
as res judicata between the parties. The decision of the NLRC was affirmed by the CA, hence, this
petition.
Issue:
Whether or not petitioners complaint is already barred by res judicata.
Ruling:
No. A compromise agreement, once approved, has the effect of res judicata between the
parties and should not be disturbed except for vices of consent, forgery, fraud, misrepresentation,
and coercion. A judgment upon compromise is therefore not appealable, immediately executory, and
can be enforced by a writ of execution. However, this broad precept enunciated under Article 2037 of
the Civil Code has been qualified by Article 2041 of the same Code which recognizes the right of an
aggrieved party to either (1) enforce the compromise by a writ of execution, or (2) regard it as
rescinded and insist upon his original demand, upon the other party's failure or refusal to abide by
the compromise.
At the outset, it must be emphasized that there was no indication that petitioners
deliberately refused to comply with the procedures prior to their purported reassignment.
Petitioners alleged that they reported to Napar several times waiting for their assignment and that
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Napar was giving them a run-around even as they tried to comply with the requirements. These
matters were not disputed by respondents. Thus, the Court cannot agree with respondents that
petitioners were the ones who violated the compromise agreement. Napar's scheme of requiring
petitioners to comply with reassessment procedures only seeks to prevent petitioners' immediate
reassignment.
Respondents' non-compliance with the strict terms of the Joint Compromise Agreement of
reassigning petitioners and ensuring that they will be given work within the required time
constitutes repudiation of the agreement. As such, the agreement is considered rescinded in
accordance with Article 2041 of the Civil Code. Petitioners properly chose to rescind the compromise
agreement and exercised the option of filing anew their complaints, pursuant to Art. 2041. It was
error on the part of the CA to deny petitioners' the right of rescission.
CREDIT TRANSACTIONS
CHATTEL MORTGAGE
NUNELON MARQUEZ v. ELISAN CREDIT CORPORATION
G.R. No. 194642, April 6, 2015, BRION, J.
Although a promise expressed in a chattel mortgage to include debts that are yet to be
contracted can be a binding commitment that can be compelled upon, the security itself, however, does
not come into existence or arise until after a chattel mortgage agreement covering the newly contracted
debt is executed either by concluding a fresh chattel mortgage or by amending the old
contract conformably with the form prescribed by the Chattel Mortgage Law.
Facts:
Nunelon Marquez obtained a first loan from Elisan Credit Corporation (ECC) for P53,000
payable in 180 days. Marquez signed a promissory note which provides that it is payable in weekly
installments and subject to 26% annual interest. In case of non-payment, he agreed to pay 10%
monthly penalty based on the total amount unpaid and another 25% of such for attorneys fees. To
further secure payment of the loan, Marquez executed a chattel mortgage over a motor vehicle which
reads that, among others, the motor vehicle shall stand as a security for the first loan and "all other
obligations of every kind already incurred or which may hereafter be incurred."
Subsequently, Marquez obtained a second loan from ECC for P55,000, as evidenced by a
promissory note and a cash voucher. The promissory note covering the second loan contained
exactly the same terms and conditions as the first promissory note. When the second loan had
matured, Marquez only paid P29,600, leaving an unpaid balance of P25,040. Due to liquidity
problems, Marquez asked ECC if he could pay in daily installments until the second loan is paid, to
which the latter acquiesced. Twenty-one (21) months after the second loans maturity, Marquez had
already paid P56,440, an amount greater than the principal.
Despite the receipt of such an amount, ECC filed a complaint for judicial foreclosure of the
chattel mortgage because Marquez allegedly failed to settle the balance of the second loan despite
demand. It further alleged that pursuant to the terms of the promissory note, Marquezs failure to
fully pay upon maturity triggered the imposition of the 10% monthly penalty and 25% attorneys
fees. Before Marquez could file an answer, the MTC approved the writ of replevin which ECC sought
for. The MTC found for Marquez and held that the second loan was fully extinguished. The RTC
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initially affirmed the ruling but reversed the same upon reconsideration. The CA affirmed the
reversal.
Issue:
Whether or not the chattel mortgage may cover the second loan.
Ruling:
No. While a pledge, real estate mortgage, or antichresis may exceptionally secure afterincurred obligations so long as these future debts are accurately described, a chattel mortgage,
however, can only cover obligations existing at the time the mortgage is constituted. Although a
promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a
binding commitment that can be compelled upon, the security itself, however, does not come into
existence or arise until after a chattel mortgage agreement covering the newly contracted debt is
executed either by concluding a fresh chattel mortgage or by amending the old contract conformably
with the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute
the agreement so as to cover the after-incurred obligation can constitute an act of default on the part
of the borrower of the financing agreement whereon the promise is written but, of course, the
remedy of foreclosure can only cover the debts extant at the time of constitution and during the life
of the chattel mortgage sought to be foreclosed.
The only obligation specified in the chattel mortgage contract was the first loan which the
petitioner later fully paid. By virtue of Section 3 of the Chattel Mortgage Law, the payment of the
obligation automatically rendered the chattel mortgage terminated; the chattel mortgage had ceased
to exist upon full payment of the first loan. Being merely an accessory in nature, it cannot exist
independently of the principal obligation. The parties did not execute a fresh chattel mortgage nor
did they amend the chattel mortgage to comply with the Chattel Mortgage Law which requires that
the obligation must be specified in the affidavit of good faith. Simply put, there no longer was any
chattel mortgage that could cover the second loan upon full payment of the first loan.
LOAN/MUTUUM
WT CONSTRUCTION, INC. v. THE PROVINCE OF CEBU
G.R. No. 208984, September 16, 2015, PERLAS-BERNABE, J.
Forbearance, within the context of usury law, has been described as a contractual obligation
of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor
to repay the loan or debt then due and payable.
Facts:
The Province of Cebu wanted to build the Cebu International Convention Center (CICC) and
engaged WT Construction, Inc. (WTCI), the winning bidder of Phase I and II of CICC, to begin
construction. As Phase II neared completion, the Province of Cebu caused WTCI to perform additional
works on the project, to which WTCI agreed. After completing the project and the additional works,
WTCI billed the Province of Cebu, but the latter refused to pay. In 2008, WTCI demanded payment
before the trial court.
Issue:
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Whether or not the liability of the Province of Cebu is in the nature of a loan or forbearance
of money.
Ruling:
No. Forbearance, within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the
borrower or debtor to repay the loan or debt then due and payable. Forbearance of money, goods, or
credit refers to arrangements other than loan agreements where a person agrees to the temporary
use of his money, goods or credits pending the happening of certain events or fulfillment of certain
conditions such that if these conditions are breached, the said person is entitled not only to the
return of the principal amount given, but also to compensation for the use of his money equivalent to
the legal interest since the use or deprivation of funds is akin to a loan.
Here, the liability of the Province of Cebu to WTCI is not in the nature of a forbearance of
money as it does not involve an acquiescence to the temporary use of WTCI's money, goods or
credits. Rather, this case involves WTCI's performance of a particular service, i.e., the performance of
additional works on CICC. Case law provides that the liability arising from the non-payment for the
construction works do not partake of a loan or forbearance of money but is more in the nature of a
contract of service.
Hence, the Province of Cebu is liable for 6% interest per annum in the concept of actual or
compensatory damages pursuant to Eastern Shipping Lines v. CA from the time the claim is made
extrajudicially (although for failure to appeal on time, the date was reckoned from date of judicial
demand).
On top of that, the Province of Cebu is also liable for 6% legal interest per annum from the
date of finality of judgment awarding sum of money, until its full satisfaction. This is in view of the
principle that in the interim, the obligation assumes the nature of a forbearance of credit which,
pursuant to Eastern Shipping Lines, Inc. as modified by Nacar, is subject to legal interest at the rate of
6% per annum.
NUNELON MARQUEZ v. ELISAN CREDIT CORPORATION

While Central Bank Circular No. 905-82 effectively removed the ceiling on interest rates for
both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be
read as granting carte blanche authority to lenders to raise interest rates to levels that would be unduly
burdensome, to the point of oppression on their borrowers. In exercising this power to determine what is
iniquitous and unconscionable, courts must consider the circumstances of each case, since what may be
iniquitous and unconscionable in one may be totally just and equitable in another.
Facts:
Nunelon Marquez obtained a first loan from Elisan Credit Corporation (ECC) for P53,000
payable in 180 days. Marquez signed a promissory note which provides that it is payable in weekly
installments and subject to 26% annual interest. In case of non-payment, he agreed to pay 10%
monthly penalty based on the total amount unpaid and another 25% of such for attorneys fees. To
further secure payment of the loan, Marquez executed a chattel mortgage over a motor vehicle which
reads that, among others, the motor vehicle shall stand as a security for the first loan and "all other
obligations of every kind already incurred or which may hereafter be incurred."
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Subsequently, Marquez obtained a second loan from ECC for P55,000, as evidenced by a
promissory note and a cash voucher. The promissory note covering the second loan contained
exactly the same terms and conditions as the first promissory note. When the second loan had
matured, Marquez only paid P29,600, leaving an unpaid balance of P25,040. Due to liquidity
problems, Marquez asked ECC if he could pay in daily installments until the second loan is paid, to
which the latter acquiesced. Twenty-one (21) months after the second loans maturity, Marquez had
already paid P56,440, an amount greater than the principal.
Despite the receipt of such an amount, ECC filed a complaint for judicial foreclosure of the
chattel mortgage because Marquez allegedly failed to settle the balance of the second loan despite
demand. It further alleged that pursuant to the terms of the promissory note, Marquezs failure to
fully pay upon maturity triggered the imposition of the 10% monthly penalty and 25% attorneys
fees. Before Marquez could file an answer, the MTC approved the writ of replevin which ECC sought
for. The MTC found for Marquez and held that the second loan was fully extinguished. The RTC
initially affirmed the ruling but reversed the same upon reconsideration. The CA affirmed the
reversal.
Issue:
Whether or not the stipulated interest, penalty and attorneys fees were excessive.
Ruling:
Yes. Notwithstanding the foregoing, the Court found the stipulated rates of interest, penalty
and attorney's fees to be exorbitant, iniquitous, unconscionable and excessive. The courts can and
should reduce such astronomical rates as reason and equity demand.
Article 1229 of the Civil Code provides: The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if there has
been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable." Article 2227 of the Civil Code, on the other hand, states: "Liquidated damages,
whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable. More importantly, Article 1306 of the Civil Code is emphatic: "The contracting
parties may establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public policy."
Thus, stipulations imposing excessive rates of interest and penalty are void for being
contrary to morals, if not against the law. Further, it is repeatedly held that while Central Bank
Circular No. 905-82, effectively removed the ceiling on interest rates for both secured and unsecured
loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte
blanche authority to lenders to raise interest rates to levels that would be unduly burdensome, to the
point of oppression on their borrowers. In exercising this power to determine what is iniquitous and
unconscionable, courts must consider the circumstances of each case since what may be iniquitous
and unconscionable in one may be totally just and equitable in another.
Applying the foregoing principles, we hereby reduce the stipulated rates as follows: the
interest of twenty-six percent (26%) per annum is reduced to two percent (2%) per annum; the
penalty charge of ten percent (10%) per month, or one-hundred twenty percent (120%) per annum
is reduced to two percent (2%) per annum; and the amount of attorney's fees from twenty-five
percent (25%) of the total amount due to two percent (2%) of the total amount due.
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NORLINDA S. MARILAG v. MARCELINO B. MARTINEZ
Settled is the principle which the Court has affirmed in a number of cases that stipulated
interest rates of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and
exorbitant.
Facts:
Rafael, respondent's father, obtained from petitioner a loan with a stipulated monthly
interest of five percent, payable within a period of six months. The loan was secured by a real estate
mortgage over a parcel of land covered by TCT. Rafael however, failed to settle his obligation upon
maturity despite repeated demands. This prompted petitioner to file a Complaint for Judicial
Foreclosure of Real Estate Mortgage before the RTC. Upon failure to file his answer and, upon
petitioner's motion, Rafael was declared in default. After an ex parte presentation of petitioner's
evidence, the RTC issued a Decision in the foreclosure case, declaring the stipulated 5% monthly
interest to be usurious and reducing the same to 12% per annum.
Issue:
Whether or not the stipulated 5% monthly interest is excessive and unconscionable.
Ruling:
Yes. The Court finds the stipulated 5% monthly interest to be excessive and unconscionable.
In a plethora of cases, the Court has affirmed that stipulated interest rates of three percent (3%) per
month and higher are excessive, iniquitous, unconscionable, and exorbitant, hence, illegal and void
for being contrary to morals.
In Agner v. BPI Family Savings Bank, Inc., the Court had the occasion to rule: settled is the
principle which this Court has affirmed in a number of cases that stipulated interest rates of three
percent (3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant. While
Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively removed the
ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the
said circular could possibly be read as granting carte blanche authority to lenders to raise interest
rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their
assets. Since the stipulation on the interest rate is void for being contrary to morals, if not against the
law, it is as if there was no express contract on said interest rate; thus, the interest rate may be
reduced as reason and equity demand.
As such, the stipulated 5% monthly interest should be equitably reduced to 1% per month or
12% p.a. reckoned from the execution of the real estate mortgage on July 30, 1992.
NEIL B. AGUILAR and RUBEN CALIMBAS v. LIGHTBRINGERS CREDIT COOPERATIVE

G.R. No. 209605, January 12, 2015, Mendoza, J.
A check constitutes an evidence of indebtedness and is a veritable proof of an obligation.
FACTS:
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Lightbringers Credit Cooperative filed a complaint for sum of money against Tantiangco,
Aguilar and Calimbas alleging that they were members of the cooperative who borrowed funds but
gave a lower net loan from the proceeds of such evidenced by cash disbursement vouchers and PNB
checks which were varying in amount. They claimed that such discrepancies showed that they never
borrowed the amounts being collected. They also asserted that no interest could be claimed as there
was no written agreement to the imposition. The MCTC absolved Tantiangco but found both
Calimbas and Aguilar liable to their respective debts. The RTC affirmed the MCTC decisions stating
that the PNB checks were concrete evidence of the indebtedness of Agular and Calimbas.
Issue:
Whether or not a contract of loan exists.
Ruling:
Yes. The Court agrees with the findings of fact of the MCTC and the RTC that a check was a
sufficient evidence of a loan transaction. The findings of fact of the trial court, its calibration of the
testimonies of the witnesses and its assessment of the probative weight thereof, as well as its
conclusions anchored on the findings are accorded high respect, if not conclusive effect.
In Pacheco v. Court of Appeals, the Court has expressly recognized that a check constitutes an
evidence of indebtedness and is a veritable proof of an obligation. Hence, it can be used in lieu of and
for the same purpose as a promissory note. In fact, in the seminal case of Lozano v. Martinez, the
Supreme Court pointed out that a check functions more than a promissory note since it not only
contains an undertaking to pay an amount of money but is an "order addressed to a bank and
partakes of a representation that the drawer has funds on deposit against which the check is drawn,
sufficient to ensure payment upon its presentation to the bank." The Court reiterated this rule in the
relatively recent Lim v. Mindanao Wines and Liquour Galleria stating that a check, the entries of which
are in writing, could prove a loan transaction.
There is no dispute that the signatures of the petitioners were present on both the PNB
checks and the cash disbursement vouchers. The checks were also made payable to the order of the
petitioners. Hence, respondent can properly demand that they pay the amounts borrowed. If the
petitioners believe that there is some other bogus scheme afoot, then they must institute a separate
action against the responsible personalities. Otherwise, the Court can only rule on the evidence on
record in the case at bench, applying the appropriate laws and jurisprudence.
MORTGAGE
SPOUSES JOSE O. GATUSLAO and ERMILA LEONILA LIMSIACO-GATUSLAO v. LEO RAY V.
YANSON
It is settled that the issuance of a Writ of Possession may not be stayed by a pending action for
annulment of mortgage or the foreclosure itself.
Facts:
Petitioner Limsiaco-Gatuslao is the daughter of the late Limsiaco, who was the registered
owner of two parcels of land. He mortgaged the said lots along with the house standing thereon to
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PNB. Upon Limsiacos failure to pay, PNB extrajudicially foreclosed on the mortgage and caused the
properties sale at a public auction where it emerged as the highest bidder. When the one-year
redemption period expired without Limsiacos estate redeeming the properties, PNB caused the
consolidation of titles in its name. Thereafter, a Deed of Absolute Sale was executed by PNB
conveying the subject properties in favor of respondent Yanson, who later on filed with the RTC an
Ex-Parte Motion for Writ of Possession pursuant to Section 7 of Act No. 3135, as amended. The RTC
granted the issuance of the writ. Petitioners moved for reconsideration which was denied.
Respondent moved to execute the possessory writ which was granted.
Issues:
1. Whether or not the pending action for annulment of foreclosure of mortgage and the
corresponding sale at public auction of the subject properties operates as a bar to the issuance of a
writ of possession.
2. Whether or not Sps. Gatuslao may be evicted by a mere ex parte writ of possession as they
were not parties to the foreclosure.
3. Whether or not Yanson may avail of a writ of possession pursuant to Section 7 of Act No.
3135, as amended.
Ruling:
1. No. BPI Family Savings Bank, Inc. v. Golden Power Diesel Sales Center, Inc. (G.R. No. 176019,
January 12, 2011), reiterates the long-standing rule that It is settled that a pending action for
annulment of mortgage or foreclosure sale does not stay the issuance of the writ of possession. The
trial court, where the application for a writ of possession is filed, does not need to look into the
validity of the mortgage or the manner of its foreclosure. The purchaser is entitled to a writ of
possession without prejudice to the outcome of the pending annulment case. This is in line with the
ministerial character of the possessory writ.
2. Yes. Sps. Gatuslao are the mortgagor Limsiacos heirs. It was precisely because of
Limsiacos death that petitioners obtained the right to possess the subject properties and, as such,
are considered transferees or successors-in-interest of the right of possession of the latter. As
Limsiacos successors-in-interest, the spouses merely stepped into his shoes and are, thus, compelled
not only to acknowledge but, more importantly, to respect the mortgage he had earlier executed in
favor of Yanson. They cannot effectively assert that their right of possession is adverse to that of
Limsiaco as they do not have an independent right of possession other than what they acquired from
him. Not being third parties who have a right contrary to that of the mortgagor, the trial court was
thus justified in issuing the writ and in ordering its implementation.
3. Yes. Yanson, as a transferee or successor-in interest of PNB by virtue of the contract of sale
between them, is considered to have stepped into the shoes of PNB. As such, he is necessarily entitled
to avail of the provisions of Section 7 of Act No. 3135, as amended, as if he is PNB. Further,
respondent may rightfully take possession of the subject properties through a writ of possession,
even if he was not the actual buyer thereof at the public auction sale, in consonance with the courts
ruling in Ermitao v. Paglas (G.R. No. 174436, January 23, 2013), which acknowledged respondent's
right, as a subsequent buyer of the properties from the actual purchaser of the same in the public
auction sale, to possess the property after the expiration of the period to redeem sans any
redemption. Verily, Ermitao demonstrates the applicability of the provisions of Section 7 of Act No.
3135 to such a subsequent purchaser like Yanson in the present case.
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ST. RAPHAEL MONTESSORI SCHOOL, INC., REPRESENTED BY TERESITA G. BADIOLA v. BANK OF
THE PHILIPPINE ISLANDS
G.R. No. 184076, October 21, 2015, PERALTA, J.
The issuance of a writ of possession to a purchaser in a public auction is a ministerial function
of the court, which cannot be enjoined or restrained, even by the filing of a civil case for the declaration
of nullity of the foreclosure and consequent auction sale.
Facts:
Spouses Andaya obtained a loan for themselves and on behalf of St. Raphael from BPI,
secured by real estate mortgages. They defaulted on their obligation, thus BPI extrajudicially
foreclosed the mortgaged property. The spouses failed to redeem the property, BPI executed an
Affidavit of Consolidation and the property was issued in its name and upon petition, was issued a
Writ of Possession by the court. The Spouses failed to vacate the subject property, BPI asked the
sheriff to implement the writ of possession which was earlier deferred. St. Raphael sought to be
restored to the possession of the premises, which the court granted, in order to maintain the status
quo. The CA reversed the status quo order, and upheld the writ of possession of BPI.
Issue:
Whether or not the writ of possession that was issued ex-parte as a result of the foreclosure
of the mortgages executed by the Spouses Andaya on the subject property can be enforced and
utilized by BPI to oust St. Raphael from the physical possession of its school buildings built on the
same subject property.
Ruling:
Yes. The issuance of a writ of possession to a purchaser in a public auction is a ministerial
function of the court, which cannot be enjoined or restrained, even by the filing of a civil case for the
declaration of nullity of the foreclosure and consequent auction sale. Once title to the property has
been consolidated in the buyers name upon failure of the mortgagor to redeem the property within
the one-year redemption period, the writ of possession becomes a matter of right belonging to the
buyer. The buyer can demand possession of the property at anytime. Its right to possession has then
ripened into the right of a confirmed absolute owner and the issuance of the writ becomes a
ministerial function that does not admit of the exercise of the courts discretion. The court, acting on
an application for its issuance, should issue the writ as a matter of course and without delay.
UNITED OVERSEAS BANK OF THE PHILIPPINES, INC. v. THE BOARD OF COMMISSIONERSHLURB, J.O.S. MANAGING BUILDERS, INC., AND EDUPLAN PHILS., INC.
G.R. No. 182133, June 23, 2015, PERALTA, J.
While a mortgage may be nullified if it was in violation of Section 18 of P.D. No. 957, such
nullification applies only to the interest of the complaining buyer.
Facts:
EDUPLAN bought from JOS Managing Builders Condominium Unit E, 10th Floor of the Aurora
Milestone Tower. EDUPLAN has fully paid the consideration but JOS Managing Builders failed to
cause the issuance of a CCT over the condominium unit in the name of EDUPLAN. EDUPLAN learned
that the lots on which the condominium building project Aurora Milestone Tower was erected had
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been mortgaged to United Overseas Bank of the Philippines without the prior written approval of the
HLURB. The said mortgage was subsequently foreclosed and the Bank emerged as the highest bidder.
Consequently, EDUPLAN filed a complaint for specific performance and damages against JOS
Managing Builders and United Overseas Bank before the HLURB. HLURB Arbiter ruled in favor of
EDUPLAN and declared the mortgage executed as well as the foreclosure proceedings null and void.
HLURB Board of Commissioners affirmed the Arbiter's decision, but deleted an award. Hence, United
Overseas Bank filed a petition for review under Rule 43 before the CA but the same was dismissed.
Issue:
Whether or not the HLURB erred in declaring null and void the entire mortgage executed
between JOS Managing Builders and United Overseas Bank.
Ruling:
Yes. While a mortgage may be nullified if it was in violation of Section 18 of P.D. No. 957,
such nullification applies only to the interest of the complaining buyer. It cannot extend to the entire
mortgage. A buyer of a particular unit or lot has no standing to ask for the nullification of the entire
mortgage.
Since EDUPLAN has an actionable interest only over Unit E, 10th Floor, Aurora Milestone
Tower, it is but logical to conclude that it has no standing to seek for the complete nullification of the
subject mortgage and the HLURB was incorrect when it voided the whole mortgage between JOS
Managing Builders and United Overseas Bank.
Considering that EDUPLAN had already paid the full purchase price of the subject unit, the latter is
entitled to the transfer of ownership of the subject property in its favor. This right is provided for in
Section 25 of P.D. No. 957. Hence, the petition was granted.
SPOUSES EMILIANO L. JALBAY, SR. and MAMERTA C. JALBAY v. PHILIPPINE NATIONAL BANK
G.R. No. 177803, August 3, 2015, PERALTA, J.
The doctrine of the mortgagee in good faith, wherein buyers or mortgagees dealing with
property covered by a Torrens Certificate of Title are no longer required to go beyond what appears on
the face of the title, is not applicable to banks, since a banking institution is expected to exercise due
diligence before entering into a mortgage contract.
Facts:
Spouses Jalbay sought the reconstitution of a title over a lot they own and such title was
released to their daughter Virginia Agus, while the Spouses were working abroad. Agus applied for a
loan with PNB and constituted a real estate mortgage over the lot as a security. When Agus failed to
settle her obligation, PNB foreclosed the mortgage over the property and became the highest bidder
at the public auction. When Spouses Jalbay learned about the same, they filed a complaint against
PNB contending that the mortgage and the foreclosure proceedings were invalid for lack of consent
of the real registered owners. The RTC declare the real estate mortgage and the foreclosure
proceedings null and void. However, the CA reversed the decision of the RTC. Now, Spouses Jalbay
posited that PNB did not act with the requisite diligence when it approved the loan application of
Agus and that PNB was not a mortgagee in good faith.
Issue:
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Whether or not PNB exerted the requisite diligence in granting the loan and entering into the
real estate mortgage.
Ruling:
Yes. A banking institution is expected to exercise due diligence before entering into a
mortgage contract. Indeed, under the doctrine of the mortgagee in good faith, wherein buyers or
mortgagees dealing with property covered by a Torrens Certificate of Title are no longer required to
go beyond what appears on the face of the title. However, the rule that persons dealing with
registered lands can rely solely on the certificate of title is not applicable to banks. Thus, before
approving a loan application, it is a standard operating practice for these institutions to conduct an
ocular inspection of the property offered for mortgage and to verify the veracity of the title to
determine its real owners.
In this case, the Court held that PNB has complied with the required degree of diligence,
prudence, and care in dealing with the mortgagor. There was also no sign or circumstance which
could have possible triggered suspicion on the banks part. Aside from the fact that the certificate of
title to the subject lot is authentic and issued in the name of the Spouses Jalbay, they also appeared to
have been the ones occupying the property.
METROPOLITAN BANK AND TRUST COMPANY v. CPR PROMOTIONS AND MARKETING, INC. and
SPOUSES CORNELIO P. REYNOSO, JR. and LEONIZA F. REYSONO
G.R. No. 200567, June 22, 2015, VELASCO, JR., J.
Where the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to
recover the deficiency from the debtor.
Facts:
Spouses Leoniza F. Reynoso and Cornelio P. Reynoso, Jr., as Treasurer and President of CPR
Promotions, respectively, executed a continuing surety agreement binding themselves solidarily with
CPR Promotions to pay any and all loans CPR Promotions may have obtained from MBTC. CPR
Promotions defaulted in the payment of their loans covered by fifteen (15) PNs and secured by two
REMs in favor of MBTC. The REMs were foreclosed. Notwithstanding the foreclosure, MBTC alleged
that there remained a deficiency balance. CPR Promotions and Spouses Reynoso failed to settle the
alleged deficiency. Thus, MBTC filed an action for collection of sum of money against them. RTC ruled
in favor of MBTC that there, indeed, was a balance. However, CA reversed the judgment and ordered
MBTC to refund to Spouses Reynoso the amount of PhP722,602.22 representing the remainder of the
proceeds of the foreclosure sale with legal interest.
Issue:
Whether or not the CA gravely abused its discretion when it ruled that MBTC failed to prove
that a deficiency balance resulted after conducting the extrajudicial foreclosure sales of the
mortgaged properties.
Ruling:
No. MBTC failed to prove that there is a deficiency balance of PhP 2,628,520.73. The Court
has already ruled in several cases that in extrajudicial foreclosure of mortgage, where the proceeds of
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the sale are insufficient to pay the debt, the mortgagee has the right to recover the deficiency from
the debtor. In ascertaining the deficit amount, Sec. 4, Rule 68 of the Rules of Court is elucidating, to
wit:
Section 4. Disposition of proceeds of sale. The amount realized from the foreclosure sale of
the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing
the mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due,
the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the
court, or if there be no such encumbrancers or there be a balance or residue after payment to them,
then to the mortgagor or his duly authorized agent, or to the person entitled to it.
Verily, there can only be a deficit when the proceeds of the sale is not sufficient to cover (1)
the costs of foreclosure proceedings; and (2) the amount due to the creditor, inclusive of interests
and penalties, if any, at the time of foreclosure.
BANK OF THE PHILIPPINE ISLANDS v. SPOUSES JOHNSON & EVELYN CO & JUPITER REAL
ESTATE VENTURES, INC.
G.R. No. 171172, November 09, 2015, JARDELEZA, J.
The remedy from an order granting a writ of possession after the lapse of redemption period is
an ordinary appeal. After the lapse of the redemption period, the remedy of a debtor to contest the
possession of the property is a separate action, e.g., action for recovery of ownership, for annulment of
mortgage and/or annulment of foreclosure, and not the appeal provided for in Section 8 of Act No.
3135.
Facts:
BPI foreclosed the real estate mortgage of Sps. Co pursuant to Act No. 3135. After the
expiration of the period for redemption the spouses filed a complaint for the nullification of
foreclosure proceedings while BPI filed a petition for the issuance of a writ of possession. In an
Order, the RTC issued the writ of possession prayed for. Thereafter, the spouses filed a notice of
appeal of the said Order. In its comment, BPI argued that the order of the trial court granting a writ of
possession is merely interlocutory from which no appeal is taken.
Issue:
Whether or not the remedy from an order granting a writ of possession is an ordinary
appeal.
Ruling:
Yes. The order for the issuance of a writ of possession being final, is a proper subject for
appeal. It is the ministerial duty of the trial court to issue a writ of possession in favor of the
purchaser who has already consolidated its title. After the consolidation of title in the buyer's name
for failure of the mortgagor to redeem the property, the writ of possession becomes a matter of right.
Its issuance to a purchaser in an extrajudicial foreclosure sale is merely a ministerial function. The
trial court has no discretion on this matter. Hence, any assertion of discretion in connection with
such issuance is misplaced, and a petition for certiorari is not a proper remedy.
However, this remedy of appeal is different from the remedy provided in Section 8 of Act No.
3135. Act No. 3135 finds no application after the lapse of the redemption period, and the remedy of a
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debtor to contest the possession of the property is a separate action, and not the appeal provided for
in Section 8 of the Act.
The remedy provided under Section 8 of Act No. 3135 to the debtor becomes available only
after the purchaser acquires actual possession of the property. This is required because until then the
debtor, as the owner of the property, does not lose his right to possess. However, upon the lapse of
the redemption period without the debtor exercising his right of redemption and the purchaser
consolidates his title, it becomes unnecessary to require the purchaser to assume actual possession
thereof before the debtor may contest it. Possession of the property becomes an absolute right of the
purchaser as an incident of his ownership. Accordingly, the debtor contesting the purchaser's
possession may no longer avail of the remedy under Section 8 of Act No. 3135, but should pursue a
separate action e.g., action for recovery of ownership, for annulment of mortgage and/or annulment
of foreclosure.
PACTUM COMMISSORIUM
HOME GUARANTY CORPORATION v. LA SAVOIE DEVELOPMENT CORPORATION
G.R. No. 168616, January 28, 2015, LEONEN, J.
Prompt assignment and conveyance without the need of conducting foreclosure proceedings,
judicial or otherwise is indicative of pactum commissorium which is void and ineffectual and does not
serve to vest ownership.
Facts:
La Savoie Development Corporation, engaged in the business of real estate development,
found itself unable to pay its obligations to its creditors with the onset of the Asian financial crisis in
1997 the devaluation of the Philippine peso and due to other factors such as lack of working capital,
high interest rates, etc. Thus it filed a petition for the declaration of state of suspension of payments
with approval of proposed rehabilitation plan. With La Savoie's compliance and finding its petition to
be sufficient in form and substance, then Regional Trial Court Judge Estela Perlas-Bernabe issued a
Stay Order, staying the enforcement of all claims against La Savoie. However, Home Guaranty
Corporation filed an Opposition even though it was not a creditor of petitioner. It asserted that it had
a material and beneficial interest in the petition, in relation to the interest of Philippine Veterans
Bank (PVB), Planters Development Bank (PDB), and Land Bank of the Philippines (LBP), which are
listed as creditors. On the other hand, La Savoie asserted that for the assignment to take effect, Home
Guaranty Corporation had to first pay the holders of the La Savoie Development Certificates. The RTC
however, issued an Order denying due course to La Savoie's Petition for Rehabilitation and lifting the
stay Order. In the meantime, Home Guaranty Corporation, through Planters Development Bank, paid
a total of P128.5 million as redemption value to certificate holders. It now claims that the properties
comprising the Asset Pool should be excluded from the rehabilitation proceedings as these have now
been removed from the dominion of La Savoie and have been conveyed and assigned to it. La Savoie
contends that the transfer was ineffectual as the Stay Order was in effect at the time of the execution
of the Deed.
Issue:
Whether or not Home Guaranty should be excluded from the coverage of La Savoie's Petition
for Rehabilitation.
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Ruling:
No. First, rehabilitation proceedings are not bound by procedural rules spelled out in the
Rules of Court. The Interim Rules, not the Rules of Court, was the procedural law and as such it
provided an exception to the general principle that an appeal stays the judgment or final order
appealed from. On the case at hand, there was no order enjoining or restraining the order appealed
from. Therefore, Home Guaranty as guarantor was capacitated, in accordance with Sections 12 and
13 of the Contract of Guaranty to effect payment to the holders of the LSDC certificates.
Viewed solely through the lens of the Trust Agreement and the Contract of Guaranty, the
transfer made to Home Guaranty on the strength of the Deed of Conveyance appears valid and
binding. The argument that the preference of credit does not apply in rehabilitation proceedings,
does not apply to corporations who have sought to put themselves under receivership but, for lack of
judicial sanction, have not been put under or are no longer under receivership. Therefore, while La
Savoie remained to be not under receivership, a valid transfer of the properties comprising the Asset
Pool was made in favor of Home Guaranty. They would thus be beyond the reach of rehabilitation
proceedings and no longer susceptible to the rule against preference of creditors.
However, the transfer made to Home Guaranty Corporation was ineffectual. The execution of
a Deed of Conveyance without resorting to foreclosure is indicative of pactum commissorium. In this
case, Sections 13.1 and 13.2 of the Contract of Guaranty call for the "prompt assignment and
conveyance to Home Guaranty Corporation of all the corresponding properties in the Asset Pool.
Moreover, Sections 13.1 and 13.2 dispense with the need of conducting foreclosure proceedings,
judicial or otherwise. This goes to show that there is automatic appropriation by the paying
guarantor of the properties held as security. It is null and void. Accordingly, whatever conveyance
was made by Planters Development Bank to Home Guaranty Corporation in view of this illicit
stipulation is ineffectual. It did not vest ownership in Home Guaranty Corporation.
EXTRAJUDICIAL FORECLOSURE
SPOUSES RODOLFO and MARCELINA GUEVARRA v. THE COMMONER LENDING CORPORATION,
INC.
G.R. No. 204672, February 18, 2015, PERLAS-BERNABE, J.
In an extra-judicial foreclosure of registered land acquired under a free patent, the mortgagor
may redeem the property within 2 years from the date of foreclosure if the land is mortgaged to a rural
bank, or within 1 year from the registration of the certificate of sale if the land is mortgaged to parties
other than rural banks. If the mortgagor fails to exercise such right, he or his heirs may still repurchase
the property within 5 years from the expiration of the aforementioned redemption period pursuant to
Section 119 of the Public Land Act (PLA).
Facts:
Sps. Guevarra obtained a loan from TCLC, which was secured by a real estate mortgage over
a parcel of land. Sps. Guevarra, however, defaulted in the payment of their loan, prompting TCLC to
extra-judicially foreclose the mortgage on the subject property in accordance with Act No. 3135. In
the process, TCLC emerged as the highest bidder at the public auction sale. Eventually, Sps. Guevarra
failed to redeem the subject property within the 1 year reglementary period, which led to the
issuance of Transfer Certificate of Title in the name of TCLC. Thereafter, TCLC demanded that Sps.
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Guevarra vacate the property, but to no avail. RTC granted TCLCs petition resulting in the issuance of
the writ of possession. CA affirmed.
Issue:
Whether or not the CA committed a reversible error in ruling that the repurchase price for
the subject property should be fixed by TCLC.
Ruling:
No. In an extra-judicial foreclosure of registered land acquired under a free patent, the
mortgagor may redeem the property within 2 years from the date of foreclosure if the land is
mortgaged to a rural bank, or within 1 year from the registration of the certificate of sale if the land is
mortgaged to parties other than rural banks. If the mortgagor fails to exercise such right, he or his
heirs may still repurchase the property within 5 years from the expiration of the aforementioned
redemption period pursuant to Section 119 of the Public Land Act (PLA). In this case, the subject
property was mortgaged to and foreclosed by TCLC, which is a lending or credit institution, and not a
rural bank; hence, the redemption period is 1 year from the registration of the certificate of sale.
Given that Sps. Guevarra failed to redeem the subject property within the aforestated redemption
period, TCLC was entitled, as a matter of right, to consolidate its ownership and to possess the
same. Nonetheless, such right should not negate Sps. Guevarra's right to repurchase said property
within 5 years from the expiration of the redemption period.
In this relation, the tender of the repurchase price is not necessary for the preservation of
the right of repurchase, because the filing of a judicial action for such purpose within the 5 year
period under Section 119 of the PLA is already equivalent to a formal offer to redeem. Consignation
of the redemption price is equally unnecessary, thus we now proceed to determine the proper
amount of the repurchase price. Redemptions from lending or credit institutions, like TCLC, are
governed by Section 78 of the General Banking Law of 2000. Nonetheless, the Court cannot subscribe
to TCLC's contention that it is entitled to its total claims under the promissory note and the mortgage
contract in view of the settled rule that an action to foreclose must be limited to the amount
mentioned in the mortgage. Hence, amounts not stated therein must be excluded, like the penalty
charges of 3% per month included in TCLC's claim. A penalty charge is likened to a compensation for
damages in case of breach of the obligation. Being penal in nature, it must be specific and fixed by the
contracting parties.
Settled is the principle which this Court has affirmed in a number of cases that stipulated
interest rates of 3% per month and higher are excessive, iniquitous, unconscionable, and exorbitant.
While CB Circ. No. 905-82, effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as
granting carte blanche authority to lenders to raise interest rates to levels which would either
enslave their borrowers or lead to a hemorrhaging of their assets. Since the stipulation on the
interest rate is void for being contrary to morals, if not against the law, it is as if there was no express
contract on said interest rate; thus, the interest rate may be reduced as reason and equity demand. As
such, the stipulated 3% monthly interest should be equitably reduced to 1% per month or 12% per
annum reckoned from the execution of the real estate mortgage, until the filing of the petition in
Cadastral Case No. 122.
SPOUSES BENITO BAYSA and VICTORIA BAYSA v. SPOUSES FIDEL PLANTILLA and SUSAN
PLANTILLA, REGISTER OF DEEDS OF QUEZON CITY, and THE SHERIFF OF QUEZON CITY
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To enable the extrajudicial foreclosure of a Real Estate Mortgage (REM), the special power to
sell should have been either inserted in the REM itself or embodied in a separate instrument attached to
the REM.
Facts:
Spouses Baysa and Spouses Plantilla executed a Real Estate Mortgage pursuant to a loan in
favor of spouses Baysa in which Paragraph 13 thereof provides:
Paragraph 13. x x x; - In the event of non-payment of the entire principal and accrued interest
due under the conditions described in this paragraph, the mortgagors expressly and specifically
agree to the extra-judicial foreclosure of the mortgaged property.
Based on the above, the lower court and CA agreed that an extra judicial foreclosure is valid.
On the contrary, Spouses Chua claim that it is not.
Issue:
Whether or not the CA is correct in rendering that an extrajudicial foreclosure of REM is
valid based on the above stipulation provided in par. 13 of the REM.
Ruling:
No. Based on the text of par. 13 of the REM, the petitioners evidently agreed only to the
holding of the extrajudicial foreclosure should they default in their obligations. Their agreement was
a mere expression of their amenability to extrajudicial foreclosure as the means of foreclosing the
mortgage, and did not constitute the special power or authority to sell the mortgaged property to
enable the mortgagees to recover the unpaid obligations. What was necessary was the special power
or authority to sell whether inserted in the REM itself, or annexed thereto that authorized the
respondent spouses to sell in the public auction their mortgaged property.
The requirement for the special power or authority to sell finds support in the civil law. To
begin with, because the sale of the property by virtue of the extrajudicial foreclosure would be made
through the sheriff by the respondent spouses as the mortgagees acting as the agents of the
petitioners as the mortgagors-owners, there must be a written authority from the latter in favor of
the former as their agents; otherwise, the sale would be void. Secondly, considering that, pursuant to
Article 1878, (5), of the Civil Code, a special power of attorney was necessary for entering into any
contract by which the ownership of an immovable is transmitted or acquired either gratuitously or
for a valuable consideration, the written authority must be a special power of attorney to sell.
Contrary to the CAs opinion, therefore, the power or authority to sell by virtue of the extrajudicial
foreclosure of the REM could not be necessarily implied from the text of paragraph 13, supra,
expressing the petitioners agreement to the extrajudicial foreclosure.
Having found and declared the extrajudicial foreclosure of the REM and the foreclosure sale
of the mortgaged property of the petitioner void for want of the special power to sell, there is no right
of redemption to speak of if the foreclosure was void.
BANK OF THE PHILIPPINE ISLANDS (formerly Prudential Bank) v. SPOUSES DAVID M. CASTRO
and CONSUELO B. CASTRO
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The mistakes and omissions which would invalidate notice pertain to those which: 1) are
calculated to deter or mislead bidders, 2) to depreciate the value of the property, or 3) to prevent it from
bringing a fair price.
Facts:
The Complaint has its origins from the two loans contracted by respondent Spouses David M.
Castro (David) and Consuelo B. Castro (Consuelo) from Prudential Bank in the amounts of
P100,000.00 and P55,000.00 in July and August 1987. The P100,000.00 loan was secured by a Real
Estate Mortgage (REM) over petitioners' property located in Quezon City and covered by TCT No.
364277 while the P55,000.00 loan was secured by another REM over two parcels of land located in
Alaminos, Laguna covered by TCT Nos. T-2225 and T-2226, registered in the name of Davids mother,
Guellerma Malabanan. The loans remained unpaid as of 30 April 1996. Prudential Bank, through
counsel, filed two separate petitions for foreclosure of the mortgage. In their first petition, Prudential
Bank admitted that through inadvertence, the photocopies of the first two pages of the REM covering
the properties in Laguna were mixed and attached to the photocopies of the last two pages of the
REM covering the Quezon City property. Thus, in the Notice of Sheriffs Sale, the name Guellerma
Malabanan rep. by her AIF David M. Castro appeared as mortgagor while the amount of mortgaged
indebtedness is P96,870.20. The real property described therein however is the Quezon City
property. In their Complaint, Spouses Castro alleged that the extrajudicial foreclosure and sale of the
Quezon City property is null and void for lack of notice and publication of the extrajudicial
foreclosure sale. Spouses Castro proffered that the property foreclosed is not one of the properties
covered by the REM executed by Guellerma Malabanan which was the basis of the Notice of Sheriffs
Sale which was posted and published. Spouses Castro prayed for the declaration of the Sheriffs
Certificate of Sale as null and void and for award of damages.
Issue:
Whether or not the errors in the Notice of Sheriffs Sale invalidate the notice and render the
sale and the certificate of such sale void.
Ruling:
No. In Philippine National Bank v. Maraya, Jr., the Court elucidated that one of the most
important requirements of Act No. 3135 is that the notice of the time and place of sale shall be given.
The mistakes and omissions which would invalidate notice pertain to those which: 1) are calculated
to deter or mislead bidders, 2) to depreciate the value of the property, or 3) to prevent it from
bringing a fair price. The errors pointed out by respondents appear to be harmless. The evils that can
result from an erroneous notice did not arise. There was no intention to mislead, as the errors in fact
did not mislead the bidders as shown by the fact that the winning registered bid of P396,000.00 is
over and above the real amount of indebtedness of P209,205.05. Notably, the mentioned amount of
P96,870.20 refers to the mortgage indebtedness not the value of the property. Equally notable is the
announcement in the notice that the amount excludes penalties, charges, attorneys fees and all legal
fees and expenses for the foreclosure and sale. As regards the designation of Guellerma Malabanan
as the mortgagor, the Court agree with the reference made by the Court of Appeals to the case of
Langkaan Realty Devt Inc. v. UCPB which ruled that the erroneous designation of an entity as the
mortgagor does not invalidate the notice of sale.
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REDEMPTION
THE CITY OF DAVAO represented by THE CITY TREASURER OF DAVAO CITY v. THE INTESTATE
OF AMADO S. DALISAY, represented by SPECIAL ADMINISTRATOR ATTY. NICASIO B. PADERNA,
G.R. No. 207791, July 15, 2015, MENDOZA, J.
A valid redemption of property must appropriately be based on the law which is the very source
of this substantive right. It is, therefore, necessary that compliance with the rules set forth by law and
jurisprudence should be shown in order to render validity to the exercise of this right. Hence, when the
Court is beckoned to rule on this validity, a hasty resort to elementary rules on construction proves
inadequate.
Facts:
The real properties of the estate of Dalisay were advertised for sale at a public auction for
non-payment of real estate taxes. Since, no bidders appeared on the date of the public auction, the
aforesaid properties were acquired by the City Government of Davao (the City) pursuant to Section
263 of RA No. 7160. From the acquisition of the City of Davao more than 1 year had already passed
before the Estate inquired the status of the real property. As a response, the city through its treasurer
erroneously belatedly issued a declaration of forfeiture which should have been done earlier. Thus,
the estate claimed that they have the right to redeem from the period of declaration and not from the
acquisition of the City of Davao when no bidders attended the public auction. On the contrary, the
City of Davao avers that the period commences from the date of the forfeiture, that is, the date of the
auction.
Issue:
Whether or not the one (1) year redemption period of forfeited tax delinquent properties
purchased by the local government for want of a bidder is reckoned from the date of the auction.
Ruling:
Yes. It is now apparent that the previous rule enunciating the reckoning period of
redemption for tax delinquent properties from the date of the registration of sale of the property is
no longer controlling. Section 261 now mandates that the owner of the delinquent real property or
person having legal interest therein, or his representative, has the right to redeem the property
within one (1) year from the date of sale upon payment of the delinquent tax and other fees.
Inasmuch as the crafter of the Local Government Code clearly worded the above-cited
Section to repeal PD No. 464, it is a clear showing of their legislative intent that RA No. 7160 was to
supersede PD No. 464. As such, it is apparent that in case of sale of tax delinquent properties, RA No.
7160 is the general law applicable. From the foregoing, the owner of the delinquent real property or
person having legal interest therein, or his representative, has the right to redeem the property
within one (1) year from the date of sale upon payment of the delinquent tax and other fees. Verily,
the period of redemption of tax delinquent properties should be counted not from the date of
registration of the certificate of sale, as previously provided by Section 78 of PD No. 464, but rather
on the date of sale of the tax delinquent property, as explicitly provided by Section 261 of RA No.
7160.
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SURETYSHIP
YULIM INTERNATIONAL COMPANY LTD., JAMES YU, JONATHAN YU, and ALMERICK TIENG LIM
v. INTERNATIONAL EXCHANGE BANK (now Union Bank of the Philippines)
A surety is considered in law as being the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable.
Facts:
iBank, a commercial bank, granted Yulim, a domestic partnership, a credit facility in the form
of an Omnibus Loan Line as evidenced by a Credit Agreement which was secured by a Chattel
Mortgage over Yulims inventories in its merchandise warehouse. As further guarantee, the partners,
namely, James, Jonathan and Almerick, executed a Continuing Surety Agreement in favor of iBank.
The above promissory notes (PN) were later consolidated under a single promissory note. Yulim
defaulted on the said note. iBank sent demand letters to Yulim, through its President, James, and
through Almerick, but without success. iBank then filed a Complaint for Sum of Money. RTC
dismissed the complaint and ordered Yulim alone to pay iBank. CA granted iBanks appeal.
Issue:
Whether or not the CA erred in ordering James, Jonathan and Almerick jointly and severally
liable with Yulim to pay iBank.
Ruling:
No. Firstly, the individual petitioners do not deny that they executed the Continuing Surety
Agreement, wherein they "jointly and severally with the PRINCIPAL [Yulim], hereby unconditionally
and irrevocably guarantee full and complete payment when due, whether at stated maturity, by
acceleration, or otherwise, of any and all credit accommodations that have been granted" to Yulim by
iBank, including interest, fees, penalty and other charges. Under Article 2047 of the Civil Code, these
words are said to describe a contract of suretyship. In a contract of suretyship, one lends his credit by
joining in the principal debtors obligation so as to render himself directly and primarily responsible
with him without reference to the solvency of the principal. According to the above Article, if a
person binds himself solidarily with the principal debtor, the provisions of Articles 1207 to 1222, or
Section 4, Chapter 3, Title I, Book IV of the Civil Code on joint and solidary obligations, shall be
observed. Thus, where there is a concurrence of two or more creditors or of two or more debtors in
one and the same obligation, Article 1207 provides that among them, there is a solidary liability only
when the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity. A surety is considered in law as being the same party as the debtor in relation to whatever
is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be
inseparable. Also, it is well settled that when the obligor or obligors undertake to be "jointly and
severally" liable, it means that the obligation is solidary, as in this case. There can be no mistaking the
same import of Article I of the Continuing Surety Agreement executed.
Thereunder, in addition to binding themselves "jointly and severally" with Yulim to
"unconditionally and irrevocably guarantee full and complete payment" of any and all credit
accommodations that have been granted to Yulim, the petitioners further warrant that their liability
as sureties "shall be direct, immediate and not contingent upon the pursuit [by] the BANK of
whatever remedies it may have against the PRINCIPAL of other securities." There can thus be no
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doubt that the individual petitioners have bound themselves to be solidarily liable with Yulim for the
payment of its loan with iBank.
GUARANTY
ALLIED BANKING CORPORATION v. JESUS YUJUICO
G.R. No. 163116, June 29, 2015, BERSAMIN, J.
In guaranty, the guarantor binds himself to the creditor to fulfill the obligation of the principal
debtor in case the latter should fail to do so. In contrast, the surety is solidarily bound to the obligation
of the principal debtor.
Facts:
General Bank & Trust Company (Genbank) granted YLTC an Omnibus Credit Line amounting
to P800,000 to be made available by overdrafts, loans and advances upon condition that the
principals of YLTC would personally bind themselves in a Continuing Guarantee to secure payment of
obligations drawn on said credit extended by Genbank. Hence, Gregoria Paredes, Clarencio Yujuico
and Jesus Yujuico, principal stockholders of YLTC as sureties, executed a Continuing Guarantee. Then,
Genbank granted YLTC a credit line of P1.5M which included the preceding P800,000-credit line and
the principal stockholders again executed a Continuing Guarantee. Genbank granted YLTC a credit
line of P5M and Clarence Yujuico, as lone surety, executed a Continuing Guarantee. Meanwhile, loans
contracted by YLTC became due and demandable. However, Genbank was placed under liquidation
by the Monetary Board. Allied Banking, as successor-in-interest of Genbank, sought to collect the
amount covered by the promissory notes but YLTC failed to pay. Hence, Allied Banking filed a
collection suit. The RTC dismissed the complaint against Jesus since he had been sued for those
obtained by YLTC after the third guaranty agreement in which Jesus was not a signatory. Jesus, as a
guarantor did not consent to the novation of the credit agreement between Genbank and YLTC
increasing its credit line. Moreover, he revoked his guaranty under the old credit line and should be
released from his undertaking. The RTC decision was affirmed by the CA.
Issue:
Whether or not the undertaking of Jesus was of a surety and not a guarantor.
Ruling:
Yes, his undertaking is one of surety. In guaranty, the guarantor "binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so." The
liability of the guarantor is secondary to that of the principal debtor because he "cannot be compelled
to pay the creditor unless the latter has exhausted all the property of the debtor, and has resorted to
all the legal remedies against the debtor." In contrast, the surety is solidarily bound to the obligation
of the principal debtor. Although the first part of the continuing guaranties showed that Jesus as the
signatory had agreed to be bound "either as guarantor or otherwise," the usage of term
guaranty or guarantee in the caption of the documents, or of the word guarantor in the contents of
the documents did not conclusively characterize the nature of the obligations assumed therein. With
the stipulations in the continuing guaranties indicating that he was the surety of the credit line
extended to YLTC, Jesus was solidarity liable to Genbank for the indebtedness of YLTC. In other
words, he thereby rendered himself "directly and primarily responsible" with YLTC, "without
reference to the solvency of the principal.
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Be that as it may, the continuing guaranties could not answer for the promissory notes
amounting to P6,020,184.90 that the petitioner sought to judicially recover from Jesus as surety. The
courts below found and declared that the continuing guaranties of February 8, 1966 and February
22, 1967 were not renewed after the expiration of the credit line. The petitioner did not establish
that another suretyship by Jesus ensured the payment of the credit line issued on April 4, 1968 upon
the expiration of the credit line for 1967. What was shown instead is that on February 6, 1974, or
about seven years after the expiration of the continuing guaranty of February 22, 1967, it was
Clarencio who executed a continuing guaranty for P5,000,000.00. Since Genbank accepted the
promissory note of P5,200,000.00 on April 30, 1975, the continuing guaranty that Clarencio executed
about two months earlier covered that amount. Hence, Clarencio, not Jesus, was the party solidarily
liable for the indebtedness incurred after February 6, 1974 starting with the promissory note dated
April 30, 1975.
SALES
WHEN SALE IS PERFECTED
FAR EAST BANK AND TRUST COMPANY v. PHILIPPINE DEPOSIT INSURANCE CORPORATION,
G.R. No. 172983, July 22, 2015, BRION, J.
A contract of sale is perfected upon the meeting of the minds of the parties on the essential
elements of the contract, i.e., consent, object certain, and the consideration of the contract.
Facts:
The Central Bank invited banks for the purchase of the PBC. In answer to the formal
invitation, the FEBTC submitted its bid and was accepted after finding it as the most advantageous.
The FEBTC as the buyer, the PBC as the seller, and the Central Bank entered into MOA. The PBC was
represented by Liquidator Santos. The FEBTC also took possession and custody of the fixed assets of
the PBC. The FEBTC wrote a letter to Liquidator Santos, following up the execution of the deeds of
sale over the fixed assets of the PBC. However, Liquidator Santos failed to execute the purchase
agreement covering the disputed fixed assets.
The respondent PDIC, thereafter, took over as the new PBC Liquidator. The PDIC President
replaced Liquidator Santos. Liquidator Naagas informed the FEBTC that all the fixed assets of the
PBC can be purchased only at their present appraisal value. He also proceeded to start the bidding or
negotiated sale to third persons of the PBC's fixed assets. This move prompted the FEBTC to file
before the RTC a motion to compel the Liquidator to execute the implementing deeds of sale over the
disputed PBC fixed assets.
Issue:
Whether or not the PDIC, as the Liquidator of the PBC, may be compelled to execute the
deeds of sale over the nine (9) disputed PBC fixed assets.
Ruling:
Yes, as there was a perfected contract of sale over the disputed fixed assets. It is wellestablished that a contract undergoes various stages that include its negotiation or preparation, its
perfection, and finally, its consummation.
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Negotiation covers the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is concluded (perfected). The perfection of the
contract takes place upon the concurrence of its essential elements. A contract which is consensual as
to perfection is so established upon a mere meeting of minds, i.e., the concurrence of offer and
acceptance, on the object and on the cause or consideration. The consummation stage begins when
the parties perform their respective undertakings under the contract, culminating in its
extinguishment.
Specifically, contracts of sale are perfected by mutual consent, when the seller obligates
himself, for a price certain, to deliver and transfer ownership of a specified thing or right to the buyer
over which the latter agrees. Mutual consent, as a state of mind, may only be inferred from the
confluence of two acts of the parties: an offer certain as to the object of the contract and its
consideration, and an absolute acceptance of the offer, i.e., with respect to the exact object and
consideration embodied in the offer. While it may not be possible to expect the acceptance
to echo every nuance of the offer, it is imperative that it assents to those points in the offer that,
under the operative facts of each contract, are not only material but motivating as well.
Simply put, a contract of sale is perfected upon the meeting of the minds of the parties on the
essential elements of the contract, i.e., consent, object certain, and the consideration of the contract.
Based on the above well-established principles, the Court rules that the essential elements of a
contract of sale are present in the MOA as confirmed by the FEBTC's bid and the provisions of the
MOA and the PA. This conclusion becomes more apparent upon a closer review of the developments
in the various stages of the parties' contract of sale.
DELIVERY
NFF INDUSTRIAL CORPORATION v. G & L ASSOCIATED BROKERAGE and/or GERARDO
TRINIDAD
G.R. No. 178169, January 12, 2015, PERALTA, J.
Delivery has been described as a composite act, a thing in which both parties must join and the
minds of both parties concur. It is an act by which one party parts with the title to and the possession of
the property, and the other acquires the right to and the possession of the same.
Facts:
G&L ordered bulk bags from NFF payable within 30 days covered by PO No. 97-002 payable
within 30 days from delivery with instructions that the bulk bags were for immediate delivery to G&L
c/o Hi-Cement Corporation. G&L ordered an additional stock of bulk bags. NFF made deliveries of
the bulk bags to Hi-Cements evidenced by a document showing the date of delivery , amount,
delivery receipts and sales invoices. NFF alleged that the deliveries were acknowledged by
representatives of G&L. NFF also claims that the receipts were rubber stamped, dated and signed by
the security guard-on-duty as well as other representatives of G&L. The invoices were duly served
upon, and recived by one Marian Gabay who represented G&L. On the other hand, G&L alleged that
the bulk bags were to be delivered at Hi-Cement to Mr. Raul Ambrosio who was G&Ls cheker and
authorized representative. They claimed that the bulk bags were not recieved because it was not
brought to the authorized representative. NFF sent a demand letter to G&L for non-payment of the
bulk bags but G&L failed to respond even in the succeeding phone calls. After a third demand letter
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which was unheeded, NFF filed for a sum of money. The RTC ruled in favor of NFF but the CA reverse
the RTCs decision.
Issue:
Whether or not there is a valid delivery of the bulk bags.
Ruling:
Yes. Based on the direct examination, it is clear that petitioner has actually delivered the
bulk bags to respondent company, albeit the same was not delivered to the person named in the
Purchase Order. In addition, by allowing petitioners employee to pass through the guard-on-duty,
who allowed the entry of delivery into the premises of Hi-Cement, which is the designated delivery
site, respondents had effectively abandoned whatever infirmities may have attended the delivery of
the bulk bags. As a matter of fact, if respondents were wary about the manner of delivery, such issue
should have been brought up immediately after the first delivery was made. Instead, Mr. Trinidad
acknowledged receipt of the first batch of the bulk bags and even followed up the remaining balance
of the orders for delivery.
Delivery has been described as a composite act, a thing in which both parties must join and
the minds of both parties concur. It is an act by which one party parts with the title toand the
possession of the property, and the other acquires the right to and the possession of the same. In its
natural sense, delivery means something in addition to the delivery of property or title; it means
transfer of possession. In the Law on Sales, delivery may be either actual or constructive, but both
forms of delivery contemplate "the absolute giving up of the control and custody of the property on
the part of the vendor, and the assumption of the same by the vendee."
BILL OF LADING
EASTERN SHIPPING LINES, INC. v. BPI/MS INSURANCE CORP., and MITSUI SUMITOMO
INSURANCE CO., LTD.
Mere proof of delivery of the goods in good order to a common carrier and of their arrival in
bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If
no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened,
the transporter shall be held responsible.
Facts:
At Yokohama, Japan, Sumitomo Corporation shipped on board Eastern Shipping Lines vessel
M/V Eastern Venus 22 coils of various Steel Sheet in good order and condition for transportation to
and delivery at the port of Manila, Philippines in favor of consignee Calamba Steel Center, Inc.
(Calamba Steel) located in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos.
ESLIYMA001. The declared value of the shipment was US$83,857.59 as shown by an Invoice with
Nos. KJGE-03-1228-NT/KE3. The shipment was insured with the respondents BPI/MS and Mitsui
against all risks under Marine Policy No. 103-GG03448834.
The complaint alleged that the shipment arrived at the port of Manila in an unknown
condition (later found to be already damaged prior to its delivery to ATI) and was turned over to ATI
for safekeeping. Upon withdrawal of the shipment by the Calamba Steels representative, it was
found out that part of the shipment was damaged and was in bad order condition such that there was
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a Request for Bad Order Survey. Calamba Steel attributed the damages on both shipments to ESLI as
the carrier and ATI as the arrastre operator in charge of the handling and discharge of the coils and
filed a claim against them. When ESLI and ATI refused to pay, Calamba Steel filed an insurance claim
for the total amount of the cargo against BPI/MS and Mitsui as cargo insurers. As a result, BPI/MS
and Mitsui became subrogated in place of and with all the rights and defenses accorded by law in
favor of Calamba Steel.
Issues:
1. Whether or not Eastern Shipping Lines Inc. (ESLI) is liable for the damage in the shipment.
2. Whether or not Eastern Shipping Lines Inc. (ESLI) liability is limited due to the failure to
state in the bill of lading itself the actual amount of the shipment.
Ruling:
1. Yes. From the evidence, ESLI was negligent, whether solely or together with ATI. ESLI
cannot invoke its non-liability solely on the manner the cargo was discharged and unloaded. The
actual condition of the cargoes upon arrival prior to discharge is equally important and cannot be
disregarded. Proof is needed that the cargo arrived at the port of Manila in good order condition and
remained as such prior to its handling by ATI. Common carriers, from the nature of their business
and on public policy considerations, are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the
goods. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the consignee, or to the person who
has a right to receive them.
2. No. COGSA provides under Section 4, Subsection 5 that an amount recoverable in case of
loss or damage shall not exceed US$500.00 per package or per customary freight unless the nature
and value of such goods have been declared by the shipper before shipment and inserted in the bill of
lading. As to the non-declaration of the value of the goods on the bill of lading, there is no error on the
part of the appellate court when it ruled that there was a compliance of the requirement provided by
COGSA. The declaration requirement does not require that all the details must be written down on
the very bill of lading itself. It must be emphasized that all the needed details are in the invoice, which
contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping charges,
and other details which may contain numerous sheets. In Unsworth Transport International (Phils.),
Inc. v. Court of Appeals (G.R. No. 166250, July 26, 2010), the Court held that the insertion of an invoice
number does not in itself sufficiently and convincingly show that petitioner had knowledge of the
value of the cargo. However, the same interpretation does not squarely apply if the carrier had been
advised of the value of the goods as evidenced by the invoice and payment of corresponding freight
charges. It would be unfair for ESLI to invoke the limitation under COGSA when the shipper in fact
paid the freight charges based on the value of the goods.
EARNEST MONEY
FIRST OPTIMA REALTY CORPORATION v. SECURITRON SECURITY SERVICES, INC.
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Earnest money only applies to a perfected sale. Prior payment of earnest money even before the
property owner can agree to sell his property is irregular and cannot be used to bind the owner to the
obligations of a seller.
Facts:
Securitron, looking to expand its business, sent a letter to petitioner - through its Executive
Vice-President Carolina Young offering to purchase the subject property at P6,000.00 per square
meter. Securitron was unable to personally negotiate with Young or the petitioners Board of
Directors as the negotiations were confined with telephone calls with Youngs secretary. Despite
personal negotiations, Young declined to accept payment, saying that she still needed to secure her
sisters advice on the matter. She likewise informed Eleazar that prior approval of petitioners Board
of Directors was required for the transaction. However, Securitron thereafter sent a Letter to the
petitioner which indicate among others the payment of earnest money in the amount of P100,000.00.
A check with the same amount accompanied such letter. The letter and check was coursed through
the petitioners receptionist who then issued a provisional receipt. The check was eventually
deposited with and credited to petitioners bank account. Respondent therefore demanded in writing
that petitioner proceed with the sale.
Issue:
parties.
Whether or not the receipt of earnest money is indicative of a perfected sale between the
Ruling:
No. Earnest money applies to a perfected sale, however on the present case, the parties
never got past the negotiation stage. Nothing shows that the parties had agreed on any final
arrangement containing the essential elements of a contract of sale. Respondents subsequent
sending of the letter bearing the payment of the earnest money and check to petitioner, without
awaiting the approval of petitioners board of directors and Youngs decision, or without making a
new offer, constitutes a mere reiteration of its original offer which was already rejected previously.
Thus, petitioner was under no obligation to reply. It would be absurd to require a party to reject the
very same offer each and every time it is made; otherwise, a perfected contract of sale could simply
arise from the failure to reject the same offer made for the hundredth time. Thus, said letter cannot
be considered as evidence of a perfected sale, which does not exist in the first place. The letter made
no new offer replacing the first which was rejected. In a potential sale transaction, the prior payment
of earnest money even before the property owner can agree to sell his property is irregular, and
cannot be used to bind the owner to the obligations of a seller under an otherwise perfected contract
of sale.
SIMULATED SALE
VALENTINA CLEMENTE v. COURT OF APPEALS, et al.
G.R. No. 175483, October 14, 2015, JARDELEZA, J.
If the words of a contract appear to contravene the evident intention of the parties, the latter
shall prevail. Such intention is determined not only from the express terms of their agreement, but also
from the contemporaneous and subsequent acts of the parties. This is especially true in a claim of
absolute simulation where a colorable contract is executed.
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Facts:
Adela Shotwell owned properties in Q.C., subdivided as Lots 32, 34 and 35-B. From 1985 to
1987, Adela simulated the transfer of Lots 32 and 34 to her two (2) grandsons, Carlos Jr. and Dennis
Shotwell while Lot 35-B remained with Adela. It is undisputed that the transfers were never intended
to vest title to the grandsons who will both return the lots to Adela when requested. Prior to Adelas
departure for the US, Adela requested Carlos Jr. to execute a deed of reconveyance over the lots and
register the same. Adela then executed a deed of absolute sale over Lots 32 and 34 to Valentina
Shotwell and a special power of attorney in the latters favor to take charge and manage, for the
formers benefit, all of her properties in the Philippines.
When Valentina returned to the Philippines, she registered the sale over Lots 32 and 34, and
TCTs was issued in her name, respectively. Adela died in the US and was succeeded by her four (4)
children, namely Annie, Carlos Sr., Anselmo, and Corazon (private respondents). Valentina sought to
eject two (2) of Adelas children who were staying on the properties. When Carlos Sr. and Anselmo
learned of the transfer of titles to Valentina, they filed a complaint for reconveyance over the
properties. In their amended complaint, the children sought nullification of the Deeds of Absolute
Sale. When Carlos Sr. died, he was substituted by Dennis. The RTC decided in the private
respondents favor and the CA affirmed the same with modification, ruling that the deeds were
instead simulated.
Issue:
Whether or not the Deeds of Absolute Sale between Valentina and Adela over the properties
are void.
Ruling:
Yes. There was no valid contract of sale between Valentina and Adela because their consent
was absent. In ruling that the Deeds of Absolute Sale were absolutely simulated, the lower courts
considered the totality of the prior, contemporaneous and subsequent acts of the parties. The
following circumstances give a conclusion that the Deeds of Absolute Sale are simulated, and that the
transfers were never intended to affect the juridical relation of the parties:
(1) There was no indication that Adela intended to alienate her properties in favor of Valentina.
In fact, the letter of Adela to Dennis reveals that she has reserved the ownership of the
properties in favor of Dennis.
(2) Adela continued exercising acts of dominion and control over the properties, even after the
execution of the Deeds of Absolute Sale, and though she lived abroad for a time. In Adelas
letter to a certain Candy, she advised the latter to stay in one of the properties. Also, in
Valentinas letter to her cousin Dennis, she admitted that Adela continued to be in charge of
the properties; that she has no say when it comes to the properties; that she does not
intend to claim exclusive ownership of Lot 35-B; and that she is aware that the ownership
and control of the properties are intended to be consolidated in Dennis favor.
(3) The SPA executed on the same day as the Deeds of Absolute Sale appointing Valentina as
administratrix of Adelas properties, including the properties, is repugnant to Valentinas
claim that the ownership of the same had been transferred to her.
(4) The previous sales of the properties to Dennis and Carlos, Jr. were simulated. This history,
coupled with Adelas treatment of Valentina, and the surrounding circumstances of the sales,
strongly show that Adela only granted Valentina the same favor she had granted to Dennis
and Carlos Jr. The letter to Dennis convincingly shows Adelas intention to give him the
Properties.
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Valentina claims this letter was not properly identified and is thus, hearsay evidence. The
records, however, show that the letter was admitted by the trial court in its order. While it is true
that the letter is dated prior (or six days before to be exact) to the execution of the Deeds of Absolute
Sale and is not conclusive that Adela did not change her mind, We find that the language of the letter
is more consistent with the other pieces of evidence that show Adela never intended to relinquish
ownership of the properties to Valentina. Valentinas letter to her cousin Dennis also sufficiently
establishes that Adela retained control over the properties, even after the execution of the Deeds of
Absolute Sale. Valentina herself admitted that she was only following the orders of Adela, and that
she has no claim over the properties. In the letter, Adela even requested her granddaughter Candy to
stay in the house rent- and expense-free.
Valentina claims that Candy and the house referred to in the letter were not identified.
Records show, however, that Valentina has testified she has a cousin named Candy Shotwell who
stayed at one of the properties. Clearly, the submission of Valentina to the orders of Adela does not
only show that the latter retained dominion over the Properties, but also that Valentina did not
exercise acts of ownership over it. If at all, her actions only affirm the conclusion that she was merely
an administratrix of the Properties by virtue of the SPA.
EQUITABLE MORTGAGE
HEIRS OF ANTERO SOLIVA v. SEVERINO, JOEL, GRACE, CENON, JR., RENATO, EDUARDO,
HILARIO, all surnamed SOLIVA, ROGELIO V. ROLEDA, and SANVIC ENTERPRISES, INC.,
represented by its Manager, SANTOS PORAQUE
An equitable mortgage is one which, although lacking the proper formalities, form or words,
or other requisites prescribed by law for a mortgage, nonetheless shows the real intention of the parties
to make the property subject of the contract as security for debt and contains nothing impossible or
anything contrary to law in this intent.
Facts:
Spouses Ceferino and Juana have five (5) children, namely: Dorotea (deceased), Cenon,
Severino, Victoriano and Antero. The spouses owned parcels of land in Calbayog City. A 1,600-square
meter portion of one of the parcels (Parcel 2) of said land was owned by Mancol which was sold to
Cenon. The sale was evidenced by a notarized deed of sale entitled "Escritura de Compra-Venta
Absoluta." Since Cenon lives in Manila, he left the possession and enjoyment of the property to his
parents. When Ceferino died, Juana sold the remaining square meter portions of Parcel 2 to Cenon
through a Deed of Conditional Sale with Pacto A Retro. Consequently, Cenon sold Parcel 2 to Roleda
which the latter sold to Sanvic Enterprises, Inc. (SEI). Subsequently, Antero alleges that the sale of the
said parcel of land is not a true sale but an equitable mortgage.
The Regional Trial Court (RTC) ruled that there was a valid sale and that Cenon has exclusive
rights over the property hence may sell it by virtue of his ownership over it. The Court of Appeals
(CA) modified the RTCs decision. It declared the Antero, et. al, Cenon, et. al. and SEI as co-owners of
Parcel 2. The CA agreed that the 1,600-square meter portion of Parcel 2 belongs exclusively to Cenon.
Additionally, it pointed out that the "Escritura de Compra-Venta Absoluta," which Mancol executed in
favor of Cenon, was duly notarized and therefore a public document that has in its favor the
presumption of regularity. Hence, the present petition is filed.
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Issue:
Whether or not the sale of Parcel 2 is an equitable mortgage and not a true sale.
Ruling:
No. The 1970 Conditional Sale with Pacto de Retro is a true sale, not an equitable mortgage
under Article 1602 of the Civil Code. A contract of sale, whether an absolute sale or with a right of
repurchase, is presumed by law to be an equitable mortgage under any of the following
circumstances:
1.
2.
3.
4.
5.
6.
When the price of a sale with right to repurchase is unusually inadequate;

When the vendor remains in possession as lessee or otherwise;
When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed;
When the purchaser retains for himself a part of the purchase price;
When the vendor binds himself to pay the taxes on the thing sold;
In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other
obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee
as rent or otherwise shall be considered as interest which shall be subject to the usury law. For the
presumption of an equitable mortgage to arise under any of the circumstances enumerated in
Article1602, however, two requisites must concur: (a) that the parties entered into a contract
denominated as a contract of sale; and (b) that their intention was to secure an existing debt by way
of mortgage.
The CA debunked Anteros argument that the 1970 Pacto de Retro Sale was an equitable
mortgage because it found nothing which supports his theory that the "sale with right to repurchase
was executed to secure a debt. Moreover, it pointed out that Cenons administration of the property
from 1962 up to his death in 1987 indubitably shows that he had, all the while, been in constructive
possession of the property.
The Court upheld the CAs ruling on this issue for the following reasons:
First, Cenon immediately declared in his name the property sold and had continuously paid
taxes for it, sourced from the propertys income. As an owner, Cenon has the right to the propertys
fruits and income which he could freely dispose of according to his discretion. Thus, contrary to
Anteros claim, Cenons payment of the taxes from the propertys income is in fact consistent with his
exercise of ownership rights over the property.
Second, Cenon and his children benefited from the propertys produce.
Third, Juana, as the vendor a retro, never questioned the nature of the 1970 Pacto de Retro
sale as a mortgage, nor argued that in reality it was intended to secure a debt.
Fourth, other than his bare allegation, Antero (with the plaintiffs a quo) did not present any
evidence to prove that what the parties to the 1970 Sale a Retro actually intended was to secure a
debt, instead of a true sale.
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REDEMPTION
AQA GLOBAL CONSTRUCTION, INC. v. PLANTERS DEVELOPMENT BANK
JE-AN SUPREME BUILDERS AND SALES CORPORATION v. PLANTERS DEVELOPMENT BANK
(Consolidated Petitions)
G.R. No. 211649 & G.R. No. 211742, August 12, 2015, PERLAS-BERNABE, J.
Upon the expiration of the right of redemption, the possession of the property shall be given to
the purchaser or last redemptioner unless a third party is actually holding the property adversely to the
judgment obligor. For the exception to apply, the property need not only be possessed by a third party,
but also held by him adversely to the judgment obligor.
Facts:
For failure of KTC (mortgagor) to redeem the properties, Planters bank applied for a writ of
possession, which was granted by the RTC. The writ of possession together with the Notice to Vacate
was served to petitioner AQA, which occupied the subject properties. AQA moved to intervene in the
case and to be excluded from the implementation of the writ of possession, claiming that its
possession: (a) was adverse to that of KTC; and (b) stemmed from a ten (10) year contract of lease,
with petitioner Je-an, which had bought the subject property from Little Giant Realty Corporation,
the registered owner of the subject properties.
On the other hand, Je-An filed an Affidavit of Third Party Claim to stay the implementation of
the writ of possession, alleging that its right to possess the subject properties was: (a) separate and
distinct from that of KTC; and (b) derived from a Contract to Sell executed by Little Giant. After
hearing AQA's motion, the RTC issued an Order excluding AQA and Je-An from the implementation of
the writ of possession.
Issue:
Whether or not RTC is correct in staying the implementation of the writ of possession
against AQA and Je-An.
Ruling:
No. Upon the expiration of the right of redemption, the possession of the property shall be
given to the purchaser or last redemptioner unless a third party is actually holding the property
adversely to the judgment obligor. For the exception to apply, the property need not only be
possessed by a third party, but also held by him adversely to the judgment obligor - such as that of a
co-owner, agricultural tenant or usufructuary, who possess the property in their own right and not
merely the successor or transferee of the right of possession of, or privy to, the judgment obligor.
Clearly, the stay of the implementation of the writ of possession prayed for by Je-An on the
basis of such inchoate right would becloud the integrity and derogate the indefeasibility of the
torrens title issued in favor of Planters bank as a confirmed owner, which the Court cannot allow.
Corollarily, the enforcement of the writ of possession cannot also be stayed in favor of AQA which
merely derived its possession from Je-An through an unregistered contract of lease. The Court simply
cannot subscribe to AQA's claim that its status as a tenant renders its possession adverse to that of
Planters bank.
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ASSIGNMENT OF CREDIT
METROPOLITAN BANK & TRUST COMPANY v. G & P BUILDERS, INCORPORATED, SPOUSES
ELPIDIO AND ROSE VIOLET PARAS, SPOUSES JESUS and MA. CONSUELO PARAS AND VICTORIA
PARAS
G.R. No. 189509, November 23, 2015, LEONEN, J.
Through the assignment of credit, the new creditor is entitled to the rights and remedies
available to the previous creditor. Moreover, under Article 1627 of the Civil Code, the assignment of a
credit includes all the accessory rights, such as a guaranty, mortgage, pledge, or preference.
Facts:
G & P Builders, Incorporated (G & P) filed a Petition for Rehabilitation. Among the allegations
in the Petition is that G & P obtained a loan from Metrobank and mortgaged 12 parcels of land as
collateral. G & P's loan obligation amounted to P52,094,711.00 at the time of the filing of the Petition
before the trial court. The trial court issued a Stay Order on March 18, 2003, and the initial hearing
was set on May 6, 2003. However, while the rehabilitation proceedings were pending, Metrobank and
G & P executed a Memorandum of Agreement (first MOA) on August 11, 2003, where the parties
agreed that 4 out of the 12 parcels of land mortgaged would be released and sold. The sale of the
parcels of land amounted to P15,000,000.00. Pursuant to the first MOA, the amount was deposited
with Metrobank "for subsequent disposition and application [in conformity with] the Court approved
Rehabilitation Plan. Then, Metrobank entered into a Loan Sale and Purchase Agreement with Elite
Union Investments Limited (Elite Union). The former sold G & P's loan account for P10,419,000.00.
Issue:
Whether or not an agreement between a secured creditor and a third party, which
transferred to the third party all of the creditor's rights and interests over the debtor's loan
obligation and was executed during the pendency of corporate rehabilitation proceedings, covered
the P15,000,000.00 proceeds of the sale of mortgaged properties deposited with the creditor.
Ruling:
Yes. The first MOA between petitioner and G & P, as approved by the trial court, is clear that
the application of the P15,000,000.00 deposit would be subject to the court-approved rehabilitation
plan. G & P's obligation was still subsisting at this point as the parties did not agreed to outright
payment, whether full or partial. When Metrobank entered into the Loan Sale and Purchase
Agreement with Elite Union, the entire obligation was transferred to Elite Union. Assignment of
credit, which has a similar effect with that of a sale, has been defined as the process of transferring
the right of the assignor to the assignee who would then have the right to proceed against the debtor.
The assignment may be done gratuitously or onerously. Through the assignment of credit, the new
creditor is entitled to the rights and remedies available to the previous creditor. Moreover, under
Article 1627 of the Civil Code, the assignment of a credit includes all the accessory rights, such as a
guaranty, mortgage, pledge, or preference.
The Loan Sale and Purchase Agreement entitled Elite Union to all the rights and interests
that petitioner had had as creditor of respondent G & P, including the securities of the loan account.
Petitioner cannot vary the terms of the first MOA in relation to the status of the P15,000,000.00
deposit through its interpretation of the Loan Sale and Purchase Agreement. The first MOA was
judicially approved by the trial court as a compromise agreement between petitioner and respondent
G & P. Hence, the terms of the first MOA, as the applicable law, governs the parties and their assigns
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and/or heirs. A compromise agreement once approved by final order of the court has the force of res
judicata between the parties and should not be disturbed except for vices of consent or forgery.
Hence, a decision on a compromise agreement is final and executory; it has the force of law and is
conclusive between the parties. It transcends its identity as a mere contract binding only upon the
parties thereto, as it becomes a judgment that is subject to execution in accordance with the Rules.
To reiterate, the compromise judgment approved Metrobanks priority or preference as to
the deposit. However, Metrobank assigned this priority or preference in favor of Elite Union. SC
cannot speculate as to the reasons why Metrobank sold all its rights and interests over G & P's loan
account for a lower price. Without sufficient evidence, legal basis, and compelling reasons, SC cannot
read beyond the written agreements between the parties.
PARTNERSHIPS, AGENCIES, AND TRUSTS

AGENCY
MANUEL JUSAYAN, ALFREDO JUSAYAN, and MICHAEL JUSAYAN v. JORGE SOMBILLA
G.R. No. 163928, January 21, 2015, BERSAMIN, J.
Whether or not an agency has been created is determined by the fact that one is representing
and acting for another.
Facts:
Wilson Jesena, the owner of the subject land, entered in an agreement with Jorge Sombilla
wherein Wilson designated Jorge as his agent to supervise the tilling and farming of his Riceland.
Before such agreement expired, Wilson sold the land to Timoteo Jusayan. Later, Jorge and Timoteo
agreed to Jorges possession of the land sans accounting of the cultivation expenses and actual
produce of the land provided that Jorge annually delivered to him 110 cavans of palay and paid the
irrigation fees. Subsequently, Timoteo demanded the return of the possession of the land but the
request remained unheeded. This prompted Timoteo to file complaint for recovery of possession and
accounting against Jorge in the RTC. With the death of Timoteo, the petitioners substituted him as the
plaintiffs.
For his part, Jorge asserted that since the agreement is an agricultural lease, he enjoys
security of tenure and such could not terminate without valid cause. The RTC ruled in favor of
Jusayan and upheld the contractual relationship of agency between Timoteo and Jorge. On appeal, the
CA reversed the RTC ruling holding that the contractual relationship between the parties was one of
agricultural tenancy.
Issue:
Whether or not the relationship between the petitioners and respondent is that of agency.
Ruling:
No. In agency, the agent binds himself to render some service or to do something in
representation or on behalf of the principal, with the consent or authority of the latter. The basis of
the civil law relationship of agency is representation, the elements of which are, namely: (a) the
relationship is established by the parties consent, express or implied; (b) the object is the execution
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of a juridical act in relation to a third person; (c) the agent acts as representative and not for himself;
and (d) the agent acts within the scope of his authority. Whether or not an agency has been created is
determined by the fact that one is representing and acting for another.
The claim of Timoteo that Jorge was his agent contradicted the verbal agreement he had
fashioned with Jorge. By assenting to Jorges possession of the land sans accounting of the cultivation
expenses and actual produce of the land provided that Jorge annually delivered to him 110 cavans of
palay and paid the irrigation fees belied the very nature of agency, which was representation. The
verbal agreement between Timoteo and Jorge left all matters of agricultural production to the sole
discretion of Jorge and practically divested Timoteo of the right to exercise his authority over the acts
to be performed by Jorge. While in possession of the land, therefore, Jorge was acting for himself
instead of for Timoteo. Unlike Jorge, Timoteo did not benefit whenever the production increased, and
did not suffer whenever the production decreased. Timoteos interest was limited to the delivery of
the 110 cavans of palay annually without any concern about how the cultivation could be improved
in order to yield more produce.
V-GENT, INC., v. MORNING STAR TRAVEL and TOURS, INC.

G.R. No. 186305, July 22, 2015, BRION, J.
In suits where an agent represents a party, the principal is the real party-in-interest; an agent
cannot file a suit in his own name on behalf of the principal.
Facts:
Petitioner V-Gent bought twenty-six two-way plane tickets from respondent Morning Star.
V-Gent returned a total of fifteen unused tickets to the defendant but only six tickets were refunded.
Petitioner V-Gent then filed a money claim against Morning Star for payment of the unrefunded
tickets plus attorney's fees. Morning Star questioned V-Gent's personality to file the suit. It asserted
that the passengers, in whose names the tickets were issued, are the real parties-in-interest. The
MeTC dismissed the complaint for lack of a cause of action.
V-Gent appealed to the RTC wherein the latter granted the appeal. It set aside the MeTC's
judgment and ordered Morning Star to pay V-Gent the value of the unrefunded tickets plus attorney's
fees. Morning Star then filed a petition for review with the CA wherein it questioned the RTC's
appreciation of the evidence and also reiterated V-Gent's legal standing, submitting once again that
V-Gent is not the real party-in-interest. The CA held that V-Gent is not a real party ininterest
because it merely acted as an agent of the passengers who bought the tickets from Morning Star with
their own money.
Issue:
Whether or not V-Gent is not a real party-in-interest because it merely acted as an agent of
the passengers.
Ruling:
Yes. V-Gent admits that it purchased the plane tickets on behalf of the passengers as the
latter's agent. The tickets were issued in the name of the passengers and paid for with the
passengers' money. No dispute or conclusion in the lower courts' minds on this point; hence, both the
MeTC and the CA commonly found that V-Gent acted as an agent of the passengers when it purchased
the passengers' plane tickets. However, while the MeTC held that V-Gent could sue as an agent acting
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in his own name on behalf of an undisclosed principal, the CA held that it could not because the
requirements for such a suit by the agent had not been satisfied.
The Court agrees with the Court of Appeals. Every action must be prosecuted or defended in
the name of the real party-in-interest - the party who stands to be benefited or injured by the
judgment in the suit. In suits where an agent represents a party, the principal is the real party-ininterest; an agent cannot file a suit in his own name on behalf of the principal. Thus an agent may sue
or be sued solely in its own name and without joining the principal when the following elements
concur: (1) the agent acted in his own name during the transaction; (2) the agent acted for the
benefit of an undisclosed principal; and (3) the transaction did not involve the property of the
principal. When these elements are present, the agent becomes bound as if the transaction were its
own.
In the present case, only the first element is present; the purchase order and the receipt
were in the name of V-Gent. However, the remaining elements are absent because: (1) V-Gent
disclosed the names of the passengers to Morning Star - in fact the tickets were in their names; and
(2) the transaction was paid using the passengers' money. Therefore, Rule 3, Section 3 of the Rules of
Court cannot apply. To define the actual factual situation, V-Gent, the agent, is suing to recover the
money of its principals - the passengers - who are the real parties-in-interest because they stand to
be injured or benefited in case Morning Star refuses or agrees to grant the refund because the money
belongs to them. From this perspective, V-Gent evidently does not have a legal standing to file the
complaint.
V-GENT, INC., v. MORNING STAR TRAVEL and TOURS, INC.

G.R. No. 186305, July 22, 2015, BRION, J.
The power to collect and receive payments on behalf of the principal is an ordinary act of
administration covered by the general powers of an agent. On the other hand, the filing of suits is an act
of strict dominion.
Facts:
Petitioner V-Gent bought twenty-six two-way plane tickets from respondent Morning Star.
V-Gent returned a total of fifteen unused tickets to the defendant but only six tickets were refunded.
Petitioner V-Gent then filed a money claim against Morning Star for payment of the unrefunded
tickets plus attorney's fees. Morning Star questioned V-Gent's personality to file the suit. It asserted
that the passengers, in whose names the tickets were issued, are the real parties-in-interest. The
MeTC dismissed the complaint for lack of a cause of action. V-Gent argued that by making a partial
refund, Morning Star was already estopped from refusing to make a full refund on the ground that VGent is not the real party-in-interest to demand reimbursement.
Issue:
Whether or not by making a partial refund, Morning Star was already estopped from
refusing to make a full refund on the ground that V-Gent is not the real party-in-interest to demand
reimbursement.
Ruling:
No. The power to collect and receive payments on behalf of the principal is an ordinary act of
administration covered by the general powers of an agent. On the other hand, the filing of suits is an
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act of strict dominion. Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power
to exercise any act of strict dominion on behalf of the principal unless authorized by a special power
of attorney. An agent's authority to file suit cannot be inferred from his authority to collect or receive
payments; the grant of special powers cannot be presumed from the grant of general powers.
Moreover, the authority to exercise special powers must be duly established by evidence, even
though it need not be in writing.
By granting the initial refund, Morning Star recognized V-Gent's authority to buy the tickets
and collect refunds on behalf of the passengers. However, Morning Star's recognition of V-Gent's
authority to collect a refund for the passengers is not equivalent to recognition of V-Gent's authority
to initiate a suit on behalf of the passengers. Morning Star therefore, is not estopped from
questioning V-Gent's legal standing to initiate the suit.
TRUST
NORMA EDITA R. DY SUN-ONG v. JOSE VICTORY R. DY SUN
G.R. No. 207435, July 01, 2015, CARPIO, J.
The existence of implied trust prevents prescription from setting in because the defense of
prescription cannot be set up in an action to enforce trust.
Facts:
Norma filed a complaint for delivery of shares against her brother Jose. The complaint
alleged that Jose was the holder in trust of 90,848,000 shares of Yakult Philippines belonging to the
heirs of the late Don Vicente Dy Sun. Norma claimed that 18,169,600 shares belong to her and that
her demand was not heeded by Jose.
The CA held that Normas cause of action has already prescribed. It held that it was only after
the lapse of about 22 years that Norma demanded in writing the delivery of the shares of stock. The
CA also agreed with Jose that Normas long inaction in asserting her right to the subject shares of
stock bars her from recovering them under the equitable principle of laches.
Issue:
Whether or not the CA erred in its outright dismissal of the case.
Ruling:
Yes, since the petition has merit. The Court remanded the case to the RTC for trial and
judgment on the merits. The interpretations of the parties of the factual matters in dispute are so
diametrically opposed that the outright dismissal by the CA was improper.
Petitioner invokes Articles 1453 and 1457 of the Civil Code in claiming her alleged shares
from respondent. Said Articles read as follows:
Art. 1453. When property is conveyed to a person in reliance upon his declared intention to
hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the
person
whose
benefit
is
contemplated.
Art. 1457. An implied trust may be proved by oral evidence.
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Petitioner's theory of her case relies upon implied trust under Article 1453. Petitioner
further states that the existence of implied trust prevents prescription from setting in because the
defense of prescription cannot be set up in an action to enforce trust. Petitioner is willing to present
evidence, such as letters between herself and respondent as well as checks representing the cash
dividends on the YPI shares, to prove that neither prescription nor laches had set in. Respondent, on
the other hand, denies petitioner's claim of implied trust and asserts that his previous act of giving
petitioner a share of the cash dividends on the YPI shares was pure liberality on his part. Respondent
insists that petitioner's cause of action, if any, has prescribed.
The following are questions of facts which the Court cannot pass upon: (1) the alleged
existence of an implied trust between petitioner and respondent, (2) respondent's alleged
repudiation of the implied trust, and (3) prescription of petitioner's cause of action, if any. The CA's
dismissal of the case was premature as these matters need presentation and appreciation of
evidence. For a fair and just disposition of the case at hand, the parties should be allowed to present
their respective claims and defenses in a full blown trial.
SPECIAL POWER OF ATTORNEY

SPOUSES ROLANDO and HERMINIA SALVADOR v. SPOUSES ROGELIO AND ELIZABETH RABAJA
and ROSARIO GONZALES
According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act
is deemed to have been performed within the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written.
Facts:
Spouses Rolando and Herminia Salvador are registered owners of a parcel of land located in
Mandaluyong City. Herminia personally introduced Rosario Gonzales to Spouses Rabaja as the
administrator of the said property handing over to her the owners duplicate certificate of title.
Gonzales then presented the SPA executed by Rolando. The parties executed a contract to sell
transferring the property to Spouses Rabaja. The latter made several payments which were received
by Gonzales. However, Spouses Salvador complained to Spouses Rabaja that they did not receive any
payment from Gonzales. Spouses Rabaja was prompted to suspend further payment of the purchase
price; and as a consequence, they received a notice to vacate the subject property from Spouses
Salvador for non-payment of rentals. Thereafter, Spouses Salvador instituted an action for ejectment
against Spouses Rabaja. In turn, Spouses Rabaja filed an action for rescission of contract against
Spouses Salvador and Gonzales, the subject matter of the present petition.
Spouses Salvador and their counsel failed to attend the pre-trial conference. Consequently,
the RTC issued the pre-trial order declaring Spouses Salvador in default and allowing Spouses Rabaja
to present their evidence ex parte and Gonzales to present evidence in her favor. The RTC ruled that
since the contract entered into was a reciprocal contract, it could be validly rescinded by Spouses
Rabaja stating that Gonzales was undoubtedly the attorney-in-fact of Spouses Salvador. The CA
affirmed the decision with modifications.
Issue:
Whether or not Gonzales could validly receive the payments of Spouses Rabaja.
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Ruling:
Yes. Gonzales, as agent of Spouses Salvador, can receive the payment of spouses Rabaja.
According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written. In this case, Spouses Rabaja did not recklessly enter into a
contract to sell with Gonzales. They required her presentation of the power of attorney before they
transacted with her principal and when Gonzales presented the SPA to Spouses Rabaja, the latter had
no reason not to rely on it. The Court holds that, indeed, Gonzales acted within the scope of her
authority. The SPA precisely stated that she could administer the property, negotiate the sale and
collect any document and all payments related to the subject property. As the agent acted within the
scope of his authority, the principal must comply with all the obligations.
VALENTINA CLEMENTE v. COURT OF APPEALS, et al.

G.R. No. 175483, October 14, 2015, JARDELEZA, J.
The execution of an SPA for the administration of the properties, on the same day the Deeds of
Absolute Sale were executed, is antithetical to the relinquishment of ownership.
Facts:
Adela Shotwell owned properties in Q.C., subdivided as Lots 32, 34 and 35-B. From 1985 to
1987, Adela simulated the transfer of Lots 32 and 34 to her two (2) grandsons, Carlos Jr. and Dennis
Shotwell while Lot 35-B remained with Adela. It is undisputed that the transfers were never intended
to vest title to the grandsons who will both return the lots to Adela when requested. Prior to Adelas
departure for the US, Adela requested Carlos Jr. to execute a deed of reconveyance over the lots and
register the same. Adela then executed a deed of absolute sale over Lots 32 and 34 to Valentina
Shotwell and a SPA in the latters favor to take charge and manage, for the formers benefit, all of her
properties in the Philippines.
When Valentina returned to the Philippines, she registered the sale over Lots 32 and 34, and
TCTs was issued in her name, respectively. Adela died in the US and was succeeded by her four (4)
children, namely Annie, Carlos Sr., Anselmo, and Corazon (private respondents). Valentina sought to
eject two (2) of Adelas children who were staying on the properties. When Carlos Sr. and Anselmo
learned of the transfer of titles to Valentina, they filed a complaint for reconveyance over the
properties. In their amended complaint, the children sought nullification of the Deeds of Absolute
Sale. When Carlos Sr. died, he was substituted by Dennis. The RTC decided in the private
respondents favor and the CA affirmed the same with modification, ruling that the deeds were
instead simulated.
Issue:
Whether or not the execution of SPA is for the reconstitution of the land titles.
Ruling:
No. Valentina claims that she has sufficiently explained that the SPA is not for the
administration of the properties, but for the reconstitution of their titles. The Court agrees with the
lower courts that the execution of an SPA for the administration of the properties, on the same day
the Deeds of Absolute Sale were executed, is antithetical to the relinquishment of ownership. The SPA
shows that it is so worded as to leave no doubt that Adela is appointing Valentina as the
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administratrix of her properties. Had the SPA been intended only to facilitate the processing of the
reconstitution of the titles, there would have been no need to confer other powers of administration,
such as the collection of debts, filing of suit, etc., to petitioner. In any case, the explanation given by
Valentina that the SPA was executed so as only to facilitate the reconstitution of the titles of the
properties is not inconsistent with the idea of her being the administratrix of the properties. On the
other hand, the idea of assigning her as administratrix is not only inconsistent, but also repugnant, to
the intention of selling and relinquishing ownership of the properties.
TORTS AND DAMAGES

ROGELIO ROQUE v. PEOPLE OF THE PHILIPPINES
G.R. No. 193169, April 6, 2015, DEL CASTILLO, J.
Absent competent proof on the actual damages suffered, a party still has the option of claiming
temperate damages, which may be allowed in cases where, from the nature of the case, definite proof of
pecuniary loss cannot be adduced although the court is convinced that the aggrieved party suffered
some pecuniary loss.
Facts:
While brothers Reynaldo and Rodolfo Marquez were in the house of Bella Salvador-Santos in
Bulacan, Rodolfo spotted Rogelio dela Cruz and shouted to him to join them. Believing that the shout
was directed at him, Rogelio Roque (accused) stopped the tricycle he and his wife were in and cursed
Rodolfo. Reynaldo apologized for the misunderstanding but the accused was unyielding. Before
leaving, he warned the Marquez brothers that something bad would happen to them if they continue
to perturb him. Bothered, Rodolfo went to the house of Barangay Chairman Pablo Tayao (Tayao) to
ask for assistance in settling the misunderstanding. Because of this, Reynaldo, who had already gone
home, was fetched by dela Cruz and brought to the house of Tayao. Since Tayao was then no longer
around, Reynaldo just proceeded to the accuseds house to follow Tayao and Rodolfo who had
already gone ahead. Upon arriving at the accuseds residence, Reynaldo again apologized to
petitioner but the latter did not reply. Instead, the accused entered the house, was already holding a
gun when he came out, and suddenly fired at Reynaldo who was hit in his right ear. He still shot
Reynaldo when the latter hit the ground. Unsatisfied, he kicked the victim on the face and back.
Reynaldo pleaded Tayao for help to no avail, since the accused warned those around not to get
involved. Fortunately, Reynaldo's parents arrived and took him to a local hospital for emergency
medical treatment. Dr. Renato Raymundo attended to him and issued a medical certificate stating
that a bullet entered the base of Reynaldo's skull and exited at the back of his right ear. The RTC
found the accused guilty. The CA affirmed the ruling.
Issue:
Whether or not the CA erroneously appreciated the facts and evidence on record.
Ruling:
The Court noted that while the penalty imposed upon appellant is also proper, there is a
need to modify the assailed CA Decision in that awards of damages must be made in favor of the
victim Reynaldo. The RTC and the CA correctly held that actual damages cannot be awarded to
Reynaldo due to the absence of receipts to prove the medical expenses he incurred from the incident.
Nonetheless, absent competent proof on the actual damages suffered, a party still has the option of
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claiming temperate damages, which may be allowed in cases where, from the nature of the case,
definite proof of pecuniary loss cannot be adduced although the court is convinced that the aggrieved
party suffered some pecuniary loss. Since it was undisputed that Reynaldo was hospitalized due to
the gunshot wounds inflicted by the accused, albeit as observed by the RTC, there was no evidence
offered as to the expenses he incurred by reason thereof, Reynaldo is entitled to temperate damages
in the amount of P25,000.00. Aside from this, he is also entitled to moral damages of P25,000.00.
These awards of damages are in accordance with settled jurisprudence. An interest at the legal rate
of 6% per annum must also be imposed on the awarded damages to commence from the date of
finality of this Resolution until fully paid.
DOLORES DIAZ v. PEOPLE OF THE PHILIPPINES and LETICIA S. ARCILLA

G.R. No. 208113, December 2, 2015, PERLAS-BERNABE, J.
The extinction of the penal action does not carry with it the extinction of the civil liability where
the acquittal is based on reasonable doubt.
Facts:
Leticia Arcilla, a businesswoman engaged in the business of selling goods/merchandise
through her agents, consigned in favor of one of her agents, Dolores Diaz, certain goods for the
purpose of selling them. Diaz was supposed to turn over the proceeds or return the goods to Arcilla if
unsold. Thereafter, Diaz filed a criminal complaint for estafa against Diaz on the ground as Diaz did
not remit the full amount of the goods entrusted to her by Arcilla.
The RTC acquitted Diaz for the criminal charge of estafa, but held her civilly liable for the
amount of the entrusted goods. On appeal, the CA affirmed the decision of the RTC.
Issue:
Whether or not Diaz is still civilly liable despite her acquittal.
Ruling:
Yes. The extinction of the penal action does not carry with it the extinction of the civil
liability where the acquittal is based on reasonable doubt, such as in this case, as only preponderance
of evidence, or "greater weight of the credible evidence," is required. Thus, an accused acquitted of
estafa may still be held civilly liable where the facts established by the evidence so warrant, as in this
case.
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